Labor Law Review | Cases
Dean Ada D. Abad
[1] G.R. No. 155098 September 16, 2005
CAPITOL MEDICAL CENTER, INC. and DR. THELMA
NAVARETTE-CLEMENTE, Petitioners,
vs.
DR. CESAR E. MERIS, Respondent.
DECISION
CARPIO MORALES, J.:
Subject of the present appeal is the Court of Appeals Decision1
dated February 15, 2002 reversing the NLRC Resolution2 dated
January 19, 1999 and Labor Arbiter Decision3 dated April 28,
1998 which both held that the closure of the Industrial Service
Unit of the
Capitol Medical Center, Inc., resulting to the termination of the
services of herein respondent Dr. Cesar Meris as Chief thereof,
was valid.
On January 16, 1974, petitioner Capitol Medical Center, Inc.
(Capitol) hired Dr. Cesar Meris (Dr. Meris),4 one of its
stockholders,5 as in charge of its Industrial Service Unit (ISU)
at a monthly salary of ₱10,270.00.
Until the closure of the ISU on April 30, 1992,6 Dr. Meris
performed dual functions of providing medical services to
Capitol’s more than 500 employees and health workers as well
as to employees and workers of companies having retainer
contracts with it.7
On March 31, 1992, Dr. Meris received from Capitol’s president
and chairman of the board, Dr. Thelma Navarette-Clemente
(Dr. Clemente), a notice advising him of the management’s
decision to close or abolish the ISU and the consequent
termination of his services as Chief thereof, effective April 30,
1992.8 The notice reads as follows:
March 31, 1992
Dr. Cesar E. Meris
Chief, Industrial Service Unit
Capitol Medical Center
Dear Dr. Meris:
Greetings!
Please be formally advised that the hospital management has
decided to abolish CMC’s Industrial Service Unit as of April 30,
1992 in view of the almost extinct demand for direct medical
services by the private and semi-government corporations in
providing health care for their employees. Such a decision was
arrived at, after considering the existing trend of industrial
companies allocating their health care requirements to Health
Maintenance Organizations (HMOs) or thru a tripartite
arrangement with medical insurance carriers and designated
hospitals.
As a consequence thereof, all positions in the unit will be
decommissioned at the same time industrial services [are]
deactivated. In that event, you shall be entitled to return to
your private practice as a consultant staff of the institution and
will become eligible to receive your retirement benefits as a
former hospital employee. Miss Jane Telan on the other hand
will be transferred back to Nursing Service for reassignment at
the CSR.
We wish to thank you for your long and faithful service to the
institution and hope that our partnership in health care delivery
to our people will continue throughout the future. Best regards.
Very truly yours,
(SGD.) DR. THELMA NAVARETTE-CLEMENTE9 (Emphasis and
underscoring supplied)
Dr. Meris, doubting the reason behind the management’s
decision to close the ISU and believing that the ISU was not in
fact abolished as it continued to operate and offer services to
the client companies with Dr. Clemente as its head and the
notice of closure was a mere ploy for his ouster in view of his
refusal to retire despite Dr. Clemente’s previous prodding for
him to do so,10 sought his reinstatement but it was unheeded.
Dr. Meris thus filed on September 7, 1992 a complaint against
Capitol and Dr. Clemente for illegal dismissal and
reinstatement with claims for backwages, moral and exemplary
damages, plus attorney’s fees.11
Finding for Capitol and Dr. Clemente, the Labor Arbiter held
that the abolition of the ISU was a valid and lawful exercise of
management prerogatives and there was convincing evidence
to show that ISU was being operated at a loss.12 The decretal
text of the decision reads:
WHEREFORE, judgment is hereby rendered dismissing the
complaint. Respondents are however ordered to pay
complainant all sums due him under the hospital retirement
plan.
SO ORDERED.13 (Emphasis supplied)
On appeal by Dr. Meris, the National Labor Relations
Commission (NLRC) modified the Labor Arbiter’s decision. It
held that in the exercise of Capitol’s management prerogatives,
it had the right to close the ISU even if it was not suffering
business losses in light of Article 283 of the Labor Code and
jurisprudence.14
And the NLRC set aside the Labor Arbiter’s directive for the
payment of retirement benefits to Dr. Meris because he did not
retire. Instead, it ordered the payment of separation pay as
provided under Article 283 as he was discharged due to closure
of ISU, to be charged against the retirement fund.15
Undaunted, Dr. Meris elevated the case to the Court of Appeals
via petition for review16 which, in the interest of substantial
justice, was treated as one for certiorari.17
Discrediting Capitol’s assertion that the ISU was operating at a
loss as the evidence showed a continuous trend of increase in
its revenue for three years immediately preceding Dr. Meris’s
dismissal on April 30, 1992,18 and finding that the ISU’s
"Analysis of Income and Expenses" which was prepared long
after Dr. Meris’s dismissal, hence, not yet available, on or
before April 1992, was tainted with irregular entries, the
appellate court held that Capitol’s evidence failed to meet the
standard of a sufficient and adequate proof of loss necessary
to justify the abolition of the ISU.19
The appellate court went on to hold that the ISU was not in fact
abolished, its operation and management having merely
changed hands from Dr. Meris to Dr. Clemente; and that there
was a procedural lapse in terminating the services of Dr. Meris,
no written notice to the Department of Labor and Employment
(DOLE) of the ISU abolition having been made, thereby
violating the requirement embodied in Article 283.20
The appellate court, concluding that Capitol failed to strictly
comply with both procedural and substantive due process, a

condition sine qua non for the validity of a case of
termination,21 held that Dr. Meris was illegally dismissed. It
accordingly reversed the NLRC Resolution and disposed as
follows:
IN VIEW OF ALL THE FOREGOING, the assailed resolutions of
the NLRC are hereby set aside, and another one entered –
1 – declaring illegal the dismissal of petitioner as Chief of the
Industrial Service Unit of respondent Medical Center;
2 – ordering respondents to pay petitioner
a) backwages from the date of his separation in April 1992 until
this decision has attained finality;
b) separation pay in lieu of reinstatement computed at the rate
of one (1) month salary for every year of service with a fraction
of at least six (6) months being considered as one year;
c) other benefits due him or their money equivalent;
d) moral damages in the sum of ₱50,000.00;
e) exemplary damages in the sum of ₱50,000.00; and
f) attorney’s fees of 10% of the total monetary award payable
to petitioner.
SO ORDERED.22
Hence, the present petition for review assigning to the
appellate court the following errors:
I expense to it;32 the appellate court’s decision is at best an
. . . IN OVERTURNING THE FACTUAL FINDINGS AND
CONCLUSIONS OF BOTH THE NATIONAL LABOR RELATIONS
COMMISSION (NLRC) AND THE LABOR ARBITER.
II
. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE
LABOR ARBITER AND THE NATIONAL LABOR RELATIONS
COMMISSION, THAT THE INDUSTRIAL UNIT (ISU) WAS NOT
INCURRING LOSSES AND THAT IT WAS NOT IN FACT
ABOLISHED.
III
. . . IN NOT UPHOLDING PETITIONERS’ MANAGEMENT
PREROGATIVE TO ABOLISH THE INDUSTRIAL SERVICE UNIT
(ISU).
IV
. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT
BACKWAGES AS WELL AS DAMAGES AND ATTORNEY’S
FEES.23
Capitol questions the appellate court’s deciding of the petition
of Dr. Meris on the merits, instead of merely determining
whether the administrative bodies acted with grave abuse of
discretion amounting to lack or excess of jurisdiction.
The province of a special civil action for certiorari under Rule
65, no doubt the appropriate mode of review by the Court of
Appeals of the NLRC decision,24 is limited only to correct errors
of jurisdiction or grave abuse of discretion amounting to lack
or excess of jurisdiction.25 In light of the merits of Dr. Meris’
claim, however, the relaxation by the appellate court of
procedural technicality to give way to a substantive
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Dean Ada D. Abad
determination of a case, as this Court has held in several
cases,26 to subserve the interest of justice, is in order.
Capitol argues that the factual findings of the NLRC, particularly
when they coincide with those of the Labor Arbiter, as in the
present case, should be accorded respect, even finality.27
For factual findings of the NLRC which affirm those of the Labor
Arbiter to be accorded respect, if not finality, however, the
same must be sufficiently supported by evidence on record.28
Where there is a showing that such findings are devoid of
support, or that the judgment is based on a misapprehension
of facts,29 the lower tribunals’ factual findings will not be
upheld.
As will be reflected in the following discussions, this Court finds
that the Labor Arbiter and the NLRC overlooked some material
facts decisive of the instant controversy.
Capitol further argues that the appellate court’s conclusion that
the ISU was not incurring losses is arbitrary as it was based
solely on the supposed increase in revenues of the unit from
1989-1991, without taking into account the "Analysis of
Income and Expenses" of ISU from July 1, 1990 to July 1, 1991
which shows that the unit operated at a loss;30 and that the
demand for the services of ISU became almost extinct in view
of the affiliation of industrial establishments with HMOs such as
Fortunecare, Maxicare, Health Maintenance, Inc. and
Philamcare and of tripartite arrangements with medical
insurance carriers and designated hospitals,31 and the trend
resulted in losses in the operation of the ISU.
Besides, Capitol stresses, the health care needs of the hospital
employees had been taken over by other units without added
undue interference with, and curtailment of, the exercise by an
employer of its management prerogatives;33 at the time of the
closure of the ISU, Dr. Meris was already eligible for retirement
under the Capitol’s retirement plan; and the appellate court
adverted to the alleged lack of notice to the DOLE regarding
Dr. Meris’s dismissal but the latter never raised such issue in
his appeal to the NLRC or even in his petition for review before
the Court of Appeals, hence, the latter did not have authority
to pass on the matter.34
Work is a necessity that has economic significance deserving
legal protection. The social justice and protection to labor
provisions in the Constitution dictate so.
Employers are also accorded rights and privileges to assure
their self-determination and independence and reasonable
return of capital. This mass of privileges comprises the so-
called management prerogatives. Although they may be broad
and unlimited in scope, the State has the right to determine
whether an employer’s privilege is exercised in a manner that
complies with the legal requirements and does not offend the
protected rights of labor. One of the rights accorded an
employer is the right to close an establishment or undertaking.
The right to close the operation of an establishment or
undertaking is explicitly recognized under the Labor Code as
one of the authorized causes in terminating employment of
workers, the only limitation being that the closure must not be
for the purpose of circumventing the provisions on termination
of employment embodied in the Labor Code.
ART. 283. Closure of establishment and reduction of personnel.
– The employer may also terminate the employment of any
employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the

workers and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or
redundancy, the worker affected shall be entitled to a
separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service,
whichever is higher. In case retrenchment to prevent losses
and in cases of closures or cessation of
operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (Emphasis and underscoring supplied)
The phrase "closures or cessation of operations of
establishment or undertaking" includes a partial or total closure
or cessation.35
x x x Ordinarily, the closing of a warehouse facility and the
termination of the services of employees there assigned is a
matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The
applicable law in such a case is Article 283 of the Labor Code
which permits ‘closure or cessation of operation of an
establishment or undertaking not due to serious business
losses or financial reverses,’ which, in our reading includes both
the complete cessation of operations and the cessation of only
part of a company’s business. (Emphasis supplied)
And the phrase "closures or cessation x x x not due to serious
business losses or financial reverses" recognizes the right of
the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business
losses or financial reverses, as long as he pays his employees
their termination pay in the amount corresponding to their
length of service.36
It would indeed be stretching the intent and spirit of the law if
a court were to unjustly interfere in management’s prerogative
to close or cease its business operations just because said
business operation or undertaking is not suffering from any
loss.37 As long as the company’s exercise of the same is in
good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the
law or a valid agreement, such exercise will be upheld.38
Clearly then, the right to close an establishment or undertaking
may be justified on grounds other than business losses but it
cannot be an unbridled prerogative to suit the whims of the
employer.
The ultimate test of the validity of closure or cessation of
establishment or undertaking is that it must be bona fide in
character.39 And the burden of proving such falls upon the
employer.40
In the case at bar, Capitol failed to sufficiently prove its good
faith in closing the ISU.
From the letter of Dr. Clemente to Dr. Meris, it is gathered that
the abolition of the ISU was due to the "almost extinct demand
for
direct medical service by the private and semi-government
corporations in providing health care for their employees;" and
that such extinct demand was brought about by "the existing
trend of industrial companies allocating their health care
requirements to Health Maintenance Organizations (HMOs) or
thru a tripartite arrangement with medical insurance carriers
and designated hospitals."
The records of the case, however, fail to impress that there was
indeed extinct demand for the medical services rendered by
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Dean Ada D. Abad
the ISU. The ISU’s Annual Report for the fiscal years 1986 to
1991, submitted by Dr. Meris to Dr. Clemente, and
uncontroverted by Capitol, shows the following:
Fiscal Year No. of Industrial No of No. of Capitol
Patients Companies Employees
1986-1987 466 11 1445
1987-1988 580 17 1707
1988-1989 676 14 1888
1989-1990 571 16 2731
1990-1991 759 18 232041
If there was extinct demand for the ISU medical services as
what Capitol and Dr. Clemente purport to convey, why the
number of client companies of the ISU increased from 11 to 18
from 1986 to 1991, as well as the number of patients from both
industrial corporations and Capitol employees, they did not
explain.
The "Analysis of Income and Expenses" adduced by Capitol
showing that the ISU incurred losses from July 1990 to
February 1992, to wit:
July 1, 1990 to July 1, 1991 to
June 30, 1991 February 29, 1992
INCOME ₱16, 772.00 ₱35, 236.00
TOTAL EXPENSES ₱225, 583.70 ₱169,244.34
NET LOSS ₱(208,811.70) ₱(134,008.34),42
was prepared by its internal auditor Vicenta Fernandez,43 a
relative of Dr. Clemente, and not by an independent external
auditor, hence, not beyond doubt. It is the financial statements
audited by independent external auditors which constitute the
normal method of proof of the profit and loss performance of a
company.44
At all events, the claimed losses are contradicted by the
accounting records of Capitol itself which show that ISU had
increasing revenue from 1989 to 1991.
Year In-Patient Out-Patient Total Income
1989 ₱230,316.38 ₱ 79,477.50 ₱309,793.88
1990 ₱278,438.10 ₱124,256.65 ₱402,694.75
1991 ₱305,126.35 ₱152,920.15 ₱458,046.5045
The foregoing disquisition notwithstanding, as reflected above,
the existence of business losses is not required to justify the
closure or cessation of establishment or undertaking as a
ground to terminate employment of employees. Even if the ISU
were not incurring losses, its abolition or closure could be
justified on other grounds like that proffered by Capitol –
extinct demand. Capitol failed, however, to present sufficient
and convincing evidence to support such claim of extinct
demand. In fact, the employees of Capitol submitted a
petition46 dated April 21, 1992 addressed to Dr. Clemente
opposing the abolition of the ISU.
The closure of ISU then surfaces to be contrary to the
provisions of the Labor Code on termination of employment.
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Dean Ada D. Abad

The termination of the services of Dr. Meris not having been

premised on a just or authorized cause, he is entitled to either
reinstatement or separation pay if reinstatement is no longer
viable, and to backwages.

Reinstatement, however, is not feasible in case of a strained

employer-employee relationship or when the work or position
formerly held by the dismissed employee no longer exists, as
in the instant case.47 Dr. Meris is thus entitled to payment of
separation pay at the rate of one (1) month salary for every
year of his employment, with a fraction of at least six (6)
months being considered as one(1) year,48 and full backwages
from the time of his dismissal from April 30, 1992 until the
expiration of his term as Chief of ISU or his mandatory
retirement, whichever comes first.

The award by the appellate court of moral damages,49

however, cannot be sustained, solely upon the premise that the
employer fired his employee without just cause or due process.
Additional facts must be pleaded and proven to warrant the
grant of moral damages under the Civil Code, such as that the
act of dismissal was attended by bad faith or fraud, or was
oppressive to labor, or done in a manner contrary to morals,
good customs, or public policy; and of course, that social
humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom.50 Such circumstances, however, do not obtain in
the instant case. More specifically on bad faith, lack of it is
mirrored in Dr. Clemente’s offer to Dr. Meris to be a consultant
of Capitol, despite the abolition of the ISU.

There being no moral damages, the award of exemplary

damages does not lie.51

The award for attorney’s fees, however, remains.52

WHEREFORE, the decision of the Court of Appeals dated

February 15, 2002 is hereby AFFIRMED with MODIFICATION.
As modified, judgment is hereby rendered ordering Capitol
Medical Center, Inc. to pay Dr. Cesar Meris separation pay at
the rate of One (1) Month salary for every year of his
employment, with a fraction of at least Six (6) Months being
considered as One (1) Year, full backwages from the time of
his dismissal from April 30, 1992 until the expiration of his term
as Chief of the ISU or his mandatory retirement, whichever
comes first; other benefits due him or their money equivalent;
and attorney’s fees.

Costs against petitioners.

SO ORDERED.

[2] G.R. No. 194969
CONVOY MARKETING CORPORATION and/or ARNOLD
LAAB, Petitioners
vs.
OLIVER B. ALBIA,* Respondent
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court, seeking to nullify and set aside the Court of
Appeals (CA) Decision1 dated May 31, 2010 and the
Resolution2 dated December 28, 20 10 in CA-G.R. SP No.
98958.
The factual antecedents, as found by the CA, are as follows:
Based on his sinumpaang salaysay, it appears that the
petitioner Oliver Alvia started working as a common laborer for
the respondent Convoy Marketing, a distributor of bottled
wines, liquor and bottled water, in 2001. He was assigned the
job of a pahinante, or one who loads and unloads cargoes
transported to customers by the delivery vehicles of the
company. A year later, he was promoted to delivery van driver.
As a driver, he was paid a fixed salary of P290 per trip
regardless of route. The delivery van he drove belonged to the
company which shouldered its maintenance and gasoline costs.
He was on the road from Mondays to Saturdays, observing
working hours that often exceeded the usual 8 hours, and
despite his perseverance, he was not given holiday pay,
vacation leave with pay, service incentive leave pay and 13th
month pay.
On July 22, 2004, he did something that cost him his job. He
smelled of liquor upon his arrival from the delivery route. He
gave the explanation that after completing the delivery, he and
his two pahinantes decided to rest a little in a store outside the
company compound. They drank several bottles of beer before
going back to the compound to start loading for the next
morning's delivery.
It was, however, reported to the logistics manager, the
respondent Arnold Laab, that he was under the influence of
liquor. As a result, he received his marching orders. In a memo
on July 23, the next day, he was told - we regret to inform that
management decided to terminate your delivery agency
agreement with Convoy Marketing Corporation effective July
23, 2004. The petition was addressed in the communication
signed by Laab as a per trip driver with notice to the HRAD
manager, the present- day title for the company official who
supervises the company's rank-and- file, the personnel
manager.
The petitioner did not delay in protesting his dismissal, filing on
July 26, 2004, only days later, a complaint for illegal dismissal
and non- payment of wage benefits. The respondents Convoy
Marketing and Laab joined issue by contending in substance
that the petitioner was not an employee of the company but an
independent contractor, and presenting papers to document it.
xxx
The respondents came forward with a series of delivery agency
agreements signed by the petitioner to correspond to particular
periods of service. There are, on record, four of these
agreements relating to the periods November 22, 2002 to April
22, 2003, May 29, 2003 to October 29, 2003, November 11,
2003 to April 10, 2004, and April 13, 2004 to September 13,
2004. In all these documents, it was made to appear that the
respondent company would furnish the delivery vehicle and
take care of its maintenance and upkeep and pay the petitioner
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Dean Ada D. Abad
a fixed per trip fee to drive the vehicle according to a schedule
prepared by it. The petitioner, in turn, would post a cash bond
of P3,000 to answer for damages to the vehicle and be
responsible for such payments to the government as SSS
premiums and Pag-IBIG contributions. The agreement ends
with this stipulation - under no circumstance shall the driver be
deemed an employee of the principal, and the driver shall not
represent himself as an employee of the principal to any
person, it being clearly understood that the driver is an
independent service contractor for a fixed period.
Indeed, at the end of every service period stated in the
contracts, the petitioner was studiedly made to sign a quitclaim
and release in which he acknowledged receiving a certain sum,
at most P5, 172.28, in satisfaction of all claims that he may
have against the company, and confirmed the termination of
the agreement due to the expiration of the stated period. x x x
The petitioner signed his last two quitclaims and releases in
April and August 2004. The April 2004 quitclaim saw him
receiving P2,716.42 for releasing the respondents forever from
liability in connection with the contract ending April 10, 2004.
When the petitioner signed the August 2004 quitclaim, on the
other hand, his case against the respondents was already on-
going. During the conference held that month before the Labor
Arbiter, the petitioner was recorded as having admitted that
his claim for non-payment of salaries and refund of the cash
bond deposit were already settled. The minutes of the
conference read - Non-payment of salaries and cash bond
deposit as per manifestation of the complainant was already
settled. The minutes also stated - By agreement of the parties,
case reset on August 24, 2004 at 10 AM.
In the same month, the petitioner executed the quitclaim and
release in connection with the termination of his agreement on
July 23, 2004 accepting payment of the sum of Pl,805.72. In
spite of this development, the case went on to its conclusion.3
On January 10, 2006, the Labor Arbiter rendered a Decision4
dismissing Albia's complaint for lack of merit, thus:
Be it pointed out and emphasized that the record shows that
herein complainant signed a Quitclaim and Release in favor of
the respondent corporation on 19 April 2004. That during one
of the settings herein (on 17 August 2004), complainant
manifested in open proceedings that his claims for unpaid
salaries and cash bond had already been settled.
Indeed, although waivers[,] releases and quitclaims are
generally looked down with disfavor as the workers concerned
either are unaware of the consequences thereof or have signed
the same under factors tending to vitiate consent, not all
waivers and quitclaims are to be considered invalid. It is to be
pointed out that absent any pellucid showing of the above-
mentioned factors or variables surrounding the execution of
said documents, the same must be deemed valid and binding
between and among the parties.
In the case at bench, there is absolutely nothing on record
tending to show the existence of such factors or variables which
may have the tendency of invalidating or affecting the validity
and binding effect of the quitclaim and release executed by
herein complainant in respondents' favor.
All told, complainant's cause for illegal dismissal must
necessarily fail.5
Aggrieved, Albia appealed to the National Labor Relations
Commission (NLRC).
On November 28, 2006, the NLRC dismissed the appeal and
affirmed the Labor Arbiter's Decision, thus:

An examination of the minutes of the August 17, 2004
proceedings indeed shows that the admission by complainant
as to the settlement of his claims merely referred to non-
payment of salaries and refund of cash bond. However, the
Quitclaim and Release executed by the complainant on August
4, 2004 clearly contained an admission of his engagement as
an "independent service contractor" and the termination of the
said contract on July 23, 2004. Such admission of the nature
of complainant's work accords credence to the claim of the
respondents that they acted upon complainant's representation
as an independent contractor as he conducted his own business
on his own account and free from their supervision and control.
This is further supported by a contract otherwise being referred
to as a "Delivery Agency Agreements."
It is, therefore, incorrect for the complainant to state that the
quitclaim only covered his money claims. Said quitclaim
specifically made reference to the termination of the juridical
relationship between the parties on July 23, 2004 which was
the same date when complainant alleged that he was dismissed
from employment. And, there being no contest raised by the
complainant with respect to the genuineness and due execution
of the said quitclaim, the presumption to that effect accorded
to a public document, it being notarized, mu[s]t be
acknowledged.6
Albia filed a motion for reconsideration which the NLRC denied
in a Resolution7 dated March 30, 2007.
Unfazed, Albia filed a petition for certiorari before the Court of
Appeals.
On May 31, 2010, the CA reversed and set aside the NLRC's
Resolutions, and ruled as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the assailed NLRC
resolutions of November 28, 2006 and March 30, 2007 are set
aside. The private respondent Convoy Marketing Corporation is
ordered to reinstate the petitioner to his former position and
pay him full backwages from the date of his termination on July
23, 2004 until (sic) payment,8plus 10% of the monetary award
of attorney's fees. This case is remanded to the NLRC for
computation of the award.
SO ORDERED.9
Petitioners filed a motion for reconsideration, but the CA denied
it in a Resolution dated December 28, 2010.
Hence, this petition for review on certiorari wherein petitioners
raised two issues:
I.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR IN EXCESS OF JURISDICTION WHEN IT REVERSED
THE DECISION AND RESOLUTION OF BOTH THE HONORABLE
LABOR ARBITER AND THE HONORABLE COMMISSION.
II.
WITH ALL DUE RESPECT, THE DECISION DATED 31 MAY 2010,
AND THE RESOLUTION DATED 28 DECEMBER 2010, OF THE
HONORABLE COURT OF APPEALS, ARE CONTRARY TO LAW
AND WELL-SETTLED JURISPRUDENCE.10
Petitioners insist that Albia was not a regular employee of
Convoy, but merely a contractual one whose services ended
upon the expiration of the period agreed upon. They aver that
the activities which he was called upon to undertake are not
necessary and/or desirable in the company business. They
point out that Albia was only an on-call driver who did not have
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Dean Ada D. Abad
to report for work every day, but only when excess deliveries
could no longer be made by Convoy's fifteen (15) regular
drivers; that he was not even included in the company payroll
because he was paid on a per trip basis; and that Convoy did
not have control over him and his helpers.
To substantiate their claim that Albia was a mere contractual
employee of Convoy, petitioners presented the affidavit of
Ofelia B. Miranda, Convoy's Human Resources Administration
Manager, and the Delivery Agency Agreements (For Driver)11
executed between him and Convoy. Stating that such
agreements are valid fixed-period employment contracts, they
assert that Albia knowingly and voluntarily entered into them,
without any force, duress or improper pressure or moral
dominance brought upon him.
Petitioners also contend that Albia was dismissed for senous
misconduct after admittedly having been caught under the
influence of alcohol while in the discharge of his official
functions.
Petitioners further argue that the quitclaims and releases
executed by Albia on various occasions are valid and binding,
and the fact that he executed one of such quitclaims after he
had filed the illegal dismissal complaint on July 26, 2004 only
shows that he was not forced to sign it nor was his consent
thereto vitiated. Moreover, not having assailed the
genuineness and authenticity of such quitclaim, Albia's bare
allegation that he was constrained to sign it because he was in
dire need of money and employment, will not suffice to
invalidate the same.
Petitioners fault the CA for not giving weight to the fact that
the quitclaim was voluntarily executed by Albia after he filed
an illegal dismissal complaint. They argue that the issue of
whether or not he is an employee of Convoy should have been
laid to rest, since the validity of the quitclaim where he had
admitted to be a mere independent contractor, was upheld by
the Labor Arbiter and the NLRC. Noting that Albia even
manifested in the proceedings before the Labor Arbiter that his
claim for unpaid salaries and cash bond had already been
settled, they claim that such act shows that he signed the
quitclaim voluntarily and with the intention of fully discharging
Convoy from any and all of his claims. In support of their
contentions, they invoke the principle that factual findings of
the NLRC affirming those of the Labor Arbiter - both bodies
being deemed to have acquired expertise in matters within
their jurisdictions - when supported by evidence on record, are
accorded respect if not finality and are considered binding on
the CA.
The core issues are: (1) whether Albia is a regular or a fixed-
term employee of Convoy; (2) whether he was dismissed for a
just cause; and (3) whether the quitclaims and releases he
executed are valid.
The petition lacks merit.
It is well settled that the Court is not a trier of facts, and the
scope of its authority under Rule 45 of the Rules of Court is
confined only to errors of law and doesextendnot to questions
of fact, which are for labor tribunals to resolve.12 However, the
rule is not cast in stone and admits of recognized exceptions,
such as when the factual findings and conclusion of the labor
tribunals are contradictory or inconsistent with those of the
CA.13 When there is such a variance in the factual findings, as
in this case, it is incumbent upon the Court to re-examine the
facts.14
On the first issue, it bears emphasis that the existence of an
employer- employee relationship cannot be negated by
expressly repudiating it in a contract and providing therein that
the employee is an independent contractor when the facts

clearly show otherwise.15 This is because the employment
status of a person is defined and prescribed by law and not by
what the parties say it should be.16 Article 280 of the Labor
Code, as amended, pertinently provides:
Art. 280. Regular and casual employment. - The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertakingor the completion termination 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 nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph: Provided, That any employee who
has rendered at least one year of service, whether such service
is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his
employment shall continue while such activity exists.17
Contrary to petitioners' claim, the fact that Convoy has fifteen
(15) regular drivers only underscores that indeed, having been
hired as a driver, Albia was engaged to perform an activity
which is necessary or desirable in the usual company business
of marketing and distribution of bottled wines, liquor and
bottled water. No less than Convoy's daily trip summary
breakdowns18 contradict petitioners' allegation that Albia is
only an on-call driver who does not have for to report work
daily.
That Albia has become a regular employee is evident from the
Delivery Agency Agreements (For Driver)19 - executed for the
periods of November 22, 2002 to April 22, 2003, May 29, 2003
to October 29, 2003, November 11, 2003 to April 10, 2004,
and April 13, 2004 to September 13, 2004 - which indicate that
he had rendered at least one year of broken service with
respect to the same activity in which he was employed from
the time he was hired as a driver on November 22, 2002 until
he was terminated on July 23, 2004.
The Court cannot likewise sustain petitioners' claim that Albia
is an independent contractor. The test of independent
contractorship is whether one claiming to be an independent
contractor has contracted to do the work according to his own
methods and without being subject to the control of the
employer, except only as to the results of the work.20 The
criteria m determining the existence of an independent and
permissible contractor relationship are as follows:
x x x [W]hether or not the contractor is carrying on an
independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the
right to assign the performance of a specified piece of work;
the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment
of the contractor's workers; the control of the premises; the
duty to supply the premises, tools, appliances, materials, and
labor; and the mode, manner and terms of payment.21
Applying the foregoing criteria, Albia cannot be considered as
in independent contractor. There is no dispute that it was
Convoy who engaged the services of Albia as a driver without
the intervention of a third party, paid his wages on a per trip
basis, and abruptly terminated his services the next day after
admitting to have consumed three bottles of beer after
finishing his deliveries on July 22, 2004. There is, likewise, no
question that Convoy controls or has reserved its right to
control Albia's conduct, not only as to the result of his work but
also as to the means and methods by which such result is to
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Dean Ada D. Abad
be accomplished.22 This is evident from the following express
provisions of the Delivery Agency Agreements (For Driver)23
executed between Convoy and Albia:
1.The truck/s being driven by Albia belongs to Convoy;
2.The gasoline and fuel expenses, maintenance, repair and
spare parts for the upkeep of the delivery truck, provided they
are not abnormal and patently disproportionate to his gross
sales for the month, are for the account of Convoy; but if the
expenses and repair on the vehicle are caused by his
carelessness or that of his helper, then he must assume full
responsibility therefor;
3.The truck assigned to him shall be used solely and exclusively
to carry the products of Convoy, and that he cannot directly or
indirectly handle/deliver products other than those which it is
handling; and
4.Any violation of the said agreement, and any act of Albia
against Convoy, its officers, employees and properties which
shall result to harm or damage, directly or indirectly, shall be
constituted as a violation thereof and shall give the company
the right to unilaterally terminate him.
Further, as aptly ruled by the CA:
The petitioner [Albia] is not an independent contractor of the
respondent [Convoy] but only a regular rank-and-file
employee. He has been hired for a fixed wage, and the means
and methods of his work are absolutely controlled by the
respondent which exercises full power to discipline and
terminate him. He has none of the qualifications of an
independent contractor. He is only a paid hand. He has no
independent resources to conduct the business of contracting,
and, in fact, works for no one else but the respondent. The
vehicle he operates belongs and is maintained by the
respondent, and his pahinantes are the respondents' admitted
employees.24
Neither could be Albia deemed a fixed-term contractual
employee, as the Delivery Agency Agreements executed
between him and Convoy fall short of the requisites for such
fixed-term contracts to be valid.
Considered to be legitimate under the Labor Code,25 fixed-
term employment contracts terminate by their own terms at
the end of a definite period.26 The fact that the service
rendered by the employees is usually necessary and desirable
in the business operations of the employer will not impair the
validity of such contracts.27 For, the decisive determinant in
the term employment is not the activities that the employee is
called to perform, but the day certain agreed upon by the
parties for the commencement and termination of their
employment relationship.28
Aware of the possible abuse of fixed-term employment
contracts, the Court stressed in Brent School, Inc. v. Zamora
that where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down as
contrary to public policy or morals.29 The Court thus laid down
indications or criteria under which the term "employment"
cannot be said to be in circumvention of the law on security of
tenure, namely:
1) The fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any force,
duress, or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his
consent; or

2) It satisfactorily appears that the employer and the employee
dealt with
each other on more or less equal terms with no moral
dominance exercised by the former or the latter.30
In GMA Network, Inc. v. Pabriga,31 the Court stated that
"these indications, which must be read
together, make the Brent doctrine applicable only in a few
special cases whereinand the employer employee are on more
or less in equal footing in entering into the contract. The reason
for this is evident: when a prospective employee, on account
of special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective
employee needs less protection than the ordinary worker.
Lesser limitations on the paiiies' freedom of contract are thus
required for the protection of the employee."32
Neither of the said two indications was proven in this case.
Petitioners failed to show that Convoy and Albia dealt with each
other on more or less equal terms with no moral dominance
whatever being exercised by the former on the latter who, as
a plain wage earner with low educational attainment, having
only reached grade 4 in the elementary level,33 cannot be
presumed to be fully aware of the effects of the pro forma and
English-written Delivery Agency Agreements (For Driver).34
On the second issue, the Court agrees with the CA that Albia
was dismissed without a just cause.
While an employee's right to security of tenure does not give
him such a vested right to his position, it bears stressing that
employment is not merely a contractual relationship. In the life
of most workers, it assumes the nature of a property right
which may spell the difference of whether or not a family will
have food on their table, roof over their heads and education
for their children.35 In termination cases, therefore, the
burden of proof rests upon the employer to show that the
dismissal is for a just and valid cause, and failure to do so would
necessarily mean that the dismissal was illegal.36 For an
employee's dismissal to be valid, it must comply with both
procedural and substantive due process, viz.:37
For a worker's dismissal to be considered valid, it must comply
with both procedural and substantive due process. The legality
of the manner of dismissal constitutes procedural due process,
while the legality of the act of dismissal constitutes substantive
due process.
Procedural due process in dismissal cases consists of the twin
requirements of notice and hearing.1âwphi1 The employer
must furnish the employee with two written notices before the
termination of employment can be effected: (1) the first notice
apprises the employee of the particular acts or omissions for
which his dismissal is sought; and (2) the second notice
informs the employee of the employer's decision to dismiss
him. Before the issuance of the second notice, the requirement
of a hearing must be complied with by giving the worker an
opportunity to be heard. It is not necessary that an actual
hearing be conducted.
Substantive due process, on the other hand, requires that
dismissal by the employer be made under a just or authorized
cause under Articles 282 to 284 of the Labor Code.38
Serious misconduct is a valid ground for termination of the
services of an employee as provided for under Article 282 (a)
of the Labor Code, as amended, to wit:
ART. 282. Termination by employer. - An employer may
terminate an employment for any of the following causes:
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(a) Serious misconduct or willful disobedience by the employee
of the lawful orders of his employer or representative in
connection with his work; x x x
Misconduct is defined as the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere
error in judgment.39 In order for a misconduct to justify
dismissal, these requisites must be present:
(1) it must be serious; (2) it must relate to the performance of
the employee's duties; and (3) it must show that the employee
has become unfit to continue working for the employer.40
Petitioners failed to establish these requisites.
It must be noted that Albia's termination came as a result of a
lone incident on July 22, 2004 when he admitted that after
finishing their deliveries, he and his helpers decided to drink
bottles of beer at a store outside the company compound
before returning to work to finish loading the deliveries for the
next day. While an employer is given a wide latitude of
discretion in managing its own affairs, in the promulgation of
policies, rules and regulations on work-related activities of its
employees, and in the imposition of disciplinary measures on
them, the exercise of disciplining and imposing appropriate
penalties on erring employees must be practiced in good faith
and for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of
employees under special laws or under valid agreements.41
While it is true that under Convoy's code on employee
discipline, the penalty for "performing work while under the
influence of liquor"42 is "suspension to dismissal depending
upon the gravity of the offense,"43 nothing in the records
would support the imposition of the supreme penalty of
dismissal against Albia. Having finished his driving duty when
he was reported at about 6:20 p.m.44 of July 22, 2004 to have
admitted drinking beer, Albia cannot be faulted with gross
misconduct on account of "the danger that he may cause to
himself, to his passengers and to the goods he is
transporting."45 Thus, the Court finds no compelling reason to
disturb the CA ruling:
It is also clear that there was no valid grounds for the
termination of petitioner. His misconduct was not gross. He was
not guilty of any seriously offensive conduct, nor was there any
untoward incident that occurred. The penalty of dismissal was
certainly not commensurate to the infraction committed. It has
not been shown that he has by his conduct become unfit to
continue working for the respondents.46
Aside from its failure to accord Albia his right to substantive
due process, petitioners were also unable to show that his right
to procedural due process was observed. In Realda v. New Age
Graphics, Inc.,47 the Court explained the manner by which the
procedural due requirements of due process can be satisfied:
To clarify, the following should be considered in terminating the
services of employees:
(1) The first written notice to be served on the employees
should contain the specific causes or grounds for termination
against them, and a directive that the employees are given the
opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed
as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the
employees to intelligently prepare their explanation and

defenses, the notice should contain a detailed narration of the
facts and circumstances that will serve as basis for the charge
against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the
employees.
(2) After serving the first notice, the employers should
schedule and conduct a hearing or conference wherein the
employees will be given the opportunity to: (1) explain and
clarify their defenses to the charge against them; (2) present
evidence in support of their defenses; and (3) rebut the
evidence presented against them by the management. During
the hearing or conference, the employees are given the chance
to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this
conference or hearing could be used by the parties as an
opportunity to to come an amicable settlement.
(3) After determining that termination of employment is
justified, the employers shall serve the employees a written
notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been
considered; and (2) grounds have been established to justify
the severance of their employment.
Convoy terminated Albia without the requisite first notice
apprising him of the particular acts or omissions for which his
dismissal is sought, as well as the requisite hearing or
conference. Convoy thus failed to afford Albia with a reasonable
opportunity and to be heard defend himself he when was issued
a termination letter on July 23, 2004, the following day after
he admitted having consumed bottles of beer after finishing his
driving duty before the security department and the logistics
manager, Laab.
On the third issue, the Court finds that the quitclaims and
releases Albia executed are invalid.
Cases abound where the Court gave effect to quitclaims
executed by the employees when the employer is able to prove
the following requisites, to wit:
(1) the employee executes a deed of quitclaim voluntarily; (2)
there is no fraud or deceit on the part of any of the parties; (3)
the consideration of the quitclaim is credible and reasonable;
and (4) the contract is not contrary to law, public order, public
policy, morals or good customs, or prejudicial to a third person
with a right recognized by law.48
In this case, however, petitioners failed to prove that the P
1,805.72 consideration for the Quitclaim and Release49 dated
August 4, 2004 is credible and reasonable vis-a-vis what Albia
should receive in full as a regular employee who was illegally
dismissed. The same holds true with respect to the Quitclaim
and Release50 dated November 21, 2003 and April 19, 2004
with considerations of PS,712.28 and P 2,716.42, respectively.
That all the said waivers and quitclaims are agreements
between two (2) intelligent parties who are, more or less, in
the same footing cannot also be sustained because of Albia' s
low educational attainment, having finished only grade 4 in the
elementary level,51 as well as his status as a plain wage
earner.
Moreover, all the quitclaims and releases executed by Albia
upon the termination of the five-month Delivery Agency
Agreements (For Driver)52 are contrary to law and public
policy, as they preclude him from becoming a regular employee
and acquiring tenurial security. As correctly observed by the
CA:
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Indeed, at the end of every service period stated in the
contracts, the petitioner [Albia] was studiedly made to sign a
quitclaim and release in which he acknowledged receiving a
certain sum, at most PS,712.28, in satisfaction of all claims
that he may have against the company, and confirmed the
termination of the agreement due to the expiration of the
stated period. On overview, the quitclaim was nothing but a
formality, because as soon as one delivery agency agreement
terminates, another is signed to replace it and reflect the
continuity of the petitioner's service.53
It may not be amiss to state that a deed of release or quitclaim,
like those executed between Convoy and Albia, does not bar
an employee from demanding benefits to which he is legally
entitled. Employees who received their separation pay are, in
fact, not barred from contesting the legality of their dismissal,
and the acceptance of such benefits would not amount to
estoppel. As held in Sari-Sari Group of Companies v. Piglas
Kamao, et al. :54
Acceptance of those benefits would not amount to estoppel.
The reason is plain.1âwphi1 Employer and employee,
obviously, do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to get
hold of money. Because, out of job, he had to face the harsh
necessities of life. He thus found himself in no position to resist
money proffered. His, then, is a case of adherence, not of
choice. x x x55
Having been illegally dismissed from work, Albia is entitled to
reinstatement without loss of seniority rights, and other
privileges, as well as to full backwages, inclusive of allowances,
and to other benefits or their monetary equivalentfrom
computed the time his compensation was withheld from him
up to the time of his actual reinstatement.56 Backwages
include the whole amount of salaries plus all other benefits and
bonuses and general increases to which Albia would have been
normally entitled had he not been illegally dismissed,57 such
as the legally-mandated Emergency Cost of Living Allowance
(ECOLA), 13th month pay, and service incentive leave pay, as
well as the unpaid holiday pay for such holidays that he worked
based on Convoy's daily trip summary breakdowns.58 Hence,
the Court upholds the CA in ordering Convoy to reinstate Albia
and pay his full backwages from the date of his termination on
July 23, 2004 until his actual reinstatement.
Finally, the Court sustains the CA in holding Albia entitled to
attorney's fees in the amount of ten percent (10%) of the total
monetary award, pursuant to Article 11159 of the Labor Code.
Where an employee was forced to litigate and incur expenses
to protect his rights and interest, the awardfeesof such is
legally and morally justifiable.60
WHEREFORE, the petition is DENIED. The Court of Appeals
Decision dated May 31, 2010 and the Resolution dated
December 28, 2010 in CA-G.R. SP No. 98958, are AFFIRMED.
SO ORDERED.

[3] G.R. No. 192558 February 15, 2012
BITOY JAVIER (DANILO P. JAVIER), Petitioner,
vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO,
Respondents.
DECISION
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure
assailing the March 18, 2010 Decision1 of the Court of Appeals
(CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP No.
109975, which reversed the May 28, 2009 Decision3 of the
National Labor Relations Commission (NLRC) in the case
entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding that
petitioner Bitoy Javier (Javier) was illegally dismissed from
employment and ordering Fly Ace Corporation (Fly Ace) to pay
backwages and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for
underpayment of salaries and other labor standard benefits. He
alleged that he was an employee of Fly Ace since September
2007, performing various tasks at the respondent’s warehouse
such as cleaning and arranging the canned items before their
delivery to certain locations, except in instances when he would
be ordered to accompany the company’s delivery vehicles, as
pahinante; that he reported for work from Monday to Saturday
from 7:00 o’clock in the morning to 5:00 o’clock in the
afternoon; that during his employment, he was not issued an
identification card and payslips by the company; that on May
6, 2008, he reported for work but he was no longer allowed to
enter the company premises by the security guard upon the
instruction of Ruben Ong (Mr. Ong), his superior;5 that after
several minutes of begging to the guard to allow him to enter,
he saw Ong whom he approached and asked why he was being
barred from entering the premises; that Ong replied by saying,
"Tanungin mo anak mo;" 6 that he then went home and
discussed the matter with his family; that he discovered that
Ong had been courting his daughter Annalyn after the two met
at a fiesta celebration in Malabon City; that Annalyn tried to
talk to Ong and convince him to spare her father from trouble
but he refused to accede; that thereafter, Javier was
terminated from his employment without notice; and that he
was neither given the opportunity to refute the cause/s of his
dismissal from work.
To support his allegations, Javier presented an affidavit of one
Bengie Valenzuela who alleged that Javier was a stevedore or
pahinante of Fly Ace from September 2007 to January 2008.
The said affidavit was subscribed before the Labor Arbiter
(LA).7
For its part, Fly Ace averred that it was engaged in the business
of importation and sales of groceries. Sometime in December
2007, Javier was contracted by its employee, Mr. Ong, as extra
helper on a pakyaw basis at an agreed rate of ₱ 300.00 per
trip, which was later increased to ₱ 325.00 in January 2008.
Mr. Ong contracted Javier roughly 5 to 6 times only in a month
whenever the vehicle of its contracted hauler, Milmar Hauling
Services, was not available. On April 30, 2008, Fly Ace no
longer needed the services of Javier. Denying that he was their
employee, Fly Ace insisted that there was no illegal dismissal.8
Fly Ace submitted a copy of its agreement with Milmar Hauling
Services and copies of acknowledgment receipts evidencing
payment to Javier for his contracted services bearing the
words, "daily manpower (pakyaw/piece rate pay)" and the
latter’s signatures/initials.
Ruling of the Labor Arbiter
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On November 28, 2008, the LA dismissed the complaint for lack
of merit on the ground that Javier failed to present proof that
he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with
the Respondent nor any document showing that he received
the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give him
said ID and payslips implies that indeed he was not a regular
employee of Fly Ace considering that complainant was a helper
and that Respondent company has contracted a regular
trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in
the importation and sales of groceries. Since there is a regular
hauler to deliver its products, we give credence to
Respondents’ claim that complainant was contracted on
"pakiao" basis.
As to the claim for underpayment of salaries, the payroll
presented by the Respondents showing salaries of workers on
"pakiao" basis has evidentiary weight because although the
signature of the complainant appearing thereon are not
uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by
the above described payrolls, Respondents are not liable for
salary differentials. 9
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the
LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed
to present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer-
employee relationship. "Payment by result x x x is a method of
compensation and does not define the essence of the relation.
It is a mere method of computing compensation, not a basis
for determining the existence or absence of an employer-
employee relationship.10 " The NLRC further averred that it did
not follow that a worker was a job contractor and not an
employee, just because the work he was doing was not directly
related to the employer’s trade or business or the work may be
considered as "extra" helper as in this case; and that the
relationship of an employer and an employee was determined
by law and the same would prevail whatever the parties may
call it. In this case, the NLRC held that substantial evidence
was sufficient basis for judgment on the existence of the
employer-employee relationship. Javier was a regular
employee of Fly Ace because there was reasonable connection
between the particular activity performed by the employee (as
a "pahinante") in relation to the usual business or trade of the
employer (importation, sales and delivery of groceries). He
may not be considered as an independent contractor because
he could not exercise any judgment in the delivery of company
products. He was only engaged as a "helper."
Finding Javier to be a regular employee, the NLRC ruled that
he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, Fly Ace was found to
be liable for illegal dismissal of Javier who was likewise entitled
to backwages and separation pay in lieu of reinstatement. The
NLRC thus ordered:
WHEREFORE, premises considered, complainant’s appeal is
partially GRANTED. The assailed Decision of the labor arbiter is
VACATED and a new one is hereby entered holding respondent
FLY ACE CORPORATION guilty of illegal dismissal and non-

payment of 13th month pay. Consequently, it is hereby ordered
to pay complainant DANILO "Bitoy" JAVIER the following:
1. Backwages -₱ 45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -₱ 59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.11
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that
Javier was indeed a former employee of Fly Ace and reinstated
the dismissal of Javier’s complaint as ordered by the LA. The
CA exercised its authority to make its own factual
determination anent the issue of the existence of an employer-
employee relationship between the parties. According to the
CA:
xxx
In an illegal dismissal case the onus probandi rests on the
employer to prove that its dismissal was for a valid cause.
However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x
x it is incumbent upon private respondent to prove the
employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by
substantial evidence, that he is an employee of petitioners, but
he failed to discharge his burden. The non-issuance of a
company-issued identification card to private respondent
supports petitioners’ contention that private respondent was
not its employee.12
The CA likewise added that Javier’s failure to present salary
vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was
not an employee of Fly Ace. Further, it found that Javier’s work
was not necessary and desirable to the business or trade of the
company, as it was only when there were scheduled deliveries,
which a regular hauling service could not deliver, that Fly Ace
would contract the services of Javier as an extra helper. Lastly,
the CA declared that the facts alleged by Javier did not pass
the "control test."
He contracted work outside the company premises; he was not
required to observe definite hours of work; he was not required
to report daily; and he was free to accept other work elsewhere
as there was no exclusivity of his contracted service to the
company, the same being co-terminous with the trip only.13
Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal
could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PETITIONER WAS NOT A REGULAR
EMPLOYEE OF FLY ACE.
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Dean Ada D. Abad
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PETITIONER IS NOT ENTITLED TO HIS
MONETARY CLAIMS.14
The petitioner contends that other than its bare allegations and
self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javier was engaged on a
pakyaw basis. Assuming that Javier was indeed hired on a
pakyaw basis, it does not preclude his regular employment with
the company. Even the acknowledgment receipts bearing his
signature and the confirming receipt of his salaries will not
show the true nature of his employment as they do not reflect
the necessary details of the commissioned task. Besides,
Javier’s tasks as pahinante are related, necessary and desirable
to the line of business by Fly Ace which is engaged in the
importation and sale of grocery items. "On days when there
were no scheduled deliveries, he worked in petitioners’
warehouse, arranging and cleaning the stored cans for delivery
to clients."15 More importantly, Javier was subject to the
control and supervision of the company, as he was made to
report to the office from Monday to Saturday, from 7:00 o’clock
in the morning until 5:00 o’clock in the afternoon. The list of
deliverable goods, together with the corresponding clients and
their respective purchases and addresses, would necessarily
have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards
working hours, delivery schedule and output, and his other
duties in the warehouse.16
The petitioner chiefly relied on Chavez v. NLRC,17 where the
Court ruled that payment to a worker on a per trip basis is not
significant because "this is merely a method of computing
compensation and not a basis for determining the existence of
employer-employee relationship." Javier likewise invokes the
rule that, "in controversies between a laborer and his master,
x x x doubts reasonably arising from the evidence should be
resolved in the former’s favour. The policy is reflected is no less
than the Constitution, Labor Code and Civil Code."18
Claiming to be an employee of Fly Ace, petitioner asserts that
he was illegally dismissed by the latter’s failure to observe
substantive and procedural due process. Since his dismissal
was not based on any of the causes recognized by law, and was
implemented without notice, Javier is entitled to separation pay
and backwages.
In its Comment,19 Fly Ace insists that there was no substantial
evidence to prove employer-employee relationship. Having a
service contract with Milmar Hauling Services for the purpose
of transporting and delivering company products to customers,
Fly Ace contracted Javier as an extra helper or pahinante on a
mere "per trip basis." Javier, who was actually a loiterer in the
area, only accompanied and assisted the company driver when
Milmar could not deliver or when the exigency of extra
deliveries arises for roughly five to six times a month. Before
making a delivery, Fly Ace would turn over to the driver and
Javier the delivery vehicle with its loaded company products.
With the vehicle and products in their custody, the driver and
Javier "would leave the company premises using their own
means, method, best judgment and discretion on how to
deliver, time to deliver, where and [when] to start, and manner
of delivering the products."20
Fly Ace dismisses Javier’s claims of employment as baseless
assertions. Aside from his bare allegations, he presented
nothing to substantiate his status as an employee. "It is a basic
rule of evidence that each party must prove his affirmative
allegation. If he claims a right granted by law, he must prove
his claim by competent evidence, relying on the strength of his
own evidence and not upon the weakness of his opponent."21
Invoking the case of Lopez v. Bodega City,22 Fly Ace insists

that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that
an employer-employee relationship be proved by substantial
evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for a
valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be
established.
Fly Ace points out that Javier merely offers factual assertions
that he was an employee of Fly Ace, "which are unfortunately
not supported by proof, documentary or otherwise."23 Javier
simply assumed that he was an employee of Fly Ace, absent
any competent or relevant evidence to support it. "He
performed his contracted work outside the premises of the
respondent; he was not even required to report to work at
regular hours; he was not made to register his time in and time
out every time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to other
employees for company violations; he was not issued a
company I.D.; he was not accorded the same benefits given to
other employees; he was not registered with the Social
Security System (SSS) as petitioner’s employee; and, he was
free to leave, accept and engage in other means of livelihood
as there is no exclusivity of his contracted services with the
petitioner, his services being co-terminus with the trip only. All
these lead to the conclusion that petitioner is not an employee
of the respondents."24
Moreover, Fly Ace claims that it had "no right to control the
result, means, manner and methods by which Javier would
perform his work or by which the same is to be
accomplished."25 In other words, Javier and the company
driver were given a free hand as to how they would perform
their contracted services and neither were they subjected to
definite hours or condition of work.
Fly Ace likewise claims that Javier’s function as a pahinante was
not directly related or necessary to its principal business of
importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve the
business of inland transportation. Lastly, the acknowledgment
receipts bearing Javier’s signature and words "pakiao rate,"
referring to his earned salaries on a per trip basis, have
evidentiary weight that the LA correctly considered in arriving
at the conclusion that Javier was not an employee of the
company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javier’s alleged illegal
dismissal is anchored on the existence of an employer-
employee relationship between him and Fly Ace. This is
essentially a question of fact. Generally, the Court does not
review errors that raise factual questions. However, when there
is conflict among the factual findings of the antecedent deciding
bodies like the LA, the NLRC and the CA, "it is proper, in the
exercise of Our equity jurisdiction, to review and re-evaluate
the factual issues and to look into the records of the case and
re-examine the questioned findings."26 In dealing with factual
issues in labor cases, "substantial evidence – that amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion – is sufficient."27
As the records bear out, the LA and the CA found Javier’s claim
of employment with Fly Ace as wanting and deficient. The Court
is constrained to agree. Although Section 10, Rule VII of the
New Rules of Procedure of the NLRC28 allows a relaxation of
the rules of procedure and evidence in labor cases, this rule of
liberality does not mean a complete dispensation of proof.
Labor officials are enjoined to use reasonable means to
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Dean Ada D. Abad
ascertain the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they
provided a license to completely discount evidence, or the lack
of it. The quantum of proof required, however, must still be
satisfied. Hence, "when confronted with conflicting versions on
factual matters, it is for them in the exercise of discretion to
determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their
decision must be supported by substantial evidence."29
Accordingly, the petitioner needs to show by substantial
evidence that he was indeed an employee of the company
against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and
proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the
party on whom the burden to prove lies was able to hurdle the
same. "No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/
gr_179652_2009.html - fnt31 Hence, while no particular form
of evidence is required, a finding that such relationship exists
must still rest on some substantial evidence. Moreover, the
substantiality of the evidence depends on its quantitative as
well as its qualitative aspects."30 Although substantial
evidence is not a function of quantity but rather of quality, the
x x x circumstances of the instant case demand that something
more should have been proffered. Had there been other proofs
of employment, such as x x x inclusion in petitioner’s payroll,
or a clear exercise of control, the Court would have affirmed
the finding of employer-employee relationship."31
In sum, the rule of thumb remains: the onus probandi falls on
petitioner to establish or substantiate such claim by the
requisite quantum of evidence.32 "Whoever claims entitlement
to the benefits provided by law should establish his or her right
thereto x x x."33 Sadly, Javier failed to adduce substantial
evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed
to establish his employment with Fly Ace. By way of evidence
on this point, all that Javier presented were his self-serving
statements purportedly showing his activities as an employee
of Fly Ace. Clearly, Javier failed to pass the substantiality
requirement to support his claim. Hence, the Court sees no
reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed
stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to
fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javier’s cause.
In said document, all Valenzuela attested to was that he would
frequently see Javier at the workplace where the latter was also
hired as stevedore.34 Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable
conclusion that his mere presence at the workplace falls short
in proving employment therein. The supporting affidavit could
have, to an extent, bolstered Javier’s claim of being tasked to
clean grocery items when there were no scheduled delivery
trips, but no information was offered in this subject simply
because the witness had no personal knowledge of Javier’s
employment status in the company. Verily, the Court cannot
accept Javier’s statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the
burden to pass the well-settled tests to determine the existence
of an employer-employee relationship, viz: (1) the selection
and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; and (4) the power to control the
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Dean Ada D. Abad

employee’s conduct. Of these elements, the most important

criterion is whether the employer controls or has reserved the
right to control the employee not only as to the result of the
work but also as to the means and methods by which the result
is to be accomplished.35

In this case, Javier was not able to persuade the Court that the
above elements exist in his case.1avvphi1 He could not submit
competent proof that Fly Ace engaged his services as a regular
employee; that Fly Ace paid his wages as an employee, or that
Fly Ace could dictate what his conduct should be while at work.
In other words, Javier’s allegations did not establish that his
relationship with Fly Ace had the attributes of an employer-
employee relationship on the basis of the above-mentioned
four-fold test. Worse, Javier was not able to refute Fly Ace’s
assertion that it had an agreement with a hauling company to
undertake the delivery of its goods. It was also baffling to
realize that Javier did not dispute Fly Ace’s denial of his
services’ exclusivity to the company. In short, all that Javier
laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him
on a "per trip" rate as a stevedore, albeit on a pakyaw basis.
The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw
basis per the acknowledgment receipts admitted as competent
evidence by the LA. Unfortunately for Javier, his mere denial of
the signatures affixed therein cannot automatically sway us to
ignore the documents because "forgery cannot be presumed
and must be proved by clear, positive and convincing evidence
and the burden of proof lies on the party alleging forgery."36

Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.

One final note. The Court’s decision does not contradict the
settled rule that "payment by the piece is just a method of
compensation and does not define the essence of the
relation."37 Payment on a piece-rate basis does not negate
regular employment. "The term ‘wage’ is broadly defined in
Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and
does not define the essence of the relations. Nor does the fact
that the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining
whether the relationship is that of employer and employee or
one of an independent contractor, each case must be
determined on its own facts and all the features of the
relationship are to be considered."38 Unfortunately for Javier,
the attendant facts and circumstances of the instant case do
not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social

justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided
in favor of labor. Management also has its rights which are
entitled to respect and enforcement in the interest of simple
fair play. Out of its concern for the less privileged in life, the
Court has inclined, more often than not, toward the worker and
upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and
doctrine.39

WHEREFORE, the petition is DENIED. The March 18, 2010

Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are hereby AFFIRMED.

SO ORDERED.

[4] G.R. No. 192998 April 2, 2014
BERNARD A. TENAZAS, JAIME M. FRANCISCO and
ISIDRO G. ENDRACA, Petitioners,
vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO
VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45
of the Rules of Court, assailing the Decision2 dated March 11,
2010 and Resolution3 dated June 28, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with
modification the Decision4 dated June 23, 2009 of the National
Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-
002648-08.
The Antecedent Facts
On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M.
Francisco (Francisco) filed a complaint for illegal dismissal
against R. Villegas Taxi Transport and/or Romualdo Villegas
(Romualdo) and Andy Villegas (Andy) (respondents). At that
time, a similar case had already been filed by Isidro G. Endraca
(Endraca) against the same respondents. The two (2) cases
were subsequently consolidated.5
In their position paper,6 Tenazas, Francisco and Endraca
(petitioners) alleged that they were hired and dismissed by the
respondents on the following dates:
Name Date of Hiring
Date of Dismissal
Salary
Bernard A.
Tenazas 10/1997
07/03/07
Boundary System
Jaime M. Francisco 04/10/04
06/04/07
Boundary System
Isidro G.
Endraca 04/2000
03/06/06
Boundary System7
Relaying the circumstances of his dismissal, Tenazas alleged
that on July 1, 2007, the taxi unit assigned to him was
sideswiped by another vehicle, causing a dent on the left fender
near the driver seat. The cost of repair for the damage was
estimated at ₱500.00. Upon reporting the incident to the
company, he was scolded by respondents Romualdo and Andy
and was told to leave the garage for he is already fired. He was
even threatened with physical harm should he ever be seen in
the company’s premises again. Despite the warning, Tenazas
reported for work on the following day but was told that he can
no longer drive any of the company’s units as he is already
fired.8
Francisco, on the other hand, averred that his dismissal was
brought about by the company’s unfounded suspicion that he
was organizing a labor union. He was instantaneously
terminated, without the benefit of procedural due process, on
June 4, 2007.9
Endraca, for his part, alleged that his dismissal was instigated
by an occasion when he fell short of the required boundary for
his taxi unit. He related that before he was dismissed, he
brought his taxi unit to an auto shop for an urgent repair. He
was charged the amount of ₱700.00 for the repair services and
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Dean Ada D. Abad
the replacement parts. As a result, he was not able to meet his
boundary for the day. Upon returning to the company garage
and informing the management of the incident, his driver’s
license was confiscated and was told to settle the deficiency in
his boundary first before his license will be returned to him. He
was no longer allowed to drive a taxi unit despite his persistent
pleas.10
For their part, the respondents admitted that Tenazas and
Endraca were employees of the company, the former being a
regular driver and the latter a spare driver. The respondents,
however, denied that Francisco was an employee of the
company or that he was able to drive one of the company’s
units at any point in time.11
The respondents further alleged that Tenazas was never
terminated by the company. They claimed that on July 3, 2007,
Tenazas went to the company garage to get his taxi unit but
was informed that it is due for overhaul because of some
mechanical defects reported by the other driver who takes
turns with him in using the same. He was thus advised to wait
for further notice from the company if his unit has already been
fixed. On July 8, 2007, however, upon being informed that his
unit is ready for release, Tenazas failed to report back to work
for no apparent reason.12
As regards Endraca, the respondents alleged that they hired
him as a spare driver in February 2001. They allow him to drive
a taxi unit whenever their regular driver will not be able to
report for work. In July 2003, however, Endraca stopped
reporting for work without informing the company of his
reason. Subsequently, the respondents learned that a
complaint for illegal dismissal was filed by Endraca against
them. They strongly maintained, however, that they could
never have terminated Endraca in March 2006 since he already
stopped reporting for work as early as July 2003. Even then,
they expressed willingness to accommodate Endraca should he
wish to work as a spare driver for the company again since he
was never really dismissed from employment anyway.13
On May 29, 2008, the petitioners, by registered mail, filed a
Motion to Admit Additional Evidence.14 They alleged that after
diligent efforts, they were able to discover new pieces of
evidence that will substantiate the allegations in their position
paper. Attached with the motion are the following: (a) Joint
Affidavit of the petitioners;15 (2) Affidavit of Good Faith of
Aloney Rivera, a co-driver;16 (3) pictures of the petitioners
wearing company shirts;17 and (4) Tenazas’
Certification/Record of Social Security System (SSS)
contributions.18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a
Decision,19 which pertinently states, thus:
In the case of complainant Jaime Francisco, respondents
categorically denied the existence of an employer-employee
relationship. In this situation, the burden of proof shifts to the
complainant to prove the existence of a regular employment.
Complainant Francisco failed to present evidence of regular
employment available to all regular employees, such as an
employment contract, company ID, SSS, withholding tax
certificates, SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim
that he was only an extra driver who stopped reporting to
queue for available taxi units which he could drive. In fact,
respondents offered him in their Position Paper on record,
immediate reinstatement as extra taxi driver which offer he
refused.

In case of Bernard Tenazas, he was told to wait while his taxi
was under repair but he did not report for work after the taxi
was repaired. Respondents[,] in their Position Paper, on record
likewise, offered him immediate reinstatement, which offer he
refused.
We must bear in mind that the complaint herein is one of actual
dismissal. But there was no formal investigations, no show
cause memos, suspension memos or termination memos were
never issued. Otherwise stated, there is no proof of overt act
of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal
dismissal in the case at bar.
The situations contemplated by law for entitlement to
separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated
complaints are hereby dismissed for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to
the NLRC. Subsequently, on June 23, 2009, the NLRC rendered
a Decision,21 reversing the appealed decision of the LA,
holding that the additional pieces of evidence belatedly
submitted by the petitioners sufficed to establish the existence
of employer-employee relationship and their illegal dismissal.
It held, thus:
In the challenged decision, the Labor Arbiter found that it
cannot be said that the complainants were illegally dismissed,
there being no showing, in the first place, that the respondent
[sic] terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of
actual dismissal. But there were no formal investigations, no
show cause memos, suspension memos or termination memos
were never issued. Otherwise stated, there is no proof of overt
act of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal
dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally
dismissed from employment.
It is possible that the complainants’ Motion to Admit Additional
Evidence did not reach the Labor Arbiter’s attention because he
had drafted the challenged decision even before they submitted
it, and thereafter, his staff attended only to clerical matters,
and failed to bring the motion in question to his attention. It is
now up to this Commission to consider the complainants’
additional evidence. Anyway, if this Commission must consider
evidence submitted for the first time on appeal (Andaya vs.
NLRC, G.R. No. 157371, July 15, 2005), much more so must it
consider evidence that was simply overlooked by the Labor
Arbiter.
Among the additional pieces of evidence submitted by the
complainants are the following: (1) joint affidavit (records, p.
51-52) of the three (3) complainants; (2) affidavit (records, p.
53) of Aloney Rivera y Aldo; and (3) three (3) pictures
(records, p. 54) referred to by the complainant in their joint
affidavit showing them wearing t-shirts bearing the name and
logo of the respondent’s company.
xxxx
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Dean Ada D. Abad
WHEREFORE, the decision appealed from is hereby REVERSED.
Respondent Rom[u]aldo Villegas doing business under the
name and style Villegas Taxi Transport is hereby ordered to
pay the complainants the following (1) full backwages from the
date of their dismissal (July 3, 2007 for Tena[z]as, June 4,
2004 for Francisco, and March 6, 2006 for Endraca[)] up to the
date of the finality of this decision[;] (2) separation pay
equivalent to one month for every year of service; and (3)
attorney’s fees equivalent to ten percent (10%) of the total
judgment awards.
SO ORDERED.22
On July 24, 2009, the respondents filed a motion for
reconsideration but the NLRC denied the same in its
Resolution23 dated September 23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with
the CA. On March 11, 2010, the CA rendered a Decision,24
affirming with modification the Decision dated June 23, 2009
of the NLRC. The CA agreed with the NLRC’s finding that
Tenazas and Endraca were employees of the company, but
ruled otherwise in the case of Francisco for failing to establish
his relationship with the company. It also deleted the award of
separation pay and ordered for reinstatement of Tenazas and
Endraca. The pertinent portions of the decision read as follows:
At the outset, We declare that respondent Francisco failed to
prove that an employer-employee relationship exists between
him and R. Transport. If there is no employer-employee
relationship in the first place, the duty of R. Transport to adhere
to the labor standards provisions of the Labor Code with
respect to Francisco is questionable.
xxxx
Although substantial evidence is not a function of quantity but
rather of quality, the peculiar environmental circumstances of
the instant case demand that something more should have
been proffered. Had there been other proofs of employment,
such as Francisco’s inclusion in R.R.
Transport’s payroll, this Court would have affirmed the finding
of employer-employee relationship.1âwphi1 The NLRC,
therefore, committed grievous error in ordering R. Transport to
answer for Francisco’s claims.
We now tackle R. Transport’s petition with respect to Tenazas
and Endraca, who are both admitted to be R. Transport’s
employees. In its petition, R. Transport puts forth the theory
that it did not terminate the services of respondents but that
the latter deliberately abandoned their work. We cannot
subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed
soon after the alleged dates of dismissal, it cannot be inferred
that respondents Tenazas and Endraca intended to abandon
their employment. The complainants for dismissal are, in
themselves, pleas for the continuance of employment. They are
incompatible with the allegation of abandonment. x x x.
For R. Transport’s failure to discharge the burden of proving
that the dismissal of respondents Tenazas and Endraca was for
a just cause, We are constrained to uphold the NLRC’s
conclusion that their dismissal was not justified and that they
are entitled to back wages. Because they were illegally
dismissed, private respondents Tenazas and Endraca are
entitled to reinstatement and back wages x x x.

xxxx
However, R. Transport is correct in its contention that
separation pay should not be awarded because reinstatement
is still possible and has been offered. It is well[-]settled that
separation pay is granted only in instances where
reinstatement is no longer feasible or appropriate, which is not
the case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations
Commission dated 23 June 2009, in NLRC LAC Case No. 07-
002648-08, and its Resolution dated 23 September 2009
denying reconsideration thereof are AFFIRMED with
MODIFICATION in that the award of Jaime Francisco’s claims is
DELETED. The separation pay granted in favor of Bernard
Tenazas and Isidro Endraca is, likewise, DELETED and their
reinstatement is ordered instead.
SO ORDERED.25 (Citations omitted)
On March 19, 2010, the petitioners filed a motion for
reconsideration but the same was denied by the CA in its
Resolution26 dated June 28, 2010.
Undeterred, the petitioners filed the instant petition for review
on certiorari before this Court on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination
of the existence of employer-employee relationship and
whether there was an illegal dismissal. Remarkably, the LA,
NLRC and the CA had varying assessment on the matters at
hand. The LA believed that, with the admission of the
respondents, there is no longer any question regarding the
status of both Tenazas and Endraca being employees of the
company. However, he ruled that the same conclusion does not
hold with respect to Francisco whom the respondents denied to
have ever employed or known. With the respondents’ denial,
the burden of proof shifts to Francisco to establish his regular
employment. Unfortunately, the LA found that Francisco failed
to present sufficient evidence to prove regular employment
such as company ID, SSS membership, withholding tax
certificates or similar articles. Thus, he was not considered an
employee of the company. Even then, the LA held that Tenazas
and Endraca could not have been illegally dismissed since there
was no overt act of dismissal committed by the respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled
that the petitioners were all employees of the company. The
NLRC premised its conclusion on the additional pieces of
evidence belatedly submitted by the petitioners, which it
supposed, have been overlooked by the LA owing to the time
when it was received by the said office. It opined that the said
pieces of evidence are sufficient to establish the circumstances
of their illegal termination. In particular, it noted that in the
affidavit of the petitioners, there were allegations about the
company’s practice of not issuing employment records and this
was not rebutted by the respondents. It underscored that in a
situation where doubt exists between evidence presented by
the employer and the employee, the scales of justice must be
tilted in favor of the employee. It awarded the petitioners with:
(1) full backwages from the date of their dismissal up to the
finality of the decision; (2) separation pay equivalent to one
month of salary for every year of service; and (3) attorney’s
fees.
On petition for certiorari, the CA affirmed with modification the
decision of the NLRC, holding that there was indeed an illegal
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Dean Ada D. Abad
dismissal on the part of Tenazas and Endraca but not with
respect to Francisco who failed to present substantial evidence,
proving that he was an employee of the respondents. The CA
likewise dismissed the respondents’ claim that Tenazas and
Endraca abandoned their work, asseverating that immediate
filing of a complaint for illegal dismissal and persistent pleas
for continuance of employment are incompatible with
abandonment. It also deleted the NLRC’s award of separation
pay and instead ordered that Tenazas and Endraca be
reinstated.28
"Well-settled is the rule that the jurisdiction of this Court in a
petition for review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are completely
devoid of support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts."29 The
Court finds that none of the mentioned circumstances is
present in this case.
In reviewing the decision of the NLRC, the CA found that no
substantial evidence was presented to support the conclusion
that Francisco was an employee of the respondents and
accordingly modified the NLRC decision. It stressed that with
the respondents’ denial of employer-employee relationship, it
behooved Francisco to present substantial evidence to prove
that he is an employee before any question on the legality of
his supposed dismissal becomes appropriate for discussion.
Francisco, however, did not offer evidence to substantiate his
claim of employment with the respondents. Short of the
required quantum of proof, the CA correctly ruled that the
NLRC’s finding of illegal dismissal and the monetary awards
which necessarily follow such ruling lacked factual and legal
basis and must therefore be deleted.
The action of the CA finds support in Anonas Construction and
Industrial Supply Corp., et al. v. NLRC, et al.,30 where the
Court reiterated:
[J]udicial review of decisions of the NLRC via petition for
certiorari under Rule 65, as a general rule, is confined only to
issues of lack or excess of jurisdiction and grave abuse of
discretion on the part of the NLRC. The CA does not assess and
weigh the sufficiency of evidence upon which the LA and the
NLRC based their conclusions. The issue is limited to the
determination of whether or not the NLRC acted without or in
excess of its jurisdiction, or with grave abuse of discretion in
rendering the resolution, except if the findings of the NLRC are
not supported by substantial evidence.31 (Citation omitted and
emphasis ours)
It is an oft-repeated rule that in labor cases, as in other
administrative and quasi-judicial proceedings, "the quantum of
proof necessary is substantial evidence, or such amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion."32 "[T]he burden of proof
rests upon the party who asserts the affirmative of an issue."33
Corollarily, as Francisco was claiming to be an employee of the
respondents, it is incumbent upon him to proffer evidence to
prove the existence of said relationship.
"[I]n determining the presence or absence of an employer-
employee relationship, the Court has consistently looked for
the following incidents, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control
the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is
the most important element."34
There is no hard and fast rule designed to establish the
aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards,

cash vouchers, social security registration, appointment letters
or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status.35
In this case, however, Francisco failed to present any proof
substantial enough to establish his relationship with the
respondents. He failed to present documentary evidence like
attendance logbook, payroll, SSS record or any personnel file
that could somehow depict his status as an employee. Anent
his claim that he was not issued with employment records, he
could have, at least, produced his social security records which
state his contributions, name and address of his employer, as
his co-petitioner Tenazas did. He could have also presented
testimonial evidence showing the respondents’ exercise of
control over the means and methods by which he undertakes
his work. This is imperative in light of the respondents’ denial
of his employment and the claim of another taxi operator,
Emmanuel Villegas (Emmanuel), that he was his employer.
Specifically, in his Affidavit,36 Emmanuel alleged that
Francisco was employed as a spare driver in his taxi garage
from January 2006 to December 2006, a fact that the latter
failed to deny or question in any of the pleadings attached to
the records of this case. The utter lack of evidence is fatal to
Francisco’s case especially in cases like his present
predicament when the law has been very lenient in not
requiring any particular form of evidence or manner of proving
the presence of employer-employee relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court
emphasized, thus:
No particular form of evidence is required to prove the
existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted. For, if only documentary evidence would be
required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no employer
would wish to come out with any trace of the illegality he has
authored considering that it should take much weightier proof
to invalidate a written instrument.38
Here, Francisco simply relied on his allegation that he was an
employee of the company without any other evidence
supporting his claim. Unfortunately for him, a mere allegation
in the position paper is not tantamount to evidence.39 Bereft
of any evidence, the CA correctly ruled that Francisco could not
be considered an employee of the respondents.
The CA’s order of reinstatement of Tenazas and Endraca,
instead of the payment of separation pay, is also well in
accordance with prevailing jurisprudence. In Macasero v.
Southern Industrial Gases Philippines,40 the Court reiterated,
thus:
[A]n illegally dismissed employee is entitled to two reliefs:
backwages and reinstatement.1âwphi1 The two reliefs
provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation
pay is granted. In effect, an illegally dismissed employee is
entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal,
then, are reinstatement without loss of seniority rights, and
payment of backwages computed from the time compensation
was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of
separation pay is in addition to payment of backwages.41
(Emphasis supplied)
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Clearly, it is only when reinstatement is no longer feasible that
the payment of separation pay is ordered in lieu thereof. For
instance, if reinstatement would only exacerbate the tension
and strained relations between the parties, or where the
relationship between the employer and the employee has been
unduly strained by reason of their irreconcilable differences, it
would be more prudent to order payment of separation pay
instead of reinstatement.42
This doctrine of strained relations, however, should not be used
recklessly or applied loosely43 nor be based on impression
alone. "It bears to stress that reinstatement is the rule and, for
the exception of strained relations to apply, it should be proved
that it is likely that if reinstated, an atmosphere of antipathy
and antagonism would be generated as to adversely affect the
efficiency and productivity of the employee concerned."44
Moreover, the existence of strained relations, it must be
emphasized, is a question of fact. In Golden Ace Builders v.
Talde,45 the Court underscored:
Strained relations must be demonstrated as a fact, however,
to be adequately supported by evidence—substantial evidence
to show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the
judicial controversy.46 (Citations omitted and emphasis ours)
After a perusal of the NLRC decision, this Court failed to find
the factual basis of the award of separation pay to the
petitioners. The NLRC decision did not state the facts which
demonstrate that reinstatement is no longer a feasible option
that could have justified the alternative relief of granting
separation pay instead.
The petitioners themselves likewise overlooked to allege
circumstances which may have rendered their reinstatement
unlikely or unwise and even prayed for reinstatement alongside
the payment of separation pay in their position paper.47 A bare
claim of strained relations by reason of termination is
insufficient to warrant the granting of separation pay. Likewise,
the filing of the complaint by the petitioners does not
necessarily translate to strained relations between the parties.
As a rule, no strained relations should arise from a valid and
legal act asserting one’s right.48 Although litigation may also
engender a certain degree of hostility, the understandable
strain in the parties’ relation would not necessarily rule out
reinstatement which would, otherwise, become the rule rather
the exception in illegal dismissal cases.49 Thus, it was a
prudent call for the CA to delete the award of separation pay
and order for reinstatement instead, in accordance with the
general rule stated in Article 27950 of the Labor Code.
Finally, the Court finds the computation of the petitioners'
backwages at the rate of ₱800.00 daily reasonable and just
under the circumstances. The said rate is consistent with the
ruling of this Court in Hyatt Taxi Services, Inc. v. Catinoy,51
which dealt with the same matter.
WHEREFORE, in view of the foregoing disquisition, the petition
for review on certiorari is DENIED. The Decision dated March
11, 2010 and Resolution dated June 28, 2010 of the Court of
Appeals in CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.

[5] G.R. No. 206390
JACK C. VALENCIA, Petitioner,
vs.
CLASSIQUE VINYL PRODUCTS CORPORATION, JOHNNY
CHANG (Owner) and/or CANTINGAS MANPOWER
SERVICES, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari assails the December 5,
2012 Decision1 and March 18, 2013 Resolution2 of the Court
of Appeals (CA) in CA-G.R. SP No. 120999, which respectively
denied the Petition for Certiorari filed therewith by petitioner
Jack C. Valencia (Valencia) and the motion for reconsideration
thereto.
Factual Antecedents
On March 24, 2010, Valencia filed with the Labor Arbiter a
Complaint3 for Underpayment of Salary and Overtime Pay;
Non-Payment of Holiday Pay, Service Incentive Leave Pay,
13th Month Pay; Regularization; Moral and Exemplary
Damages; and, Attorney's Fees against respondents Classique
Vinyl Products Corporation (Classique Vinyl) and its owner
Johnny Chang (Chang) and/or respondent Cantingas
Manpower Services (CMS). When Valencia, however, asked
permission from Chang to attend the hearing in connection the
said complaint on April 17, 2010, the latter allegedly scolded
him and told him not to report for work anymore. Hence,
Valencia amended his complaint to include illegal dismissal.4
In his Sinumpaang Salaysay, 5 Valencia alleged that he applied
for work with Classique Vinyl but was told by the latter's
personnel office to proceed to CMS, a local manpower agency,
and therein submit the requirements for employment. Upon
submission thereof, CMS made him sign a contract of
employment6 but no copy of the same was given to him. He
then proceeded to Classique Vinyl for interview and thereafter
started working for the company in June 2005 as felitizer
operator. Valencia claimed that he worked 12 hours a day from
Monday to Saturday and was receiving ₱187.52 for the first
eight hours and an overtime pay of ₱117.20 for the next four
hours, or beyond the then minimum wage mandated by law.
Five months later, he was made to serve as extruder operator
but without the corresponding increase in sa1aiy. He was
neither paid his holiday pay, service incentive leave pay, and
13th month pay. Worse, premiums for Philhealth and Pag-IBIG
Fund were not paid and his monthly deductions for Social
Security System (SSS) premiums were not properly remitted.
He was also being deducted the amounts of ₱100.00 and
₱60.00 a week for Cash Bond and Agency Fee, respectively.
Valencia averred that his salary was paid on a weekly basis but
his pay slips neither bore the name of Classique Vinyl nor of
CMS; that all the machineries that he was using/operating in
connection with his work were all owned by Classique Vinyl;
and that his work was regularly supervised by Classique Vinyl.
He further averred that he worked for Classique Vinyl for four
years until his dismissal. Hence, by operation of law, he had
already attained the status of a regular employee of his true
employer, Classique Vinyl, since according to him, CMS is a
mere labor-only contractor. Valencia, therefore, argued that
Classique Vinyl should be held guilty of illegal dismissal for
failing to comply with the twin-notice requirement when it
dismissed him from the service and be made to pay for his
monetary claims.
Classique Vinyl, for its part, denied having hired Valencia and
instead pointed to CMS as the one who actually selected,
engaged, and contracted out Valencia's services. It averred
that CMS would only deploy Valencia to Classique Vinyl
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Dean Ada D. Abad
whenever there was an urgent specific task or temporary work
and these occasions took place sometime in the years 2005,
2007, 2009 and 2010. It stressed that Valencia's deployment
to Classique Vinyl was intermittent and limited to three to four
months only in each specific year. Classique Vinyl further
contended that Valencia's performance was exclusively and
directly supervised by CMS and that his wages and other
benefits were also paid by the said agency. It likewise denied
dismissing Valencia from work and instead averred that on April
16, 2010, while deployed with Classique Vinyl, Valencia went
on a prolonged absence from work for reasons only known to
him. In sum, Classique Vinyl asserted that there was no
employer-employee relationship between it and Valencia,
hence, it could not have illegally dismissed the latter nor can it
be held liable for Valencia's monetary claims. Even assuming
that Valencia is entitled to monetary benefits, Classique Vinyl
averred that it cannot be made to pay the same since it is an
establishment regularly employing less than 10 workers. As
such, it is exempted from paying the prescribed wage orders in
its area and other benefits under the Labor Code. At any rate,
Classique Vinyl insisted that Valencia's true employer was CMS,
the latter being an independent contractor as shown by the fact
that it was duly incorporated and registered not only with the
Securities and Exhange Commission but also with the
Department of Labor and Employment; and, that it has
substantial capital or investment in connection with the work
performed and services rendered by its employees to clients.
CMS, on the other hand, denied any employer-employee
relationship between it and Valencia. It contended that after it
deployed Valencia to Classique Vinyl, it was already the latter
which exercised full control and supervision over him. Also,
Valencia's wages were paid by Classique Vinyl only that it was
CMS which physically handed the same to Valencia.
Ruling of the Labor Arbiter
On September 13, 2010, the Labor Arbiter issued a Decision,7
the pertinent portions of which read:
Is [Valencia] a regular employee of respondent (Classique
Vinyl]?
The Certificate of Business Name Registration issued by the
Department of Trade and Industry dated 17 August 2007 and
the Renewal of PRP A License No. M-08-03-269 for the period
29 August 2008 to 28 August 2010 issued by the Regional
Director of the National Capital Region of the Department of
Labor and Employment [on the] 1st day of September 2008
are pieces of evidence to prove that respondent [CMS] is a
legitimate Private Recruitment and Placement Agency.
Pursuant to its business objective, respondent CMS entered
into several Employment Contracts with complainant Valencia
as Contractual Employee for deployment to respondent
[Classique Vinyl], the last of which was signed by [Valencia] on
06 February 2010.
The foregoing Employment Contract for a definite period
supports respondent [Classique Vinyl's] assertion that
[Valencia] was not hired continuously but intermittently
ranging from 3 months to 4 months for the years 2005, 2007,
2009 and 2010. Notably, no controverting evidence was
offered to dispute respondent [Classique Vinyl's] assertion.
Obviously, [Valencia] was deployed by CMS to [Classique Vinyl]
for a fixed period.
In Pangilinan v. General Milling Corporation, G.R. No. 149329,
July 12, 2004, the Supreme Court ruled that it does not
necessarily follow that where the duties of the employee
consist of activities usually necessary or desirable in the usual
business of the employer, the parties are forbidden from

agreeing on a period of time for the performance of such
activities. There is thus nothing essentially contradictory
between a definite period of employment and the nature of the
employee's duties.
Thus, even if respondent [Classique Vinyl] exercises full control
and supervision over the activities perfom1ed by [Valencia],
the latter's employment cannot be considered as regular.
Likewise, even if [Valencia] is considered the regular employee
of respondent CMS, the complaint for illegal dismissal cannot
prosper as [the] employment was not terminated by
respondent CMS.
On the other hand, there is no substantial evidence to support
[Valencia's] view that he was actually dismissed from his
employment by respondent [Classique Vinyl]. After all, it is
elementary that he who makes an affirmative allegation has
the burden of proof. On this score, [Valencia] failed to establish
that he was actually dismissed from his job by respondent
[Classique Vinyl], aside from his bare allegation.
With regard to underpayment of salary, respondent CMS
admitted that it received from respondent [Classique Vinyl] the
salary for [Valencia's] deployment. Respondent CMS never
contested that the amount received was sufficient for the
payment of [Valencia's] salary.
Furthermore, respondent [Classique Vinyl] cannot be obliged
to pay [Valencia's] overtime pay, holiday pay, service incentive
leave and 13th month pay as well as the alleged illegal
deduction on the following grounds:
a) [Valencia] is not a rank-and-file employee of [Classique
Vinyl];
b) No proof was offered to establish that [Valencia] actually
rendered overtime services;
c) [Valencia had] not [worked] continuously or even
intermittently for [one whole] (1) year[-]period during the
specific year of his deployment with respondent [Classique
Vinyl] to be entitled to service incentive leave pay.
d) [Valencia] failed to offer substantial evidence to prove that
respondent [Classique Vinyl] illegally deducted from his sala.7
the alleged agency and cash bond.
Moreover, as against respondent CMS[,] the record is bereft of
factual basis for the exact computation of [Valencia's] money
claims as it has remained uncontroverted that [Valencia] was
not deployed continuously neither with respondent [Classique
Vinyl] and/or to such other clientele.
WHEREFORE, premises considered, judgment is hereby
rendered [d]ismissing the above-entitled case for lack of merit
and/or factual basis
SO ORDERED,8
Ruling of the National Labor Relations Commission
Valencia promptly appealed to the National Labor Relations
Commission (NLRC). Applying the four-fold test, the NLRC,
however, declared CMS as Valencia's employer in its
Resolution9 dated April 14, 2011, viz.:
In Order to determine the existence of an employer-employee
relationship, the following yardstick had been consistently
applied: (l) the selection and engagement; (2) payment of
wages; (3) power of dismissal and; (4) the power to control
the employee[']s conduct.
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Dean Ada D. Abad
In this case, [Valencia] admitted that he applied for work with
respondent [CMS] x x x. Upon the acceptance of his
application, he was made to sign an employment contract x x
x. [Valencia] also admitted that he received his wages from
respondent [CMS] x x x. As a matter of fact, respondent [CMS]
argued that [Valencia] was given a non-cash wage in the
approximate amount of Php3,000.00 x x x.
Notably, it is explicitly stated in the employment contract of
[Valencia] that he is required to observe all the rules and
regulations of the company as well as [the] lawful instructions
of the management during his employment. That failure to do
so would cause the termination of his employment contract.
The pertinent provision of the contract reads:
2. The employee shall observe all the rules and regulations of
the company during the period of employment and [the] lawful
instructions of the management or its representatives. Failure
to do so or if performance is below company standards,
management [has] the right to immediatelycancel this
contract. x x x
The fact that [Vale1icia] was subjected to such restriction is an
evident exercise of the power of control over [Valencia].
The power of control of respondent [CMS] over Valencia was
further bolstered by the declaration of the former that they will
not take against [Valencia] his numerous tardiness and
absences at work and[;] his nonobservance of the company
rules,· The statement of [CMS] reads:
Needless to say that [Valencia] in the course of his employment
has incurred many infractions like tardiness and absences,
non-observance of company rules, but respondent [CMS], in
reiteration will not take this up as leverage against [Valencia].
xxx
Though [Valencia] worked in the premises of Classique Vinyl x
x x and that the [equipment] he used in the performance of his
work was provided by the between [Valencia] and Classique
Vinyl x x x in view of the foregoing circumstances earlier
reflected. Besides, as articulated by jurisprudence, the power
of control does not require actual exercise of the power but the
power to wield that power x x x.
With the foregoing chain of events, it is evident that [Valencia]
is an employee of respondent [CMS].
x x x x10
Accordingly, the NLRC held that there is no basis for Valencia
to hold Classique Vinyl liable for his alleged illegal dismissal as
well as for his money claims. Hence, the NLRC dismissed
Valencia's appeal and affirmed the decision of the Labor
Arbiter.
Valencia's motion for reconsideration thereto was likewise
denied for lack of merit in the Resolution11 dated June 8, 2011.
Ruling of the Court of Appeals
When Valencia sought recourse from the CA, the said court
rendered a Decision12 dated December 5, 2012 denying his
Petition for Certiorari and affirming the ruling of the NLRC.
Valencia's motion for reconsideration was likewise denied in a
Resolution 13 dated March 18, 2013.
Hence, this Petition for Review on Certiorari imputing upon the
CA the following errors:

WITH DUE RESPECT, IT IS A SERIOUS ERROR WHICH
CONSTITUTE[S] GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR IN EXCESS OF JURISDICTION ON THE PART OF
THE HONORABLE COURT OF APPEALS TO HAVE RULED THAT
PETITIONER IS AN EMPLOYEE OF CMS AND FURTHER RULED
THAT HE IS NOT ENTITLED TO HIS MONETARY CLAIMS.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS[']
DECISION AND RESOLUTION ARE CONTRARY TO LAW AND
WELL-SETTLED RULE.14
Valencia points out that the CA, in ruling that he was an
employee of CMS, relied heavily on the employment contract
which the latter caused him to sign. He argues, however, that
the said contract deserves scant consideration since aside from
being improperly filled up (there were many portions without
entries), the same was not notarized. Valencia likewise
stresses that ti.11e burden of proving that CMS is a legitimate
job contractor lies with respondents. Here, neither Classique
Vinyl nor CMS was able to present proof that the latter has
substantial capital to do business as to be considered a
legitimate independent contractor. Hence, CMS is presumed to
be a mere labor-only contractor and Classique Vinyl, as CMS'
principal, was Valencia's true employer. As to his alleged
dismissal, Valencia argues that respondents failed to establish
just or authorized cause, thus, his dismissal was illegal. Anent
his monetary claims, Valencia invokes the principle that he who
pleads payment has the burden of proving it. Since
respondents failed to present even a single piece of evidence
that he has been paid his labor standards benefits, he believes
that he is entitled to recover them from respondents who must
be held jointly and severally liable for the same. Further,
Valencia contends that respondents should be assessed moral
and exemplary damages for circumventing pertinent labor laws
by preventing him from attaining regular employment status.
Lastly, for having been compelled to engage the services of
counsel, Valencia claims that he is likewise entitled to
attorney's fees.
For their part, respondents Classique Vinyl and Chang point out
that the issues raised by Valencia involve questions of fact
which are not within the ambit of a petition for review on
certiorari. Besides, findings of facts of the labor tribunals when
affirmed by the CA are generally binding on this Court. At any
rate, the said respondents reiterate the argun1ents they raised
before the labor tribunals and the CA.
With respect to respondent CMS, the Court dispensed with the
filing of its comment15 when the resolution requiring it to file
one was returned to the Court unserved 16 and after Valencia
informed the Court that per Certification 17 of the Office of the
Treasurer of Valenzuela City where CMS's office was located,
the latter had already closed down its business on March 21,
2012.
Our Ruling
There is no merit in the Petition.
The core issue here is whether there exists an employer-
employee relationship between Classique Vinyl and Valencia.
Needless to state, it is from the said detennination that the
other issues raised, i.e., whether Valencia was illegally
dismissed by Classique Vinyl and whether the latter is liable for
his monetary claims, hinge. However, as correctly pointed out
by Classique Vinyl, "[t]he issue of whether or not an employer-
employee relationship existed between [Valencia] and
[Classique Vinyl] is essentially a question of fact." 18 "The
Court is not a trier of facts and will not review the factual
findings of the lower tribunals as these are generally binding
and conclusive."'19 While there are recognized exceptions,20
none of them applies in this case.
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Even if otherwise, the Court is not inclined to depart from the
uniform findings of the Labor Arbiter, the NLRC and the CA.
"It is an oft-repeated rule that in labor cases, as in other
administrative and quasi-judicial proceedings, 'the quantum of
proof necessary is substantial evidence, or such amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.’ ‘The burden of proof rests
upon the party who asserts the affirmative of an issue’."21
Since it is Valencia here who is claiming to be an employee of
Classique Vinyl, it is thus incumbent upon him to proffer
evidence to prove the existence of employer-employee
relationship between them. He "needs to show by substantial
evidence that he was indeed an employee of the company
against which he claims illegal dismissal."22 Corollary, the
burden to prove the elements of an employer-employee
relationship, viz.: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power of control, lies upon Valencia.
Indeed, there is no hard and fast rule designed to establish the
aforementioned elements of employer-employee
relationship.23 "Any competent and relevant evidence to prove
the relationship may be admitted."24 In this case, however,
Valencia failed to present competent evidence, documentary or
otherwise, to support his claimed employer-employee
relationship between him and Classique Vinyl. All he advanced
were mere factual assertions unsupported by proof.
In fact, most of Valencia's allegations even militate against his
claim that Classique Vinyl was his true employer. For one,
Valencia stated in his Sinumpaang Salaysay that his application
was actually received and processed by CMS which required
him to submit the necessary requirements for employment.
Upon submission thereof, it was CMS that caused him to sign
an employment contract, which upon perusal, is actually a
contract between him and CMS. It was only after he was
engaged as a contractual employee of CMS that he was
deployed to Classique Vinyl. Clearly, Valencia's selection and
engagement was undertaken by CMS and conversely, this
negates the existence of such element insofar as Classique
Vinyl is concerned. It bears to state, in addition, that as
opposed to Valencia's argument, the lack of notarization of the
said employment contract did not adversely affect its veracity
and effectiveness since significantly, Valencia does not deny
having signed the same.25 The CA, therefore, did not err in
relying on the said employment contract in its determination of
the merits of this case. For another, Valencia himself
acknowledged that the pay slips26 he submitted do not bear
the name of Classique Vinyl. While the Court in Vinoya v.
National Labor Relations Commission27took judicial notice of
the practice of employer to course through the purported
contractor the act of paying wages to evade liabilities under the
Labor Code, hence, the non-appearance of employer's name in
the pay slip, the Court is not inclined to rule that such is the
case here. This is conside1ing that although CMS claimed in its
supplemental Position Paper/Comment that the money it used
to pay Valencia's wages came from Classique Vinyl,28 the
same is a mere allegation without proof Moreover, such
allegation is inconsistent with CMS's earlier assertion in its
Position Paper29 that Valencia received from it non-cash wages
in an approximate amount of ₱3,000.00. A clear showing of the
element of payment of wages by Classique Vinyl is therefore
absent.
Aside from the afore-mentioned inconsistent allegations of
Valencia, his claim that his work was supervised by Classique
Vinyl does not hold water. Again, the Court finds the same as
a self-serving assertion unworthy of credence. On the other
hand, the employment contract which Valencia signed with
CMS categorically states that the latter possessed not only the
power of control but also of dismissal over him, viz.:
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xxxx

2. That the employee shall observe all rules and regulations of

the company during the period of employment and [the] lawful
instructions of the management or its representatives. Failure
to do so or if performance is below company standards,
management [has] the right to immediately cancel this
contract.

x x x x30

Clearly, therefore, no error can be attributed on the part of the

labor tribunals and the CA in ruling out the existence of
employer-employee relationship between Valencia and
Classique Vinyl.

Further, the Court finds untenable Valencia's argument that

neither Classique Vinyl nor CMS was able to present proof that
the latter is a legitimate independent contractor and therefore,
unable to rebut the presumption that a contractor is presumed
to be a labor-only contractor. "Genera1ly, the presumption is
that the contractor is a labor-only [contractor] unless such
contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the lik.e."31 Here, to
prove that CMS was a legitimate contractor, Classique Vinyl
presented the former's Certificate of Registration32 with the
Department of Trade and Industry and, License33 as private
recruitment and placement agency from the Department of
Labor and Employment. Indeed, these documents are not
conclusive evidence of the status of CMS as a contractor.
However, such fact of registration of CMS prevented the legal
presumption of it being a mere labor-only contractor from
arising.34 In any event, it must be stressed that "in labor-only
contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if
such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarily
liable with the labor-only contractor for all the rightful claims
of the employees."35 The facts of this case, however, failed to
establish that there is any circumvention of labor laws as to call
for the creation by the statute of an employer-employee
relationship between Classique Vinyl and Valencia. In fact,
even as against CMS, Valencia's money claims has been
debunked by the labor tribunals and the CA. Again, the Court
is not inclined to disturb the same.

In view of the above disquisition, the Court finds no necessity

to dwell on the issue of whether Valencia was illegally
dismissed by Classique Vinyl and whether the latter is liable for
Valencia's money claims.

WHEREFORE, the Petition for Review on Certiorari is DENIED.

'The assailed December 5, 2012 Decision and March 18, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 120999
are AFFIRMED.

SO ORDERED.

[6] G.R. No. 173489 February 25, 2013
ALILEM CREDIT COOPERATIVE, INC., now known as
ALILEM MULTIPURPOSE COOPERATIVE, INC., Petitioner,
vs.
SALVADOR M. BANDIOLA, JR., Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court filed by petitioner Alilem Credit Cooperative, Inc.
against respondent Salvador M. Bandiola, Jr. assailing the
Court of Appeals (CA) Decision1 dated January 16, 2006 and
Resolution2 dated July 5, 2006 in CAG. R. SP No. 64554.
The case stemmed from the following facts:
Respondent was employed by petitioner as bookkeeper.
Petitioner's Board of Directors (the Board) received a letter
from a certain Napoleon Gao-ay (Napoleon) reporting the
alleged immoral coaduct and unbecoming behavior of
respondent by having an illicit relationship with Napoleon’s
sister, Thelma G. Palma (Thelma). This prompted the Board to
conduct a preliminary investigation.3
During the preliminary investigation, the Board received the
following evidence of respondent’s alleged extramarital affair:
1. Melanie Gao-ay’s (Melanie) sworn statement declaring that
sometime in December 1996, respondent slept on the same
bed with Thelma in a boarding house in San Fernando, La Union
where she (Melanie) and Thelma resided. She personally
witnessed the intimacy of respondent and Thelma when they
engaged in lovemaking as they slept in one room and openly
displayed their affection for each other.4
2. Rosita Tegon’s (Rosita) sworn statement that on May 23,
1997, she saw Thelma talk to respondent in petitioner’s office
asking him to accompany her in San Fernando, La Union.5
3. Emma Gao-ay Lubrin’s (Emma, Thelma’s sister) interview
wherein she admitted that she and her family confronted
Thelma about the alleged extramarital affair which Thelma
allegedly admitted.6
4. Napoleon’s interview with the Board wherein he claimed that
their family tried to convince Thelma to end her extramarital
affair with respondent but instead of complying, she in fact
lived together with respondent.7
The Board decided to form an Ad Hoc Committee to investigate
the charges against respondent yielding the following
additional evidence:
1. Agustina Boteras’ (Agustina) sworn statement that she
witnessed a confrontation between Thelma and her sister in the
latter’s residence concerning the alleged extramarital affair. At
that time, respondent’s wife was allegedly present who in fact
pleaded Thelma to end her relationship with respondent but
she supposedly said "No way!"8
2. Milagros Villacorte’s sworn statement that while she was at
the Bethany Hospital in San Fernando, La Union where her
husband was confined, respondent approached her and asked
her to look for Thelma who was then having her class. When
he finally found her, respondent and Thelma met and talked in
the hospital premises.9
3. Julienne Marie L. Dalangey’s certification that on August 9
to 10, 1996, respondent attended a seminar on Internal
Control and Systems Design I at the Northern Luzon Federation
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Dean Ada D. Abad
of Cooperatives and Development Center (NORLU) Pension
House in Baguio City, together with a lady companion whom
he introduced as his wife. Apparently, the lady was not his wife
because at that time, his wife reported for work in the Municipal
Hall of Alilem.10
Respondent, on the other hand, denied the accusation against
him. He, instead, claimed that the accusation was a result of
the insecurity felt by some members of the cooperative and of
the Board because of his growing popularity owing to his
exemplary record as an employee.11 Thelma executed an
affidavit likewise denying the allegations of extra-marital
affair.12
Meanwhile, on June 7, 1997, the Board received a petition from
about fifty members of the cooperative asking the relief of
respondent due to his illicit affair with Thelma.13
In its Summary Investigation Report, the Ad Hoc Committee
concluded that respondent was involved in an extra-marital
affair with Thelma. On July 10, 1997, the Chairman of the
Board sent a letter14 to respondent informing him of the
existence of a prima facie case against him for "illicit marital
affair, an act that brings discredit to the cooperative
organization and a cause for termination per AMPC (Alilem
Multi-Purpose Cooperative) Personnel Policy. Respondent was
directed to appear and be present at the AMPC office for a
hearing. He was likewise advised of his right to be assisted by
counsel.
On the day of the hearing, respondent requested15 for
postponement on the ground that his lawyer was not available.
The request was, however, denied and the hearing proceeded
as scheduled.
In a Memorandum16 dated July 16, 1997, respondent was
informed of Board Resolution No. 05, series of 199717
embodying the Board’s decision to terminate his services as
bookkeeper of petitioner, effective July 31, 1997, without any
compensation or benefit except the unpaid balance of his
regular salary for services actually rendered.18
Aggrieved, respondent filed a Complaint for Illegal Dismissal
against petitioner before the Regional Arbitration Branch of the
National Labor Relations Commission (NLRC).19
On April 30, 1998, the Labor Arbiter (LA) dismissed20
respondent’s complaint for lack of merit. The LA concluded that
respondent had been or might still be carrying on an affair with
a married woman. The LA found it unforgiving in the case of a
married employee who sleeps with or has illicit relations with
another married person for in such case, the employee sullies
not only the reputation of his spouse and his family but the
reputation as well of the spouse of his paramour and the latter’s
family.21 As opposed to respondent’s claim that the accusation
is a mere fabrication of some of the directors or cooperative
members who were allegedly envious of his growing popularity,
the LA gave more credence to the testimonies of petitioner’s
witnesses who were relatives of Thelma and who had no motive
to falsely testify because their family reputation was likewise
at a risk of being tarnished.22 The LA, thus, found respondent
to have been validly dismissed from employment for violation
of the cooperative’s Personnel Policy, specifically "the
commission of acts that bring discredit to the cooperative
organization, especially, but not limited to conviction of any
crime, illicit marital affairs, scandalous acts inimical to
established and accepted social mores." The LA also found no
violation of respondent’s right to due process as he was given
ample opportunity to defend himself from the accusation
against him.23
On appeal, the NLRC set aside24 the LA decision and rendered
a judgment disposed in this wise:

WHEREFORE, the appealed Decision of the Executive Labor
Arbiter is SET ASIDE. Judgment is hereby rendered:
1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI)
also known as Alilem Multi-Purpose Cooperative (AMPC) guilty
of illegal dismissal for the reasons above-discussed;
2. directing the said respondent to pay complainant Salvador
Bandiola, Jr. full backwages computed from the time of (sic)
his wages were withheld until finality of this judgment;
3. directing, on account of strained relationship between the
parties, the above-named respondent to pay complainant, in
lieu of reinstatement, separation pay computed at one (1)
month pay for every year of service, a fraction of six (6)
months to be computed as one (1) whole year; [and]
4. directing respondent to pay complainant ten (10%) percent
attorney’s fees based on the total monetary award.
SO ORDERED.25
The NLRC found petitioner’s Personnel Policy to be of
questionable existence and validity because it was
unnumbered.26 It held that even assuming that respondent
had an extra-marital affair with a married woman, the latter is
not his fellow worker in petitioner’s business establishment.27
It, thus, concluded that respondent’s dismissal was not
founded on any of the just causes for termination of
employment under Article 282 of the Labor Code, as
amended.28 It, likewise, declared that respondent was not
afforded his right to his counsel of choice as his request for
postponement was not allowed.29 Therefore, the NLRC
declared respondent’s dismissal from employment illegal,
entitling him to the payment of backwages, separation pay,
and attorney’s fees.30
Petitioner elevated the matter to the CA, but it failed to obtain
a favorable decision. The CA found respondent’s dismissal
being founded on the serious misconduct he allegedly
committed by carrying an illicit relationship with a married
woman.31 While considering said act a serious misconduct, it
refused to consider it sufficient to justify respondent’s
dismissal, because it was not done in the performance of his
duties as would make him unfit to continue working for
petitioner.32 Petitioner’s motion for reconsideration was
likewise denied in the assailed July 5, 2006 resolution.
Unsatisfied, petitioner now comes before the Court in this
petition for review on certiorari insisting on the validity of
respondent’s dismissal from employment.
We find merit in the petition.
It is undisputed that respondent was dismissed from
employment for engaging in extramarital affairs, a ground for
termination of employment stated in petitioner’s Personnel
Policy. This basis of termination was made known to
respondent as early as the first communication made by
petitioner. In its June 20, 1997 letter, petitioner directed
respondent to explain in writing or personal confrontation why
he should not be terminated for violation of Section 4.1.4 of
the Personnel Policy.33 Respondent merely denied the
accusation against him34 and did not question the basis of such
termination. When the LA was called upon to decide the illegal
dismissal case, it ruled in favor of petitioner and upheld the
basis of such dismissal which is the cited Personnel
Policy.1âwphi1 The NLRC, however, refused to recognize the
existence and validity of petitioner’s Personnel Policy on which
the ground for termination was embodied.35
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Dean Ada D. Abad
The existence of the Personnel Policy containing provisions on
the grounds for termination of employees was not questioned
by respondent. In his position paper, respondent only assailed
the effectivity of the policy, as for him as it was amended on
the same date as the letter-complaints against him. In other
words, he claimed that the policy was amended in order to
include therein the ground for his termination to make sure
that he is removed from his position.36
We do not subscribe to such an argument.
A comparison of petitioner’s old and new Personnel Policies
attached by respondent himself to his Position Paper shows
that under the old policy, one of the grounds for termination of
an employee is "commission of acts or commission (sic) of
duties that bring discredit to the organization,37" while under
the new policy, one of the grounds is the "commission of acts
that brings (sic) discredit to the cooperative organization,
especially, but not limited to, conviction of any crime, illicit
marital affairs, scandalous acts inimical to established and
accepted social mores."38 Contrary to respondent’s claim, with
the amendment of the Personnel Policy, petitioner did not
create a new ground for the termination of employment to
make sure that respondent is removed from his position. The
quoted ground under the old policy is similar to that provided
for in the new policy. The enumeration containing the specific
act of "illicit marital affairs" is not an additional ground, but an
example of an act that brings discredit to the cooperative. It is
merely an interpretation of what petitioner considers as such.
It is, thus, clear from the foregoing that engaging in extra-
marital affairs is a ground for termination of employment not
only under the new but even under the old Personnel Policy of
petitioner. The effectivity of the policy as to respondent cannot,
therefore, be questioned.
To be sure, an employer is free to regulate all aspects of
employment.39 It may make reasonable rules and regulations
for the government of its employees which become part of the
contract of employment provided they are made known to the
employee.40 In the event of a violation, an employee may be
validly terminated from employment on the ground that an
employer cannot rationally be expected to retain the
employment of a person whose lack of morals, respect and
loyalty to his employer, regard for his employer’s rules and
application of the dignity and responsibility, has so plainly and
completely been bared.41
Applying now the above-discussed ground for termination, we
now determine whether respondent was properly dismissed
from employment. In other words, did petitioner adequately
prove that respondent indeed engaged in extra-marital affairs,
an act which petitioner considers as would bring discredit to
the cooperative?
We answer in the affirmative.
The employer’s evidence consists of sworn statements of either
relatives or friends of Thelma and respondent. They either had
direct personal knowledge of the illicit relationship or revealed
circumstances indicating the existence of such relationship. As
aptly observed by the LA:
x x x Moreover, the credibility of the persons who bore witness
against him can hardly be questioned because some of these
persons are relatives or friends of either [respondent] or his
lover. In particular, it is hard to see how Napoleon Gao-ay, the
brother of his lover, Thelma, could have resorted to a lie just
to destroy him when the same scandal could also result in
tarnishing the reputation of his own family. The motive of
Napoleon in bringing the matter to the attention of the Board
of Directors, after all, was based on ethical grounds – he
wanted a stop to the affair because it was a disgrace to the
community.
 Labor Law Review | Cases
Dean Ada D. Abad

There is also no reason to doubt the statement of Melanie Gao-

ay, the wife of Napoleon, who witnessed the embarrassing
"encounter", to borrow the term she used, between
[respondent] and Thelma in her own boarding house.42

While respondent’s act of engaging in extra--marital affairs

may be considered personal to him and does not directly affect
the performance of his assigned task as bookkeeper, aside
from the fact that the act was specifically provided for by
petitioner’s Personnel Policy as one of the grounds for
termination of employment, said act raised concerns to
petitioner as the Board received numerous complaints and
petitions from the cooperative members themselves asking for
the removal of respondent because of his immoral conduct.43

The next question is whether procedural due process was

observed in the termination of respondent’s services. "Before
the services of an employee can be validly terminated, the
employer must furnish him two written notices: (a) a written
notice served on the employee specifying the ground or
grounds for termination, and giving the employee reasonable
opportunity to explain his side; and (b) a written notice of
termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been
established to justify his termination."44 The employer must
inform the employee of the charges against him and to hear
his defenses. A full adversarial proceeding is not necessary as
the parties may be heard through pleadings, written
explanations, position papers, memorandum or oral
argument.45

In this case, respondent was adequately afforded the

opportunity to defend himself and explain the accusation
against him. Upon receipt of the complaint, petitioner
conducted a preliminary investigation and even created an Ad
Hoc Committee to investigate the matter. Respondent was
directed to explain either in writing or by a personal
confrontation with the Board why he should not be terminated
for engaging in illicit affair.46 Not only did petitioner give him
the opportunity but respondent in fact informed petitioner that
he opted to present his side orally47 and did so as promised
when he specifically denied such allegations before the AdHoc
Committee.48 Moreover, respondent was also allowed to
peruse the investigation report prepared by the Ad Hoc
Committee and was advised that he was entitled to assistance
of counsel.49 Afterwhich, hearing was conducted. It was only
after thorough investigation and proper notice and hearing to
respondent that petitioner decided whether to dismiss the
former or not. The decision to terminate respondent from
employment was embodied in Board Resolution No. 05, series
of 1997 a copy of which was furnished respondent.50 With this
resolution, respondent was adequately notified of petitioner’s
decision to remove him from his position. Respondent cannot
now claim that his right to due process was infringed upon.

WHEREFORE, premises considered, the petition is hereby

GRANTED. The Court of Appeals Decision dated January 16,
2006 and Resolution dated July 5, 2006 in CA-G.R. SP No.
64554, are SET ASIDE. The Labor Arbiter's Decision dated April
30, 1998 in NLRC Case No. RAB-1-08-1144-97 (IS) dismissing
respondent Salvador M. Bandiola, Jr.'s complaint against
petitioner Alilem Credit Cooperative, Inc., Is REINSTATED.

SO ORDERED.

[7] G.R. No. 178505, September 30, 2008
CHERRY J. PRICE, STEPHANIE G. DOMINGO AND LOLITA
ARBILERA, Petitioners,
- versus -
INNODATA PHILS. INC.,/ INNODATA CORPORATION,
LEO RABANG AND JANE NAVARETTE, Respondents.
DECISION
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules
of Court assails the Decision1 dated 25 September 2006 and
Resolution2 dated 15 June 2007 of the Court of Appeals in CA-
G.R. SP No. 72795, which affirmed the Decision dated 14
December 2001 of the National Labor Relations Commission
(NLRC) in NLRC NCR Case No. 30-03-01274-2000 finding that
petitioners were not illegally dismissed by respondents.
The factual antecedents of the case are as follows:
Respondent Innodata Philippines, Inc./Innodata Corporation
(INNODATA) was a domestic corporation engaged in the data
encoding and data conversion business. It employed encoders,
indexers, formatters, programmers, quality/quantity staff, and
others, to maintain its business and accomplish the job orders
of its clients. Respondent Leo Rabang was its Human Resources
and Development (HRAD) Manager, while respondent Jane
Navarette was its Project Manager. INNODATA had since
ceased operations due to business losses in June 2002.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita
Arbilera were employed as formatters by INNODATA. The
parties executed an employment contract denominated as a
"Contract of Employment for a Fixed Period," stipulating that
the contract shall be for a period of one year,3 to wit:
CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD
xxxx
WITNESSETH: That
WHEREAS, the EMPLOYEE has applied for the position of
FORMATTER and in the course thereof and represented
himself/herself to be fully qualified and skilled for the said
position;
WHEREAS, the EMPLOYER, by reason of the aforesaid
representations, is desirous of engaging that the (sic) services
of the EMPLOYEE for a fixed period;
NOW, THEREFORE, for and in consideration of the foregoing
premises, the parties have mutually agreed as follows:
TERM/DURATION
The EMPLOYER hereby employs, engages and hires the
EMPLOYEE and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective FEB. 16, 1999 to FEB.
16, 2000 a period of ONE YEAR.
xxxx
TERMINATION
6.1 In the event that EMPLOYER shall discontinue operating its
business, this CONTRACT shall also ipso facto terminate on the
last day of the month on which the EMPLOYER ceases
operations with the same force and effect as is such last day of
the month were originally set as the termination date of this
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Dean Ada D. Abad
Contract. Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the
project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the
need for personnel, and/or overstaffing, this contract maybe
pre-terminated by the EMPLOYER upon giving of three (3) days
notice to the employee.
6.2 In the event period stipulated in item 1.2 occurs first vis-
à-vis the completion of the project, this contract shall
automatically terminate.
6.3 COMPANY’s Policy on monthly productivity shall also apply
to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this
CONTRACT, with or without cause, by giving at least Fifteen –
(15) notice to that effect. Provided, that such pre-termination
shall be effective only upon issuance of the appropriate
clearance in favor of the said EMPLOYEE.
6.5 Either of the parties may terminate this Contract by reason
of the breach or violation of the terms and conditions hereof by
giving at least Fifteen (15) days written notice. Termination
with cause under this paragraph shall be effective without need
of judicial action or approval.4
During their employment as formatters, petitioners were
assigned to handle jobs for various clients of INNODATA,
among which were CAS, Retro, Meridian, Adobe, Netlib, PSM,
and Earthweb. Once they finished the job for one client, they
were immediately assigned to do a new job for another client.
On 16 February 2000, the HRAD Manager of INNODATA wrote
petitioners informing them of their last day of work. The letter
reads:
RE: End of Contract
Date: February 16, 2000
Please be informed that your employment ceases effective at
the end of the close of business hours on February 16, 2000.5
According to INNODATA, petitioners’ employment already
ceased due to the end of their contract.
On 22 May 2000, petitioners filed a Complaint6 for illegal
dismissal and damages against respondents. Petitioners
claimed that they should be considered regular employees
since their positions as formatters were necessary and
desirable to the usual business of INNODATA as an encoding,
conversion and data processing company. Petitioners also
averred that the decisions in Villanueva v. National Labor
Relations Commission7 and Servidad v. National Labor
Relations Commission,8 in which the Court already purportedly
ruled "that the nature of employment at Innodata Phils., Inc.
is regular,"9 constituted stare decisis to the present case.
Petitioners finally argued that they could not be considered
project employees considering that their employment was not
coterminous with any project or undertaking, the termination
of which was predetermined.
On the other hand, respondents explained that INNODATA was
engaged in the business of data processing, typesetting,
indexing, and abstracting for its foreign clients. The bulk of the
work was data processing, which involved data encoding. Data
encoding, or the typing of data into the computer, included pre-
encoding, encoding 1 and 2, editing, proofreading, and
scanning. Almost half of the employees of INNODATA did data
encoding work, while the other half monitored quality control.
Due to the wide range of services rendered to its clients,
INNODATA was constrained to hire new employees for a fixed

period of not more than one year. Respondents asserted that
petitioners were not illegally dismissed, for their employment
was terminated due to the expiration of their terms of
employment. Petitioners’ contracts of employment with
INNODATA were for a limited period only, commencing on 6
September 1999 and ending on 16 February 2000.10
Respondents further argued that petitioners were estopped
from asserting a position contrary to the contracts which they
had knowingly, voluntarily, and willfully agreed to or entered
into. There being no illegal dismissal, respondents likewise
maintained that petitioners were not entitled to reinstatement
and backwages.
On 17 October 2000, the Labor Arbiter11 issued its Decision12
finding petitioners’ complaint for illegal dismissal and damages
meritorious. The Labor Arbiter held that as formatters,
petitioners occupied jobs that were necessary, desirable, and
indispensable to the data processing and encoding business of
INNODATA. By the very nature of their work as formatters,
petitioners should be considered regular employees of
INNODATA, who were entitled to security of tenure. Thus, their
termination for no just or authorized cause was illegal. In the
end, the Labor Arbiter decreed:
FOREGOING PREMISES CONSIDERED, judgment is hereby
rendered declaring complainants’ dismissal illegal and ordering
respondent INNODATA PHILS. INC./INNODATA CORPORATION
to reinstate them to their former or equivalent position without
loss of seniority rights and benefits. Respondent company is
further ordered to pay complainants their full backwages plus
ten percent (10%) of the totality thereof as attorney’s fees.
The monetary awards due the complainants as of the date of
this decision are as follows:
A. Backwages
1. Cherry J. Price
2/17/2000 – 10/17/2000 at 223.50/day
P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00
(same computation)
3. Lolita Arbilera 46,488.00
(same computation)
Total Backwages P139,464.00
B. Attorney’s fees (10% of total award) 13,946.40
Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiter’s Decision
to the NLRC. The NLRC, in its Decision dated 14 December
2001, reversed the Labor Arbiter’s Decision dated 17 October
2000, and absolved INNODATA of the charge of illegal
dismissal.
The NLRC found that petitioners were not regular employees,
but were fixed-term employees as stipulated in their respective
contracts of employment. The NLRC applied Brent School, Inc.
v. Zamora13 and St. Theresa’s School of Novaliches
Foundation v. National Labor Relations Commission,14 in which
this Court upheld the validity of fixed-term contracts. The
determining factor of such contracts is not the duty of the
employee but the day certain agreed upon by the parties for
the commencement and termination of the employment
relationship. The NLRC observed that the petitioners freely and
voluntarily entered into the fixed-term employment contracts
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Dean Ada D. Abad
with INNODATA. Hence, INNODATA was not guilty of illegal
dismissal when it terminated petitioners’ employment upon the
expiration of their contracts on 16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed from
is hereby REVERSED and SET ASIDE and a new one entered
DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners’ Motion for Reconsideration in a
Resolution dated 28 June 2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court
filed before the Court of Appeals, petitioners prayed for the
annulment, reversal, modification, or setting aside of the
Decision dated 14 December 2001 and Resolution dated 28
June 2002 of the NLRC.lawphil.net
On 25 September 2006, the Court of Appeals promulgated its
Decision sustaining the ruling of the NLRC that petitioners were
not illegally dismissed.
The Court of Appeals ratiocinated that although this Court
declared in Villanueva and Servidad that the employees of
INNODATA working as data encoders and abstractors were
regular, and not contractual, petitioners admitted entering into
contracts of employment with INNODATA for a term of only one
year and for a project called Earthweb. According to the Court
of Appeals, there was no showing that petitioners entered into
the fixed-term contracts unknowingly and involuntarily, or
because INNODATA applied force, duress or improper pressure
on them. The appellate court also observed that INNODATA
and petitioners dealt with each other on more or less equal
terms, with no moral dominance exercised by the former on
latter. Petitioners were therefore bound by the stipulations in
their contracts terminating their employment after the lapse of
the fixed term.
The Court of Appeals further expounded that in fixed-term
contracts, the stipulated period of employment is governing
and not the nature thereof. Consequently, even though
petitioners were performing functions that are necessary or
desirable in the usual business or trade of the employer,
petitioners did not become regular employees because their
employment was for a fixed term, which began on 16 February
1999 and was predetermined to end on 16 February 2000.
The appellate court concluded that the periods in petitioners’
contracts of employment were not imposed to preclude
petitioners from acquiring security of tenure; and, applying the
ruling of this Court in Brent, declared that petitioners’ fixed-
term employment contracts were valid. INNODATA did not
commit illegal dismissal for terminating petitioners’
employment upon the expiration of their contracts.
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the
Resolution dated December 14, 2001 of the National Labor
Relations Commission declaring petitioners were not illegally
dismissed is AFFIRMED.17
The petitioners filed a Motion for Reconsideration of the afore-
mentioned Decision of the Court of Appeals, which was denied
by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition
for Review on Certiorari, based on the following assignment of
errors:
I.

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
ERROR OF LAW AND GRAVE ABUSE OF DISCRETION WHEN IT
DID NOT APPLY THE SUPREME COURT RULING IN THE CASE
OF NATIVIDAD & QUEJADA THAT THE NATURE OF
EMPLOYMENT OF RESPONDENTS IS REGULAR NOT FIXED, AND
AS SO RULED IN AT LEAST TWO OTHER CASES AGAINST
INNODATA PHILS. INC.
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
ERROR OF LAW IN RULING THAT THE STIPULATION OF
CONTRACT IS GOVERNING AND NOT THE NATURE OF
EMPLOYMENT AS DEFINED BY LAW.
III.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT DID NOT CONSIDER THE EVIDENCE
ON RECORD SHOWING THAT THERE IS CLEAR
CIRCUMVENTION OF THE LAW ON SECURITY OF TENURE
THROUGH CONTRACT MANIPULATION.18
The issue of whether petitioners were illegally dismissed by
respondents is ultimately dependent on the question of
whether petitioners were hired by INNODATA under valid fixed-
term employment contracts.
After a painstaking review of the arguments and evidences of
the parties, the Court finds merit in the present Petition. There
were no valid fixed-term contracts and petitioners were regular
employees of the INNODATA who could not be dismissed
except for just or authorized cause.
The employment status of a person is defined and prescribed
by law and not by what the parties say it should be.19 Equally
important to consider is that a contract of employment is
impressed with public interest such that labor contracts must
yield to the common good.20 Thus, provisions of applicable
statutes are deemed written into the contract, and the parties
are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply
contracting with each other.21
Regular employment has been defined by Article 280 of the
Labor Code, as amended, which reads:
Art. 280. Regular and Casual Employment. The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of engagement of the employee or
where the work or services to be performed is seasonal in
nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph. Provided, That, any employee who
has rendered at least one year of service, whether such service
is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
(Underscoring ours).
Based on the afore-quoted provision, the following employees
are accorded regular status: (1) those who are engaged to
perform activities which are necessary or desirable in the usual
business or trade of the employer, regardless of the length of
their employment; and (2) those who were initially hired as
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Dean Ada D. Abad
casual employees, but have rendered at least one year of
service, whether continuous or broken, with respect to the
activity in which they are employed.
Undoubtedly, petitioners belong to the first type of regular
employees.
Under Article 280 of the Labor Code, the applicable test to
determine whether an employment should be considered
regular or non-regular is the reasonable connection between
the particular activity performed by the employee in relation to
the usual business or trade of the employer.22
In the case at bar, petitioners were employed by INNODATA on
17 February 1999 as formatters. The primary business of
INNODATA is data encoding, and the formatting of the data
entered into the computers is an essential part of the process
of data encoding. Formatting organizes the data encoded,
making it easier to understand for the clients and/or the
intended end users thereof. Undeniably, the work performed
by petitioners was necessary or desirable in the business or
trade of INNODATA.
However, it is also true that while certain forms of employment
require the performance of usual or desirable functions and
exceed one year, these do not necessarily result in regular
employment under Article 280 of the Labor Code.23 Under the
Civil Code, fixed-term employment contracts are not limited,
as they are under the present Labor Code, to those by nature
seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free
choice have assigned a specific date of termination.24
The decisive determinant in term employment is the day
certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain
being understood to be that which must necessarily come,
although it may not be known when. Seasonal employment and
employment for a particular project are instances of
employment in which a period, where not expressly set down,
is necessarily implied.25
Respondents maintain that the contracts of employment
entered into by petitioners with INNDOATA were valid fixed-
term employment contracts which were automatically
terminated at the expiry of the period stipulated therein, i.e.,
16 February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term
employment contracts, it has consistently held that this is the
exception rather than the general rule. More importantly, a
fixed-term employment is valid only under certain
circumstances. In Brent, the very same case invoked by
respondents, the Court identified several circumstances
wherein a fixed-term is an essential and natural appurtenance,
to wit:
Some familiar examples may be cited of employment contracts
which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to
which, whatever the nature of the engagement, the concept of
regular employment with all that it implies does not appear
ever to have been applied, Article 280 of the Labor Code
notwithstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by
practice or tradition rotated among the faculty members, and
where fixed terms are a necessity without which no reasonable
rotation would be possible. Similarly, despite the provisions of
Article 280, Policy Instructions No. 8 of the Minister of Labor

implicitly recognize that certain company officials may be
elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in providing
that these officials, "x x may lose their jobs as president,
executive vice-president or vice president, etc. because the
stockholders or the board of directors for one reason or another
did not reelect them."26
As a matter of fact, the Court, in its oft-quoted decision in
Brent, also issued a stern admonition that where, from the
circumstances, it is apparent that the period was imposed to
preclude the acquisition of tenurial security by the employee,
then it should be struck down as being contrary to law, morals,
good customs, public order and public policy.27
After considering petitioners’ contracts in their entirety, as well
as the circumstances surrounding petitioners’ employment at
INNODATA, the Court is convinced that the terms fixed therein
were meant only to circumvent petitioners’ right to security of
tenure and are, therefore, invalid.
The contracts of employment submitted by respondents are
highly suspect for not only being ambiguous, but also for
appearing to be tampered with.
Petitioners alleged that their employment contracts with
INNODATA became effective 16 February 1999, and the first
day they reported for work was on 17 February 1999. The
Certificate of Employment issued by the HRAD Manager of
INNODATA also indicated that petitioners Price and Domingo
were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that
petitioners’ employment contracts were effective only on 6
September 1999. They later on admitted in their Memorandum
filed with this Court that petitioners were originally hired on 16
February 1999 but the project for which they were employed
was completed before the expiration of one year. Petitioners
were merely rehired on 6 September 1999 for a new project.
While respondents submitted employment contracts with 6
September 1999 as beginning date of effectivity, it is obvious
that in one of them, the original beginning date of effectivity,
16 February 1999, was merely crossed out and replaced with
6 September 1999. The copies of the employment contracts
submitted by petitioners bore similar alterations.
The Court notes that the attempt to change the beginning date
of effectivity of petitioners’ contracts was very crudely done.
The alterations are very obvious, and they have not been
initialed by the petitioners to indicate their assent to the same.
If the contracts were truly fixed-term contracts, then a change
in the term or period agreed upon is material and would already
constitute a novation of the original contract.
Such modification and denial by respondents as to the real
beginning date of petitioners’ employment contracts render the
said contracts ambiguous. The contracts themselves state that
they would be effective until 16 February 2000 for a period of
one year. If the contracts took effect only on 6 September
1999, then its period of effectivity would obviously be less than
one year, or for a period of only about five months.
Obviously, respondents wanted to make it appear that
petitioners worked for INNODATA for a period of less than one
year. The only reason the Court can discern from such a move
on respondents’ part is so that they can preclude petitioners
from acquiring regular status based on their employment for
one year. Nonetheless, the Court emphasizes that it has
already found that petitioners should be considered regular
employees of INNODATA by the nature of the work they
performed as formatters, which was necessary in the business
or trade of INNODATA. Hence, the total period of their
employment becomes irrelevant.
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Dean Ada D. Abad
Even assuming that petitioners’ length of employment is
material, given respondents’ muddled assertions, this Court
adheres to its pronouncement in Villanueva v. National Labor
Relations Commission,28 to the effect that where a contract of
employment, being a contract of adhesion, is ambiguous, any
ambiguity therein should be construed strictly against the party
who prepared it. The Court is, thus, compelled to conclude that
petitioners’ contracts of employment became effective on 16
February 1999, and that they were already working
continuously for INNODATA for a year.
Further attempting to exonerate itself from any liability for
illegal dismissal, INNODATA contends that petitioners were
project employees whose employment ceased at the end of a
specific project or undertaking. This contention is specious and
devoid of merit.
In Philex Mining Corp. v. National Labor Relations
Commission,29 the Court defined "project employees" as those
workers hired (1) for a specific project or undertaking, and
wherein (2) the completion or termination of such project has
been determined at the time of the engagement of the
employee.
Scrutinizing petitioners’ employment contracts with
INNODATA, however, failed to reveal any mention therein of
what specific project or undertaking petitioners were hired for.
Although the contracts made general references to a "project,"
such project was neither named nor described at all therein.
The conclusion by the Court of Appeals that petitioners were
hired for the Earthweb project is not supported by any evidence
on record. The one-year period for which petitioners were hired
was simply fixed in the employment contracts without
reference or connection to the period required for the
completion of a project. More importantly, there is also a
dearth of evidence that such project or undertaking had
already been completed or terminated to justify the dismissal
of petitioners. In fact, petitioners alleged - and respondents
failed to dispute that petitioners did not work on just one
project, but continuously worked for a series of projects for
various clients of INNODATA.
In Magcalas v. National Labor Relations Commission,30 the
Court struck down a similar claim by the employer therein that
the dismissed employees were fixed-term and project
employees. The Court here reiterates the rule that all doubts,
uncertainties, ambiguities and insufficiencies should be
resolved in favor of labor. It is a well-entrenched doctrine that
in illegal dismissal cases, the employer has the burden of proof.
This burden was not discharged in the present case.
As a final observation, the Court also takes note of several
other provisions in petitioners’ employment contracts that
display utter disregard for their security of tenure. Despite
fixing a period or term of employment, i.e., one year,
INNODATA reserved the right to pre-terminate petitioners’
employment under the following circumstances:
6.1 x x x Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the
project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the
need for personnel, and/or overstaffing, this contract maybe
pre-terminated by the EMPLOYER upon giving of three (3) days
notice to the employee.
xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this
CONTRACT, with or without cause, by giving at least Fifteen –
(15) [day] notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the
 Labor Law Review | Cases
Dean Ada D. Abad

appropriate clearance in favor of the said EMPLOYEE.
(Emphasis ours.)
Pursuant to the afore-quoted provisions, petitioners have no
right at all to expect security of tenure, even for the supposedly
one-year period of employment provided in their contracts,
because they can still be pre-terminated (1) upon the
completion of an unspecified project; or (2) with or without
cause, for as long as they are given a three-day notice. Such
contract provisions are repugnant to the basic tenet in labor
law that no employee may be terminated except for just or
authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy
of the State to assure the workers of security of tenure and
free them from the bondage of uncertainty of tenure woven by
some employers into their contracts of employment. This was
exactly the purpose of the legislators in drafting Article 280 of
the Labor Code – to prevent the circumvention by unscrupulous
employers of the employee’s right to be secure in his tenure by
indiscriminately and completely ruling out all written and oral
agreements inconsistent with the concept of regular
employment.
WHEREFORE, the Petition for Review on Certiorari is GRANTED.
The Decision dated 25 September 2006 and Resolution dated
15 June 2007 of the Court of Appeals in CA-G.R. SP No.
72795are hereby REVERSED and SET ASIDE.
RespondentInnodata Philippines, Inc./Innodata Corporation is
ORDERED to pay petitioners Cherry J. Price, Stephanie G.
Domingo, and Lolita Arbilera: (a) separation pay, in lieu of
reinstatement, equivalent to one month pay for every year of
service, to be computed from the commencement of their
employment up to the date respondent Innodata Philippines,
Inc./Innodata Corporation ceased operations; (b) full
backwages, computed from the time petitioners’ compensation
was withheld from them up to the time respondent Innodata
Philippines, Inc./Innodata Corporation ceased operations; and
(3) 10% of the total monetary award as attorney’s fees. Costs
against respondent Innodata Philippines, Inc./Innodata
Corporation.
SO ORDERED.

In all, respondents’ insistence that it can legally dismiss

petitioners on the ground that their term of employment has
expired is untenable. To reiterate, petitioners, being regular
employees of INNODATA, are entitled to security of tenure. In
the words of Article 279 of the Labor Code:

ART. 279. Security of Tenure. – In cases of regular

employment, the employer shall not terminate the services of
an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.

By virtue of the foregoing, an illegally dismissed employee is

entitled to reinstatement without loss of seniority rights and
other privileges, with full back wages computed from the time
of dismissal up to the time of actual reinstatement.

Considering that reinstatement is no longer possible on the

ground that INNODATA had ceased its operations in June 2002
due to business losses, the proper award is separation pay
equivalent to one month pay31 for every year of service, to be
computed from the commencement of their employment up to
the closure of INNODATA.

The amount of back wages awarded to petitioners must be

computed from the time petitioners were illegally dismissed
until the time INNODATA ceased its operations in June 2002.32

Petitioners are further entitled to attorney’s fees equivalent to

10% of the total monetary award herein, for having been
forced to litigate and incur expenses to protect their rights and
interests herein.

Finally, unless they have exceeded their authority, corporate

officers are, as a general rule, not personally liable for their
official acts, because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders
and members. Although as an exception, corporate directors
and officers are solidarily held liable with the corporation,
where terminations of employment are done with malice or in
bad faith,33 in the absence of evidence that they acted with
malice or bad faith herein, the Court exempts the individual
respondents, Leo Rabang and Jane Navarette, from any
personal liability for the illegal dismissal of petitioners.

[8] G.R. No. 175678, August 22, 2012
BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS.
BANK OF THE PHILIPPINE ISLANDS EMPLOYEES UNION-
METRO MANILA, 22 AUGUST 2012 RESPONDENT.
DECISION
PERALTA, J.:
For resolution of this Court is the Petition for Review under Rule
45 of the Revised Rules of Court, dated January 20, 2007, of
petitioner Bank of the Philippine Islands (BPI) which seeks to
reverse and set aside the Court of Appeals' (CA) Decision[1]
and Resolution,[2] dated June 8, 2006 and November 29,
2006, respectively, in CA-G.R. SP No. 83387.
The antecedent facts follow.
Respondent Bank of the Philippine Islands Employees Union-
Metro Manila (BPIEU-MM), a legitimate labor organization and
the sole and exclusive bargaining representative of all the
regular rank-and-file employees of petitioner BPI in Metro
Manila and petitioner BPI have an existing Collective Bargaining
Agreement (CBA)[3] which took effect on April 1, 2001. The
CBA provides for loan benefits and relatively low interest rates.
The said provisions state:
Article VIII - Fringe Benefits
xxxx
Section 14. Multi-Purpose Loan, Real Estate Secured Housing
Loan and Car Loan. - The Bank agrees to continue and maintain
its present policy and practice, embodied in its Collective
Bargaining Agreement with the Union which expired on 31
March 2001, extending to qualified regular employees the
multi-purpose and real estate secured housing loans, subject
to the increased limits and provisions hereinbelow, to wit:
(a) Multi-Purpose Loan not exceeding FORTY THOUSAND
PESOS (P40,000.00), payable within the period not exceeding
three (3) years via semi-monthly salary deductions, with
interest at the rate of eight percent (8%) per annum computed
on the diminishing balance.
(b) Real Estate-Secured Housing Loan not exceeding FOUR
HUNDRED FIFTY THOUSAND " PESOS (P450,000.00), payable
over a period not exceeding fifteen (15) years via semi-
monthly salary deductions, with interest at the rate of nine
percent (9%) per annum computed on the diminishing balance.
The rate of interest on real estate secured loans, however, may
be reduced to six percent (6%) per annum, subject to the
following conditions:
1. If the loan is accepted for coverage by the Home Insurance
and Guaranty Corporation (HIGC).
2. The HIGC premium shall be paid by the borrower.
3. The borrower procures a Mortgage Redemption Insurance
coverage from an insurance company selected by the BANK.
4. The BANK may increase the six percent (6%) interest if the
HIGC or the Government imposes new conditions or
restrictions necessitating a higher interest in order to maintain
the BANK'S position before such conditions or restrictions were
imposed.
5. Such other terms or conditions imposed or which may be
imposed by the HIGC.
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Dean Ada D. Abad
6. It is distinctly understood that the rate of interest shall
automatically revert to nine percent (9%) per annum upon
cancellation of the HIGC coverage for any cause.
The BANK shall make strong representations with the Bangko
Sentral ng Pilipinas for a second upgrade and/or availment
under the Housing Loan Program.
(c) Car Loan. - The BANK shall submit a revised plan for the
approval of the Bangko Sentral ng Pilipinas which shall
incorporate a car loan program in its existing Housing Loan
Program. The said car loan shall be a sub-limit under the
program such that any availment thereof shall operate to
decrease the available housing loan limit. Therefore, the
combined amount of both housing and car loans that may be
availed of shall not exceed FOUR HUNDRED FIFTY THOUSAND
PESOS (P450,000.00). This supplemental revision of the loan
program shall be subject to the rules and regulations {e.g.,
amount of sub-limit, credit ratio, type and age of vehicle,
interest rate, etc.) which the BANK may promulgate, and to the
terms of the approval of the Bangko Sentral ng Pilipinas.
The multi-purpose and housing loans stated in the next
preceding paragraphs, as well as the car loan which shall be
incorporated in the housing loan program, shall be subject
further to the applicable provisions, guidelines and restrictions
set forth in the Central Bank Circular No. 561, as amended by
Central Bank Circular No. 689, and to the rules, regulations and
policies of the BANK on such loans insofar as they do not violate
the provisions, guidelines and restrictions set forth in said
Central Bank Circular No. 561, as amended.
Section 15. Emergency Loans. - The BANK agrees to increase
the amount of emergency loans assistance, upon approval by
the Central Bank of the Philippines, from a maximum amount
of Ten Thousand Pesos (PI 0,000.00) to a maximum amount of
Fifteen Thousand Pesos (P15,000.00) to qualified employees
intended to cover emergencies only, i.e., expenses incurred but
could not be foreseen such as those arising from natural
calamities, emergency medical treatment and/or
hospitalization of an employee and/or his immediate family and
other genuine emergency cases of serious hardship as the
BANK may determine. Hospital expenses for caesarian delivery
of a female employee or an employee's wife not covered by the
Group Hospitalization Insurance Plan shall qualify for the
emergency loan.
Emergency loans shall be playable in twenty-four (24) months
via semi-monthly salary deductions and shall be charged
interest at the minimal rate of Seven percent (7%) per annum
for the first P10,000.00 and Nine percent (9%) for the
additional P5.000.00 computed on the diminishing balance.
The emergency loan assistance program shall be governed by
the rules, regulations and policies of the BANK and such
amendments or modifications thereof which the BANK may
issue from time to time.[4]
Thereafter, petitioner issued a "no negative data bank
policy"[5] for the implementation/availment of the manpower
loans which the respondent objected to, thus, resulting into
labor-management dialogues. Unsatisfied with the result of
those dialogues, respondent brought the matter to the
grievance machinery and afterwards, the issue, not having
been resolved, the parties raised it to the Voluntary Arbitrator.
In his decision, the Voluntary Arbitrator found merit in the
respondent's cause. Hence, the dispositive portion of the said
decision reads as follows:
WHEREFORE, viewed in the light of the foregoing
circumstances, this Arbitrator hereby rules:

1. That the imposition of the NO NEGATIVE DATA BANK as a
new condition for the implementation and availment of the
manpower loan benefits by the employees evidently violates
the CBA;
2. That all employees who were not allowed or deprived of the
manpower loan benefits due to the NO NEGATIVE DATA BANK
POLICY be immediately granted in accordance with their
respective loan benefits applied for;
3. That the respondent herein is ordered likewise to pay ten
percent (10%) of the total amount of all loans to be granted to
all employees concerned as Attorney's Fees; and
4. That the parties herein are directed to report compliance
with the above directives within ten (10) days from receipt of
this ORDER.
SO ORDERED.[6]
Aggrieved, petitioner appealed the case to the CA via Rule 43,
but the latter affirmed the decision of the Voluntary Arbitrator
with the modification that the award of attorney's fees be
deleted. The dispositive portion states:
WHEREFORE, premises considered, the Voluntary Arbitrator's
Decision dated April 5, 2004 is hereby AFFIRMED with the
MODIFICATION that the award of attorney's fees is hereby
deleted.
SO ORDERED.[7]
Petitioner filed a motion for reconsideration, but it was denied
in a Resolution[8] dated November 29, 2006.
Hence, the present petition.
Petitioner raises the following arguments:
A. The "No NDB policy" is a valid and reasonable requirement
that is consistent with sound banking practice and is meant to
inculcate among officers and employees of the petitioner the
need for fiscal responsibility and discipline, especially in an
industry where the element of trust is paramount.
B. The "No NDB policy" does not violate the parties' Collective
Bargaining Agreement.
C. The "No NDB policy" conforms to existing BSP regulations
and circulars, and to safe and sound banking practices.[9]
Respondent, on the other hand, claims that the petition did not
comply with Section 4, Rule 45 of the Revised Rules of Court
and must be dismissed outright in accordance with Section 5
of the same rule; that the CA did not commit any reversible
error in the questioned judgment to warrant the exercise of its
discretionary appellate jurisdiction; and that the Voluntary
Arbitrator and the CA duly passed upon the same issues raised
in the instant petition and their decisions are based on
substantial evidence and are in accordance with law and
jurisprudence.[10]
Tn its Reply[11] dated September 21, 2007, petitioner
reiterates the issues it presented in its petition. It also argues
that the present petition must not be dismissed based on mere
technicality.
Subsequently, the parties submitted their respective
memoranda.
Petitioner's arguments are mere rehash of those it raised in the
CA. It insists that the rationale behind the use of the "no
negative data bank policy" aims to encourage employees of a
banking institution to exercise the highest standards of
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Dean Ada D. Abad
conduct, considering the bank's fiduciary relationship with its
depositors and clients. It likewise contends that a scrutiny of
the CBA reveals an express conformity to petitioner's
prerogative to issue policies that would guide the parties in the
availment of manpower loans under the CBA.
Furthermore, petitioner avers that the subject policy does not
only conform to the provisions of the parties' CBA, but it is also
in harmony with the circulars and regulations of the Bangko
Sentral ng Pilipinas.
The petition lacks merit.
In a petition for review on certiorari, this Court's jurisdiction is
limited to reviewing errors of law in the absence of any showing
that the factual findings complained of are devoid of support in
the records or are glaringly erroneous.[13] Firm is the doctrine
that this Court is not a trier of facts, and this applies with
greater force in labor cases.[14] The issues presented by the
petitioner are factual in nature. Nevertheless, the CA
committed no error in its questioned decision and resolution.
A CBA refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours
of work and all other terms and conditions of employment in a
bargaining unit, including mandatory provisions for grievances
and arbitration machineries.[15] As in all other contracts, there
must be clear indications that the parties reached a meeting of
the minds.[16] Therefore, the terms and conditions of a CBA
constitute the law between the parties.[17]
The CBA in this case contains no provision on the "no negative
data bank policy" as a prerequisite in the entitlement of the
benefits it set forth for the employees. In fact, a close reading
of the CBA would show that the terms and conditions contained
therein relative to the availment of the loans are plain and
clear, thus, all they need is the proper implementation in order
to reach their objective. The CA was, therefore, correct when
it ruled that, although it can be said that petitioner is
authorized to issue rules and regulations pertinent to the
availment and administration of the loans under the CBA, the
additional rules and regulations, however, must not impose
new conditions which are not contemplated in the CBA and
should be within the realm of reasonableness. The "no negative
data bank policy" is a new condition which is never
contemplated in the CBA and at some points, unreasonable to
the employees because it provides that before an employee or
his/her spouse can avail of the loan benefits under the CBA,
the said employee or his/her spouse must not be listed in the
negative data bank, or if previously listed therein, must obtain
a clearance at least one year or six months as the case may
be, prior to a loan application.
It must be remembered that negotiations between an employer
and a union transpire before they agree on the terms and
conditions contained in the CBA. If the petitioner, indeed,
intended to include a "no negative data bank policy" in the CBA,
it should have presented such proposal to the union during the
negotiations. To include such policy after the effectivity of the
CBA is deceptive and goes beyond the original agreement
between the contracting parties.
This Court also notes petitioner's argument that the "no
negative data bank policy" is intended to exact a high standard
of conduct from its employees. However, the terms and
conditions of the CBA must prevail. Petitioner can propose the
inclusion of the said policy upon the expiration of the CBA,
during the negotiations for a new CBA, but in the meantime, it
has to honor the provisions of the existing CBA.
Article 1702 of the New Civil Code provides that, in case of
doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living of the laborer.
 Labor Law Review | Cases
Dean Ada D. Abad

Thus, this Court has ruled that any doubt or ambiguity in the
contract between management and the union members should
be resolved in favor of the latter.[18] Therefore, there is no
doubt, in this case, that the welfare of the laborers stands
supreme.

WHEREFORE, the Petition for Review under Rule 45 of the

Revised Rules of Court, dated January 20, 2007, of petitioner
Bank of the Philippine Islands, is hereby DENIED and the Court
of Appeals' Decision and Resolution, dated June 8, 2006 and
November 29, 2006, respectively, are hereby AFFIRMED.

SO ORDERED.

[9] G.R. No. 192601 June 3, 2013
PHILIPPINE JOURNALISTS, INC., Petitioner,
vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION
MEMBER, MICHAEL ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a
stipulation in a collective bargaining agreement (CBA) granting
funeral or bereavement benefit to a regular employee for the
death of a legal dependent, if the CBA is silent about it, is to
be construed as similar to the meaning that contemporaneous
social legislations have set. This is because the terms of such
social legislations are deemed incorporated in or adopted by
the CBA.
The decision of the Court of Appeals (CA) under review
summarizes the factual and procedural antecedents, as
follows:
Complainant Judith Pulido alleged that she was hired by
respondent as proofreader on 10 January 1991; that she was
receiving a monthly basic salary of P-15,493.66 plus P-155.00
longevity pay plus other benefits provided by law and their
Collective Bargaining Agreement; that on 21 February 2003, as
union president, she sent two letters to President Gloria Arroyo,
regarding their complaint of mismanagement being committed
by PIJ executive; that sometime in May 2003, the union was
furnished with a letter by Secretary Silvestre Afable, Jr. head
of Presidential Management Staff (PMS), endorsing their letter-
complaint to Ombudsman Simeon V. Marcelo; that respondents
took offense and started harassments to complainant union
president; that on 30 May 2003, complainant received a letter
from respondent Fundador Soriano, International Edition
managing editor, regarding complainant’s attendance record;
that complainant submitted her reply to said memo on 02 June
2003; that on 06 June 2003, complainant received a
memorandum of reprimand; that on 04 July 2003, complainant
received another memo from Mr. Soriano, for not wearing her
company ID, which she replied the next day 05 July 2003; that
on 04 August 2003, complainant again received a memo
regarding complainant’s tardiness; that on 05 August 2003,
complainant received another memorandum asking her to
explain why she should not be accused of fraud, which she
replied to on 07 August 2003; and that on the same day
between 3:00 to 4:00 P.M., Mr. Ernesto "Estong" San Agustin,
a staff of HRD handed her termination paper.
Complainant added that in her thirteen (13) years with the
company and after so many changes in its management and
executives, she had never done anything that will cause them
to issue a memorandum against her or her work attitude, more
so, reasons to terminate her services; that she got dismissed
because she was the Union President who was very active in
defending and pursuing the rights of her union members, and
in fighting against the abuses of respondent Corporate Officers;
and that she got the ire of respondents when the employees
filed a complaint against the Corporate Officers before
Malacañang and which was later indorsed to the Office of the
Ombudsman.
The second complainant Michael L. Alfante alleged that he
started to work with respondents as computer technician at
Management Information System under manager Neri
Torrecampo on 16 May 2000; that on 15 July 2001, he was
regularized receiving a monthly salary of ₱9,070.00 plus other
monetary benefits; that sometime in 2001, Rico Pagkalinawan
replaced Torrecampo, which was opposed by complainant and
three other co-employees; that Pagkalinawan took offense of
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Dean Ada D. Abad
their objection; that on 22 October 2002, complainant Alfante
received a memorandum from Pagkalinawan regarding his
excessive tardiness; that on 10 June 2003, complainant Alfante
received a memorandum from Executive Vice-President Arnold
Banares, requiring him to explain his side on the evaluation of
his performance submitted by manager Pagkalinawan; that one
week after complainant submitted his explanation, he was
handed his notice of dismissal on the ground of "poor
performance"; and that complainant was dismissed effective
28 July 2003.
Complainant Alfante submitted that he was dismissed without
just cause.
Respondents, in their position paper, averred that
complainants Pulido and Alfante were dismissed for cause and
with due process.
With regard to complainant Pulido, respondents averred that in
a memorandum dated 30 May 2003, directed complainant to
explain her habitual tardiness, at least 75 times from January
to May of 2003. In a memorandum, dated 06 June 2003,
directed complainant to observe the 3 p.m. rule to avoid
grammatical lapses, use of stale stories just to beat the 10:00
p.m. deadline. In the same memorandum complainant was
given the warning that any repeated violation of the rules shall
be dealt with more severely. Once again, in a memorandum,
dated 04 August 2003, complainant Pulido was required to
explain why no disciplinary action should be taken against her
for habitual tardiness – 18 times out of the 23 reporting days
during the period from 27 June – 27 July 2003 and on 05
August 2003, complainant was directed to explain in writing
why complainant should not be administratively sanctioned for
committing fraud or attempting to commit fraud against
respondents. Respondents found complainant’s explanations
unsatisfactory. On 07 August 2003, respondents dismissed
complainant Pulido for habitual tardiness, gross
insubordination, utter disrespect for superiors, and committing
fraud or attempting to commit fraud which led to the
respondents’ loss of confidence upon complainant Pulido.
In case of complainant Alfante, respondents averred in defense
that complainant was dismissed for "poor performance" after
an evaluation by his superior, and after being forewarned that
complainant may be removed if there was no showing of
improvement in his skills and knowledge on current
technology.
In both instances, respondents maintained that they did not
commit any act of unfair labor practices; that they did not
commit acts tantamount to interfering, restraining, or coercing
employees in the exercise of their right to self-organization.
Respondents deny liabilities as far as complainants’ monetary
claims are concerned. Concerning violations of the provision on
wage distortion under Wage Order No. 9, respondents stressed
that complainants were not affected since their salary is way
over the minimum wage.
With respect to the alleged non-adjustment of longevity pay
and burial aid, respondent PJI pointed out that it complies with
the provisions of the CBA and that both complainants have not
claimed for the burial aid.
Respondents put forward the information that the alleged
nonpayment of rest days – every Monday for the past three (3)
years is a matter that is still at issue in NLRC Case No. 02-
0402973-93, which case is still pending before this
Commission.
Respondents asserted that the respondents Arturo Dela Cruz,
Bobby Capco, Arnold Banares, Ruby Ruiz-Bruno and Fundador

Soriano should not be held liable on account of complainants’
dismissal as they merely acted as agents of respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C.
Borbolla rendered her decision on March 29, 2006, disposing
thusly:
WHEREFORE, foregoing premises considered, judgment is
hereby rendered, finding complainant Judith Pulido to have
been illegally dismissed. As such, she is entitled to
reinstatement and backwages from 07 August 2003 up to her
actual or payroll reinstatement. To date, complainant’s
backwages is ₱294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay
complainant Judith Pulido her backwages from 07 August 2003
up to her actual or payroll reinstatement and to reinstate her
to her former position without loss of seniority right.
Respondent is further ordered to submit a report to this Office
on complainant’s reinstatement ten (10) days from receipt of
this decision.
The charge of illegal dismissal by Michael Alfante is hereby
dismissed for lack of merit.
The charge of unfair labor practice is dismissed for lack of basis.
SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor
organization, Journal Employees Union (JEU), filed a partial
appeal in the National Labor Relations Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido
(Pulido), the other complainant, jointly manifested to the NLRC
that the decision of March 29, 2006 had been fully satisfied as
to Pulido under the following terms, namely: (a) she would be
reinstated to her former position as editorial staffmember, or
an equivalent position, without loss of seniority rights, effective
May 15, 2006; (b) she would go on maternity leave, and report
to work after giving birth; (c) she would be entitled to
backwages of ₱130,000.00; and (d) she would execute the
quitclaim and release on May 11, 2006 in favor of petitioner.4
This left Alfante as the remaining complainant.
On January 31, 2007, the NLRC rendered its decision
dismissing the partial appeal for lack of merit.
JEU and Alfante moved for the reconsideration of the decision,
but the NLRC denied their motion on April 24, 2007.
Thereafter, JEU and Alfante assailed the decision of the NLRC
before the CA on certiorari (C.A.-G.R. SP No. 99407).
On February 5, 2010, the CA promulgated its decision in C.A.-
G.R. SP No. 99407,7 decreeing:
WHEREFORE, premises considered, the instant petition is
PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24,
2007, respectively, of the Third Division of the National Labor
Relations Commission (NLRC), in NLRC NCR CA No. 048785-06
(NLRC NCR Case No. 00-10-11413-04), are MODIFIED insofar
as the funeral or bereavement aid is concerned, which is
hereby GRANTED, but only after submission of conclusive
proofs that the deceased is a parent, either father or mother,
of the employees concerned, as well as the death certificate to
establish the fact of death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed
Resolutions are hereby AFFIRMED.
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Dean Ada D. Abad
SO ORDERED.
Both parties moved for reconsideration, but the CA denied their
respective motions for reconsideration on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to
challenge the CA’s dispositions regarding the legality of: (a)
Alfante’s dismissal; (b) the non-compliance with Minimum
Wage Order No. 9; and (c) the non-payment of the rest day.9
On August 18, 2010, the Court denied due course to the
petition in G.R. No. 192478 for failure of petitioners to
sufficiently show that the CA had committed any reversible
error to warrant the Court’s exercise of its discretionary
appellate jurisdiction.10
The Court denied with finality JEU and Alfante’s ensuing motion
for reconsideration through the resolution of December 8,
2010.11 The entry of judgment in G.R. No. 192478 issued in
due course on February 1, 2011.12
On its part, petitioner likewise appealed (G.R. No. 192601),
seeking the review of the CA’s disposition in the decision of
February 5, 2010 on the granting of the funeral and
bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under
Section 4, Article XIII of the CBA, funeral and bereavement aid
should be granted upon the death of a legal dependent of a
regular employee; that consistent with the definition provided
by the Social Security System (SSS), the term legal dependent
referred to the spouse and children of a married regular
employee, and to the parents and siblings, 18 years old and
below, of a single regular employee;13 that the CBA considered
the term dependents to have the same meaning as
beneficiaries, as provided in Section 5, Article XIII of the CBA
on the payment of death benefits;14 that its earlier granting of
claims for funeral and bereavement aid without regard to the
foregoing definition of the legal dependents of married or single
regular employees did not ripen into a company policy whose
unilateral withdrawal would constitute a violation of Article 100
of the Labor Code,15 the law disallowing the non-diminution of
benefits;16 that it had approved only four claims from 1999 to
2003 based on its mistaken interpretation of the term legal
dependents, but later corrected the same in 2000;17 that the
grant of funeral and bereavement aid for the death of an
employee’s legal dependent, regardless of the employee’s civil
status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in
appreciating a doubtful question of law; and that its denial of
subsequent claims did not amount to a violation of the law
against the non-diminution of benefits.18
In their comment,19 JEU and Alfante countered that the CBA
was a bilateral contractual agreement that could not be
unilaterally changed by any party during its lifetime; and that
the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore be
reduced, diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478,
JEU and Alfante’s submissions on the illegality of his dismissal,
the non-payment of his rest days, and the violation of Minimum
Wage Order No. 9 shall no longer be considered and passed
upon.
The sole remaining issue is whether or not petitioner’s denial
of respondents’ claims for funeral and bereavement aid granted
under Section 4, Article XIII of their CBA constituted a

diminution of benefits in violation of Article 100 of the Labor
Code.
Ruling
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda Phils.,
Inc. v. Samahan ng Malayang Manggagawa sa Honda,20
thuswise:
A collective bargaining agreement (or CBA) refers to the
negotiated contract between a legitimate labor organization
and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit.
As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals,
good customs, public order or public policy. Thus, where the
CBA is clear and unambiguous, it becomes the law between the
parties and compliance therewith is mandated by the express
policy of the law.
Accordingly, the stipulations, clauses, terms and conditions of
the CBA, being the law between the parties, must be complied
with by them. The literal meaning of the stipulations of the
CBA, as with every other contract, control if they are clear and
leave no doubt upon the intention of the contracting parties.22
Here, a conflict has arisen regarding the interpretation of the
term legal dependent in connection with the grant of funeral
and bereavement aid to a regular employee under Section 4,
Article XIII of the CBA,23 which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees
to grant a funeral/bereavement aid in the following instances:
a. Death of a regular employee in line of duty – ₱50,000
b. Death of a regular employee not in line of duty – ₱40,000
c. Death of legal dependent of a regular employee – ₱15,000.
(Emphasis supplied)
Petitioner insists that notwithstanding the silence of the CBA,
the term legal dependent should follow the definition of it under
Republic Act (R.A.) No. 8282 (Social Security Law),24 so that
in the case of a married regular employee, his or her legal
dependents include only his or her spouse and children, and in
the case of a single regular employee, his or her legal
dependents include only his or her parents and siblings, 18
years old and below; and that the term dependents has the
same meaning as beneficiaries as used in Section 5, Article XIII
of the CBA.
We cannot agree with petitioner’s insistence.
Social legislations contemporaneous with the execution of the
CBA have given a meaning to the term legal dependent. First
of all, Section 8(e) of the Social Security Law provides that a
dependent shall be the following, namely: (a) the legal spouse
entitled by law to receive support from the member; (b) the
legitimate, legitimated, or legally adopted, and illegitimate
child who is unmarried, not gainfully employed and has not
reached 21 of age, or, if over 21 years of age, is congenitally
or while still a minor has been permanently incapacitated and
incapable of self-support, physically or mentally; and (c) the
parent who is receiving regular support from the member.
Secondly, Section 4(f) of R.A. No. 7875, as amended by R.A.
No. 9241,25 enumerates who are the legal dependents, to wit:
(a) the legitimate spouse who is not a member; (b) the
unmarried and unemployed legitimate, legitimated,
illegitimate, acknowledged children as appearing in the birth
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Dean Ada D. Abad
certificate; legally adopted or step-children below 21 years of
age; (c) children who are 21 years old and order but suffering
from congenital disability, either physical or mental, or any
disability acquired that renders them totally dependent on the
member of our support; and (d) the parents who are 60 years
old or older whose monthly income is below an amount to be
determined by the Philippine Health Insurance Corporation in
accordance with the guiding principles set forth in Article I of
R.A. No. 7875. And, thirdly, Section 2(f) of Presidential Decree
No. 1146, as amended by R.A. No. 8291,dependent for support
upon the member or pensioner; (b) the legitimate, legitimated,
legally adopted child, including the illegitimate child, who is
unmarried, not gainfully employed, not over the age of
majority, or is over the age of majority but incapacitated and
incapable of self-support due to a mental or physical defect
acquired prior to age of majority; and (c) the parents
dependent upon the member for support.1âwphi1
It is clear from these statutory definitions of dependent that
the civil status of the employee as either married or single is
not the controlling consideration in order that a person may
qualify as the employee’s legal dependent. What is rather
decidedly controlling is the fact that the spouse, child, or parent
is actually dependent for support upon the employee. Indeed,
the Court has adopted this understanding of the term
dependent in Social Security System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in determining
the extent of the required "dependency" under the SS Law. In
Aguas, the Court ruled that although a husband and wife are
obliged to support each other, whether one is actually
dependent for support upon the other cannot be presumed
from the fact of marriage alone.
Further, Aguas pointed out that a wife who left her family until
her husband died and lived with other men, was not dependent
upon her husband for support, financial or otherwise, during
the entire period.
Said the Court:
In a parallel case involving a claim for benefits under the GSIS
law, the Court defined a dependent as "one who derives his or
her main support from another. Meaning, relying on, or subject
to, someone else for support; not able to exist or sustain
oneself, or to perform anything without the will, power, or aid
of someone else." It should be noted that the GSIS law likewise
defines a dependent spouse as "the legitimate spouse
dependent for support upon the member or pensioner." In that
case, the Court found it obvious that a wife who abandoned the
family for more than 17 years until her husband died, and lived
with other men, was not dependent on her husband for
support, financial or otherwise, during that entire period.
Hence, the Court denied her claim for death benefits.
The obvious conclusion then is that a wife who is already
separated de facto from her husband cannot be said to be
"dependent for support" upon the husband, absent any
showing to the contrary. Conversely, if it is proved that the
husband and wife were still living together at the time of his
death, it would be safe to presume that she was dependent on
the husband for support, unless it is shown that she is capable
of providing for herself.
Considering that existing laws always form part of any contract,
and are deemed incorporated in each and every contract,28
the definition of legal dependents under the aforecited social
legislations applies herein in the absence of a contrary or
different definition mutually intended and adopted by the
parties in the CBA. Accordingly, the concurrence of a legitimate
spouse does not disqualify a child or a parent of the employee
from being a legal dependent provided substantial evidence is
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Dean Ada D. Abad

adduced to prove the actual dependency of the child or parent

on the support of the employee.

In this regard, the differentiation among the legal dependents

is significant only in the event the CBA has prescribed a
hierarchy among them for the granting of a benefit; hence, the
use of the terms primary beneficiaries and secondary
beneficiaries for that purpose. But considering that Section 4,
Article XIII of the CBA has not included that differentiation,
petitioner had no basis to deny the claim for funeral and
bereavement aid of Alfante for the death of his parent whose
death and fact of legal dependency on him could be
substantially proved.

Pursuant to Article 100 of the Labor Code, petitioner as the

employer could not reduce, diminish, discontinue or eliminate
any benefit and supplement being enjoyed by or granted to its
employees. This prohibition against the diminution of benefits
is founded on the constitutional mandate to protect the rights
of workers and to promote their welfare and to afford labor full
protection.29 The application of the prohibition against the
diminution of benefits presupposes that a company practice,
policy or tradition favorable to the employees has been clearly
established; and that the payments made by the employer
pursuant to the practice, policy, or tradition have ripened into
benefits enjoyed by them.30 To be considered as a practice,
policy or tradition, however, the giving of the benefits should
have been done over a long period of time, and must be shown
to have been consistent and deliberate.31 It is relevant to
mention that we have not yet settled on the specific minimum
number of years as the length of time sufficient to ripen the
practice, policy or tradition into a benefit that the employer
cannot unilaterally withdraw.32

The argument of petitioner that the grant of the funeral and

bereavement benefit was not voluntary but resulted from its
mistaken interpretation as to who was considered a legal
dependent of a regular employee deserves scant consideration.
To be sure, no doubtful or difficult question of law was involved
inasmuch as the several cogent statutes existing at the time
the CBA was entered into already defined who were qualified
as the legal dependents of another. Moreover, the
voluntariness of the grant of the benefit became even manifest
from petitioner’s admission that, despite the memorandum it
issued in 200033 in order to "correct" the interpretation of the
term legal dependent, it still approved in 2003 the claims for
funeral and bereavement aid of two employees, namely: (a)
Cecille Bulacan, for the death of her father; and (b) Charito
Cartel, for the death of her mother, based on its supposedly
mistaken interpretation.34

It is further worthy to note that petitioner granted claims for

funeral and bereavement aid as early as 1999, then issued a
memorandum in 2000 to correct its erroneous interpretation of
legal dependent under Section 4, Article XIII of the CBA. This
notwithstanding, the 2001-2004 CBA35 still contained the
same provision granting funeral or bereavement aid in case of
the death of a legal dependent of a regular employee without
differentiating the legal dependents according to the
employee's civil status as married or single. The continuity in
the grant of the funeral and bereavement aid to regular
employees for the death of their legal dependents has
undoubtedly ripened into a company policy. With that, the
denial of Alfante's qualified claim for such benefit pursuant to
Section 4, Article XIII of the CBA violated the law prohibiting
the diminution of benefits.

WHEREFORE, the Court AFFIRMS the decision promulgated on

February 5, 201 0; and ORDERS petitioner to pay the costs of
suit.

SO ORDERED.

[10] G.R. No. 177524 July 23, 2014
NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT
AND ALLIED INDUSTRIES (NUWHRAIN-APL-IUF),
PHILIPPINE PLAZA CHAPTER, Petitioner,
vs.
PHILIPPINE PLAZA HOLDINGS, INC., Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,1 challenging
the January 31, 2007 decision2 and the April 20, 2007
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
93698.
This CA decision reversed the July 4, 2005 decision4 of the
National Labor Relations Commission (NLRC) in NLRC NCR CA
No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum,
reversed and set aside the April 30, 2002 decision5 of the Labor
Arbiter (LA).
The LA dismissed the complaint for non-payment of service
charges filed by petitioner National Union of Workers in Hotel
Restaurant and Allied Industries (NUWHRAIN-APL-IUF),
Philippine Plaza Chapter (Union).
The Factual Antecedents
The Union is the collective bargaining agent of the rank-and-
file employees of respondent Philippine Plaza Holdings, Inc.
(PPHI).
On November 24, 1998, the PPHI and the Union executed the
"Third Rank-and-File Collective Bargaining Agreement as
Amended"6 (CBA). The CBA provided, among others, for the
collection, by the PPHI, of a ten percent (10%) service charge
on the saleof food, beverage, transportation, laundry and
rooms. The pertinent CBA provisions read:
SECTION 68. COLLECTION. The HOTEL shall continue to collect
ten percent (10%) service charge on the sale of food,
beverage, transportation, laundry and rooms except on
negotiated contracts and special rates. [Emphasis supplied]
SECTION 69. DISTRIBUTION. The service charge to be
distributed shall consist of the following:
Effective Food & Beverage
Room, Transportation & valet
1998 95%
100%
1997 95%
100%
The distributable amount will beshared equally by all HOTEL
employees, including managerial employees but excluding
expatriates, with three shares to be given to PPHI Staff and
three shares to the UNION (one for the national and two for
the local funds) that may be utilized by them for purposes for
which the UNION may decide.
These provisions merely reiterated similar provisions found in
the PPHIUnion’s earlier collective bargaining agreement
executed on August 29, 1995.7
On February 25, 1999, the Union’s Service Charge Committee
informed the Union President, through an audit report (1st
audit report),8 of uncollected service charges for the last
quarter of 1998 amounting to ₱2,952,467.61. Specifically, the
audit report referred to the service charges from the following
items: (1) "Journal Vouchers;" (2) "Banquet Other Revenue;"
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Dean Ada D. Abad
and (3) "Staff and Promo." The Union presented this audit
report to the PPHI’s management during the February 26, 1999
Labor Management Cooperation Meeting (LMCM).9 The PPHI’s
management responded that the Hotel Financial Controller
would need to verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted
liability for ₱80,063.88 out of the ₱2,952,467.61 thatthe Union
claimed as uncollected service charges. The PPHI denied the
rest of the Union’s claims because: (1) they were exempted
from the service charge being revenues from "special
promotions" (revenue from the Westin Gold Card sales) or
"negotiated contracts" (alleged revenue from the Maxi-Media
contract); (2) the revenues did not belong to the PPHI but to
third-party suppliers; and (3) no revenue was realized from
these transactions as they were actually expenses incurred for
the benefit of executives or by way of good-will to clients and
government officials.
During the July 12, 1999 LMCM,11 the Union maintained its
position on uncollected service charges so that a deadlock on
the issue ensued. The parties agreed to refer the matter to a
third party for the solution. They considered two options –
voluntary arbitration or court action – and promised to get back
to each other on their chosen option.
In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July
21, 1999 (2nd audit report),12 the Union modified its claims.
It claimed uncollected service charges from: (1) "Journal
Vouchers - Westin Gold Revenue and Maxi-Media" (F&B and
Rooms Barter); (2) "Banquet and Other Revenue;" and (3)
"Staff and Promo."
On August 10, 2000, the Union’s Service Charge Committee
made another service charge audit report for the years 1997,
1998 and 1999 (3rd audit report).13 This 3rd audit report
reflected total uncollected service charges of ₱5,566,007.62
from the following entries: (1) "Journal Vouchers;" (2)
"Guaranteed No Show;" (3) "Promotions;" and (4) "F & B
Revenue." The Union President presented the 3rd audit report
to the PPHI on August 29, 2000.
When the parties failed to reachan agreement, the Union, on
May 3, 2001, filed before the LA (Regional Arbitration Branch
of the NLRC) a complaint14 for non-payment of specified
service charges. The Union additionally charged the PPHI with
unfair labor practice (ULP) under Article 248 of the Labor Code,
i.e., for violation of their collective bargaining agreement.
In its decision15 dated April 30, 2002, the LA dismissed the
Union’s complaint for lack of merit. The LA declared that the
Union failed to show, by law, contract and practice, its
entitlement to the payment of service charges from the entries
specified in its audit reports (specified entries/transactions).
The LA pointed out that Section 68 of the CBA explicitly
requires, as a precondition for the distribution of service
charges in favor of the covered employees, the collection of the
10% service charge on the "sale of food, beverage,
transportation, laundry and rooms;" at the same time, the
provision exempts from its coverage "negotiated contracts"
and "special rates" that the LA deemed as non-revenue
generating transactions involving "food, beverage,
transportation, laundry and rooms." The Union failed to prove
that the PPHI collected 10% service charges on the specified
entries/transactions that could have triggered the PPHI’s
obligation under this provision.
Particularly, the LA pointed out that, first, the only evidence on
record that could have formed the basis of the Union’s claim
for service charges was the PPHI’s admission that, as a matter
of policy, it has been charging, collecting and distributing to the
covered employees 10% service charge on the fifty percent

(50%) of the total selling price of the "Maxi-Media F & B" and
on the "Average House" rate of the "Maxi-Media Rooms." And
it did so, notwithstanding the fact that the "Maxi-Media F & B
and Rooms Barter" is a "negotiated contract" and/or "special
rate" that Section 68 explicitly excludes from the service
charge coverage.
Second,while the PPHI derived revenues from the sale of the
Westin Gold Cards (Westin Gold Revenue), the PPHI did not
and could not have collected a 10% service charge as these
transactions could not be considered as sale of food, beverage,
transportation, laundry and rooms that Section 68
contemplates.
Third, the "Staff and Business Promotion and Banquet" entry
refers to the expenses incurred by the PPHI’s Marketing
Department and Department Heads and Hotel executives
either as part of their perks or the PPHI’s marketing tool/public
relations. These are special rates that are essentially non-
revenue generating items.
Fourth, the "Backdrop" entry refers to services undertaken by
third parties payment for which were made of course to them;
hence, this entry/transaction could not likewise be considered
as sale of services by PPHI for which collection of the 10%
service charge was warranted.
Lastly, the LA equally brushed aside the Union’s claim of ULP
declaring that the PPHI was well within its legal and contractual
right to refuse payment of service charges for entries from
which it did not collect any service charge pursuant tothe
provision of their CBA.
The NLRC’s ruling
In its decision16 of July 4, 2005, the NLRC reversed the LA’s
decision and considered the specified entries/transactions as
"service chargeable." As the PPHI failed to prove that it paid or
remitted the required service charges, the NLRC held the PPHI
liable to pay the Union ₱5,566,007.62 representing the claimed
uncollected service charges for the years 1997, 1998 and 1999
per the 3rd audit report.
The PHHI went to the CA on a petition for certiorari17 after the
NLRC denied its motion for reconsideration.18
The CA’s ruling
The CA granted the PPHI’s petition in its January 31, 2007
decision.19 It affirmed the LA’s decision but ordered the PPHI
to pay the Union the amount of ₱80,063.88 as service charges
that it found was due under the circumstances. The CA declared
that no service charges were due from the specified
entries/transactions; either these constituted "negotiated
contracts" and "special rates" that Section 68 of the CBA
explicitly excludes from the coverage of service charges, or
they were cited bases that the Union failed to sufficiently prove.
The CA pointed out that: one, the "Westin Gold Card Revenues"
entry involved the sale, not of food, beverage, transportation,
laundry and rooms, but of a "contractual right" to be charged
a lesser rate for the products and services that the Hotel and
the stores within it provide. At any rate, the PPHI charges,
collects and distributes to the covered employees the
CBAagreed service charges whenever any Westin Gold Card
member purchases food, beverage, etc. Two, the "Maxi-Media
F & B and Rooms and Barter" entry did not involve any sale
transaction that Section 68 contemplates. The CA pointed out
that the arrangement20 between the PPHI and Maxi-Media
International, Inc. was not one of sale but an innominate
contract of facio ut des, i.e., in exchange for the professional
entertainment services provided by Maxi-Media, the Hotel
agreed to give the former ₱2,800,000.00 worth of products and
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Dean Ada D. Abad
services.The CA added that this agreement falls under
"negotiated contracts" that Section 68 explicitly exempts.
Three, the sale of "Gift Certificates" does not involve the CBA-
contemplated "sale of food, beverage, etc." Four, the Union
failed to show the source of its computations for its
"Guaranteed No Show" and "F & B Revenue" claims. Five, the
"Business Promotions" entry likewise did not involve any sale;
these were part of the PPHI’s business expenses in the form of
either signing benefits for the PPHI’s executives or asmarketing
tool used by the PPHI’s marketing personnel to generate
goodwill. And six, the Union’s claims for service charges that
the PPHI allegedly collected prior to May 3, 1998 or three years
before the Union filed itscomplaint on May 3, 2001 had already
prescribed per Article 291 of the Labor Code.
The Union filed the present petition after the CA denied its
motion for Reconsideration21
in the CA’s April 20, 2007 resolution.22
The Petition
The Union argues that the CA clearly misapprehended and
misappreciated, with grave abuse of discretion, the facts and
evidence on record. It maintains that the specified
entries/transactions are revenue based transactions which, per
Section 68 and 69 of the CBA, clearly called for the collection
and distribution of a 10% service charge in favor of the covered
employees. Particularly, the Union argues that: (1) the "Westin
Gold Cards" serve not only as a discount card but also as a
"pre-paid" card that provide its purchasing members
complimentary amenities for which the Hotel employees
rendered services and should, therefore, had been subjected
to the 10% service charge; (2) the PPHI failed to prove that it
had paid and distributed to the covered employees the service
charge due on the actual discounted sales of food, beverage,
etc., generated by the "Westin Gold Cards;" (3) the Hotel
employees likewise rendered services whenever the Maxi-
Media International, Inc. consumed or availed part of the
2,800,000.00 worth of goods and services pursuant to its
agreement with the PPHI; (4) the "Maxi-Media" discounts
should be charged to the PPHI as part of its expenses and not
the Union’s share in the service charges; (5) the PPHI has a
separate budget for promotions, hence the "Business
Promotions" entry should likewise had been subjected to the
10% service charge; (6) the sale of "Gift Certificates," recorded
in the PPHI’s "Journal Vouchers" as "other revenue/income,"
constituted a revenue transaction for which service charges
were due; (7) the PPHI admitted that service charges from
"Guaranteed No Show" were due; and (8) it properly identified
through reference numbers the uncollected service charges
from "Food and Beverage Revenue."
The Union contends that inrefusing to collect and remit the
CBA-mandated service charges that the PPHI insists were non-
revenue transactions falling under "Negotiated Contracts"
and/or "Special Rates," the PPHI, in effect, contravened the
employees’ rights to service charges under the law and the
CBA. The Union also contends that the term "Negotiated
Contracts" should be applied to "airline contracts" only that
they (the Union and the PPHI) intended when they executed
the CBA. It points out that at the time the CBA was executed,
the PPHI had an existing agreement with Northwest Airlines to
which the term "Negotiated Contracts" clearly referred to.
Further, the Union argues that its claim for unpaid services
charges for the year 1997 and part of 1998 had not yet
prescribed. Applying Article 1155 of the Civil Code in relation
toArticle 291 of the Labor Code, the Union points out that the
running of the prescriptive period for the filing of its claim was
interrupted when it presented to the PPHI its 1st audit report
during the February 26, 1999 LMCMand when the PPHI
admitted the service charges due to the Union inthe PPHI’s
June 9, 1999 letter.

The Union additionally argues that the PPHI failed to conform
to the generally accepted accounting standards when it
reclassified the revenue items as expense items.
Finally, the Union contends that the PPHI’s refusal, despite
repeated demands, to distribute the unremitted service
charges and recognize its right to service charges on the
specified entries; the PPHI’s deliberate failure to disclose its
financial transactions and audit reports; and the PPHI’s
reclassification of the revenues into expense items constitute
gross violation of the CBA that amounts to whatthe law
considers as ULP.
The Case for the Respondent
The PPHI primarily counters, in its comment,23 that the Union’s
call for the Court to thoroughly re-examinethe records violates
the Rule 45 proscription against questions of facts.The PPHI
points out that Rule 45 of the Rules of Court under which the
petition is filed requires that only questions of law be raised. In
addition, the factual findings of the LA that had been affirmed
by the CA deserve not only respect but even finality.
On the petition’s merits, the PPHI argues that the specified
entries/transactions for which the Union claims service
charges: (1) were not revenue generating transactions; (2)
that did not involve a sale of food, beverage, rooms,
transportation or laundry; and/or (3) were in the nature of
negotiated contracts and special rates that Section 68 of the
CBA specifically excepts from the collection of service charges.
Correlatively, Article 96 of the Labor Code requires the
collection of service charges as a condition precedent to its
distribution or payment. Thus, as no service charges were
collected on the specified entries/transactions that the CBA
expressly excepts, the Union’s claim for unpaid service charges
clearly had no basis.
To be precise, the PPHI points out that, first, the sale per se of
the "Westin Gold Cards" did not involve a sale of food,
beverage, etc. that Section 68 of the CBA contemplates. The
discounted sales of food, beverage, etc. to Westin Gold Card
holders, on the other hand, had already been subjected to
service charges inclusive of the discount, i.e., computed on the
gross sales of food, beverage, etc. to the card holders, and
which service charges it had already distributed to the covered
employees. Second, its agreement with Maxi-Media involved
an exchange or barter transaction, i.e., its food and Hotel
services in exchange for Maxi-Media’s entertainment services
that did not generate income. This agreement likewise falls
under "Negotiated Contracts" that Section 68 clearly excepts.
And, in any case, it had already collected, and distributed to
the covered employees, the service charges on the food,
beverage, etc. that Maxi-Media consumed based on the
monthly average rate of the rooms and on the 50% rate of the
price of the consumed food and beverage. Third, the Union
failed to prove its claims for uncollected service charges from
"Guaranteed No Show" and "Business Promotions." Fourth, the
"Food and Beverage other Revenue" entry refers to the PPHI’s
transactions with external service providers the payment for
whose services could not be considered as the PPHI’s revenue.
Fifth, the sale per se of the "Gift Certificates" also did not
involve the Section 68-contemplated sale of food, beverage,
etc. and the Union failed to prove that the presented Gift
Certificateshad actually been consumed, i.e., used within the
Hotel premises for food, beverage, etc. And sixth, it had never
been its practice to collect service charges on the specified
entries/transactions that could have otherwise resulted in what
the Union considers as "partial abolition of service charges"
when it refused to collect service charges from them.
The PPHI also disputes what it considers as the Union’s strained
interpretation of the CBA exception of "Negotiated Contracts"
as applicable to airline contracts only. It points out that the
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Dean Ada D. Abad
clear wordings of Section 68 of the CBA plainly show the intent
to except, in a general and broad sense, "Negotiated Contracts"
and "Special Rates" as to include the "Westin Gold Cards" and
"Maxi-Media" barter agreement. The PPHI additionally argues
that the CBA’s exception of "Negotiated Contracts" and "Special
Rates" from the collection of service charges does not violate
Article 96 of the Labor Code. It points out that Article 96 merely
provides for the minimum percentage distribution, between it
(the PPHI) as the employer and the Hotel’s covered employees,
of the collected service charges which their CBA more than
satisfied. It also points out that Article 96 does not prohibit the
exception of certain transactions from the coverage and/or
collection of service charges that it (as the employer) and the
Union (in behalf of the covered Hotel employees) had
voluntarily and mutually agreed on in their CBA.1âwphi1 And
in fact, the Union’s refusal to recognize these clear and express
exceptions constituted a violation of their agreement.
Further, the PPHI maintains that the Union’s claim for the
alleged uncollected service charges for the year 1997 and the
early months of 1998 had already prescribed per Article 291 of
the Labor Code.
Finally, the PPHI points out that the issue in this case is not
whether service charges had been paid. Rather, the clear issue
is whether or not service charges should have been collected
(and distributed to the covered employees) for the specified
entries/transactions that the LA and the CA correctly addressed
and which the NLRC clearly missed as it rendered a decision
without any factual or legal basis.
The Court's Ruling
We find the petition unmeritorious.
Preliminary considerations: jurisdictional limitations of the
Court’s Rule 45 review of the CA’s Rule 65 decision in labor
cases; the Montoya ruling and factual-issue-bar-rule
In a petition for review on certiorari under Rule 45 of the Rules
of Court, we review the legal errors that the CA may have
committed in the assailed decision, in contrastwith the review
for jurisdictional errors that we undertake in an original
certiorari action. In reviewing the legal correctness of the CA
decision in a labor case taken under Rule 65 of the Rules of
Court, we examine the CA decision in the context that it
determined the presence or the absence of grave abuse of
discretion in the NLRC decision before it and not on the basis
of whether the NLRC decision, on the merits of the case, was
correct. In other words, we proceed from the premise that the
CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. Within this limited scope of
our Rule 45 review, the question that we ask is: Did the CA
correctly determine whether the NLRC committed grave abuse
of discretion in ruling on the case?24
In addition, the Court’s jurisdiction in a Rule 45 petition for
review on certiorari is limited to resolving only questions of law.
A question of law arises when the doubt or controversy exists
as to what law pertains to a particular set of facts; and a
question of fact arises when the doubt or controversy pertains
to the truth or falsity of the alleged facts.25
The present petition essentially raises the question – whether
the Union may collect from the PPHI, under the terms of the
CBA, its share of the service charges. This is a clear question
of law that falls well within the Court’s power in a Rule 45
petition.
Resolution of this question of law, however, is inextricably
linked with the largely factual issue of whether the specified
entries/transactions fall within the generally covered sale of
food, beverage, transportation, etc. from which service charges

are due or within the CBA excepted "Negotiated Contracts" and
"Special Rates." It also unavoidably requires resolution of
another factual issue, i.e., whether the Union’s claim for service
charges collected for the year 1997 and the early months of
1998 had already prescribed. As questions of fact, they are
proscribed by our Rule 45 jurisdiction; we generally cannot
address these factual issues except to the extent necessary to
determine whether the CA correctly found the NLRC in grave
abuse of discretion in granting the Union’s claim for service
charges from the specified entries/transactions.
The jurisdictional limitations of our Rule 45 review of the CA’s
Rule 65 decision in labor cases constrain us to deny the present
petition for clear lack of legal error in the CA’s decision.Our
consideration of the facts taken within this limited scope of our
factual review power, convinces us that grave abuse of
discretion attended the NLRC’s decision. At what point and to
what extent the NLRC gravely abusedits discretion is the
matter we shall discuss below.
The NLRC’s patently erroneous appreciation of the real issue in
the present controversy, along with the facts and the evidence,
amounted to grave abuse of discretion
In granting the Union’s claim, the NLRC simply declared that
the PPHI "has not shown any proof that it paid or remitted what
is due to the Union and its members" and concluded that the
specified entries/transactions were "service chargeable." This
NLRC conclusion plainly failed to appreciate that it involved
only the alleged uncollected service charges from the specified
entries/transactions. The NLRC likewise, in the course of its
ruling, did not point to any evidence supporting its conclusion.
In deciding as it did, the NLRC patently proceeded from the
wrong premise, i.e., that the PPHI did not at all distribute to
the Hotel’s covered employees their share in the collected
service charges. It likewise erroneously assumed that all the
specified entries/transactions were subject to service charges
and that the PPHI collected service charges from them as its
ruling was patently silent on this point. The NLRC also
erroneously assumed that each and every transaction that the
PPHI entered into was subject to a service charge.
What the NLRC clearly and conveniently overlooked was the
underlying issue of whether service charges are due from the
specified entries/transactions, i.e., whether the specified
entries/transactions are covered by the CBA’s general-rule
provisions on the collection of service charges or whether they
are excepted because they fall within the excepted "Negotiated
Contracts" and "Special Rates" or simply did not involve a "sale
of food, beverage, etc." from which service charges are due.
This understanding of this case’s real issue is an indispensable
requisite in the proper resolution of the controversy and a task
that the NLRC, as a tribunal exercising quasi-judicial power,
mustperform with circumspection and utmost diligence. The
patent failure led to its manifestly flawed conclusions that were
belied by the underlying facts. By so doing, the NLRC acted
outside the clear contemplation of the law.26
Accordingly, we affirm the CA’s decision to be legally correct as
it correctly reversed the NLRC decision for grave abuse of
discretion.
Nature of a CBA; rules inthe interpretation of CBA provisions
A collective bargaining agreement, as used in Article 252 (now
Article 262)27 of the Labor Code, is a contract executed at the
request of either the employer or the employees’ exclusive
bargaining representative with respect to wages, hours of work
and all other terms and conditions of employment, including
proposals for adjusting any grievances or questions under such
agreement.28 Jurisprudence settles that a CBA is the law
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Dean Ada D. Abad
between the contracting parties who are obliged under the law
to comply with its provisions.29
As a contract and the governing law between the parties, the
general rules of statutory construction apply in the
interpretation of its provisions. Thus, if the terms of the CBA
are plain, clear and leave no doubt on the intention of the
contracting parties, the literal meaning of its stipulations, as
they appear on the face of the contract, shall prevail.30 Only
when the words used are ambiguous and doubtful or leading to
several interpretations of the parties’ agreement that a resort
to interpretation and construction is called for.31
No service charges were due from the specified
entries/transactions; they either fall within the CBA-excepted
"Negotiated Contracts" and "Special Rates" or did not involve
"a sale of food, beverage, etc."
The Union anchors its claim for services charges on Sections
68 and 69 of the CBA, in relation with Article96 of the Labor
Code. Section 68 states that the sale of food, beverage,
transportation, laundry and rooms are subject to service
charge at the rate often percent (10%). Excepted from the
coverage of the 10% service charge are the so-called
"negotiated contracts" and "special rates."
Following the wordings of Section 68 of the CBA, three
requisites must be present for the provisions on service
charges to operate: (1) the transaction from which service
charge is sought to be collected is a sale; (2) the sale
transaction covers food, beverage, transportation, laundry and
rooms; and (3) the sale does not result from negotiated
contracts and/or at special rates.
In plain terms, all transactions involving a "sale of food,
beverage, transportation, laundry and rooms" are generally
covered. Excepted from the coverage are, first, non-sale
transactions or transactions that do not involve any sale even
though they involve "food, beverage, etc." Second,
transactions that involve a sale but do not involve "food,
beverage, etc." And third, transactions involving "negotiated
contracts" and "special rates" i.e., a "sale of food, beverage,
etc." resulting from "negotiated contracts" or at "special rates;"
non-sale transactions involving "food, beverage, etc." resulting
from "negotiated contracts" and/or "special rates;" and sale
transactions, but not involving "food, beverage, etc.," resulting
from "negotiated contracts" and "special rates." Notably, the
CBA does not specifically define the terms "negotiated
contracts" and "special rates." Nonetheless, the CBA likewise
does not explicitly limit the use of these terms to specified
transactions. With particular reference to "negotiated
contracts," the CBA does not confine its application to "airline
contracts" as argued by the Union. Thus, as correctly declared
by the CA, the term "negotiated contracts" should be read as
applying to all types of negotiated contracts and not to "airlines
contracts" only. This is in line with the basic rule of construction
that when the terms are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its
stipulations shall prevail. A constricted interpretation of this
term, i.e., as applicable to "airlines contracts" only, must be
positively shown either by the wordings of the CBA or by
sufficient evidence of the parties’ intention to limit its
application. The Union completely failed to provide support for
its constricted reading of the term "negotiated contracts,"
either from the wordings of the CBA or from the evidence.
In reversing the NLRC’s ruling and denying the Union’s claim,
the CA found the specified entries/transactions as either falling
under the excepted negotiated contracts and/or special rates
or not involving a sale of food, beverage, etc. Specifically, it
considered the entries "Westin Gold
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Dean Ada D. Abad

Cards Revenue" and "Maxi Media Barter" to be negotiated
contracts or contracts under special rates, and the entries
"Business Promotions" and "Gift Certificates" as contracts that
did not involve a sale of food, beverage, etc. The CA also found
no factual and evidentiary basis to support the Union’s claim
for service charges on the entries "Guaranteed No show" and
"F & B Revenue."
Our consideration of the records taken under our limited factual
review power convinces us that these specified
entries/transactions are indeed not subject to a 10% service
charge. We thus see no reason to disturb the CA’s findings on
these points.
The PPHI did not violate Article 96 of the Labor Code when they
refused the Union’s claim for service charges on the specified
entries/transactions
Article 96 of the Labor Code provides for the minimum
percentage distribution between the employer and the
employees of the collected service charges, and its integration
inthe covered employees’ wages in the event the employer
terminates its policy of providing for its collection. It pertinently
reads:
Art. 96. Service Charges.
x x x In case the service charge is abolished, the share of the
covered employees shall be considered integrated in their
wages.
This last paragraph of Article 96 of the Labor Code presumes
the practice of collecting service charges and the employer’s
termination of this practice. When this happens, Article 96
requires the employer to incorporate the amount that the
employees had been receiving as share of the collected service
charges into their wages. Incases where no service charges had
previously been collected (as where the employer never had
any policy providing for collection of service charges or had
never imposed the collection of service charges on certain
specified transactions), Article 96 will not operate.
In this case, the CA found that the PPHI had not in fact been
collecting services charges on the specified
entries/transactions that we pointed out as either falling under
"negotiated contracts" and/or "special rates" or did not involve
a "sale of food, beverage, etc." Accordingly, Article 96 of the
Labor Code finds no application in this case; the PPHI did not
abolish or terminate the implementation of any company policy
providing for the collection of service charges on specified
of an action; (2) a written extrajudicial demand by the creditor;
and (3) a written acknowledgment of the debt by the debtor.
In the present petition, the facts indisputably showed that as
early as 1998, the Union demanded, via the 1st audit report,
from the PPHI the payment and/or distribution of the alleged
uncollected service charges for the year 1997. From thereon,
the parties went through negotiations (LCMC) to settle and
reconcile on their respective positions and claims.
Under these facts – the Union’s written extrajudicial demand
through its 1st audit report and the successive negotiation
meetings between the Union and the PPHI – the running of the
three-year prescriptive period under Article 291 of the Labor
Code could have effectively been interrupted. Consequently,
the Union’s claims for the alleged uncollected service charges
for the year 1997 could not have yet prescribed at the time it
filed its complaint on May 3, 2001.
This non-barring effect of prescription, notwithstanding (i.e.,
that the running of the three-year prescriptive period had
effectively been interrupted – by the Union's written
extrajudicial demand on the PPHI), the CA, as it affirmed the
LA, still correctly denied the Union's claims for the alleged
uncollected and/or undistributed service charges on the
specified entries/transactions for the year 1997 and the early
part of 1998. As the CA found and discussed in its decision, and
with which we agree as amply supported by factual and legal
bases, the nature of these specified entries/transactions as
either excepted from the collection of service charges or not
constituting a "sale of food, beverage, etc.," and the Union's
failure to support its claims by sufficient evidence warranted,
without doubt, the denial of the Union's action.
In sum, we find the CA's denial of the Union's claim for service
charges from the specified entries/transactions legally correct
and to be well supported by the facts and the law. The CA
correctly reversed for grave abuse of discretion the NLRC's
decision.
WHEREFORE, in light of these considerations, we hereby DENY
the petition. We AFFIRM the decision dated January 31, 2007
and resolution dated April 20, 2007 of the Court of Appeals in
CA-G.R. Sp No. 93698.
SO ORDERED.

entries/transactions that could have otherwise rendered it

liable to pay an amount representing the covered employees’
share in the alleged abolished service charges.

The Union’s claim for service charges for the year 1997 and the
early months of 1998 could not have yet prescribed at the time
it filed its complaint on May 3, 2001; Article 1155 of the Civil
Code applies suppletorily to Article 291 of the Labor Code

Article 291 (now Article 305)32 of the Labor Code states that
"all money claims arising from employer-employee relations x
x x shall be filed within three (3) years from the time the cause
of action accrued; otherwise, they shall forever be barred."
[Emphasis supplied]

Like other causes of action, the prescriptive period for money

claims under Article 291 of the Labor Code is subject to
interruption. And, in the absence of an equivalent Labor
Codeprovision for determining whether Article 291’s three-year
prescriptive period may be interrupted, Article 1155 of the Civil
Code33 may be applied. Thus, the period of prescription of
money claims under Article 291 is interrupted by: (1) the filing

[11] G.R. No. 175773 June 17, 2013
MITSUBISHI MOTORS PHILIPPINES SALARIED
EMPLOYEES UNION (MMPSEU), Petitioner,
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION,
Respondent.
DECISION
DEL CASTILLO, J.:
The Collective Bargaining Agreement (CBA) of the parties in
this case provides that the company shoulder the
hospitalization expenses of the dependents of covered
employees subject to certain limitations and restrictions.
Accordingly, covered employees pay part of the hospitalization
insurance premium through monthly salary deduction while the
company, upon hospitalization of the covered employees'
dependents, shall pay the hospitalization expenses incurred for
the same. The conflict arose when a portion of the
hospitalization expenses of the covered employees'
dependents were paid/shouldered by the dependent's own
health insurance. While the company refused to pay the portion
of the hospital expenses already shouldered by the dependents'
own health insurance, the union insists that the covered
employees are entitled to the whole and undiminished amount
of said hospital expenses.
By this Petition for Review on Certiorari,1 petitioner Mitsubishi
Motors Philippines Salaried Employees Union (MMPSEU) assails
the March 31, 2006 Decision2 and December 5, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
75630, which reversed and set aside the Voluntary Arbitrator’s
December 3, 2002 Decision4 and declared respondent
Mitsubishi Motors Philippines Corporation (MMPC) to be under
no legal obligation to pay its covered employees’ dependents’
hospitalization expenses which were already shouldered by
other health insurance companies.
Factual Antecedents
The parties’ CBA5 covering the period August 1, 1996 to July
31, 1999 provides for the hospitalization insurance benefits for
the covered dependents, thus:
SECTION 4. DEPENDENTS’ GROUP HOSPITALIZATION
INSURANCE – The COMPANY shall obtain group hospitalization
insurance coverage or assume under a self-insurance basis
hospitalization for the dependents of regular employees up to
a maximum amount of forty thousand pesos (₱40,000.00) per
confinement subject to the following:
a. The room and board must not exceed three hundred pesos
(₱300.00) per day up to a maximum of thirty-one (31) days.
Similarly, Doctor’s Call fees must not exceed three hundred
pesos (₱300.00) per day for a maximum of thirty-one (31)
days. Any excess of this amount shall be borne by the
employee.
b. Confinement must be in a hospital designated by the
COMPANY. For this purpose, the COMPANY shall designate
hospitals in different convenient places to be availed of by the
dependents of employees. In cases of emergency where the
dependent is confined without the recommendation of the
company doctor or in a hospital not designated by the
COMPANY, the COMPANY shall look into the circumstances of
such confinement and arrange for the payment of the amount
to the extent of the hospitalization benefit.
c. The limitations and restrictions listed in Annex "B" must be
observed.
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Dean Ada D. Abad
d. Payment shall be direct to the hospital and doctor and must
be covered by actual billings.
Each employee shall pay one hundred pesos (₱100.00) per
month through salary deduction as his share in the payment of
the insurance premium for the above coverage with the
balance of the premium to be paid by the COMPANY. If the
COMPANY is self-insured the one hundred pesos (₱100.00) per
employee monthly contribution shall be given to the COMPANY
which shall shoulder the expenses subject to the above level of
benefits and subject to the same limitations and restrictions
provided for in Annex "B" hereof.
The hospitalization expenses must be covered by actual
hospital and doctor’s bills and any amount in excess of the
above mentioned level of benefits will be for the account of the
employee.
For purposes of this provision, eligible dependents are the
covered employees’ natural parents, legal spouse and
legitimate or legally adopted or step children who are
unmarried, unemployed who have not attained twenty-one
(21) years of age and wholly dependent upon the employee for
support.
This provision applies only in cases of actual confinement in the
hospital for at least six (6) hours.
Maternity cases are not covered by this section but will be
under the next succeeding section on maternity benefits.6
When the CBA expired on July 31, 1999, the parties executed
another CBA7 effective August 1, 1999 to July 31, 2002
incorporating the same provisions on dependents’
hospitalization insurance benefits but in the increased amount
of ₱50,000.00. The room and board expenses, as well as the
doctor’s call fees, were also increased to ₱375.00.
On separate occasions, three members of MMPSEU, namely,
Ernesto Calida (Calida), Hermie Juan Oabel (Oabel) and Jocelyn
Martin (Martin), filed claims for reimbursement of
hospitalization expenses of their dependents.
MMPC paid only a portion of their hospitalization insurance
claims, not the full amount. In the case of Calida, his wife,
Lanie, was confined at Sto. Tomas University Hospital from
September 4 to 9, 1998 due to Thyroidectomy. The medical
expenses incurred totalled ₱29,967.10. Of this amount,
₱9,000.00 representing professional fees was paid by
MEDICard Philippines, Inc. (MEDICard) which provides health
maintenance to Lanie.8 MMPC only paid ₱12,148.63.9 It did
not pay the ₱9,000.00 already paid by MEDICard and the
₱6,278.47 not covered by official receipts. It refused to give to
Calida the difference between the amount of medical expenses
of ₱27,427.1010 which he claimed to be entitled to under the
CBA and the ₱12,148.63 which MMPC directly paid to the
hospital.
In the case of Martin, his father, Jose, was admitted at The
Medical City from March 26 to 27, 2000 due to Acid Peptic
Disease and incurred medical expenses amounting to
₱9,101.30.14 MEDICard paid ₱8,496.00.15 Consequently,
MMPC only paid ₱288.40,16 after deducting from the total
medical expenses the amount paid by MEDICard and the
₱316.90 discount given by the hospital.
Claiming that under the CBA, they are entitled to hospital
benefits amounting to ₱27,427.10, ₱6,769.35 and ₱8,123.80,
respectively, which should not be reduced by the amounts paid
by MEDICard and by Prosper, Calida, Oabel and Martin asked
for reimbursement from MMPC. However, MMPC denied the
claims contending that double insurance would result if the said
employees would receive from the company the full amount of

hospitalization expenses despite having already received
payment of portions thereof from other health insurance
providers.
This prompted the MMPSEU President to write the MMPC
President17 demanding full payment of the hospitalization
benefits. Alleging discrimination against MMPSEU union
members, she pointed out that full reimbursement was given
in a similar claim filed by Luisito Cruz (Cruz), a member of the
Hourly Union. In a letter-reply,18 MMPC, through its Vice-
President for Industrial Relations Division, clarified that the
claims of the said MMPSEU members have already been paid
on the basis of official receipts submitted. It also denied the
charge of discrimination and explained that the case of Cruz
involved an entirely different matter since it concerned the
admissibility of certified true copies of documents for
reimbursement purposes, which case had been settled through
voluntary arbitration.
On August 28, 2000, MMPSEU referred the dispute to the
National Conciliation and Mediation Board and requested for
preventive mediation.19
Proceedings before the Voluntary Arbitrator
On October 3, 2000, the case was referred to Voluntary
Arbitrator Rolando Capocyan for resolution of the issue
involving the interpretation of the subject CBA provision.20
MMPSEU alleged that there is nothing in the CBA which
prohibits an employee from obtaining other insurance or
declares that medical expenses can be reimbursed only upon
presentation of original official receipts. It stressed that the
hospitalization benefits should be computed based on the
formula indicated in the CBA without deducting the benefits
derived from other insurance providers. Besides, if reduction is
permitted, MMPC would be unjustly benefited from the monthly
premium contributed by the employees through salary
deduction. MMPSEU added that its members had legitimate
claims under the CBA and that any doubt as to any of its
provisions should be resolved in favor of its members.
Moreover, any ambiguity should be resolved in favor of
labor.21
On the other hand, MMPC argued that the reimbursement of
the entire amounts being claimed by the covered employees,
including those already paid by other insurance companies,
would constitute double indemnity or double insurance, which
is circumscribed under the Insurance Code. Moreover, a
contract of insurance is a contract of indemnity and the
employees cannot be allowed to profit from their dependents’
loss.22
Meanwhile, the parties separately sought for a legal opinion
from the Insurance Commission relative to the issue at hand.
In its letter23 to the Insurance Commission, MMPC requested
for confirmation of its position that the covered employees
cannot claim insurance benefits for a loss that had already been
covered or paid by another insurance company. However, the
Office of the Insurance Commission opted not to render an
opinion on the matter as the same may become the subject of
a formal complaint before it.24 On the other hand, when
queried by MMPSEU,25 the Insurance Commission, through
Atty. Richard David C. Funk II (Atty. Funk) of the Claims
Adjudication Division, rendered an opinion contained in a
letter,26 viz:
Ms. Cecilia L. ParasPresident
Mitsubishi Motors Phils.
[Salaried] Employees Union
Ortigas Avenue Extension,
Cainta, Rizal
Labor Law Review | Cases
Dean Ada D. Abad
Madam:
We acknowledge receipt of your letter which, to our impression,
basically poses the question of whether or not recovery of
medical expenses from a Health Maintenance Organization bars
recovery of the same reimbursable amount of medical
expenses under a contract of health or medical insurance.
We wish to opine that in cases of claims for reimbursement of
medical expenses where there are two contracts providing
benefits to that effect, recovery may be had on both
simultaneously. In the absence of an Other Insurance provision
in these coverages, the courts have uniformly held that an
insured is entitled to receive the insurance benefits without
regard to the amount of total benefits provided by other
insurance. (INSURANCE LAW, A Guide to Fundamental
Principles, Legal Doctrines, and Commercial Practices; Robert
E. Keeton, Alau I. Widiss, p. 261). The result is consistent with
the public policy underlying the collateral source rule – that is,
x x x the courts have usually concluded that the liability of a
health or accident insurer is not reduced by other possible
sources of indemnification or compensation. (ibid).
Very truly yours,
RICHARD DAVID C. FUNK II
Officer-in-Charge
Claims Adjudication Division
(SGD.)
Attorney IV
On December 3, 2002, the Voluntary Arbitrator rendered a
Decision27 finding MMPC liable to pay or reimburse the amount
of hospitalization expenses already paid by other health
insurance companies. The Voluntary Arbitrator held that the
employees may demand simultaneous payment from both the
CBA and their dependents’ separate health insurance without
resulting to double insurance, since separate premiums were
paid for each contract. He also noted that the CBA does not
prohibit reimbursement in case there are other health insurers.
Proceedings before the Court of Appeals
MMPC filed a Petition for Review with Prayer for the Issuance
of a Temporary Restraining Order and/or Writ of Preliminary
Injunction28 before the CA. It claimed that the Voluntary
Arbitrator committed grave abuse of discretion in not finding
that recovery under both insurance policies constitutes double
insurance as both had the same subject matter, interest
insured and risk or peril insured against; in relying solely on
the unauthorized legal opinion of Atty. Funk; and in not finding
that the employees will be benefited twice for the same loss.
In its Comment,29 MMPSEU countered that MMPC will unjustly
enrich itself and profit from the monthly premiums paid if full
reimbursement is not made.
On March 31, 2006, the CA found merit in MMPC’s Petition. It
ruled that despite the lack of a provision which bars recovery
in case of payment by other insurers, the wordings of the
subject provision of the CBA showed that the parties intended
to make MMPC liable only for expenses actually incurred by an
employee’s qualified dependent. In particular, the provision
stipulates that payment should be made directly to the hospital
and that the claim should be supported by actual hospital and
doctor’s bills. These mean that the employees shall only be paid
amounts not covered by other health insurance and is more in
keeping with the principle of indemnity in insurance contracts.
Besides, a contrary interpretation would "allow unscrupulous
employees to unduly profit from the x x x benefits" and shall
"open the floodgates to questionable claims x x x."30

The dispositive portion of the CA Decision31 reads:
WHEREFORE, the instant petition is GRANTED. The decision of
the voluntary arbitrator dated December 3, 2002 is REVERSED
and SET ASIDE and judgment is rendered declaring that under
Art. XI, Sec. 4 of the Collective Bargaining Agreement between
petitioner and respondent effective August 1, 1999 to July 31,
2002, the former’s obligation to reimburse the Union members
for the hospitalization expenses incurred by their dependents
is exclusive of those paid by the Union members to the hospital.
SO ORDERED.32
In its Motion for Reconsideration,33 MMPSEU pointed out that
the alleged oppression that may be committed by abusive
employees is a mere possibility whereas the resulting losses to
the employees are real. MMPSEU cited Samsel v. Allstate
Insurance Co.,34 wherein the Arizona Supreme Court explicitly
ruled that an insured may recover from separate health
insurance providers, regardless of whether one of them has
already paid the medical expenses incurred. On the other hand,
MMPC argued in its Comment35 that the cited foreign case
involves a different set of facts.
The CA, in its Resolution36 dated December 5, 2006, denied
MMPSEU’s motion.
Hence, this Petition.
Issues
MMPSEU presented the following grounds in support of its
Petition:
A.THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
REVERSED THE DECISION DATED 03 [DECEMBER] 2002 OF
THE VOLUNTARY ARBITRATOR BELOW WHEN THE SAME WAS
SUPPORTED BY SUBSTANTIAL EVIDENCE, INCLUDING THE
OPINION OF THE INSURANCE COMMISSION THAT RECOVERY
FROM BOTH THE CBA AND SEPARATE HEALTH CARDS IS NOT
PROHIBITED IN THE ABSENCE OF ANY SPECIFIC PROVISION
IN THE CBA.
B.THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
IN OVERTURNING THE DECISION OF THE VOLUNTARY
ARBITRATOR WITHOUT EVEN GIVING ANY LEGAL OR
JUSTIFIABLE BASIS FOR SUCH REVERSAL.
C.THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
REFUSING TO CONSIDER OR EVEN MENTION ANYTHING
ABOUT THE AMERICAN AUTHORITIES CITED IN THE RECORDS
THAT DO NOT PROHIBIT, BUT IN FACT ALLOW, RECOVERY
FROM TWO SEPARATE HEALTH PLANS.
D.THE COURT OF APPEALS GRAVELY ERRED IN GIVING MORE
IMPORTANCE TO A POSSIBLE, HENCE MERELY SPECULATIVE,
ABUSE BY EMPLOYEES OF THE BENEFITS IF DOUBLE
RECOVERY WERE ALLOWED INSTEAD OF THE REAL INJURY TO
THE EMPLOYEES WHO ARE PAYING FOR THE CBA
HOSPITALIZATION BENEFITS THROUGH MONTHLY SALARY
DEDUCTIONS BUT WHO MAY NOT BE ABLE TO AVAIL OF THE
SAME IF THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH
INSURANCE.37
MMPSEU avers that the Decision of the Voluntary Arbitrator
deserves utmost respect and finality because it is supported by
substantial evidence and is in accordance with the opinion
rendered by the Insurance Commission, an agency equipped
with vast knowledge concerning insurance contracts. It
maintains that under the CBA, member-employees are entitled
to full reimbursement of medical expenses incurred by their
dependents regardless of any amounts paid by the latter’s
health insurance provider. Otherwise, non-recovery will
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Dean Ada D. Abad
constitute unjust enrichment on the part of MMPC. It avers that
recovery from both the CBA and other insurance companies is
allowed under their CBA and not prohibited by law nor by
jurisprudence.
Our Ruling
The Petition has no merit.
Atty. Funk erred in applying the
collateral source rule.
The Voluntary Arbitrator based his ruling on the opinion of Atty.
Funk that the employees may recover benefits from different
insurance providers without regard to the amount of benefits
paid by each. According to him, this view is consistent with the
theory of the collateral source rule.
As part of American personal injury law, the collateral source
rule was originally applied to tort cases wherein the defendant
is prevented from benefiting from the plaintiff’s receipt of
money from other sources.38 Under this rule, if an injured
person receives compensation for his injuries from a source
wholly independent of the tortfeasor, the payment should not
be deducted from the damages which he would otherwise
collect from the tortfeasor.39 In a recent Decision40 by the
Illinois Supreme Court, the rule has been described as "an
established exception to the general rule that damages in
negligence actions must be compensatory." The Court went on
to explain that although the rule appears to allow a double
recovery, the collateral source will have a lien or subrogation
right to prevent such a double recovery.41 In Mitchell v.
Haldar,42 the collateral source rule was rationalized by the
Supreme Court of Delaware:
The collateral source rule is ‘predicated on the theory that a
tortfeasor has no interest in, and therefore no right to benefit
from monies received by the injured person from sources
unconnected with the defendant’. According to the collateral
source rule, ‘a tortfeasor has no right to any mitigation of
damages because of payments or compensation received by
the injured person from an independent source.’ The rationale
for the collateral source rule is based upon the quasi-punitive
nature of tort law liability. It has been explained as follows:
The collateral source rule is designed to strike a balance
between two competing principles of tort law: (1) a plaintiff is
entitled to compensation sufficient to make him whole, but no
more; and (2) a defendant is liable for all damages that
proximately result from his wrong. A plaintiff who receives a
double recovery for a single tort enjoys a windfall; a defendant
who escapes, in whole or in part, liability for his wrong enjoys
a windfall. Because the law must sanction one windfall and
deny the other, it favors the victim of the wrong rather than
the wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full
value of his or her negligent conduct even if it results in a
windfall for the innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the
responsibility for losses on the party causing them.43 Its
application is justified so that "'the wrongdoer should not
benefit from the expenditures made by the injured party or
take advantage of contracts or other relations that may exist
between the injured party and third persons."44 Thus, it finds
no application to cases involving no-fault insurances under
which the insured is indemnified for losses by insurance
companies, regardless of who was at fault in the incident
generating the losses.45 Here, it is clear that MMPC is a no-
fault insurer. Hence, it cannot be obliged to pay the
hospitalization expenses of the dependents of its employees
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Dean Ada D. Abad

which had already been paid by separate health insurance
providers of said dependents.
The Voluntary Arbitrator therefore erred in adopting Atty.
Funk’s view that the covered employees are entitled to full
payment of the hospital expenses incurred by their
dependents, including the amounts already paid by other
health insurance companies based on the theory of collateral
source rule.
The conditions set forth in the CBA provision indicate an
intention to limit MMPC’s liability only to actual expenses
incurred by the employees’ dependents, that is, excluding the
amounts paid by dependents’ other health insurance providers.
The Voluntary Arbitrator ruled that the CBA has no express
provision barring claims for hospitalization expenses already
paid by other insurers. Hence, the covered employees can
recover from both. The CA did not agree, saying that the
conditions set forth in the CBA implied an intention of the
parties to limit MMPC’s liability only to the extent of the
expenses actually incurred by their dependents which excludes
the amounts shouldered by other health insurance companies.
We agree with the CA. The condition that payment should be
direct to the hospital and doctor implies that MMPC is only liable
to pay medical expenses actually shouldered by the employees’
dependents. It follows that MMPC’s liability is limited, that is, it
does not include the amounts paid by other health insurance
providers. This condition is obviously intended to thwart not
only fraudulent claims but also double claims for the same loss
of the dependents of covered employees.
It is well to note at this point that the CBA constitutes a contract
between the parties and as such, it should be strictly construed
for the purpose of limiting the amount of the employer’s
liability.46 The terms of the subject provision are clear and
provide no room for any other interpretation. As there is no
ambiguity, the terms must be taken in their plain, ordinary and
popular sense.47 Consequently, MMPSEU cannot rely on the
rule that a contract of insurance is to be liberally construed in
favor of the insured. Neither can it rely on the theory that any
doubt must be resolved in favor of labor.
MMPSEU insists that MMPC is also liable for the amounts
covered under other insurance policies; otherwise, MMPC will
unjustly profit from the premiums the employees contribute
through monthly salary deductions.
This contention is unmeritorious.
To constitute unjust enrichment, it must be shown that a party
was unjustly enriched in the sense that the term unjustly could
mean illegally or unlawfully.50 A claim for unjust enrichment
fails when the person who will benefit has a valid claim to such
benefit.51
The CBA has provided for MMPC’s limited liability which extends
only up to the amount to be paid to the hospital and doctor by
the employees’ dependents, excluding those paid by other
insurers. Consequently, the covered employees will not receive
more than what is due them; neither is MMPC under any
obligation to give more than what is due under the CBA.
Moreover, since the subject CBA provision is an insurance
contract, the rights and obligations of the parties must be
determined in accordance with the general principles of
insurance law.52 Being in the nature of a non-life insurance
contract and essentially a contract of indemnity, the CBA
provision obligates MMPC to indemnify the covered employees’
medical expenses incurred by their dependents but only up to
the extent of the expenses actually incurred.53 This is
consistent with the principle of indemnity which proscribes the
insured from recovering greater than the loss.54 Indeed, to
profit from a loss will lead to unjust enrichment and therefore
should not be countenanced. As aptly ruled by the CA, to grant
the claims of MMPSEU will permit possible abuse by employees.
WHEREFORE, the Petition is DENIED. The Decision dated March
31, 2006 and Resolution dated December 5, 2006 of the Court
of Appeals in CA-G.R. SP No. 75630, are AFFIRMED.
SO ORDERED.

Samsel v. Allstate Insurance Co. is not

on all fours with the case at bar.

MMPSEU cannot rely on Samsel v. Allstate Insurance Co. where

the Supreme Court of Arizona allowed the insured to enjoy
medical benefits under an automobile policy insurance despite
being able to also recover from a separate health insurer. In
that case, the Allstate automobile policy does not contain any
clause restricting medical payment coverage to expenses
actually paid by the insured nor does it specifically provide for
reduction of medical payments benefits by a coordination of
benefits.48 However, in the case before us, the dependents’
group hospitalization insurance provision in the CBA specifically
contains a condition which limits MMPC’s liability only up to the
extent of the expenses that should be paid by the covered
employee’s dependent to the hospital and doctor. This is
evident from the portion which states that "payment by MMPC
shall be direct to the hospital and doctor."49 In contrast, the
Allstate automobile policy expressly gives Allstate the authority
to pay directly to the insured person or on the latter’s behalf
all reasonable expenses actually incurred. Therefore, reliance
on Samsel is unavailing because the facts therein are different
and not decisive of the issues in the present case.

To allow reimbursement of amounts paid

under other insurance policies shall
constitute double recovery which is not
sanctioned by law.

[12] G.R. No. 191281 December 5, 2012
BEST WEAR GARMENTS and/or WARREN PARDILLA,
Petitioners,
vs.
ADELAIDA B. DE LEMOS and CECILE M. OCUBILLO,
Respondents.
DECISION
VILLARAMA, J.:
This is a petition for review on certiorari under Rule 45 assailing
the Decision1 dated February 24, 2009 and Resolution2 dated
February 10, 2010 of the Court of Appeals (CA) in CA-G.R. SP
No. 102002. TheCA reversed the Decision3 dated August 28,
2007 of the National Labor Relations Commission (NLRC) and
reinstated the September 5, 2005 Decision 4 of the Labor
Arbiter.
Petitioner Best Wear Garments is a sole proprietorship
represented by its General Manager Alex Sitosta. Respondents
Cecile M. Ocubillo and Adelaida B. De Lemos were hired as
sewers on piece-rate basis by petitioners on October 27, 1993
andJuly 12, 1994, respectively.
On May 20, 2004, De Lemos filed a complaint5 for illegal
dismissal with prayer for backwages and other accrued
benefits, separation pay, service incentive leave pay and
attorney’s fees. A similar complaint6 was filed by Ocubillo on
June 10, 2004. Both alleged in their position paper that in
August 2003, Sitosta arbitrarily transferred them to other areas
of operation of petitioner’s garments company, which they said
amounted to constructive dismissal as it resulted in less
earnings for them.
De Lemos claimed that after two months in her new
assignment, she was able to adjust but Sitosta again
transferred her to a "different operation where she could not
earn [as] much as before because by-products require long
period of time to finish." She averred that the reason for her
transfer was her refusal "to render [overtime work] up to 7:00
p.m." Her request to be returned to her previous assignment
was rejected and she was "constrained not to report for work
as Sitosta had become indifferent to her since said transfer of
operation." She further alleged that her last salary was
withheld by petitioner company.7
On her part, Ocubillo alleged that her transfer was precipitated
by her having "incurred excessive absences since 2001." Her
absences were due to the fact that her father became very sick
since 2001 until his untimely demise on November 9, 2003;
aside from this, she herself became very sickly. She claimed
that from September to October 2003, Sitosta assigned her to
different machines "whichever is available" and that "there
were times, she could not earn for a day because there was no
available machine to work for [sic]." Sitosta also allegedly
required her to render overtime work up to 7:00 p.m. which
she refused "because she was only paid up to 6:25 p.m."8
Petitioners denied having terminated the employment of
respondents who supposedly committed numerous absences
without leave (AWOL). They claimed that sometime in February
2004, De Lemos informed Sitosta that due to personal problem,
she intends to resign from the company. She then demanded
the payment of separation pay. In March 2004, Ocubillo
likewise intimated her intention to resign and demanded
separation pay. Sitosta explained to both De Lemos and
Ocubillo that the company had no existing policy on granting
separation pay, and hence he could not act on their request.
De Lemos never reported back to work since March 2004, while
Ocubillo failed to report for work from October 2004 to the
present.
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Dean Ada D. Abad
As to the allegation of respondents that the reason for their
transfer was their refusal to render overtime work until 7:00
p.m., petitioners asserted that respondents are piece-rate
workers and hence they are not paid according to the number
of hours worked.
On September 5, 2005, Labor Arbiter Arden S. Anni rendered
a Decision granting respondents’ claims, as follows:
WHEREFORE, ALL THE FOREGOING CONSIDERED, judgment is
rendered, as follows:
1. Declaring that complainants were constructively, nay,
illegally dismissed from employment;
2. Ordering respondents to pay each of the complainants
SEPARATION PAY equivalent to one-month salary for every
year of service, a fraction of at least six (6) months being
considered as one (1) whole year;
3. Ordering respondents to pay each of the complainants
BACKWAGES computed from the time of their dismissal up to
the finality of this decision.
For this purpose, both parties are directed to submit their
respective computations of the total amount awarded for
approval by this office.
All other claims are dismissed for lack of merit.
SO ORDERED.9
Labor Arbiter Anni ruled that since respondents neither
resigned nor abandoned their jobs, the ambiguities in the
circumstances surrounding their dismissal are resolved in favor
of the workers. It was emphasized that respondents could no
longer be deemed terminated for reason of AWOL because this
prerogative should have been exercised before the dismissals
have been effected. Moreover, it would have been illogical for
respondents to resign and then file a complaint for illegal
dismissal.
Petitioners appealed to the NLRC which reversed the Labor
Arbiter’s decision and dismissed respondents’ complaints. The
NLRC found no basis for the charge of constructive dismissal,
thus:
Complainants’ alleged demotion is vague. They simply allege
that by reason of their transfer in August 2003, they did not
earn as much as they earned in their previous assignments.
They failed to state how much they earned before and after
their transfer, if only to determine whether or not there was
indeed a diminution in their earnings. Further, it is to be
stressed that complainants were paid on a piece rate basis,
which simply means that the more output, they produced the
more earnings they will have. In other words, the earning is
dependent upon complainants.
We find more credible respondents’ assertion that
complainants’ transfer was a valid exercise of management
prerogative. Respondent company points out that it is engaged
in the business of garments manufacturing as a sub-contractor.
That, the kind of work it performs is dependent into with its
client which specifies the work it has to perform. And, that
corollary thereto, the work to be performed by its employees
will depend on the work specifications in the contract. Thus, if
complainants have been assigned to different operations, it
was pursuant to the requirements of its contracts. x x x.
In furtherance of their defense that complainants were not
dismissed, either actual or constructive in August 2003,
respondents allege that complainants continued to report for

work until February 2004 for complainant De Lemos and
August 2004 for complainant Ocubillo. We lend credence to this
allegation of respondents because it remains unrebutted by
complainants.
It is to be noted that it was only [on] May 20, 2004 and June
10, 2004 that the instant consolidated cases were filed by
complainant De Lemos and Ocubillo, respectively. It may not
be amiss to state that the date of filing jibe with respondents’
allegation that sometime in February and March 2004,
complainants intimated their intention to resign and demanded
for payment of separation pay but was not favorably acted
upon by management.
Be that as it may, considering that complainants were not
dismissed by respondents, they should be ordered to report
back to work without backwages and for the respondents to
accept them.
WHEREFORE, premises considered, the Decision dated
September 5, 2005 is hereby SET ASIDE and a new one
entered dismissing complainants’ charge of illegal dismissal for
lack of merit. However, there being no dismissal, complainants
Adelaida B. De Lemos and Cecile M. Ocubillo are hereby
directed to report back to work without backwages within ten
(10) days from receipt of this Resolution and for the respondent
Company to accept them under the same terms and conditions
at the time of their employment.
SO ORDERED.10 (Italics in the original; emphasis supplied)
Respondents filed a motion for reconsideration which the NLRC
denied. Thus, they elevated the case to the CA alleging grave
abuse of discretion on the part of the NLRC.
By Decision dated February 24, 2009, the CA granted the
petition for certiorari, reversed the ruling of the NLRC and
reinstated the Labor Arbiter’s decision with modification that
the service incentive leave pay shall be excluded in the
computation of the monetary award. The CA found no valid and
legitimate business reason for the transfer order which entailed
the reduction of respondents’ earnings. Because respondents’
plea to be returned to their former posts was not heeded by
petitioners, no other conclusion "is discernible from the
attendant circumstances except the fact that [respondents’]
transfer was unreasonable, inconvenient and prejudicial to
them which [is] tantamount to a constructive dismissal."11
Moreover, the unauthorized absences of respondents did not
warrant a finding of abandonment in view of the length of their
service with petitioner company and the difficulty in finding
similar employment. The CA further invoked the rule that an
employee who forthwith takes steps to protest his layoff cannot
by any logic be said to have abandoned his work.
Petitioners filed a motion for partial reconsideration which was
denied by the CA.
Hence, this petition alleging that the CA has glaringly
overlooked and clearly erred in its findings of fact and in
applying the law on constructive dismissal.
At the outset, it must bestated that the main issue in this case
involves a question of fact. It is an established rule that the
jurisdiction of the Supreme Court in cases brought before it
from the CA via Rule 45 of the 1997 Rules of Civil Procedure is
generally limited to reviewing errors of law. This Court is not a
trier of facts. In the exercise of its power of review, the findings
of fact of the CA are conclusive and binding and consequently,
it is not our function to analyze or weigh evidence all over
again.12
There are, however, recognized exceptions13 to this rule such
as when there is a divergence between the findings of facts of
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Dean Ada D. Abad
the NLRC and that of the CA.14 In this case, the CA’s findings
are contrary to those of the NLRC. There is, therefore, a need
to review the records to determine which of them should be
preferred as more conformable to evidentiary facts.15
The right of employees to security of tenure does not give them
vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or
to transfer them. Thus, an employer may transfer or assign
employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary,
benefits, and other privileges, and the action is not motivated
by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause.16
In Blue Dairy Corporation v. NLRC,17 we held that:
x x x. The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion, bearing in mind
the basic elements of justice and fair play. Having the right
should not be confused with the manner in which that right is
exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In particular,
the employer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his
salaries, privileges and other benefits. Should the employer fail
to overcome this burden of proof, the employee’s transfer shall
be tantamount to constructive dismissal, which has been
defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay. Likewise,
constructive dismissal exists when an act of clear
discrimination, insensibility or disdain by an employer has
become so unbearable to the employee leaving him with no
option but to forego with his continued employment.18
With the foregoing as guidepost, we hold that the CA erred in
reversing the NLRC’s ruling that respondents were not
constructively dismissed.
Being piece-rate workers assigned to individual sewing
machines, respondents’ earnings depended on the quality and
quantity of finished products. That their work output might
have been affected by the change in their specific work
assignments does not necessarily implythat any
resultingreduction in payis tantamount to constructive
dismissal. Workers under piece-rate employment have no fixed
salaries and their compensation is computed on the basis of
accomplished tasks. As admitted by respondent De Lemos,
some garments or by-products took a longer time to finish so
they could not earn as much as before. Also,the type of sewing
jobs available would depend on the specifications made by the
clients of petitioner company. Under these circumstances, it
cannot be said that the transfer was unreasonable,
inconvenient or prejudicial to the respondents. Such
deployment of sewers to work on different types of garments
as dictated by present business necessity is within the ambit of
management prerogative which, in the absence of bad faith, ill
motive or discrimination, should not be interfered with by the
courts.
The records are bereft of any showing of clear discrimination,
insensibility or disdain on the part of petitioners in transferring
respondents to perform a different type of sewing job.It is
unfair to charge petitioners with constructive dismissal simply
because the respondents insist that their transfer to a new
work assignment was against their will. We have long stated
that "the objection to the transfer being grounded on solely
upon the personal inconvenience or hardship that will be
caused to the employee by reason of the transfer is not a valid
reason to disobey an order of transfer."19 That respondents
eventually discontinued reporting for work after their plea to
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Dean Ada D. Abad

be returned to their former work assignment was their personal

decision, for which the petitioners should not be held liable
particularly as the latter did not, in fact, dismiss them.

Indeed, there was no evidence that respondents were

dismissed from employment.1âwphi1 In fact, petitioners
expressed willingness to accept them back to work. There
being no termination of employment by the employer, the
award of backwages cannot be sustained. It is well settled that
backwages may be granted only when there is a finding of
illegal dismissal.20 In cases where there is no evidence of
dismissal, the remedy is reinstatement but without
backwages.21

The constitutional policy of providing full protection to labor is

not intended to oppress or destroy management.22 While the
Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that
every labor dispute will be automatically decided in favor of
labor. Management also has its rights which are entitled to
respect and enforcement in the interest of simple fair play.23
Thus, where management prerogative to transfer employees is
validly exercised, as in this case, courts will decline to interfere.

WHEREFORE, the petition for review on certiorari is GRANTED.

The Decision dated February 24, 2009 and Resolution dated
February 10, 2010 of the Court of Appeals in CA-G.R. SP No.
102002 are SET ASIDE. The Decision dated August 28, 2007 of
the National Labor Relations Commission is hereby
REINSTATED and UPHELD.

[13] G.R. Nos. 158786 & 158789 October 19,
2007
TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION (TMPCWA), ED CUBELO, EDWIN
ALARANA, ALEX ALEJO, ERWIN ALFONSO, MELVIN APOSTOL, DANIEL AROLLADO,
DOMINADOR ARRIOLA, LESTER ATUN, ROLANDO BALUYOT, RODERICK BAYANI, ABEL
BERCES, BENNY BERING, MELCHOR BLANCO, JERRY BOLOCON, ELMER BULAN, NELSON
CABAHUG, JESSIE CABATAY, MARCELO CABEZAS, ROQUE CANDELARIO, JR., LORENZO
CARAQUEO, DENNIS CARINGAL, GIENELL CASABA, CHRISTOPHER CATAPUSAN, RICO
CATRAL, JULIUS COMETA, JAY ANTONIO CORAL, REYNALDO CUEVAS, BENIGNO DAVID,
JR., JOEY DE GUZMAN, LEONARDO DE LEON, ROGELIO DELOS SANTOS, JOSELITO DE
OCAMPO, FRANK MANUEL DIA, ANTONIO DIMAYUGA, ARMANDO ERCILLO, DELMAR
ESPADILLA, DENNIS ESPELOA, JASON FAJILAGUTAN, JOHN FAJURA, MELENCIO FRANCO,
DEXTER FULGAR, EDUARDO GADO, ERWIN GALANG, ROBIN GARCES, ARIEL GARCIA,
RONALD GASPI, ANGELO GAVARRA, REYNALDO GOJAR, EDGAR HILANGA, EUGENE JAY
HONDRADA, ALEJANDRO IMPERIAL, FERDINAND JAEN, JOEY JAVILLONAR, BASILIO
LAQUI, ALBERTO LOMBOY, JUDE JONOBELL LOZADA, JOHNNY LUCIDO, ROMMEL
MACALINDONG, NIXON MADRAZO, ROGELIO MAGISTRADO, JR., PHILIP JOHN MAGNAYE,
ALLAN JOHN MALABANAN, ROLANDO MALALUAN, JR., PAULINO MALEON, MANUEL
MANALO, JR., JONAMAR MANAOG, JOVITO MANECLANG, BAYANI MANGUIL, JR., CARLITO
MARASIGAN, ROMMEL MARIANO, BOBIT MENDOZA, ERICSON MONTERO, MARLAW
MONTERO, EDWIN NICANOR, RODERICK NIERVES, LOLITO NUNEZ, FELIMON ORTIZ,
EDWIN PECAYO, ERWIN PENA, JOWALD PENAMANTE, JORGE POLUTAN, EDDIE RAMOS,
ROLANDO REYES, PHILIP ROXAS, DAVID SALLAN, JR., BERNARDO SALVADOR, BALDWIN
SAN PABLO, JEFFREY SANGALANG, BERNABE SAQUILABON, ALEX SIERRA, ROMUALDO
SIMBORIO, EDWIN TABLIZO, PETRONIO TACLAN, JR., RODEL TOLENTINO, ROMMEL
TOLENTINO, GRANT ROBERT TORAL, FEDERICO TORRES, JR., EMANNUEL TULIO, NESTOR
UMITEN, JR., APOLLO VIOLETA, SR., DOMINADOR ZAMORA, JR., ROMMEL ARCETA,
ANTONIO BORSIGUE, EMILIO COMPLETO, RANDY CONSIGNADO, BASILIO DELA CRUZ,
ALEXANDER ESTEVA, NIKKO FRANCO, RODEL GAMIT, ROBERTO GONZALES, PHILIP JALEA,
JOEY LLANERA, GERONIMO LOPEZ, RUEL MANEGO, EDWIN MANZANILLA, KENNETH
NATIVIDAD, LARRY ORMILLA, CORNELIO PLATON, PAUL ARTHUR SALES, ALEJANDRO
SAMPANG, LAURO SULIT, ROLANDO TOMAS, JOSE ROMMEL TRAZONA, MICHAEL TEDDY
YANGYON, MAXIMINO CRUZ, VIRGILIO COLANDOG, ROMMEL DIGMA, JOSELITO HUGO,
and RICKY CHAVEZ, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (NLRC-2ND DIVISION), HON.
COMMISSIONERS: VICTORINO CALAYCAY, ANGELITA GACUTAN, and RAUL AQUINO,
TOYOTA MOTOR PHILIPPINES CORPORATION, TAKESHI FUKUDA, and DAVID GO,
Respondents,
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. Nos. 158798-99
TOYOTA MOTOR PHILIPPINES CORPORATION, Petitioner,
vs.
TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION
(TMPCWA), Respondent.
DECISION
VELASCO, JR., J.:
The Case
In the instant petition under Rule 45 subject of G.R. Nos.
158786 and 158789, Toyota Motor Philippines Corporation
Workers Association (Union) and its dismissed officers and
members seek to set aside the February 27, 2003 Decision1 of
the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561,
which affirmed the August 9, 2001 Decision2 and September
14, 2001 Resolution3 of the National Labor Relations
Commission (NLRC), declaring illegal the strikes staged by the
Union and upholding the dismissal of the 227 Union officers and
members.
On the other hand, in the related cases docketed as G.R. Nos.
158798-99, Toyota Motor Philippines Corporation (Toyota)
prays for the recall of the award of severance compensation to
the 227 dismissed employees, which was granted under the
June 20, 2003 CA Resolution4 in CA-G.R. SP Nos. 67100 and
67561.
In view of the fact that the parties are petitioner/s and
respondent/s and vice-versa in the four (4) interrelated cases,
they will be referred to as simply the Union and Toyota
hereafter.
The Facts
The Union is a legitimate labor organization duly registered
with the Department of Labor and Employment (DOLE) and is
the sole and exclusive bargaining agent of all Toyota rank and
file employees.5
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Dean Ada D. Abad
Toyota, on the other hand, is a domestic corporation engaged
in the assembly and sale of vehicles and parts.6 It is a Board
of Investments (BOI) participant in the Car Development
Program and the Commercial Vehicle Development Program. It
is likewise a BOI-preferred non-pioneer export trader of
automotive parts and is under the "Special Economic Zone Act
of 1995." It is one of the largest motor vehicle manufacturers
in the country employing around 1,400 workers for its plants
in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets
amount to PhP 5.525 billion, with net sales of PhP 14.646 billion
and provisions for income tax of PhP 120.9 million.
On February 14, 1999, the Union filed a petition for certification
election among the Toyota rank and file employees with the
National Conciliation and Mediation Board (NCMB), which was
docketed as Case No. NCR-OD-M-9902-001. Med-Arbiter Ma.
Zosima C. Lameyra denied the petition, but, on appeal, the
DOLE Secretary granted the Union’s prayer, and, through the
June 25, 1999 Order, directed the immediate holding of the
certification election.7
After Toyota’s plea for reconsideration was denied, the
certification election was conducted. Med-Arbiter Lameyra’s
May 12, 2000 Order certified the Union as the sole and
exclusive bargaining agent of all the Toyota rank and file
employees. Toyota challenged said Order via an appeal to the
DOLE Secretary.8
In the meantime, the Union submitted its Collective Bargaining
Agreement (CBA) proposals to Toyota, but the latter refused to
negotiate in view of its pending appeal. Consequently, the
Union filed a notice of strike on January 16, 2001 with the
NCMB, docketed as NCMB-NCR-NS-01-011-01, based on
Toyota’s refusal to bargain. On February 5, 2001, the NCMB-
NCR converted the notice of strike into a preventive mediation
case on the ground that the issue of whether or not the Union
is the exclusive bargaining agent of all Toyota rank and file
employees was still unresolved by the DOLE Secretary.
In connection with Toyota’s appeal, Toyota and the Union were
required to attend a hearing on February 21, 2001 before the
Bureau of Labor Relations (BLR) in relation to the exclusion of
the votes of alleged supervisory employees from the votes cast
during the certification election. The February 21, 2001 hearing
was cancelled and reset to February 22, 2001. On February 21,
2001, 135 Union officers and members failed to render the
required overtime work, and instead marched to and staged a
picket in front of the BLR office in Intramuros, Manila.9 The
Union, in a letter of the same date, also requested that its
members be allowed to be absent on February 22, 2001 to
attend the hearing and instead work on their next scheduled
rest day. This request however was denied by Toyota.
Despite denial of the Union’s request, more than 200
employees staged mass actions on February 22 and 23, 2001
in front of the BLR and the DOLE offices, to protest the partisan
and anti-union stance of Toyota. Due to the deliberate absence
of a considerable number of employees on February 22 to 23,
2001, Toyota experienced acute lack of manpower in its
manufacturing and production lines, and was unable to meet
its production goals resulting in huge losses of PhP 53,849,991.
Soon thereafter, on February 27, 2001, Toyota sent individual
letters to some 360 employees requiring them to explain within
24 hours why they should not be dismissed for their obstinate
defiance of the company’s directive to render overtime work on
February 21, 2001, for their failure to report for work on
February 22 and 23, 2001, and for their participation in the
concerted actions which severely disrupted and paralyzed the
plant’s operations.10 These letters specifically cited Section D,
paragraph 6 of the Company’s Code of Conduct, to wit:

Inciting or participating in riots, disorders, alleged strikes, or
concerted actions detrimental to [Toyota’s] interest.
1st offense – dismissal.11
Meanwhile, a February 27, 2001 Manifesto was circulated by
the Union which urged its members to participate in a
strike/picket and to abandon their posts, the pertinent portion
of which reads, as follows:
YANIG sa kanyang komportableng upuan ang management ng
TOYOTA. And dating takot, kimi, at mahiyaing manggagawa ay
walang takot na nagmartsa at nagprotesta laban sa
desperadong pagtatangkang baguhin ang desisyon ng DOLE na
pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa
tatlong daang manggagawa ang lumahok.
xxxx
HANDA na tayong lumabas anumang oras kung patuloy na
ipagkakait ng management ang CBA. Oo maari tayong
masaktan sa welga. Oo, maari tayong magutom sa piketlayn.
Subalit may pagkakaiba ba ito sa unti-unting pagpatay sa atin
sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang
taon na lang ay magkakabutas na ang ating mga baga sa mga
alipato at usok ng welding. Ilang taon na lang ay marupok na
ang ating mga buto sa kabubuhat. Kung dumating na ang
panahong ito at wala pa tayong CBA, paano na? Hahayaan ba
nating ang kumpanya lang ang makinabang sa yamang likha
ng higit sa isang dekadang pagpapagal natin?
HUWAG BIBITIW SA NASIMULANG TAGUMPAY!
PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG
MAKATARUNGANG CBA!
HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA
MANGGAGAWA SA TOYOTA!12 (Emphasis supplied.)
On the next day, the Union filed with the NCMB another notice
of strike docketed as NCMB-NCR-NS-02-061-01 for union
busting amounting to unfair labor practice.
On March 1, 2001, the Union nonetheless submitted an
explanation in compliance with the February 27, 2001 notices
sent by Toyota to the erring employees. The Union members
explained that their refusal to work on their scheduled work
time for two consecutive days was simply an exercise of their
constitutional right to peaceably assemble and to petition the
government for redress of grievances. It further argued that
the demonstrations staged by the employees on February 22
and 23, 2001 could not be classified as an illegal strike or
picket, and that Toyota had already condoned the alleged acts
when it accepted back the subject employees.13
Consequently, on March 2 and 5, 2001, Toyota issued two (2)
memoranda to the concerned employees to clarify whether or
not they are adopting the March 1, 2001 Union’s explanation
as their own. The employees were also required to attend an
investigative interview,14 but they refused to do so.
On March 16, 2001, Toyota terminated the employment of 227
employees15 for participation in concerted actions in violation
of its Code of Conduct and for misconduct under Article 282 of
the Labor Code. The notice of termination reads:
After a careful evaluation of the evidence on hand, and a
thorough assessment of your explanation, TMP has concluded
that there are overwhelming reasons to terminate your
services based on Article 282 of the Labor Code and TMP’s Code
of Conduct.
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Dean Ada D. Abad
Your repeated absences without permission on February 22 to
23, 2001 to participate in a concerted action against TMP
constitute abandonment of work and/or very serious
misconduct under Article 282 of the Labor Code.
The degree of your offense is aggravated by the following
circumstances:
1. You expressed to management that you will adopt the
union’s letter dated March 1, 2001, as your own explanation to
the charges contained in the Due Process Form dated February
27, 2001. It is evident from such explanation that you did not
come to work because you deliberately participated together
with other Team Members in a plan to engage in concerted
actions detrimental to TMP’s interest. As a result of your
participation in the widespread abandonment of work by Team
Members from February 22 to 23, 2001, TMP suffered
substantial damage.
It is significant that the absences you incurred in order to
attend the clarificatory hearing conducted by the Bureau of
Labor Relations were unnecessary because the union was
amply represented in the said hearings by its counsel and
certain members who sought and were granted leave for the
purpose. Your reason for being absent is, therefore, not
acceptable; and
2. Your participation in the organized work boycott by Team
Members on February 22 and 23 led to work disruptions that
prevented the Company from meeting its production targets,
resulting [in] foregone sales of more than eighty (80) vehicles,
mostly new-model Revos, valued at more than Fifty Million
Pesos (50,000,000.00).
The foregoing is also a violation of TMP’s Code of Conduct
(Section D, Paragraph 6) to wit:
"Inciting or participating in riots, disorders, illegal strikes or
concerted actions detrimental to TMP’s interest."
Based on the above, TMP Management is left with no other
recourse but to terminate your employment effective upon
your receipt thereof.
[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager16
In reaction to the dismissal of its union members and officers,
the Union went on strike on March 17, 2001. Subsequently,
from March 28, 2001 to April 12, 2001, the Union intensified
its strike by barricading the gates of Toyota’s Bicutan and Sta.
Rosa plants. The strikers prevented workers who reported for
work from entering the plants. In his Affidavit, Mr. Eduardo
Nicolas III, Security Department Head, stated that:
3. On March 17, 2001, members of the Toyota Motor
Philippines Corporation Workers Association (TMPCWA), in
response to the dismissal of some two hundred twenty seven
(227) leaders and members of TMPCWA and without observing
the requirements mandated by the Labor Code, refused to
report for work and picketed TMPC premises from 8:00 a.m. to
5:00 p.m. The strikers badmouthed people coming in and
hurled invectives such as "bakeru" at Japanese officers of the
company. The strikers likewise pounded the officers’ vehicle as
they tried to enter the premises of the company.
4. On March 28, 2001, the strikers intensified their picketing
and barricaded the gates of TMPC’s Bicutan and Sta. Rosa
plants, thus, blocking the free ingress/egress to and from the
premises. Shuttle buses and cars containing TMPC employees,
suppliers, dealers, customers and other people having business

with the company, were prevented by the strikers from
entering the plants.
5. As a standard operating procedure, I instructed my men to
take photographs and video footages of those who participated
in the strike. Seen on video footages taken on various dates
actively participating in the strike were union officers Emilio C.
Completo, Alexander Esteva, Joey Javellonar and Lorenzo
Caraqueo.
6. Based on the pictures, among those identified to have
participated in the March 28, 2001 strike were Grant Robert
Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel
Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya,
Feliciano Mercado, Charlie Oliveria, Philip Roxas, June
Lamberte, Manjolito Puno, Baldwin San Pablo, Joseph Naguit,
Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino,
Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy
Hembra, Albert Mariquit, Ramil Gecale, Jimmy Palisoc,
Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo
Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino,
Allan Palomares, Arturo Murillo and Robert Gonzales. Attached
hereto as Annexes "1" to "18" are the pictures taken on March
28, 2001 at the Bicutan and Sta. Rosa plants.
7. From March 29 to 31, 2001, the strikers continued to
barricade the entrances to TMPC’s two (2) plants. Once again,
the strikers hurled nasty remarks and prevented employees
aboard shuttle buses from entering the plants. Among the
strikers were Christopher Saldivar, Basilio Laqui, Sabas
Bernabise, Federico Torres, Freddie Olit, Josel Agosto, Arthur
Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie
Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial,
Manjolito Puno, Delmar Espadilla, Domingo Javier, Apollo
Violeta and Elvis Tabinao.17
On March 29, 2001, Toyota filed a petition for injunction with a
prayer for the issuance of a temporary restraining order (TRO)
with the NLRC, which was docketed as NLRC NCR Case No. INJ-
0001054-01. It sought free ingress to and egress from its
Bicutan and Sta. Rosa manufacturing plants. Acting on said
petition, the NLRC, on April 5, 2001, issued a TRO against the
Union, ordering its leaders and members as well as its
sympathizers to remove their barricades and all forms of
obstruction to ensure free ingress to and egress from the
company’s premises. In addition, the NLRC rejected the Union’s
motion to dismiss based on lack of jurisdiction.18
Meanwhile, Toyota filed a petition to declare the strike illegal
with the NLRC arbitration branch, which was docketed as NLRC
NCR (South) Case No. 30-04-01775-01, and prayed that the
erring Union officers, directors, and members be dismissed.19
On April 10, 2001, the DOLE Secretary assumed jurisdiction
over the labor dispute and issued an Order20 certifying the
labor dispute to the NLRC. In said Order, the DOLE Secretary
directed all striking workers to return to work at their regular
shifts by April 16, 2001. On the other hand, it ordered Toyota
to accept the returning employees under the same terms and
conditions obtaining prior to the strike or at its option, put them
under payroll reinstatement. The parties were also enjoined
from committing acts that may worsen the situation.1âwphi1
The Union ended the strike on April 12, 2001. The union
members and officers tried to return to work on April 16, 2001
but were told that Toyota opted for payroll-reinstatement
authorized by the Order of the DOLE Secretary.
In the meantime, the Union filed a motion for reconsideration
of the DOLE Secretary’s April 10, 2001 certification Order,
which, however, was denied by the DOLE Secretary in her May
25, 2001 Resolution. Consequently, a petition for certiorari was
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Dean Ada D. Abad
filed before the CA, which was docketed as CA-G.R. SP No.
64998.
In the intervening time, the NLRC, in compliance with the April
10, 2001 Order of the DOLE Secretary, docketed the case as
Certified Case No. 000203-01.
Meanwhile, on May 23, 2001, at around 12:00 nn., despite the
issuance of the DOLE Secretary’s certification Order, several
payroll-reinstated members of the Union staged a protest rally
in front of Toyota’s Bicutan Plant bearing placards and
streamers in defiance of the April 10, 2001 Order.
Then, on May 28, 2001, around forty-four (44) Union members
staged another protest action in front of the Bicutan Plant. At
the same time, some twenty-nine (29) payroll-reinstated
employees picketed in front of the Santa Rosa Plant’s main
entrance, and were later joined by other Union members.
On June 5, 2001, notwithstanding the certification Order, the
Union filed another notice of strike, which was docketed as
NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE
Secretary directed the second notice of strike to be subsumed
in the April 10, 2001 certification Order.
In the meantime, the NLRC, in Certified Case No. 000203-01,
ordered both parties to submit their respective position papers
on June 8, 2001. The union, however, requested for abeyance
of the proceedings considering that there is a pending petition
for certiorari with the CA assailing the validity of the DOLE
Secretary’s Assumption of Jurisdiction Order.
Thereafter, on June 19, 2001, the NLRC issued an Order,
reiterating its previous order for both parties to submit their
respective position papers on or before June 2, 2001. The same
Order also denied the Union’s verbal motion to defer hearing
on the certified cases.
On June 27, 2001, the Union filed a Motion for Reconsideration
of the NLRC’s June 19, 2001 Order, praying for the deferment
of the submission of position papers until its petition for
certiorari is resolved by the CA.
On June 29, 2001, only Toyota submitted its position paper. On
July 11, 2001, the NLRC again ordered the Union to submit its
position paper by July 19, 2001, with a warning that upon
failure for it to do so, the case shall be considered submitted
for decision.
Meanwhile, on July 17, 2001, the CA dismissed the Union’s
petition for certiorari in CA-G.R. SP No. 64998, assailing the
DOLE Secretary’s April 10, 2001 Order.
Notwithstanding repeated orders to file its position paper, the
Union still failed to submit its position paper on July 19, 2001.
Consequently, the NLRC issued an Order directing the Union to
submit its position paper on the scheduled August 3, 2001
hearing; otherwise, the case shall be deemed submitted for
resolution based on the evidence on record.
During the August 3, 2001 hearing, the Union, despite several
accommodations, still failed to submit its position paper. Later
that day, the Union claimed it filed its position paper by
registered mail.
Subsequently, the NLRC, in its August 9, 2001 Decision,
declared the strikes staged by the Union on February 21 to 23,
2001 and May 23 and 28, 2001 as illegal. The decretal portion
reads:
WHEREFORE, premises considered, it is hereby ordered:
(1) Declaring the strikes staged by the Union to be illegal.

(2) Declared [sic] that the dismissal of the 227 who
participated in the illegal strike on February 21-23, 2001 is
legal.
(3) However, the Company is ordered to pay the 227 Union
members, who participated in the illegal strike severance
compensation in an amount equivalent to one month salary for
every year of service, as an alternative relief to continued
employment.
(4) Declared [sic] that the following Union officers and directors
to have forfeited their employment status for having led the
illegal strikes on February 21-23, 2001 and May 23 and 28,
2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito
Hugo, Virgilio Colandog, Rommel Digma, Federico Torres,
Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo
Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil,
Jr., and Mayo Mata.21
SO ORDERED.22
The NLRC considered the mass actions staged on February 21
to 23, 2001 illegal as the Union failed to comply with the
procedural requirements of a valid strike under Art. 263 of the
Labor Code.
After the DOLE Secretary assumed jurisdiction over the Toyota
dispute on April 10, 2001, the Union again staged strikes on
May 23 and 28, 2001. The NLRC found the strikes illegal as
they violated Art. 264 of the Labor Code which proscribes any
strike or lockout after jurisdiction is assumed over the dispute
by the President or the DOLE Secretary.
The NLRC held that both parties must have maintained the
status quo after the DOLE Secretary issued the
assumption/certification Order, and ruled that the Union did
not respect the DOLE Secretary’s directive.
Accordingly, both Toyota and the Union filed Motions for
Reconsideration, which the NLRC denied in its September 14,
2001 Resolution.23 Consequently, both parties questioned the
August 9, 2001 Decision24 and September 14, 2001 Resolution
of the NLRC in separate petitions for certiorari filed with the
CA, which were docketed as CA-G.R. SP Nos. 67100 and
67561, respectively. The CA then consolidated the petitions.
In its February 27, 2003 Decision,25 the CA ruled that the
Union’s petition is defective in form for its failure to append a
proper verification and certificate of non-forum shopping, given
that, out of the 227 petitioners, only 159 signed the verification
and certificate of non-forum shopping. Despite the flaw, the CA
proceeded to resolve the petitions on the merits and affirmed
the assailed NLRC Decision and Resolution with a modification,
however, of deleting the award of severance compensation to
the dismissed Union members.
In justifying the recall of the severance compensation, the CA
considered the participation in illegal strikes as serious
misconduct. It defined serious misconduct as a transgression
of some established and definite rule of action, a forbidden act,
a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. It cited Panay Electric
Company, Inc. v. NLRC,26 where we revoked the grant of
separation benefits to employees who lawfully participated in
an illegal strike based on Art. 264 of the Labor Code, which
states that "any union officer who knowingly participates in an
illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike
may be declared to have lost his employment status."27
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Dean Ada D. Abad
However, in its June 20, 2003 Resolution,28 the CA modified
its February 27, 2003 Decision by reinstating severance
compensation to the dismissed employees based on social
justice.
The Issues
Petitioner Union now comes to this Court and raises the
following issues for our consideration:
I. Whether the mere participation of ordinary employees in an
illegal strike is enough reason to warrant their dismissal.
II. Whether the Union officers and members’ act of holding the
protest rallies in front of the BLR office and the Office of the
Secretary of Labor and Employment on February 22 and 23,
2001 should be held as illegal strikes. In relation hereto,
whether the protests committed on May 23 and 28, 2001,
should be held as illegal strikes. Lastly, whether the Union
violated the Assumption of Jurisdiction Order issued by the
Secretary of Labor and Employment.
III. Whether the dismissal of 227 Union officers and members
constitutes unfair labor practice.
IV. Whether the CA erred in affirming the Decision of the NLRC
which excluded the Union’s Position Paper which the Union filed
by mail. In the same vein, whether the Union’s right to due
process was violated when the NLRC excluded their Position
Paper.
V. Whether the CA erred in dismissing the Union’s Petition for
Certiorari.
Toyota, on the other hand, presents this sole issue for our
determination:
I. Whether the Court of Appeals erred in issuing its Resolution
dated June 20, 2003, partially modifying its Decision dated
February 27, 2003, and awarding severance compensation to
the dismissed Union members.
In sum, two main issues are brought to the fore:
(1) Whether the mass actions committed by the Union on
different occasions are illegal strikes; and
(2) Whether separation pay should be awarded to the Union
members who participated in the illegal strikes.
The Court’s Ruling
The Union contends that the NLRC violated its right to due
process when it disregarded its position paper in deciding
Toyota’s petition to declare the strike illegal.
We rule otherwise.
It is entirely the Union’s fault that its position paper was not
considered by the NLRC. Records readily reveal that the NLRC
was even too generous in affording due process to the Union.
It issued no less than three (3) orders for the parties to submit
its position papers, which the Union ignored until the last
minute. No sufficient justification was offered why the Union
belatedly filed its position paper. In Datu Eduardo Ampo v. The
Hon. Court of Appeals, it was explained that a party cannot
complain of deprivation of due process if he was afforded an
opportunity to participate in the proceedings but failed to do
so. If he does not avail himself of the chance to be heard, then
it is deemed waived or forfeited without violating the
constitutional guarantee.29 Thus, there was no violation of the
Union’s right to due process on the part of the NLRC.

On a procedural aspect, the Union faults the CA for treating its
petition as an unsigned pleading and posits that the verification
signed by 159 out of the 227 petitioners has already
substantially complied with and satisfied the requirements
under Secs. 4 and 5 of Rule 7 of the Rules of Court.
The Union’s proposition is partly correct.
Sec. 4 of Rule 7 of the Rules of Court states:
Sec. 4. Verification.—Except when otherwise specifically
required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read
the pleading and that the allegations therein are true and
correct of his personal knowledge or based on authentic
records.
A pleading required to be verified which contains a verification
based on "information and belief" or upon "knowledge,
information and belief," or lacks a proper verification, shall be
treated as an unsigned pleading.
The verification requirement is significant, as it is intended to
secure an assurance that the allegations in the pleading are
true and correct and not the product of the imagination or a
matter of speculation.30 This requirement is simply a condition
affecting the form of pleadings, and noncompliance with the
requirement does not necessarily render it fatally defective.
Indeed, verification is only a formal and not a jurisdictional
requirement.31
In this case, the problem is not the absence but the adequacy
of the Union’s verification, since only 159 out of the 227
petitioners executed the verification. Undeniably, the petition
meets the requirement on the verification with respect to the
159 petitioners who executed the verification, attesting that
they have sufficient knowledge of the truth and correctness of
the allegations of the petition. However, their signatures
cannot be considered as verification of the petition by the other
68 named petitioners unless the latter gave written
authorization to the 159 petitioners to sign the verification on
their behalf. Thus, in Loquias v. Office of the Ombudsman, we
ruled that the petition satisfies the formal requirements only
with regard to the petitioner who signed the petition but not
his co-petitioner who did not sign nor authorize the other
petitioner to sign it on his behalf.32 The proper ruling in this
situation is to consider the petition as compliant with the formal
requirements with respect to the parties who signed it and,
therefore, can be given due course only with regard to them.
The other petitioners who did not sign the verification and
certificate against forum shopping cannot be recognized as
petitioners have no legal standing before the Court. The
petition should be dismissed outright with respect to the non-
conforming petitioners.
In the case at bench, however, the CA, in the exercise of sound
discretion, did not strictly apply the ruling in Loquias and
instead proceeded to decide the case on the merits.
The alleged protest rallies in front of the offices of BLR and
DOLE Secretary and at the Toyota plants constituted illegal
strikes
When is a strike illegal?
Noted authority on labor law, Ludwig Teller, lists six (6)
categories of an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such
as strike by employees performing governmental functions; or
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(2) [when it] violates a specific requirement of law[, such as
Article 263 of the Labor Code on the requisites of a valid
strike]; or
(3) [when it] is declared for an unlawful purpose, such as
inducing the employer to commit an unfair labor practice
against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its
objective, such as a widespread terrorism of non-strikers [for
example, prohibited acts under Art. 264(e) of the Labor Code];
or
(5) [when it] is declared in violation of an existing injunction[,
such as injunction, prohibition, or order issued by the DOLE
Secretary and the NLRC under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a
no-strike clause or conclusive arbitration clause.33
Petitioner Union contends that the protests or rallies conducted
on February 21 and 23, 2001 are not within the ambit of strikes
as defined in the Labor Code, since they were legitimate
exercises of their right to peaceably assemble and petition the
government for redress of grievances. Mainly relying on the
doctrine laid down in the case of Philippine Blooming Mills
Employees Organization v. Philippine Blooming Mills Co.,
Inc.,34 it argues that the protest was not directed at Toyota
but towards the Government (DOLE and BLR). It explains that
the protest is not a strike as contemplated in the Labor Code.
The Union points out that in Philippine Blooming Mills
Employees Organization, the mass action staged in Malacañang
to petition the Chief Executive against the abusive behavior of
some police officers was a proper exercise of the employees’
right to speak out and to peaceably gather and ask government
for redress of their grievances.
The Union’s position fails to convince us.
While the facts in Philippine Blooming Mills Employees
Organization are similar in some respects to that of the present
case, the Union fails to realize one major difference: there was
no labor dispute in Philippine Blooming Mills Employees
Organization. In the present case, there was an on-going labor
dispute arising from Toyota’s refusal to recognize and negotiate
with the Union, which was the subject of the notice of strike
filed by the Union on January 16, 2001. Thus, the Union’s
reliance on Phililippine Blooming Mills Employees Organization
is misplaced, as it cannot be considered a precedent to the case
at bar.
A strike means any temporary stoppage of work by the
concerted action of employees as a result of an industrial or
labor dispute. A labor dispute, in turn, includes any controversy
or matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions
of employment, regardless of whether the disputants stand in
the proximate relation of the employer and the employee.35
In Bangalisan v. Court of Appeals, it was explained that "[t]he
fact that the conventional term ‘strike’ was not used by the
striking employees to describe their common course of action
is inconsequential, since the substance of the situation and not
its appearance, will be deemed controlling."36 The term
"strike" has been elucidated to encompass not only concerted
work stoppages, but also slowdowns, mass leaves, sit-downs,
attempts to damage, destroy, or sabotage plant equipment and
facilities, and similar activities.37
Applying pertinent legal provisions and jurisprudence, we rule
that the protest actions undertaken by the Union officials and
members on February 21 to 23, 2001 are not valid and proper

exercises of their right to assemble and ask government for
redress of their complaints, but are illegal strikes in breach of
the Labor Code. The Union’s position is weakened by the lack
of permit from the City of Manila to hold "rallies." Shrouded as
demonstrations, they were in reality temporary stoppages of
work perpetrated through the concerted action of the
employees who deliberately failed to report for work on the
convenient excuse that they will hold a rally at the BLR and
DOLE offices in Intramuros, Manila, on February 21 to 23,
2001. The purported reason for these protest actions was to
safeguard their rights against any abuse which the med-arbiter
may commit against their cause. However, the Union failed to
advance convincing proof that the med-arbiter was biased
against them. The acts of the med-arbiter in the performance
of his duties are presumed regular. Sans ample evidence to the
contrary, the Union was unable to justify the February 2001
mass actions. What comes to the fore is that the decision not
to work for two days was designed and calculated to cripple the
manufacturing arm of Toyota. It becomes obvious that the real
and ultimate goal of the Union is to coerce Toyota to finally
acknowledge the Union as the sole bargaining agent of the
company. This is not a legal and valid exercise of the right of
assembly and to demand redress of grievance.
We sustain the CA’s affirmance of the NLRC’s finding that the
protest rallies staged on February 21 to 23, 2001 were actually
illegal strikes. The illegality of the Union’s mass actions was
succinctly elaborated by the labor tribunal, thus:
We have stated in our questioned decision that such mass
actions staged before the Bureau of Labor Relations on
February 21-23, 2001 by the union officers and members fall
squarely within the definition of a strike (Article 212 (o), Labor
Code). These concerted actions resulted in the temporary
stoppage of work causing the latter substantial losses. Thus,
without the requirements for a valid strike having been
complied with, we were constrained to consider the strike
staged on such dates as illegal and all employees who
participated in the concerted actions to have consequently lost
their employment status.
If we are going to stamp a color of legality on the two (2) [day-
] walk out/strike of respondents without filing a notice of strike,
in effect we are giving license to all the unions in the country
to paralyze the operations of their companies/employers every
time they wish to hold a demonstration in front of any
government agency. While we recognize the right of every
person or a group to peaceably assemble and petition the
government for redress of grievances, the exercise of such
right is governed by existing laws, rules and regulations.
Although the respondent union admittedly made earnest
representations with the company to hold a mass protest
before the BLR, together with their officers and members, the
denial of the request by the management should have been
heeded and ended their insistence to hold the planned mass
demonstration. Verily, the violation of the company rule cannot
be dismissed as mere absences of two days as being suggested
by the union [are but] concerted actions detrimental to
Petitioner Toyota’s interest.38 (Emphasis supplied.)
It is obvious that the February 21 to 23, 2001 concerted actions
were undertaken without satisfying the prerequisites for a valid
strike under Art. 263 of the Labor Code. The Union failed to
comply with the following requirements: (1) a notice of strike
filed with the DOLE 30 days before the intended date of strike,
or 15 days in case of unfair labor practice;39 (2) strike vote
approved by a majority of the total union membership in the
bargaining unit concerned obtained by secret ballot in a
meeting called for that purpose; and (3) notice given to the
DOLE of the results of the voting at least seven days before the
intended strike. These requirements are mandatory and the
failure of a union to comply with them renders the strike
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illegal.40 The evident intention of the law in requiring the strike
notice and the strike-vote report is to reasonably regulate the
right to strike, which is essential to the attainment of legitimate
policy objectives embodied in the law.41 As they failed to
conform to the law, the strikes on February 21, 22, and 23,
2001 were illegal.
Moreover, the aforementioned February 2001 strikes are in
blatant violation of Sec. D, par. 6 of Toyota’s Code of Conduct
which prohibits "inciting or participating in riots, disorders,
alleged strikes or concerted actions detrimental to [Toyota’s]
interest." The penalty for the offense is dismissal. The Union
and its members are bound by the company rules, and the
February 2001 mass actions and deliberate refusal to render
regular and overtime work on said days violated these rules.
In sum, the February 2001 strikes and walk-outs were illegal
as these were in violation of specific requirements of the Labor
Code and a company rule against illegal strikes or concerted
actions.
With respect to the strikes committed from March 17 to April
12, 2001, those were initially legal as the legal requirements
were met. However, on March 28 to April 12, 2001, the Union
barricaded the gates of the Bicutan and Sta. Rosa plants and
blocked the free ingress to and egress from the company
premises. Toyota employees, customers, and other people
having business with the company were intimidated and were
refused entry to the plants. As earlier explained, these strikes
were illegal because unlawful means were employed. The acts
of the Union officers and members are in palpable violation of
Art. 264(e), which proscribes acts of violence, coercion, or
intimidation, or which obstruct the free ingress to and egress
from the company premises. Undeniably, the strikes from
March 28 to April 12, 2001 were illegal.
Petitioner Union also posits that strikes were not committed on
May 23 and 28, 2001. The Union asserts that the rallies held
on May 23 and 28, 2001 could not be considered strikes, as the
participants were the dismissed employees who were on payroll
reinstatement. It concludes that there was no work stoppage.
This contention has no basis.
It is clear that once the DOLE Secretary assumes jurisdiction
over the labor dispute and certifies the case for compulsory
arbitration with the NLRC, the parties have to revert to the
status quo ante (the state of things as it was before). The
intended normalcy of operations is apparent from the fallo of
the April 10, 2001 Order of then DOLE Secretary Patricia A.
Sto. Tomas, which reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby
CERTIFIES the labor dispute at Toyota Motors Philippines
Corporation to the [NLRC] pursuant to Article 263 (g) of the
Labor Code, as amended. This Certification covers the current
labor cases filed in relation with the Toyota strike, particularly,
the Petition for Injunction filed with the National Labor
Relations Commission entitled Toyota Motor Philippines
Corporation vs. Toyota Motor Philippines Corporation Workers
Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction Case
No. 3401054-01; Toyota Motor Philippines Corporation vs.
Toyota Motor Philippines Corporation Workers Association, et
al., NLRC NCR Case No. 3004-01775-01, and such other labor
cases that the parties may file relating to the strike and its
effects while this Certification is in effect.
As provided under Article 2634(g) of the Labor Code, all
striking workers are directed to return to work at their regular
shifts by April 16, 2001; the Company is in turn directed to
accept them back to work under the same terms and conditions
obtaining prior to the work stoppage, subject to the option of
the company to merely reinstate a worker or workers in the
payroll in light of the negative emotions that the strike has

generated and the need to prevent the further deterioration of
the relationship between the company and its workers.
Further, the parties are hereby ordered to cease and desist
from committing any act that might lead to the worsening of
an already deteriorated situation.42 (Emphasis supplied.)
It is explicit from this directive that the Union and its members
shall refrain from engaging in any activity that might
exacerbate the tense labor situation in Toyota, which certainly
includes concerted actions.
This was not heeded by the Union and the individual
respondents who staged illegal concerted actions on May 23
and 28, 2001 in contravention of the Order of the DOLE
Secretary that no acts should be undertaken by them to
aggravate the "already deteriorated situation."
While it may be conceded that there was no work disruption in
the two Toyota plants, the fact still remains that the Union and
its members picketed and performed concerted actions in front
of the Company premises. This is a patent violation of the
assumption of jurisdiction and certification Order of the DOLE
Secretary, which ordered the parties "to cease and desist from
committing any act that might lead to the worsening of an
already deteriorated situation." While there are no work
stoppages, the pickets and concerted actions outside the plants
have a demoralizing and even chilling effect on the workers
inside the plants and can be considered as veiled threats of
possible trouble to the workers when they go out of the
company premises after work and of impending disruption of
operations to company officials and even to customers in the
days to come. The pictures presented by Toyota undoubtedly
show that the company officials and employees are being
intimidated and threatened by the strikers. In short, the Union,
by its mass actions, has inflamed an already volatile situation,
which was explicitly proscribed by the DOLE Secretary’s Order.
We do not find any compelling reason to reverse the NLRC
findings that the pickets on May 23 and 28, 2001 were unlawful
strikes.
From the foregoing discussion, we rule that the February 21 to
23, 2001 concerted actions, the March 17 to April 12, 2001
strikes, and the May 23 and 28, 2001 mass actions were illegal
strikes.
Union officers are liable for unlawful strikes or illegal acts
during a strike
Art. 264 (a) of the Labor Code provides:
ART. 264. PROHIBITED ACTIVITIES
(a) x x x
Any worker whose employment has been terminated as a
consequence of an unlawful lockout shall be entitled to
reinstatement with full backwages. Any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground
for termination of his employment, even if a replacement had
been hired by the employer during such lawful strike.
Art. 264(a) sanctions the dismissal of a union officer who
knowingly participates in an illegal strike or who knowingly
participates in the commission of illegal acts during a lawful
strike.
It is clear that the responsibility of union officials is greater than
that of the members. They are tasked with the duty to lead and
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Dean Ada D. Abad
guide the membership in decision making on union activities in
accordance with the law, government rules and regulations,
and established labor practices. The leaders are expected to
recommend actions that are arrived at with circumspection and
contemplation, and always keep paramount the best interests
of the members and union within the bounds of law. If the
implementation of an illegal strike is recommended, then they
would mislead and deceive the membership and the supreme
penalty of dismissal is appropriate. On the other hand, if the
strike is legal at the beginning and the officials commit illegal
acts during the duration of the strike, then they cannot evade
personal and individual liability for said acts.
The Union officials were in clear breach of Art. 264(a) when
they knowingly participated in the illegal strikes held from
February 21 to 23, 2001, from March 17 to April 12, 2001, and
on May 23 and 28, 2001. We uphold the findings of fact of the
NLRC on the involvement of said union officials in the unlawful
concerted actions as affirmed by the CA, thus:
As regards to the Union officers and directors, there is
overwhelming justification to declare their termination from
service. Having instigated the Union members to stage and
carry out all illegal strikes from February 21-23, 2001, and May
23 and 28, 2001, the following Union officers are hereby
terminated for cause pursuant to Article 264(a) of the Labor
Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito
Hugo, Virgilio Colandog, Rommel Digma, Federico Torres,
Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo
Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil,
Jr., and Mayo Mata.43
The rule is well entrenched in this jurisdiction that factual
findings of the labor tribunal, when affirmed by the appellate
court, are generally accorded great respect, even finality.44
Likewise, we are not duty-bound to delve into the accuracy of
the factual findings of the NLRC in the absence of clear showing
that these were arbitrary and bereft of any rational basis.45 In
the case at bench, the Union failed to convince us that the NLRC
findings that the Union officials instigated, led, and knowingly
participated in the series of illegal strikes are not reinforced by
substantial evidence. Verily, said findings have to be
maintained and upheld. We reiterate, as a reminder to labor
leaders, the rule that "[u]nion officers are duty bound to guide
their members to respect the law."46 Contrarily, if the "officers
urge the members to violate the law and defy the duly
constituted authorities, their dismissal from the service is a just
penalty or sanction for their unlawful acts."47
Member’s liability depends on participation in illegal acts
Art. 264(a) of the Labor Code provides that a member is liable
when he knowingly participates in an illegal act "during a
strike." While the provision is silent on whether the strike is
legal or illegal, we find that the same is irrelevant. As long as
the members commit illegal acts, in a legal or illegal strike,
then they can be terminated.48 However, when union
members merely participate in an illegal strike without
committing any illegal act, are they liable?
This was squarely answered in Gold City Integrated Port
Service, Inc. v. NLRC,49 where it was held that an ordinary
striking worker cannot be terminated for mere participation in
an illegal strike. This was an affirmation of the rulings in Bacus
v. Ople50 and Progressive Workers Union v. Aguas,51 where it
was held that though the strike is illegal, the ordinary member
who merely participates in the strike should not be meted loss
of employment on the considerations of compassion and good
faith and in view of the security of tenure provisions under the
Constitution. In Esso Philippines, Inc. v. Malayang
Manggagawa sa Esso (MME), it was explained that a member

is not responsible for the union’s illegal strike even if he voted
for the holding of a strike which became illegal.52
Noted labor law expert, Professor Cesario A. Azucena, Jr.,
traced the history relating to the liability of a union member in
an illegal strike, starting with the "rule of vicarious liability,"
thus:
Under [the rule of vicarious liability], mere membership in a
labor union serves as basis of liability for acts of individuals, or
for a labor activity, done on behalf of the union. The union
member is made liable on the theory that all the members are
engaged in a general conspiracy, and the unlawful acts of the
particular members are viewed as necessary incidents of the
conspiracy. It has been said that in the absence of statute
providing otherwise, the rule of vicarious liability applies.
Even the Industrial Peace Act, however, which was in effect
from 1953 to 1974, did not adopt the vicarious liability concept.
It expressly provided that:
No officer or member of any association or organization, and
no association or organization participating or interested in a
labor dispute shall be held responsible or liable for the unlawful
acts of individual officers, members, or agents, except upon
proof of actual participation in, or actual authorization of, such
acts or of ratifying of such acts after actual knowledge thereof.
Replacing the Industrial Peace Act, the Labor Code has not
adopted the vicarious liability rule.53
Thus, the rule on vicarious liability of a union member was
abandoned and it is only when a striking worker "knowingly
participates in the commission of illegal acts during a strike"
that he will be penalized with dismissal.
Now, what are considered "illegal acts" under Art. 264(a)?
No precise meaning was given to the phrase "illegal acts." It
may encompass a number of acts that violate existing labor or
criminal laws, such as the following:
(1) Violation of Art. 264(e) of the Labor Code which provides
that "[n]o person engaged in picketing shall commit any act of
violence, coercion or intimidation or obstruct the free ingress
to or egress from the employer’s premises for lawful purposes,
or obstruct public thoroughfares";
(2) Commission of crimes and other unlawful acts in carrying
out the strike;54 and
(3) Violation of any order, prohibition, or injunction issued by
the DOLE Secretary or NLRC in connection with the assumption
of jurisdiction/certification Order under Art. 263(g) of the Labor
Code.
As earlier explained, this enumeration is not exclusive and it
may cover other breaches of existing laws.
In the cases at bench, the individual respondents participated
in several mass actions, viz:
(1) The rallies held at the DOLE and BLR offices on February
21, 22, and 23, 2001;
(2) The strikes held on March 17 to April 12, 2001; and
(3) The rallies and picketing on May 23 and 28, 2001 in front
of the Toyota Bicutan and Sta. Rosa plants.
Did they commit illegal acts during the illegal strikes on
February 21 to 23, 2001, from March 17 to April 12, 2001, and
on May 23 and 28, 2001?
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The answer is in the affirmative.
As we have ruled that the strikes by the Union on the three
different occasions were illegal, we now proceed to determine
the individual liabilities of the affected union members for acts
committed during these forbidden concerted actions.
Our ruling in Association of Independent Unions in the
Philippines v. NLRC lays down the rule on the liability of the
union members:
Decisive on the matter is the pertinent provisions of Article 264
(a) of the Labor Code that: "[x x x] any worker [x x x] who
knowingly participates in the commission of illegal acts during
a strike may be declared to have lost his employment status.
[x x x]" It can be gleaned unerringly from the aforecited
provision of law in point, however, that an ordinary striking
employee can not be terminated for mere participation in an
illegal strike. There must be proof that he committed illegal
acts during the strike and the striker who participated in the
commission of illegal act[s] must be identified. But proof
beyond reasonable doubt is not required. Substantial evidence
available under the circumstances, which may justify the
imposition of the penalty of dismissal, may suffice.
In the landmark case of Ang Tibay vs. CIR, the court ruled "Not
only must there be some evidence to support a finding or
conclusion, but the evidence must be ‘substantial.’ Substantial
evidence is more than a mere scintilla. It means such relevant
evidence that a reasonable mind might accept as sufficient to
support a conclusion."55 (Emphasis supplied.)
Thus, it is necessary for the company to adduce proof on the
participation of the striking employee in the commission of
illegal acts during the strikes.
After a scrutiny of the records, we find that the 227 employees
indeed joined the February 21, 22, and 23, 2001 rallies and
refused to render overtime work or report for work. These
rallies, as we earlier ruled, are in reality illegal strikes, as the
procedural requirements for strikes under Art. 263 were not
complied with. Worse, said strikes were in violation of the
company rule prohibiting acts "in citing or participating in riots,
disorders, alleged strikes or concerted action detrimental to
Toyota’s interest."
With respect to the February 21, 22, and 23, 2001 concerted
actions, Toyota submitted the list of employees who did not
render overtime work on February 21, 2001 and who did not
report for work on February 22 and 23, 2001 as shown by
Annex "I" of Toyota’s Position Paper in NLRC Certified Case No.
000203-01 entitled In Re: Labor Dispute at Toyota Motor
Philippines Corp. The employees who participated in the illegal
concerted actions were as follows:
1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana,
Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin; 7. Apolinario, Dennis;
8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11.
Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola, Dominador;
14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17.
Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19. Benabise, Sabas
Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto;
23. Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry;
26. Borebor, Rurel; 27. Borromeo, Jubert; 28. Borsigue,
Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo,
Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug, Nelson; 34.
Cabatay, Jessie; 35. Cabezas, Marcelo; 36. Calalang, Richard;
37. Candelario, Roque Jr.; 38. Capate, Leo Nelson; 39.
Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal,
Dennis; 42. Casaba, Gienell; 43. Catapusan, Christopher; 44.
Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47. Cometa,
Julius; 48. Completo, Emilio; 49. Consignado, Randy; 50.

Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas,
Reynaldo; 53. Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon,
Herbert; 56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De
Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz,
Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo;
63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De
Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68.
Dela Ysla, Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio;
71. Dingcong, Jessiah; 72. Dumalag, Jasper; 73. Duyag,
Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo,
Lionel; 77. Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole,
Francisco; 80. Fajardo, George; 81. Fajilagutan, Jason; 82.
Fajura, John; 83. Franco, Melencio; 84. Franco, Nikko; 85.
Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88.
Galang, Erwin; 89. Gamit, Rodel; 90. Garces, Robin; 91.
Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94.
Gerola, Genaro Jr.; 95. Gerola, Larry; 96. Gohilde, Michael; 97.
Gojar, Regino; 98. Gojar, Reynaldo; 99. Gonzales, Roberto;
100. Gutierrez, Bernabe; 101. Hilaga, Edgar; 102. Hilanga,
Melchor; 103. Hondrada, Eugene Jay; 104. Imperial,
Alejandro; 105. Jaen, Ferdinand; 106. Jalea, Philip; 107.
Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio;
110. Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar;
113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising,
Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118.
Lopez, Geronimo; 119. Lozada, Jude Jonobell; 120. Lucido,
Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123.
Magbalita, Valentin; 124. Magistrado, Rogelio Jr.; 125.
Magnaye, Philip John; 126. Malabanan, Allan John; 127.
Malabrigo, Angelito; 128. Malaluan, Rolando Jr.; 129. Malate,
Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132.
Manalang, Joseph Patrick; 133. Manalo, Manuel Jr.; 134.
Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado,
Melvin; 137. Maneclang, Jovito; 138. Manego, Ruel; 139.
Manguil, Bayani Jr.; 140. Manigbas, June; 141. Manjares,
Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144.
Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147.
Mendoza, Bobit; 148. Mendoza, Roberto; 149. Milan, Joseph;
150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero,
Ericson; 153. Montero, Marlaw; 154. Montes, Ruel; 155.
Morales, Dennis; 156. Natividad, Kenneth; 157. Nava,
Ronaldo; 158. Nevalga, Alexander; 159. Nicanor, Edwin; 160.
Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito; 163.
Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit,
Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169.
Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172.
Ortiz, Felimon; 173. Paniterce, Alvin; 174. Parallag, Gerald;
175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante,
Jowald; 178. Piamonte, Melvin; 179. Piamonte, Rogelio; 180.
Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183.
Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando;
186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David
Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191.
San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago,
Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196.
Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex;
199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao,
Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio; 204.
Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson
Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick;
209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino,
Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214.
Toral, Grant Robert; 215. Torres, Dennis; 216. Torres,
Federico; 217. Trazona, Jose Rommel; 218. Tulio, Emmanuel;
219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara,
Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224.
Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar,
Christopher; and 227. Zamora, Dominador Jr.
Toyota’s Position Paper containing the list of striking workers
was attested to as true and correct under oath by Mr. Jose Ma.
Aligada, First Vice President of the Group Administration
Division of Toyota. Mr. Emerito Dumaraos, Assistant
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Dean Ada D. Abad
Department Manager of the Production Department of Toyota,
likewise submitted a June 29, 2001 Affidavit56 confirming the
low attendance of employees on February 21, 22, and 23,
2001, which resulted from the intentional absences of the
aforelisted striking workers. The Union, on the other hand, did
not refute Toyota’s categorical assertions on the participation
of said workers in the mass actions and their deliberate refusal
to perform their assigned work on February 21, 22, and 23,
2001. More importantly, it did not deny the fact of absence of
the employees on those days from the Toyota manufacturing
plants and their deliberate refusal to render work. Their
admission that they participated in the February 21 to 23, 2001
mass actions necessarily means they were absent from their
work on those days.
Anent the March 28 to April 12, 2001 strikes, evidence is ample
to show commission of illegal acts like acts of coercion or
intimidation and obstructing free ingress to or egress from the
company premises. Mr. Eduardo Nicolas III, Toyota’s Security
Chief, attested in his affidavit that the strikers "badmouthed
people coming in and shouted invectives such as bakeru at
Japanese officers of the company." The strikers even pounded
the vehicles of Toyota officials. More importantly, they
prevented the ingress of Toyota employees, customers,
suppliers, and other persons who wanted to transact business
with the company. These were patent violations of Art. 264(e)
of the Labor Code, and may even constitute crimes under the
Revised Penal Code such as threats or coercion among others.
On March 28, 2001, the following have committed illegal acts–
–blocking the ingress to or egress from the two (2) Toyota
plants and preventing the ingress of Toyota employees on
board the company shuttle–– at the Bicutan and Sta. Rosa
Plants, viz:
1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan
John Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7. Charlie
Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico
Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan
Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman
Ercillo; 17. Joey Llanera; and 18. Roberto Gonzales
Photographs were submitted by Toyota marked as Annexes "1"
through "18" of its Position Paper, vividly showing the
participation of the aforelisted employees in illegal acts.57
To further aggravate the situation, a number of union members
committed illegal acts (blocking the ingress to and egress from
the plant) during the strike staged on March 29, 2001 at the
Toyota plant in Bicutan, to wit:
1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4.
Freddie Olit; and 5. Joel Agosto
Pictures marked as Annexes "21" to "22" of Toyota’s Position
Paper reveal the illegal acts committed by the aforelisted
workers.58
On the next day, March 30, 2001, several employees again
committed illegal acts (blocking ingress to and egress from the
plant) during the strike at the Bicutan plant, to wit:
1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4.
Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro Imperial; 7.
Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10.
Elvis Tabirao
Pictures marked as Annexes "25" to "26" and "28" of Toyota’s
Position Paper show the participation of these workers in
unlawful acts.59
On April 5, 2001, seven (7) Toyota employees were identified
to have committed illegal acts (blocking ingress to and egress

from the plant) during the strike held at the Bicutan plant, to
wit:
1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4.
Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel Borebor;
and 7. Alberto Lomboy
The participations of the strikers in illegal acts are manifest in
the pictures marked as Annexes "32" and "33" of Toyota’s
Position Paper.60
On April 6, 2001, only Rogelio Piamonte was identified to have
committed illegal acts (blocking ingress to and egress from the
Toyota plant) during the strike at the Toyota Santa Rosa
plant.61 Then, on April 9, 2001, Alvin Paniterce, Dennis
Apolinario, and Eduardo Miranda62 were identified to have
committed illegal acts (blocking ingress to and egress from the
Toyota plant) during the strike at the Toyota Santa Rosa plant
and were validly dismissed by Toyota.
Lastly, the strikers, though on payroll reinstatement, staged
protest rallies on May 23, 2001 and May 28, 2001 in front of
the Bicutan and Sta. Rosa plants. These workers’ acts in joining
and participating in the May 23 and 28, 2001 rallies or pickets
were patent violations of the April 10, 2001 assumption of
jurisdiction/certification Order issued by the DOLE Secretary,
which proscribed the commission of acts that might lead to the
"worsening of an already deteriorated situation." Art. 263(g) is
clear that strikers who violate the assumption/certification
Order may suffer dismissal from work. This was the situation
in the May 23 and 28, 2001 pickets and concerted actions, with
the following employees who committed illegal acts:
a. Strikers who joined the illegal pickets on May 23, 2001 were
(1) Dennis Apolinario; (2) Abel Berces; (3) Benny Bering; (4)
Dexter Bolaños; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.;
(7) Randy Consignado; (8) Herbert Dalanon; (9) Leodegario De
Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12)
Nikko Franco; (13) Genaro Gerola, Jr.; (14) Michael Gohilde;
(15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17)
Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19) Nila Marcial;
(20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz;
(23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric
Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28)
Rommel Tagala.
Pictures show the illegal acts (participation in pickets/strikes
despite the issuance of a return-to-work order) committed by
the aforelisted strikers.63
b. Strikers who participated in the May 28, 2001 were (1) Joel
Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis
Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester
Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter Bolanos;
(11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo
Caraqueo; (14) Christopher Catapusan; (15) Ricky Chavez;
(16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo;
(19) Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David,
Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel
Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar
Espadilla; (28) Alexander Esteva; (29) Nikko Franco; (30)
Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33)
Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey
Javillonar; (36) Basilio Laqui; (37) Alberto Lomboy; (38)
Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon
Madrazo; (41) Valentin Magbalita; (42) Allan Jon Malabanan;
(43) Jonamar Manaog; (44) Bayani Manguil; (45) June
Manigbas; (46) Alfred Manjares; (47) Edwin Manzanilla; (48)
Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio
Piamonte; (52) George Polutan; (53) Eric Santiago; (54)
Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo
Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin
Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62)
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Joseph Vargas; (63) Edwin Vergara; and (64) Michael Teddy
Yangyon.
Toyota presented photographs which show said employees
conducting mass pickets and concerted actions.64
Anent the grant of severance compensation to legally
dismissed union members, Toyota assails the turn-around by
the CA in granting separation pay in its June 20, 2003
Resolution after initially denying it in its February 27, 2003
Decision. The company asseverates that based on the CA
finding that the illegal acts of said union members constitute
gross misconduct, not to mention the huge losses it suffered,
then the grant of separation pay was not proper.
The general rule is that when just causes for terminating the
services of an employee under Art. 282 of the Labor Code exist,
the employee is not entitled to separation pay. The apparent
reason behind the forfeiture of the right to termination pay is
that lawbreakers should not benefit from their illegal acts. The
dismissed employee, however, is entitled to "whatever rights,
benefits and privileges [s/he] may have under the applicable
individual or collective bargaining agreement with the
employer or voluntary employer policy or practice"65 or under
the Labor Code and other existing laws. This means that the
employee, despite the dismissal for a valid cause, retains the
right to receive from the employer benefits provided by law,
like accrued service incentive leaves. With respect to benefits
granted by the CBA provisions and voluntary management
policy or practice, the entitlement of the dismissed employees
to the benefits depends on the stipulations of the CBA or the
company rules and policies.
As in any rule, there are exceptions. One exception where
separation pay is given even though an employee is validly
dismissed is when the court finds justification in applying the
principle of social justice well entrenched in the 1987
Constitution. In Phil. Long Distance Telephone Co. (PLDT) v.
NLRC, the Court elucidated why social justice can validate the
grant of separation pay, thus:
The reason is that our Constitution is replete with positive
commands for the promotion of social justice, and particularly
the protection of the rights of the workers. The enhancement
of their welfare is one of the primary concerns of the present
charter. In fact, instead of confining itself to the general
commitment to the cause of labor in Article II on the
Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social
justice and human rights with a separate sub-topic for labor.
Article XIII expressly recognizes the vital role of labor, hand in
hand with management, in the advancement of the national
economy and the welfare of the people in general. The
categorical mandates in the Constitution for the improvement
of the lot of the workers are more than sufficient basis to justify
the award of separation pay in proper cases even if the
dismissal be for cause.66
In the same case, the Court laid down the rule that severance
compensation shall be allowed only when the cause of the
dismissal is other than serious misconduct or that which
reflects adversely on the employee’s moral character. The
Court succinctly discussed the propriety of the grant of
separation pay in this wise:
We hold that henceforth separation pay shall be allowed as a
measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where
the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft
or illicit sexual relations with a fellow worker, the employer may
not be required to give the dismissed employee separation pay,

or financial assistance, or whatever other name it is called, on
the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring
employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is
granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if
he is again found out. This kind of misplaced compassion is not
going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the
protection and concern of the Constitution.
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if
their hands are clean and their motives blameless and not
simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have
proved they are not worthy of it, like the workers who have
tainted the cause of labor with the blemishes of their own
character.67
Explicit in PLDT are two exceptions when the NLRC or the courts
should not grant separation pay based on social
justice¾serious misconduct (which is the first ground for
dismissal under Art. 282) or acts that reflect on the moral
character of the employee. What is unclear is whether the
ruling likewise precludes the grant of separation pay when the
employee is validly terminated from work on grounds laid down
in Art. 282 of the Labor Code other than serious misconduct.
A recall of recent cases decided bearing on the issue reveals
that when the termination is legally justified on any of the
grounds under Art. 282, separation pay was not allowed. In Ha
Yuan Restaurant v. NLRC,68 we deleted the award of
separation pay to an employee who, while unprovoked, hit her
co-worker’s face, causing injuries, which then resulted in a
series of fights and scuffles between them. We viewed her act
as serious misconduct which did not warrant the award of
separation pay. In House of Sara Lee v. Rey,69 this Court
deleted the award of separation pay to a branch supervisor who
regularly, without authorization, extended the payment
deadlines of the company’s sales agents. Since the cause for
the supervisor’s dismissal involved her integrity (which can be
considered as breach of trust), she was not worthy of
compassion as to deserve separation pay based on her length
of service. In Gustilo v. Wyeth Phils., Inc.,70 this Court found
no exceptional circumstance to warrant the grant of financial
assistance to an employee who repeatedly violated the
company’s disciplinary rules and regulations and whose
employment was thus terminated for gross and habitual
neglect of his duties. In the doctrinal case of San Miguel v.
Lao,71 this Court reversed and set aside the ruling of the CA
granting retirement benefits or separation pay to an employee
who was dismissed for willful breach of trust and confidence by
causing the delivery of raw materials, which are needed for its
glass production plant, to its competitor. While a review of the
case reports does not reveal a case involving a termination by
reason of the commission of a crime against the employer or
his/her family which dealt with the issue of separation pay, it
would be adding insult to injury if the employer would still be
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Dean Ada D. Abad
compelled to shell out money to the offender after the harm
done.
In all of the foregoing situations, the Court declined to grant
termination pay because the causes for dismissal recognized
under Art. 282 of the Labor Code were serious or grave in
nature and attended by willful or wrongful intent or they
reflected adversely on the moral character of the employees.
We therefore find that in addition to serious misconduct, in
dismissals based on other grounds under Art. 282 like willful
disobedience, gross and habitual neglect of duty, fraud or
willful breach of trust, and commission of a crime against the
employer or his family, separation pay should not be conceded
to the dismissed employee.
In analogous causes for termination like inefficiency, drug use,
and others, the NLRC or the courts may opt to grant separation
pay anchored on social justice in consideration of the length of
service of the employee, the amount involved, whether the act
is the first offense, the performance of the employee and the
like, using the guideposts enunciated in PLDT on the propriety
of the award of separation pay.
In the case at bench, are the 227 striking employees entitled
to separation pay?
In the instant case, the CA concluded that the illegal strikes
committed by the Union members constituted serious
misconduct.72
The CA ratiocinated in this manner:
Neither can social justice justify the award to them of
severance compensation or any other form of financial
assistance. x x x
xxxx
Considering that the dismissal of the employees was due to
their participation in the illegal strikes as well as violation of
the Code of Conduct of the company, the same constitutes
serious misconduct. A serious misconduct is a transgression of
some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. In fact, in Panay Electric
Company, Inc. v. NLRC, the Supreme Court nullified the grant
of separation benefits to employees who unlawfully
participated in an illegal strike in light of Article 264, Title VIII,
Book V of the Labor Code, that, "any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his
employment status."
The constitutional guarantee on social justice is not intended
only for the poor but for the rich as well. It is a policy of fairness
to both labor and management.73 (Emphasis supplied.)
In disposing of the Union’s plea for reconsideration of its
February 27, 2003 Decision, the CA however performed a
volte-face by reinstating the award of separation pay.
The CA’s grant of separation pay is an erroneous departure
from our ruling in Phil. Long Distance Telephone Co. v. NLRC
that serious misconduct forecloses the award of separation
pay. Secondly, the advertence to the alleged honest belief on
the part of the 227 employees that Toyota committed a breach
of the duty to bargain collectively and an abuse of valid
exercise of management prerogative has not been
substantiated by the evidence extant on record. There can be
no good faith in intentionally incurring absences in a collective
fashion from work on February 22 and 23, 2001 just to attend
the DOLE hearings. The Union’s strategy was plainly to cripple

the operations and bring Toyota to its knees by inflicting
substantial financial damage to the latter to compel union
recognition. The Union officials and members are supposed to
know through common sense that huge losses would befall the
company by the abandonment of their regular work. It was not
disputed that Toyota lost more than PhP 50 million because of
the willful desertion of company operations in February 2001
by the dismissed union members. In addition, further damage
was experienced by Toyota when the Union again resorted to
illegal strikes from March 28 to April 12, 2001, when the gates
of Toyota were blocked and barricaded, and the company
officials, employees, and customers were intimidated and
harassed. Moreover, they were fully aware of the company rule
on prohibition against concerted action inimical to the interests
of the company and hence, their resort to mass actions on
several occasions in clear violation of the company regulation
cannot be excused nor justified. Lastly, they blatantly violated
the assumption/certification Order of the DOLE Secretary,
exhibiting their lack of obeisance to the rule of law. These acts
indeed constituted serious misconduct.
A painstaking review of case law renders obtuse the Union’s
claim for separation pay. In a slew of cases, this Court refrained
from awarding separation pay or financial assistance to union
officers and members who were separated from service due to
their participation in or commission of illegal acts during
strikes. In the recent case of Pilipino Telephone Corporation v.
Pilipino Telephone Employees Association (PILTEA),74 this
Court upheld the dismissal of union officers who participated
and openly defied the return-to-work order issued by the DOLE
Secretary. No separation pay or financial assistance was
granted. In Sukhothai Cuisine and Restaurant v. Court of
Appeals,75 this Court declared that the union officers who
participated in and the union members who committed illegal
acts during the illegal strike have lost their employment status.
In this case, the strike was held illegal because it violated
agreements providing for arbitration. Again, there was no
award of separation pay nor financial assistance. In Philippine
Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel
Employees Union,76 the strike was declared illegal because the
means employed was illegal. We upheld the validity of
dismissing union members who committed illegal acts during
the strike, but again, without awarding separation pay or
financial assistance to the erring employees. In Samahang
Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines,77 this
Court upheld the dismissal of union officers who participated in
an illegal strike sans any award of separation pay. Earlier, in
Grand Boulevard Hotel v. Genuine Labor Organization of
Workers in Hotel, Restaurant and Allied Industries,78 we
affirmed the dismissal of the Union’s officers who participated
in an illegal strike without awarding separation pay, despite the
NLRC’s declaration urging the company to give financial
assistance to the dismissed employees.79 In Interphil
Laboratories Union-FFW, et al. v. Interphil Laboratories,
Inc.,80 this Court affirmed the dismissal of the union officers
who led the concerted action in refusing to render overtime
work and causing "work slowdowns." However, no separation
pay or financial assistance was allowed. In CCBPI Postmix
Workers Union v. NLRC,81 this Court affirmed the dismissal of
union officers who participated in the strike and the union
members who committed illegal acts while on strike, without
awarding them separation pay or financial assistance. In 1996,
in Allied Banking Corporation v. NLRC,82 this Court affirmed
the dismissal of Union officers and members, who staged a
strike despite the DOLE Secretary’s issuance of a return to work
order but did not award separation pay. In the earlier but more
relevant case of Chua v. NLRC,83 this Court deleted the NLRC’s
award of separation benefits to an employee who participated
in an unlawful and violent strike, which strike resulted in
multiple deaths and extensive property damage. In Chua, we
viewed the infractions committed by the union officers and
members as a serious misconduct which resulted in the
deletion of the award of separation pay in conformance to the
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Dean Ada D. Abad
ruling in PLDT. Based on existing jurisprudence, the award of
separation pay to the Union officials and members in the
instant petitions cannot be sustained.
One last point to consider—it is high time that employer and
employee cease to view each other as adversaries and instead
recognize that theirs is a symbiotic relationship, wherein they
must rely on each other to ensure the success of the business.
When they consider only their own self-interests, and when
they act only with their own benefit in mind, both parties suffer
from short-sightedness, failing to realize that they both have a
stake in the business. The employer wants the business to
succeed, considering the investment that has been made. The
employee in turn, also wants the business to succeed, as
continued employment means a living, and the chance to
better one’s lot in life. It is clear then that they both have the
same goal, even if the benefit that results may be greater for
one party than the other. If this becomes a source of conflict,
there are various, more amicable means of settling disputes
and of balancing interests that do not add fuel to the fire, and
instead open avenues for understanding and cooperation
between the employer and the employee. Even though strikes
and lockouts have been recognized as effective bargaining
tools, it is an antiquated notion that they are truly beneficial,
as they only provide short-term solutions by forcing
concessions from one party; but staging such strikes would
damage the working relationship between employers and
employees, thus endangering the business that they both want
to succeed. The more progressive and truly effective means of
dispute resolution lies in mediation, conciliation, and
arbitration, which do not increase tension but instead provide
relief from them. In the end, an atmosphere of trust and
understanding has much more to offer a business relationship
than the traditional enmity that has long divided the employer
and the employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and 158789
are DENIED while those in G.R. Nos. 158798-99 are GRANTED.
The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100
and 67561 restoring the grant of severance compensation is
ANNULLED and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100
and 67561, which affirmed the August 9, 2001 Decision of the
NLRC but deleted the grant of severance compensation, is
REINSTATED and AFFIRMED.
No costs.
SO ORDERED.

[14] G.R. No. 184011 September 18, 2013
REYNALDO HAYAN MOYA, Petitioner,
vs.
FIRST SOLID RUBBER INDUSTRIES, INC., Respondent.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari1 from
the Decision2 of the Special Third Division of the Court of
Appeals in CA-G.R. SP No. 99500 dated 30 April 2008,
modifying the Decision of the National Labor Relations
Commission (NLRC) by deleting the award of separation pay in
favor of Reynaldo Hayan Moya (Moya). The dispositive portion
of the assailed decision reads:
WHEREFORE, premises considered, the petition is hereby
GRANTED. The Resolutions dated January 31, 2007 and April
24, 2007 of the National Labor Relations Commission in NLRC
NCR CA No. 048653-06 (NLRC NCR Case No. 00-11-12626
2004) affirming the Decision dated February 28, 2006 of the
Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting the
award for separation pay in favor of private respondent
Reynaldo Hayan Moya.3
The facts as gathered by this Court follow:
On 25 January 2005, Moya filed before the NLRC-National
Capital Region a complaint for illegal dismissal against First
Solid Rubber Industries, Inc. (First Solid) and its President
Edward Lee Sumulong. In his complaint-affidavit,4 Moya
alleged that:
1. Sometime in May 1993, he was hired by the company First
Solid, a business engaged in manufacturing of tires and
rubbers, as a machine operator;
2. Through years of dedication to his job, he was promoted as
head of the Tire Curing Department of the company;
3. On October 15, 2004, he reported an incident about an
under curing of tires within his department which led to the
damage of five tires;
4. The company conducted an investigation of the incident and
he was later required to explain;
5. In his explanation, he stated that the damage was caused
by machine failure and the incident was without any fault of
the operator;
6. Despite his explanation of what transpired, he was
terminated by the company through a letter dated November
9, 2004.
From the foregoing, he prayed that payment of backwages,
separation pay, moral damages and exemplary damages be
adjudged in his favor due to the illegal dismissal he suffered
from the company.
Moya, through his Reply,5 added that his termination fell short
of any of the just causes of serious misconduct, gross and
habitual neglect of duties and willful breach of trust. He pointed
out that the company failed to prove that his act fell within the
purview of improper or wrong misconduct, and that a single act
of negligence as compared to eleven (11) years of service of
good record with the company will not justify his dismissal.
First Solid, in its Position Paper,6 Reply7 and Memorandum,8
admitted that Moya was a former employee of the company
and was holding the position of Officer-in-Charge of the Tire
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Curing Department until his valid dismissal. However, it denied
that it illegally dismissed Moya and maintained that his
severance from the company was due to a valid exercise of
management prerogative.9 The company insisted on its right
to validly dismiss an employee in good faith if it has a
reasonable ground to believe that its employee is responsible
of misconduct, and the nature of his participation therein
renders him absolutely unworthy of the trust and confidence
demanded by his position.10
Opposing the story of Moya, the company countered that Moya,
who was exercising supervision and control over the employees
as a department head, failed to exercise the diligence required
of him to see to it that the machine operator, Melandro Autor,
properly operated the machine. This act is considered as a
gross and habitual neglect of duty which caused actual losses
to the company.11
During the initial investigation, Moya, in his Explanation
Letter12 dated 15 October 2004, insisted that the cause of the
damage of five (5) tires was due to premature hauling of the
tires below curing time. Unsatisfied with the explanation, the
company sent Moya a Letter13 dated 26 October 2004 stating
that he failed to explain what really transpired in the under
curing of tires. The company informed Moya that the damage
was caused by the operator’s unlawful setting of the timer from
manual to automatic without Moya’s permission. To make the
matter worse, Moya failed to disclose the real situation that the
operator was at fault.
Moya was given twenty-four (24) hours to defend himself and
explain the matter. In response, Moya admitted in a letter
dated 29 October 2004 his mistake of not disclosing the true
incident and explained that he found it more considerate to just
let the operator be suspended and be fined for the damage
committed. He denied any willful intention to conceal the truth
or cover up the mistake of his employee. Finally, he asked for
the company’s forgiveness for the fault he had committed.14
In a letter dated 3 November 2004, Moya reiterated his plea
for forgiveness and asked for another chance to continue his
employment with the company.15
Procedural due process, through issuance of twin notices, was
also complied with by the company. Moya was informed of the
charges against him through a memorandum16 indicating his
violation and was given an opportunity to answer or rebut the
charges. After giving his explanation through several letters to
the company, a notice was sent informing him of the
management’s decision of his dismissal and termination from
services on9 November 2004 based on serious misconduct,
gross and habitual neglect of duty and willful breach of trust
reposed upon him by the company.17
On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr.
rendered a judgment18 finding sufficient and valid grounds to
dismiss Moya for concealing and lying to First Solid about the
factual circumstances leading to the damage of five (5) tires on
15 October 2004. However, it ruled that the dismissal from
service of the complainant was too harsh as a penalty since it
was a first offense and there was no willful and malicious
intention on his part to cause damage. The dispositive portion
reads:
WHEREFORE, judgment is hereby rendered ordering
Respondents First Solid Rubber Industrial, Inc. and Edward Lee
Sumulong to jointly and severally pay complainant separation
pay in lieu of reinstatement the amount of ₱63, 654.00.
All other claims whether monetary or otherwise are hereby
DISMISSED for lack of merit.19
In justifying his decision, the Labor Arbiter explained that the
length of time during which the complainant was deprived of

employment was sufficient penalty for the act he had
committed against the company. As a result, his reinstatement
without backwages to his former position was in order.
However, since the employment was already strained and
Moya was no longer seeking to be reinstated, he decided that
it was for the best interest of both parties to award instead a
separation pay of one (1) month salary for every year of
credited service less the total of cash advances of the
complainant amounting to ₱19,000.00.20
Not in total accord with the outcome of the decision, First Solid
filed its partial appeal before the NLRC on 13 April 2006. The
company assailed as error on the part of the Labor Arbiter the
grant of separation pay in favor of Moya despite the finding
that there was a just cause for the employee’s dismissal from
service. It was submitted that the complainant’s length of
service to the company cannot be invoked to justify the award.
It was argued that Moya was dismissed for just causes; hence,
to award separation pay would be tantamount to giving a prize
for disloyalty and breach of trust.21
On 31 January 2007, the NLRC affirmed the Decision of the
Labor Arbiter in its entirety.22
The NLRC affirmed the finding of the Labor Arbiter that a
separation pay should be given to Moya in lieu of reinstatement
citing primarily his length of service and years of contribution
to the profitable business operation of the company. It also
noted that this transgression was the first mistake of Moya in
the performance of his functions. Finally, it cited as justification
the Court’s ruling in St. Michael’s Institute v. Santos,23
wherein the Court held that "even when an employee is found
to have transgressed the employer’s rules, in the actual
imposition of penalties upon the erring employee, due
consideration must still be given to his length of service and
the number of violations committed during his employment."24
In its Motion for Reconsideration,25 First Solid insisted that
length of service cannot mitigate breach of trust which is
penalized with dismissal.
On 24 April 2007, the NLRC denied the motion of First Solid as
it found no compelling justification to overturn its findings.26
In its Petition for Certiorari before the Court of Appeals, the
company reiterated its previous arguments that separation pay
cannot be awarded to validly dismissed employees and that
length of service was not a ground to reduce the penalty of
dismissal due to breach of trust.27
In his Comment28 and Memorandum,29 Moya capitalized on
the pronouncement of the Labor Arbiter that his alleged
infraction does not merit a penalty of dismissal from service
given his length of service to the company as well as the failure
of the company to prove that he acted maliciously and with the
intention to cause damage.
First Solid, in its Reply30 and Memorandum,31 argued that
Moya, being a supervisor, the company reposed on him its trust
and confidence. He was expected to remain loyal and
trustworthy and promote the best interest of the company. His
act of concealing, by making a fraudulent report to the
company regarding the transgression of the machine operator
under him, is a valid basis for dismissal based on breach of
trust and confidence. The company further contended that the
award of separation pay made by the labor tribunals was
contrary to law and jurisprudence.
In its Decision,32 the Court of Appeals ruled in favor of the
company and reversed the decisions of the labor tribunals. The
dispositive portions reads:
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Dean Ada D. Abad
WHEREFORE, premises considered, the petition is GRANTED.
The Resolutions dated January 31, 2007 and April 24, 2007 of
the National Labor Relations Commission in NLRC NCR CA No.
048653-06(NLRC NCR Case No. 00-11-12626-2004) affirming
the Decision dated February 28, 2006 of the Labor Arbiter Pablo
C. Espiritu, Jr. is MODIFIED by deleting the award for
separation pay in favor of private respondent Reynaldo Hayan
Moya.33
The appellate court ruled that an employee found to be guilty
of serious misconduct or other acts reflecting his moral
character is not entitled to separation pay. Moya who held a
supervisory position as the Head of the Curing Department
breached the trust reposed upon him when he did not disclose
what was actually done by the machine operator which
eventually caused the damage. It was only when the company
discovered that the report was not in accordance with what
really transpired that Moya admitted its mistake. In sum, the
appellate court agreed that First Solid presented substantial
proof to consider Moya as dishonest and disloyal to the
company.
It took the position that instead of being a basis for the award
of separation pay, Moya’s length of service should have been
taken against him. The reason for his dismissal was his lack of
integrity and loyalty to the company reflecting upon his moral
character.
The appellate court emphasized that while the law is
considerate to the welfare of the employees whenever there is
a labor conflict, it also protects the right of an employer to
exercise its management prerogative in good faith.
The Court’s Ruling
That there is a valid ground for the dismissal of Moya based on
breach and loss of trust and confidence is no longer at issue.
The Labor Arbiter, NLRC and the appellate court were
unanimous in their rulings on this matter. The remaining
question is whether or not petitioner employee is entitled to
separation pay based on his length of service.
Petitioner is not entitled to separation pay. Payment of
separation pay cannot be justified by his length of service.
It must be stressed that Moya was not an ordinary rank-and-
file employee. He was holding a supervisory rank being an
Officer-in-Charge of the Tire Curing Department. The position,
naturally one of trust, required of him abiding honesty as
compared to ordinary rank-and-file employees. When he made
a false report attributing the damage of five tires to machine
failure, he breached the trust and confidence reposed upon him
by the company.
In a number of cases,34 this Court put emphasis on the right
of an employer to exercise its management prerogative in
dealing with its company’s affairs including its right to dismiss
its erring employees. We recognized the right of the employer
to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal
and recall of workers.35 It is a general principle of labor law to
discourage interference with an employer’s judgment in the
conduct of his business. As already noted, even as the law is
solicitous of the welfare of the employees, it also recognizes
employer’s exercise of management prerogatives. As long as
the company’s exercise of judgment is in good faith to advance
its interest and not for the purpose of defeating or
circumventing the rights of employees under the laws or valid
agreements, such exercise will be upheld.36
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Following the ruling in The Coca-Cola Export Corporation v.
Gacayan,37 the employers have a right to impose a penalty of
dismissal on employees by reason of loss of trust and
confidence. More so, in the case of supervisors or personnel
occupying positions of responsibility, does loss of trust justify
termination. Loss of confidence as a just cause for termination
of employment is premised on the fact that an employee
concerned holds a position of trust and confidence. This
situation holds where a person is entrusted with confidence on
delicate matters, such as the custody, handling, or care and
protection of the employer’s property. But, in order to
constitute a just cause for dismissal, the act complained of
must be "work-related" such as would show the employee
concerned to be unfit to continue working for the employer.38
The foregoing as viewpoint, the right of First Solid to handle its
own affairs in managing its business must be respected. The
clear consequence is the denial of the grant of separation pay
in favor of Moya.
As pronounced in the recent case of Unilever Philippines, Inc.,
v. Rivera,39 an employee who has been dismissed for any of
the just causes enumerated under Article 28240 of the Labor
Code, including breach of trust, is not entitled to separation
pay.41 This is further bolstered by Section 7,Rule I, Book VI of
the Omnibus Rules Implementing the Labor Code which
provides that:
Moya’s dismissal is based on one of the grounds under Art. 282
of the Labor Code which is willful breach by the employee of
the trust reposed in him by his employer. Also, he is outside
the protective mantle of the principle of social justice as his act
of concealing the truth from the company is clear disloyalty to
the company which has long employed him.1âwphi1
Indeed, as found below, Moya’s length of service should be
taken against him. The pronouncement in Reno Foods, Inc. v.
Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan45 is
instructive on the matter:
x x x Length of service is not a bargaining chip that can simply
be stacked against the employer. After all, an employer-
employee relationship is symbiotic where both parties benefit
from mutual loyalty and dedicated service. If an employer had
treated his employee well, has accorded him fairness and
adequate compensation as determined by law, it is only fair to
expect a long-time employee to return such fairness with at
least some respect and honesty. Thus, it may be said that
betrayal by a long-time employee is more insulting and odious
for a fair employer.46 (Emphasis supplied).
WHEREFORE, we DENY the petition for review on certiorari. The
Decision dated 30 April 2008 and Resolution dated 1 August
2008 of the Special Third Division of the Court of Appeals in
CA-G.R. SP No. 99500 are hereby AFFIRMED.

Sec. 7. Termination of employment by employer. — The just

causes for terminating the services of an employee shall be
those provided in Article 282 of the Code. The separation from
work of an employee for a just cause does not entitle him to
the termination pay provided in the Code, without prejudice,
however, to whatever rights, benefits and privileges he may
have under the applicable individual or collective agreement
with the employer or voluntary employer policy or
practice.1âwphi1

However, this Court also provides exceptions to the rule based

on "social justice" or on "equitable grounds" following the ruling
in Philippine Long Distance Telephone Co. v. NLRC,42 stating
that separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the
valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the
ground of social justice.43

The PLDT case further elucidates why an erring employee could

not benefit under the cloak of social justice in the award of
separation pay, we quote:

The policy of social justice is not intended to countenance

wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if
their hands are clean and their motives blameless and not
simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have
proved they are not worthy of it, like the workers who have
tainted the cause of labor with the blemishes of their own
character.44

[15] G.R. No. 172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the
SOCIAL SECURITY COMMISSION and SOCIAL SECURITY
SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under
Rule 45 of the 1997 Revised Rules of Civil Procedure seeking
to annul and set aside the Decision1 and Resolution2 of the
Court of Appeals in CA-G.R. SP No. 87236, dated 5 January
2006 and 20 March 2006, respectively, which annulled and set
aside the Orders of the Social Security Commission (SSC) in
SSC Case No. 6-15507-03, dated 17 February 20043 and 16
September 2004,4 respectively, thereby dismissing the
petition-complaint dated 12 June 2003 filed by herein
petitioner Social Security System (SSS) against herein
respondent.
Herein petitioner Republic of the Philippines is represented by
the SSC, a quasi-judicial body authorized by law to resolve
disputes arising under Republic Act No. 1161, as amended by
Republic Act No. 8282.5 Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as
amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created
pursuant to Republic Act No. 69386 and duly registered with
the Cooperative Development Authority (CDA) on 23
November 1999 with Registration Certificate No. 0-623-2460.7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-
members. Under its by-laws, owners-members are of two
categories, to wit: (1) regular member, who is entitled to all
the rights and privileges of membership; and (2) associate
member, who has no right to vote and be voted upon and shall
be entitled only to such rights and privileges provided in its by-
laws.8 Its primary objectives are to provide savings and credit
facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service
Contracts9 with Stanfilco - a division of DOLE Philippines, Inc.
and a company based in Bukidnon. The owners-members do
not receive compensation or wages from the respondent
cooperative. Instead, they receive a share in the service
surplus10 which the respondent cooperative earns from
different areas of trade it engages in, such as the income
derived from the said Service Contracts with Stanfilco. The
owners-members get their income from the service surplus
generated by the quality and amount of services they rendered,
which is determined by the Board of Directors of the
respondent cooperative.
In order to enjoy the benefits under the Social Security Law of
1997, the owners-members of the respondent cooperative,
who were assigned to Stanfilco requested the services of the
latter to register them with petitioner SSS as self-employed
and to remit their contributions as such. Also, to comply with
Section 19-A of Republic Act No. 1161, as amended by Republic
Act No. 8282, the SSS contributions of the said owners-
members were equal to the share of both the employer and the
employee.
On 26 September 2002, however, petitioner SSS through its
Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent
a letter11 to the respondent cooperative, addressed to its Chief
Executive Officer (CEO) and General Manager Leo G. Parma,
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informing the latter that based on the Service Contracts it
executed with Stanfilco, respondent cooperative is actually a
manpower contractor supplying employees to Stanfilco and for
that reason, it is an employer of its owners-members working
with Stanfilco. Thus, respondent cooperative should register
itself with petitioner SSS as an employer and make the
corresponding report and remittance of premium contributions
in accordance with the Social Security Law of 1997. On 9
October 2002,12 respondent cooperative, through its counsel,
sent a reply to petitioner SSS’s letter asserting that it is not an
employer because its owners-members are the cooperative
itself; hence, it cannot be its own employer. Again, on 21
October 2002,13 petitioner SSS sent a letter to respondent
cooperative ordering the latter to register as an employer and
report its owners-members as employees for compulsory
coverage with the petitioner SSS. Respondent cooperative
continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14
before petitioner SSC against the respondent cooperative and
Stanfilco praying that the respondent cooperative or, in the
alternative, Stanfilco be directed to register as an employer and
to report respondent cooperative’s owners-members as
covered employees under the compulsory coverage of SSS and
to remit the necessary contributions in accordance with the
Social Security Law of 1997. The same was docketed as SSC
Case No. 6-15507-03. Respondent cooperative filed its Answer
with Motion to Dismiss alleging that no employer-employee
relationship exists between it and its owners-members, thus,
petitioner SSC has no jurisdiction over the respondent
cooperative. Stanfilco, on the other hand, filed an Answer with
Cross-claim against the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order denying
the Motion to Dismiss filed by the respondent cooperative. The
respondent cooperative moved for the reconsideration of the
said Order, but it was likewise denied in another Order issued
by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative
filed a Motion for Extension of Time to File a Petition for Review
before the Court of Appeals. Subsequently, respondent
cooperative filed a Manifestation stating that it was no longer
filing a Petition for Review. In its place, respondent cooperative
filed a Petition for Certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 87236, with the following
assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004
of [herein petitioner] SSC were issued with grave abuse of
discretion amounting to a (sic) lack or excess of jurisdiction in
that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it
has jurisdiction over the petition a quo, considering that it
failed to first resolve the issue of the existence of an employer-
employee relationship between [respondent] cooperative and
its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to coverage,
benefits, contributions, and related matters, it is respectfully
submitted that [petitioner] SSC may only assume jurisdiction
in cases where there is no dispute as to the existence of an
employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal
issue of employer-employee relationship raised in
[respondent’s] Motion to Dismiss can be preliminarily resolved
through summary hearings prior to the hearing on the merits.
However, any inquiry beyond a preliminary determination, as
what [petitioner SSC] wants to accomplish, would be to
encroach on the jurisdiction of the National Labor Relations

Commission [NLRC], which is the more competent body clothed
with power to resolve issues relating to the existence of an
employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take
cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation
of the Labor Law but is a multi-purpose cooperative created
pursuant to Republic Act No. 6938 and composed of owners-
members, not employees.
B. The rights and obligations of the owners-members of
[respondent] cooperative are derived from their Membership
Agreements, the Cooperatives By-Laws, and Republic Act No.
6938, and not from any contract of employment or from the
Labor Laws. Moreover, said owners-members enjoy rights that
are not consistent with being mere employees of a company,
such as the right to participate and vote in decision-making for
the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the
owners-members of [respondent] cooperative are not paid any
compensation income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision
granting the petition filed by the respondent cooperative. The
decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders
dated [17 February 2004] and [16 September 2004], are
ANNULLED and SET ASIDE and a new one is entered
DISMISSING the petition-complaint dated [12 June 2003] of
[herein petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for
a reconsideration, but it was denied by the appellate court in
its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or
not the Court of Appeals erred in not finding that the SSC has
jurisdiction over the subject matter and it has a valid basis in
denying respondent’s Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-
complaint filed before it by the [petitioner SSS] under R.A. No.
8282.
II. Respondent [cooperative] is estopped from questioning the
jurisdiction of petitioner SSC after invoking its jurisdiction by
filing an [A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of
discretion in denying respondent [cooperative’s] [M]otion to
[D]ismiss.
IV. The existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between
[respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-
complaint filed before it by petitioner SSS as it involved an
issue of whether or not a worker is entitled to compulsory
coverage under the SSS Law. Petitioners avow that Section 5
of Republic Act No. 1161, as amended by Republic Act No.
8282, expressly confers upon petitioner SSC the power to
settle disputes on compulsory coverage, benefits, contributions
and penalties thereon or any other matter related thereto.
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Dean Ada D. Abad
Likewise, Section 9 of the same law clearly provides that SSS
coverage is compulsory upon all employees. Thus, when
petitioner SSS filed a petition-complaint against the
respondent cooperative and Stanfilco before the petitioner SSC
for the compulsory coverage of respondent cooperative’s
owners-members as well as for collection of unpaid SSS
contributions, it was very obvious that the subject matter of
the aforesaid petition-complaint was within the expertise and
jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is
a prior need to determine the existence of an employer-
employee relationship between the respondent cooperative
and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid petition-
complaint. Considering that the principal relief sought in the
said petition-complaint has to be resolved by reference to the
Social Security Law and not to the Labor Code or other labor
relations statutes, therefore, jurisdiction over the same solely
belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent
cooperative’s Motion to Dismiss grounded on the alleged lack
of employer-employee relationship does not constitute grave
abuse of discretion on the part of petitioner SSC because the
latter has the authority and power to deny the same. Moreover,
the existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
Petitioners also maintain that the respondent cooperative is
already estopped from assailing the jurisdiction of the
petitioner SSC because it has already filed its Answer before it,
thus, respondent cooperative has already submitted itself to
the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee
relationship between the respondent cooperative and its
owners-members. The respondent cooperative is the employer
of its owners-members considering that it undertook to provide
services to Stanfilco, the performance of which is under the full
and sole control of the respondent cooperative.
On the other hand, respondent cooperative alleges that its
owners-members own the cooperative, thus, no employer-
employee relationship can arise between them. The persons of
the employer and the employee are merged in the owners-
members themselves. Likewise, respondent cooperative’s
owners-members even requested the respondent cooperative
to register them with the petitioner SSS as self-employed
individuals. Hence, petitioner SSC has no jurisdiction over the
petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals
correctly ruled that petitioner SSC acted with grave abuse of
discretion when it assumed jurisdiction over the petition-
complaint without determining first if there was an employer-
employee relationship between the respondent cooperative
and its owners-members. Respondent cooperative claims that
the question of whether an employer-employee relationship
exists between it and its owners-members is a legal and not a
factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be
considered estopped from assailing the jurisdiction of petitioner
SSC simply because it filed an Answer with Motion to Dismiss,
especially where the issue of jurisdiction is raised at the very
first instance and where the only relief being sought is the
dismissal of the petition-complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may
be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-
complaint filed before it by petitioner SSS against the
respondent cooperative.
II. Whether the respondent cooperative is estopped from
assailing the jurisdiction of petitioner SSC since it had already
filed an Answer with Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of
Republic Act No. 8282 as well as in Section 1, Rule III of the
1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under
this Act with respect to coverage, benefits, contributions and
penalties thereon or any other matter related thereto, shall be
cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of
Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social
Security Act with respect to coverage, entitlement of benefits,
collection and settlement of contributions and penalties
thereon, or any other matter related thereto, shall be
cognizable by the Commission after the SSS through its
President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first
taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue
regarding the compulsory coverage of the SSS is well within
the exclusive domain of the petitioner SSC. It is important to
note, though, that the mandatory coverage under the SSS Law
is premised on the existence of an employer-employee
relationship17 except in cases of compulsory coverage of the
self-employed.
It is axiomatic that the allegations in the complaint, not the
defenses set up in the Answer or in the Motion to Dismiss,
determine which court has jurisdiction over an action;
otherwise, the question of jurisdiction would depend almost
entirely upon the defendant.18 Moreover, it is well-settled that
once jurisdiction is acquired by the court, it remains with it until
the full termination of the case.19 The said principle may be
applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS
before the petitioner SSC against the respondent cooperative
and Stanfilco alleges that the owners-members of the
respondent cooperative are subject to the compulsory
coverage of the SSS because they are employees of the
respondent cooperative. Consequently, the respondent
cooperative being the employer of its owners-members must
register as employer and report its owners-members as
covered members of the SSS and remit the necessary premium
contributions in accordance with the Social Security Law of
1997. Accordingly, based on the aforesaid allegations in the
petition-complaint filed before the petitioner SSC, the case
clearly falls within its jurisdiction. Although the Answer with
Motion to Dismiss filed by the respondent cooperative
challenged the jurisdiction of the petitioner SSC on the alleged
lack of employer-employee relationship between itself and its
owners-members, the same is not enough to deprive the
petitioner SSC of its jurisdiction over the petition-complaint
filed before it. Thus, the petitioner SSC cannot be faulted for
initially assuming jurisdiction over the petition-complaint of the
petitioner SSS.
Nonetheless, since the existence of an employer-employee
relationship between the respondent cooperative and its
owners-members was put in issue and considering that the
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Dean Ada D. Abad
compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC
to determine if there is really an employer-employee
relationship that exists between the respondent cooperative
and its owners-members.
The question on the existence of an employer-employee
relationship is not within the exclusive jurisdiction of the
National Labor Relations Commission (NLRC). Article 217 of the
Labor Code enumerating the jurisdiction of the Labor Arbiters
and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE
COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (₱5,000.00) regardless of whether
accompanied with a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for
Social Security, it would necessarily include issues on the
coverage thereof, because claims are undeniably rooted in the
coverage by the system. Hence, the question on the existence
of an employer-employee relationship for the purpose of
determining the coverage of the Social Security System is
explicitly excluded from the jurisdiction of the NLRC and falls
within the jurisdiction of the SSC which is primarily charged
with the duty of settling disputes arising under the Social
Security Law of 1997.
On the basis thereof, considering that the petition-complaint of
the petitioner SSS involved the issue of compulsory coverage
of the owners-members of the respondent cooperative, this
Court agrees with the petitioner SSC when it declared in its
Order dated 17 February 2004 that as an incident to the issue
of compulsory coverage, it may inquire into the presence or
absence of an employer-employee relationship without need of
waiting for a prior pronouncement or submitting the issue to
the NLRC for prior determination. Since both the petitioner SSC
and the NLRC are independent bodies and their jurisdiction are
well-defined by the separate statutes creating them, petitioner
SSC has the authority to inquire into the relationship existing
between the worker and the person or entity to whom he
renders service to determine if the employment, indeed, is one
that is excepted by the Social Security Law of 1997 from
compulsory coverage.21
Even before the petitioner SSC could make a determination of
the existence of an employer-employee relationship, however,
the respondent cooperative already elevated the Order of the
petitioner SSC, denying its Motion to Dismiss, to the Court of
Appeals by filing a Petition for Certiorari. As a consequence
thereof, the petitioner SSC became a party to the said Petition
for Certiorari pursuant to Section 5(b)22 of Republic Act No.
8282. The appellate court ruled in favor of the respondent
cooperative by declaring that the petitioner SSC has no
jurisdiction over the petition-complaint filed before it because
there was no employer-employee relationship between the
respondent cooperative and its owners-members. Resultantly,
the petitioners SSS and SSC, representing the Republic of the
Philippines, filed a Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s
power of review, the Court is not a trier of facts and the findings
of fact of the Court of Appeals are conclusive and binding on
the Court,23 said rule is not without exceptions. There are
several recognized exceptions24 in which factual issues may
be resolved by this Court. One of these exceptions finds

application in this present case which is, when the findings of
fact are conflicting. There are, indeed, conflicting findings
espoused by the petitioner SSC and the appellate court relative
to the existence of employer-employee relationship between
the respondent cooperative and its owners-members, which
necessitates a departure from the oft-repeated rule that factual
issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee
relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of
wages by whatever means; (3) the power of dismissal; and (4)
the power to control the worker’s conduct, with the latter
assuming primacy in the overall consideration.25 The most
important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish.26 The power
of control refers to the existence of the power and not
necessarily to the actual exercise thereof. It is not essential for
the employer to actually supervise the performance of duties
of the employee; it is enough that the employer has the right
to wield that power.27 All the aforesaid elements are present
in this case.
First. It is expressly provided in the Service Contracts that it is
the respondent cooperative which has the exclusive discretion
in the selection and engagement of the owners-members as
well as its team leaders who will be assigned at Stanfilco.28
Second. Wages are defined as "remuneration or earnings,
however designated, capable of being expressed in terms of
money, whether fixed or ascertained, on a time, task, piece or
commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or
to be done, or for service rendered or to be rendered."29 In
this case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its
owners-members were in reality wages, as the same were
equivalent to an amount not lower than that prescribed by
existing labor laws, rules and regulations, including the wage
order applicable to the area and industry; or the same shall not
be lower than the prevailing rates of wages.30 It cannot be
doubted then that those stipends or shares in the service
surplus are indeed wages, because these are given to the
owners-members as compensation in rendering services to
respondent cooperative’s client, Stanfilco. Third. It is also
stated in the above-mentioned Service Contracts that it is the
respondent cooperative which has the power to investigate,
discipline and remove the owners-members and its team
leaders who were rendering services at Stanfilco.31 Fourth. As
earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. In the
case at bar, it is the respondent cooperative which has the sole
control over the manner and means of performing the services
under the Service Contracts with Stanfilco as well as the means
and methods of work.32 Also, the respondent cooperative is
solely and entirely responsible for its owners-members, team
leaders and other representatives at Stanfilco.33 All these
clearly prove that, indeed, there is an employer-employee
relationship between the respondent cooperative and its
owners-members.
It is true that the Service Contracts executed between the
respondent cooperative and Stanfilco expressly provide that
there shall be no employer-employee relationship between the
respondent cooperative and its owners-members.34 This
Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer
relationship actually exists between the respondent
cooperative and its owners-members. The four elements in the
four-fold test for the existence of an employment relationship
have been complied with. The respondent cooperative must not
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Dean Ada D. Abad
be allowed to deny its employment relationship with its
owners-members by invoking the questionable Service
Contracts provision, when in actuality, it does exist. The
existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract, when the
terms and surrounding circumstances show otherwise. The
employment status of a person is defined and prescribed by
law and not by what the parties say it should be.35
It is settled that the contracting parties may establish such
stipulations, clauses, terms and conditions as they want, and
their agreement would have the force of law between them.
However, the agreed terms and conditions must not be
contrary to law, morals, customs, public policy or public
order.36 The Service Contract provision in question must be
struck down for being contrary to law and public policy since it
is apparently being used by the respondent cooperative merely
to circumvent the compulsory coverage of its employees, who
are also its owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in
Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37
wherein it held that:
A cooperative, therefore, is by its nature different from an
ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are
the ones who run and operate the business while the others
are its employees x x x.
An employee therefore of such a cooperative who is a member
and co-owner thereof cannot invoke the right to collective
bargaining for certainly an owner cannot bargain with himself
or his co-owners. In the opinion of August 14, 1981 of the
Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative
have no right to form or join labor organizations for purposes
of collective bargaining for being themselves co-owners of the
cooperative.1awp++i1
However, in so far as it involves cooperatives with employees
who are not members or co-owners thereof, certainly such
employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as
are enshrined in the Constitution and existing laws of the
country.
The situation in the aforesaid case is very much different from
the present case. The declaration made by the Court in the
aforesaid case was made in the context of whether an
employee who is also an owner-member of a cooperative can
exercise the right to bargain collectively with the employer who
is the cooperative wherein he is an owner-member. Obviously,
an owner-member cannot bargain collectively with the
cooperative of which he is also the owner because an owner
cannot bargain with himself. In the instant case, there is no
issue regarding an owner-member’s right to bargain
collectively with the cooperative. The question involved here is
whether an employer-employee relationship can exist between
the cooperative and an owner-member. In fact, a closer look
at Cooperative Rural Bank of Davao City, Inc. will show that it
actually recognized that an owner-member of a cooperative
can be its own employee.
It bears stressing, too, that a cooperative acquires juridical
personality upon its registration with the Cooperative
Development Authority.38 It has its Board of Directors, which
directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management
of its affairs.39 With that, a cooperative can be likened to a
corporation with a personality separate and distinct from its
owners-members. Consequently, an owner-member of a
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Dean Ada D. Abad

cooperative can be an employee of the latter and an employer-

employee relationship can exist between them.

In the present case, it is not disputed that the respondent

cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of
Registration No. 0-623-2460.40 In its by-laws,41 its Board of
Directors directs, controls, and supervises the business and
manages the property of the respondent cooperative. Clearly
then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its
owners-members as a whole. Therefore, it is completely logical
that the respondent cooperative, as a juridical person
represented by its Board of Directors, can enter into an
employment with its owners-members.

In sum, having declared that there is an employer-employee

relationship between the respondent cooperative and its
owners-member, we conclude that the petitioner SSC has
jurisdiction over the petition-complaint filed before it by the
petitioner SSS. This being our conclusion, it is no longer
necessary to discuss the issue of whether the respondent
cooperative was estopped from assailing the jurisdiction of the
petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is

hereby GRANTED. The Decision and the Resolution of the Court
of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and
20 March 2006, respectively, are hereby REVERSED and SET
ASIDE. The Orders of the petitioner SSC dated 17 February
2004 and 16 September 2004 are hereby REINSTATED. The
petitioner SSC is hereby DIRECTED to continue hearing the
petition-complaint filed before it by the petitioner SSS as
regards the compulsory coverage of the respondent
cooperative and its owners-members. No costs.

SO ORDERED.

[16] G.R. No. 153511 July 18, 2012
LEGEND HOTEL (MANILA), owned by TITANIUM
CORPORATION, and/or, NELSON NAPUD, in his capacity
as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA,
Respondent.
DECISION
BERSAMIN, J.:
This labor case for illegal dismissal involves a pianist employed
to perform in the restaurant of a hotel. On August 9, 1999,
respondent, whose stage name was Joey R. Roa, filed a
complaint for alleged unfair labor practice, constructive illegal
dismissal, and the underpayment/nonpayment of his premium
pay for holidays, separation pay, service incentive leave pay,
and 13111 month pay. He prayed for attorney's fees, moral
damages off P100,000.00 and exemplary damages for
P100,000.00.1
Respondent averred that he had worked as a pianist at the
Legend Hotel’s Tanglaw Restaurant from September 1992 with
an initial rate of P400.00/night that was given to him after each
night’s performance; that his rate had increased to
P750.00/night; and that during his employment, he could not
choose the time of performance, which had been fixed from
7:00 pm to 10:00 pm for three to six times/week. He added
that the Legend Hotel’s restaurant manager had required him
to conform with the venue’s motif; that he had been subjected
to the rules on employees’ representation checks and chits, a
privilege granted to other employees; that on July 9, 1999, the
management had notified him that as a cost-cutting measure
his services as a pianist would no longer be required effective
July 30, 1999; that he disputed the excuse, insisting that
Legend Hotel had been lucratively operating as of the filing of
his complaint; and that the loss of his employment made him
bring his complaint.2
In its defense, petitioner denied the existence of an employer-
employee relationship with respondent, insisting that he had
been only a talent engaged to provide live music at Legend
Hotel’s Madison Coffee Shop for three hours/day on two days
each week; and stated that the economic crisis that had hit the
country constrained management to dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the
complaint for lack of merit upon finding that the parties had no
employer-employee relationship.3 The LA explained thusly:
xxx
On the pivotal issue of whether or not there existed an
employer-employee relationship between the parties, our
finding is in the negative. The finding finds support in the
service contract dated September 1, 1992 xxx.
xxx
Even if we grant the initial non-existence of the service
contract, as complainant suggests in his reply (third paragraph,
page 4), the picture would not change because of the
admission by complainant in his letter dated October 8, 1996
(Annex "C") that what he was receiving was talent fee and not
salary.
This is reinforced by the undisputed fact that complainant
received his talent fee nightly, unlike the regular employees of
the hotel who are paid by monthly xxx.
xxx
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Dean Ada D. Abad
And thus, absent the power to control with respect to the
means and methods by which his work was to be accomplished,
there is no employer-employee relationship between the
parties xxx.
xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED
for lack of merit.
SO ORDERED.4
Respondent appealed, but the National Labor Relations
Commission (NLRC) affirmed the LA on May 31, 2001.5
Respondent assailed the decision of the NLRC in the Court of
Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the
NLRC,6 holding:
xxx
Applying the above-enumerated elements of the employee-
employer relationship in this case, the question to be asked is,
are those elements present in this case?
The answer to this question is in the affirmative.
xxx
Well settled is the rule that of the four (4) elements of
employer-employee relationship, it is the power of control that
is more decisive.
In this regard, public respondent failed to take into
consideration that in petitioner’s line of work, he was
supervised and controlled by respondent’s restaurant manager
who at certain times would require him to perform only tagalog
songs or music, or wear barong tagalog to conform with
Filipiniana motif of the place and the time of his performance
is fixed by the respondents from 7:00 pm to 10:00 pm, three
to six times a week. Petitioner could not choose the time of his
performance. xxx.
As to the status of petitioner, he is considered a regular
employee of private respondents since the job of the petitioner
was in furtherance of the restaurant business of respondent
hotel. Granting that petitioner was initially a contractual
employee, by the sheer length of service he had rendered for
private respondents, he had been converted into a regular
employee xxx.
xxx
xxx In other words, the dismissal was due to retrenchment in
order to avoid or minimize business losses, which is recognized
by law under Article 283 of the Labor Code, xxx.
xxx
WHEREFORE, foregoing premises considered, this petition is
GRANTED. xxx.7
Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF
EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE
PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND
THAT THE TERMINATION OF HIS SERVICES WAS ILLEGAL. THE
CA LIKEWISE ERRED WHEN IT DECLARED THE
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE
GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR
EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY
30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT
RELATIONSHIP BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO
BACKWAGES, SERVICE INCENTIVE LEAVE AND OTHER
BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER
EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31,
2001 IN NLRC NCR CA NO. 023404-2000 OF THE NLRC AS
WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR
OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT
ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE LABOR
ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR
LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION
WHICH ROA FILED IS IMPROPER SINCE IT RAISED QUESTIONS
OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED
BY ROA WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE
BEEN DISMISSED OUTRIGHT CONSIDERING THAT A PETITION
FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO
QUESTIONS OR ISSUES OF GRAVE ABUSE OF DISCRETION OR
LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE
LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE
CASE AT BAR.
The assigned errors are divided into the procedural issue of
whether or not the petition for certiorari filed in the CA was the
proper recourse; and into two substantive issues, namely: (a)
whether or not respondent was an employee of petitioner; and
(b) if respondent was petitioner’s employee, whether he was
validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondent’s petition for certiorari was
improper as a remedy against the NLRC due to its raising
mainly questions of fact and because it did not demonstrate
that the NLRC was guilty of grave abuse of discretion.
The contention is unwarranted. There is no longer any doubt
that a petition for certiorari brought to assail the decision of
the NLRC may raise factual issues, and the CA may then review
the decision of the NLRC and pass upon such factual issues in
the process.8 The power of the CA to review factual issues in
the exercise of its original jurisdiction to issue writs of certiorari
is based on Section 9 of Batas Pambansa Blg. 129, which
pertinently provides that the CA "shall have the power to try
cases and conduct hearings, receive evidence and perform any
and all acts necessary to resolve factual issues raised in cases
falling within its original and appellate jurisdiction, including
the power to grant and conduct new trials or further
proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
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Dean Ada D. Abad
We next ascertain if the CA correctly found that an employer-
employee relationship existed between the parties.
The issue of whether or not an employer-employee relationship
existed between petitioner and respondent is essentially a
question of fact.9 The factors that determine the issue include
who has the power to select the employee, who pays the
employee’s wages, who has the power to dismiss the
employee, and who exercises control of the methods and
results by which the work of the employee is accomplished.10
Although no particular form of evidence is required to prove
the existence of the relationship, and any competent and
relevant evidence to prove the relationship may be admitted,11
a finding that the relationship exists must nonetheless rest on
substantial evidence, which is that amount of relevant evidence
that a reasonable mind might accept as adequate to justify a
conclusion.12
Generally, the Court does not review factual questions,
primarily because the Court is not a trier of facts. However,
where, like here, there is a conflict between the factual findings
of the Labor Arbiter and the NLRC, on the one hand, and those
of the CA, on the other hand, it becomes proper for the Court,
in the exercise of its equity jurisdiction, to review and re-
evaluate the factual issues and to look into the records of the
case and re-examine the questioned findings.13
A review of the circumstances reveals that respondent was,
indeed, petitioner’s employee. He was undeniably employed as
a pianist in petitioner’s Madison Coffee Shop/Tanglaw
Restaurant from September 1992 until his services were
terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at
the time it entered into the service contract dated September
1, 1992 with respondent. This is true, notwithstanding
petitioner’s insistence that respondent had only offered his
services to provide live music at petitioner’s Tanglaw
Restaurant, and despite petitioner’s position that what had
really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by,
among others, the express written recommendation dated
January 12, 1998 by Christine Velazco, petitioner’s restaurant
manager, for the increase of his remuneration.14
Petitioner could not seek refuge behind the service contract
entered into with respondent. It is the law that defines and
governs an employment relationship, whose terms are not
restricted to those fixed in the written contract, for other
factors, like the nature of the work the employee has been
called upon to perform, are also considered. The law affords
protection to an employee, and does not countenance any
attempt to subvert its spirit and intent. Any stipulation in
writing can be ignored when the employer utilizes the
stipulation to deprive the employee of his security of tenure.
The inequality that characterizes employer-employee relations
generally tips the scales in favor of the employer, such that the
employee is often scarcely provided real and better options.15
Secondly, petitioner argues that whatever remuneration was
given to respondent were only his talent fees that were not
included in the definition of wage under the Labor Code; and
that such talent fees were but the consideration for the service
contract entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance
from 7:00 pm to 10:00 pm, three to six nights a week. Such
rate of remuneration was later increased to P750.00 upon
restaurant manager Velazco’s recommendation. There is no
denying that the remuneration denominated as talent fees was
fixed on the basis of his talent and skill and the quality of the

music he played during the hours of performance each night,
taking into account the prevailing rate for similar talents in the
entertainment industry.16
Respondent’s remuneration, albeit denominated as talent fees,
was still considered as included in the term wage in the sense
and context of the Labor Code, regardless of how petitioner
chose to designate the remuneration. Anent this, Article 97(f)
of the Labor Code clearly states:
xxx wage paid to any employee shall mean the remuneration
or earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time,
task, piece, or commission basis, or other method of calculating
the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered,
and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
Clearly, respondent received compensation for the services he
rendered as a pianist in petitioner’s hotel. Petitioner cannot use
the service contract to rid itself of the consequences of its
employment of respondent. There is no denying that whatever
amounts he received for his performance, howsoever
designated by petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code
and as held in Tan v. Lagrama,17 every employer is required
to pay his employees by means of a payroll, which should show
in each case, among others, the employee’s rate of pay,
deductions made from such pay, and the amounts actually paid
to the employee. Yet, petitioner did not present the payroll of
its employees to bolster its insistence of respondent not being
its employee.
That respondent worked for less than eight hours/day was of
no consequence and did not detract from the CA’s finding on
the existence of the employer-employee relationship. In
providing that the " normal hours of work of any employee shall
not exceed eight (8) hours a day," Article 83 of the Labor Code
only set a maximum of number of hours as "normal hours of
work" but did not prohibit work of less than eight hours.
Thirdly, the power of the employer to control the work of the
employee is considered the most significant determinant of the
existence of an employer-employee relationship.18 This is the
so-called control test, and is premised on whether the person
for whom the services are performed reserves the right to
control both the end achieved and the manner and means used
to achieve that end.19
Petitioner submits that it did not exercise the power of control
over respondent and cites the following to buttress its
submission, namely: (a) respondent could beg off from his
nightly performances in the restaurant for other engagements;
(b) he had the sole prerogative to play and perform any musical
arrangements that he wished; (c) although petitioner, through
its manager, required him to play at certain times a particular
music or song, the music, songs, or arrangements, including
the beat or tempo, were under his discretion, control and
direction; (d) the requirement for him to wear barong Tagalog
to conform with the Filipiniana motif of the venue whenever he
performed was by no means evidence of control; (e) petitioner
could not require him to do any other work in the restaurant or
to play the piano in any other places, areas, or establishments,
whether or not owned or operated by petitioner, during the
three hour period from 7:00 pm to 10:00 pm, three to six times
a week; and (f) respondent could not be required to sing, dance
or play another musical instrument.
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Dean Ada D. Abad
A review of the records shows, however, that respondent
performed his work as a pianist under petitioner’s supervision
and control. Specifically, petitioner’s control of both the end
achieved and the manner and means used to achieve that end
was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which
petitioners had fixed from 7:00 pm to 10:00 pm, three to six
times a week;
b. He could not choose the place of his performance;
c. The restaurant’s manager required him at certain times to
perform only Tagalog songs or music, or to wear barong
Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees’ representation
check and chits, a privilege granted to other employees.
Relevantly, it is worth remembering that the employer need
not actually supervise the performance of duties by the
employee, for it sufficed that the employer has the right to
wield that power.
Lastly, petitioner claims that it had no power to dismiss
respondent due to his not being even subject to its Code of
Discipline, and that the power to terminate the working
relationship was mutually vested in the parties, in that either
party might terminate at will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum
informing respondent of the discontinuance of his service
because of the present business or financial condition of
petitioner20 showed that the latter had the power to dismiss
him from employment.21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom
petitioner terminated to prevent losses, the conclusion that his
termination was by reason of retrenchment due to an
authorized cause under the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal
of employees recognized by the Labor Code. It is a
management prerogative resorted to by employers to avoid or
to minimize business losses. On this matter, Article 283 of the
Labor Code states:
Article 283. Closure of establishment and reduction of
personnel. – The employer may also terminate the employment
of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof. xxx. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall
be considered one (1) whole year.
The Court has laid down the following standards that an
employer should meet to justify retrenchment and to foil
abuse, namely:
 Labor Law Review | Cases
Dean Ada D. Abad

(a) The expected losses should be substantial and not merely

de minimis in extent;

(b) The substantial losses apprehended must be reasonably

imminent;

(c) The retrenchment must be reasonably necessary and likely

to effectively prevent the expected losses; and

(d) The alleged losses, if already incurred, and the expected

imminent losses sought to be forestalled must be proved by
sufficient and convincing evidence.22

Anent the last standard of sufficient and convincing evidence,

it ought to be pointed out that a less exacting standard of proof
would render too easy the abuse of retrenchment as a ground
for termination of services of employees.23

Was the retrenchment of respondent valid?

In termination cases, the burden of proving that the dismissal

was for a valid or authorized cause rests upon the employer.
Here, petitioner did not submit evidence of the losses to its
business operations and the economic havoc it would thereby
imminently sustain. It only claimed that respondent’s
termination was due to its "present business/financial
condition." This bare statement fell short of the norm to show
a valid retrenchment. Hence, we hold that there was no valid
cause for the retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by

an employer can justify retrenchment.1âwphi1 The employer
must prove, among others, that the losses are substantial and
that the retrenchment is reasonably necessary to avert such
losses. Thus, by its failure to present sufficient and convincing
evidence to prove that retrenchment was necessary,
respondent’s termination due to retrenchment is not allowed.

The Court realizes that the lapse of time since the retrenchment
might have rendered respondent's reinstatement to his former
job no longer feasible. If that should be true, then petitioner
should instead pay to him separation pay at the rate of one.
month pay for every year of service computed from September
1992 (when he commenced to work for the petitioners) until
the finality of this decision, and full backwages from the time
his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and

AFFIRM the decision of the Court of Appeals promulgated on
February 11, 2002, subject to the modification that should
reinstatement be no longer feasible, petitioner shall pay to
respondent separation pay of one month for every year of
service computed from September 1992 until the finality of this
decision, and full backwages from the time his compensation
was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.

[17] GR No. 200580, Feb 11, 2015
MARIAN B. NAVARETTE v. MANILA INTERNATIONAL
FREIGHT FORWARDERS
DECISION
VELASCO JR., J.:
The Case
Before Us is a Petition for Review on Certiorari under Rule 45
of the Rules of Court assailing the October 4, 2011 Decision of
the Court of Appeals (CA), as effectively reiterated in its
January 30, 2012 Resolution, in CA-G.R. SP No. 112102,
entitled Manila International Freight Forwarders, Inc./MIFFI
Logistics Company, Inc. v. National Labor Relations
Commission and Marian B. Navarette. The CA issuances
reversed and set aside the February 27, 2009 Decision and
October 19, 2009 Resolution of the National Labor Relations
Commission (NLRC) and reinstated the May 24, 2004 Decision
of the Labor Arbiter which dismissed the complaint for illegal
dismissal.
The Facts
Respondents Manila International Freight Forwarders, Inc.
(MIFFI) and MIFFI Logistics Company, Inc. (MCLI) are
corporations engaged in the business of freight and cargo
forwarding, hauling, carrying, handling, distributing, loading
and unloading of general cargoes and all classes of goods,
wares and merchandise.
MIFF1 had, during the period material, entered into a contract
with MBI Millennium Experts, Inc. (MBI) for the provision of
production workers and technical personnel for MIFFI's projects
or temporary needs, including the assignment of employees to
temporarily replace those in the Packaging Department who
are on maternity leave. To be able to address the immediate
concerns of the employees detailed to the aforesaid
department, MBI assigned a supervisor/coordinator, Ma.
Glynnis Quindo (Quindo), to MIFFI.
On January 15, 2002, MBI hired petitioner Marian Navarette
(Navarette) and, on the same day, assigned her as a temporary
project employee to MIFFI's Packaging Department. There, for
a fixed period of three (3) months, or until April of 2002, she
worked amongst MIFFI's regular employees who performed the
same tasks as hers. She also used MIFFI's equipment and was
supervised by Gidey Fajiculay and Sonny Porto, both
employees of MIFFI.
A second contract was later concluded between Navarette and
MBI, under which she was to serve as MIFFI's warehouse staff
from April 16, 2002 to October 1, 2002. Another contract
effective March 1, 2003 until August 1, 2003 resulted in
Navarette being transferred to respondent MLCI - MIFFI's
subsidiary.
On July 29, 2003, Navarette, joined by other employees, filed
a complaint for inspection against MIFFI, MLCI, MBI and a
certain PAMS with the Department of Labor and Employment
(DOLE) Regional Arbitration Branch IV. Following an inspection
of respondents' premises on August 5, 2003, certain violations
of labor laws were uncovered, including labor-only contracting
by MBI. Several hearings were had and eventually, the parties
decided to submit an agreement to be signed by all concerned
and to be approved by DOLE officials.
Pursuant to said covenant, MBI called a meeting where
Navarette and her co-workers were handed and asked to sign
a document entitled "Minutes of the Hearing/Agreement,
[DOLE], Region IV." Navarette found the contents of the
document to be erroneous since it stated that the parties had
already come to an agreement on the issues and conditions
Labor Law Review | Cases
Dean Ada D. Abad
when, in fact, no such agreement was made. This angered
Navarette, causing her to throw the document and to say,
"Hindi ito ang pinag-usapan natin sa DOLE! Niloloko niyo long
kami." Her actuations, to MBI, constituted serious misconduct,
for which a show cause memorandum was issued directing her
to explain herself. Dissatisfied with her explanation that her
actuations were so because the Minutes did not reflect the truth
MBI issued another memorandum which Navarette, upon
perusal, tore and threw away.
After issuing several memoranda setting conferences on the
matter to which Navarette could not attend because of her
work schedule, MBI finally terminated Navarette's employment
on October 6, 2003.[1] On October 23, 2003, Navarette filed a
complaint for illegal dismissal before the NLRC against MBI,
MIFFI and MCLI, docketed as NLRC-NCR Case No. 00-10-
11705-03.
In a Decision dated May 24, 2004, Labor Arbiter Dolores M.
Peralta-Beley dismissed the complaint on the finding that
Navarette's acts complained of constituted serious misconduct,
a valid cause for dismissal. Too, MBI, being a legitimate job
contractor, is Navarette's employer, not MIFFI or MCLI. The
fallo of the Decision reads:
In the light of the foregoing, the complaint for illegal dismissal
must be dismissed for want of factual and legal basis.
Necessarily, the claim for back wages must likewise be
dismissed as it is granted only to illegally dismissed employees
by way of relief.
xxxx
WHEREFORE, premises considered, judgment is hereby
rendered dismissing the instant complaint for lack of merit.
SO ORDERED.[2]
On appeal,[3] the NLRC reversed the Decision of the Labor
Arbiter and ordered Navarette's reinstatement with backwages
and other benefits. To the commission, MBI is a labor-only
contractor, thus making MIFFI and MCLI Navarette's employer.
The NLRC disposed of the case in this wise:
WHEREFORE, premises considered, the appeal is GRANTED.
The Decision of the Labor Arbiter dated May 24, 2004 is
REVERSED and SET ASIDE, and a NEW ONE rendered finding
respondent MBI as a labor-only contractor. Consequently,
respondents MIFFI/MCLI are declared to be complainant's
employer, and accordingly respondents MIFFI/MCLI are
ordered to:
Reinstate complainant to her former position or equivalent
position without loss of seniority rights;
Pay complainant her full backwages computed from the time
she was illegally dismissed up to the finality of this Decision;
and
Pay complainant attorney's fees in an amount equivalent to ten
(10%) of the total monetary award.
Complainant's monetary award is provisionally computed as
follows:
Backwages
1.) Basic Salary
10/6/03-6/15/05
250x26x20.30 131,950.00
6/16/05-7/10/06
275x26x12.83 91,734.50
7/11/06-8/27/07
300x26x13.57 105,846.00
8/28/07-6/13/08
362x26x9.53 89,696.36
6/14/08-8/27/08
377x26x2.47 24,210.94
 Labor Law Review | Cases
Dean Ada D. Abad

8/28/08-2/3/09 The issues in the case at bar are as follows: (1) whether
382x26x5.17 51,348.44 petitioner Navarette is respondents' employee; and (2)
494,786.24 2.) 13th mo pay whether her dismissal is illegal.
494,786.24/12
41,232.19 3.) SILP Our Ruling
250x5/12x20.30 2,114.58
275x5/12x12.83 1.470.10 We resolve to deny the petition.
300x5/12x13.57 1,696.25
362x5/12x9.53 1,437.44 Navarette is MBI's employee
377x5/12x2.47 387.99
382x5/12x5.17 822.89 A fundamental principle in Philippine labor law is the application
7,929.25 4.) COLA of the four-fold test in determining the existence of an
10/6/03-7/9/04 employer-employee relationship, thus: (1) selection and
engagement; (2) payment of wages; (3) power to dismiss; and
50x26x9.10 11,830.00 (4) power of control over the means and methods by which the
work is to be accomplished.[8] There are, however, instances
7/10/04-8/27/07 when these elements are not exercised by a single person or
entity. There are cases where one or more of the said factors
50x26x37.60 48,880.00 are assumed by another entity, for which reason, the Court
made it clear that of the four tests mentioned, it is the power
6/14/08- of control that is determinative.[9] One such instance is
8/27/08 whenever an employer supplies workers to another pursuant
to a contracting agreement, i.e., job contracting.
5x26x24.7 321.10
61,031.10 Per DOLE Order No. 3, Series of 2001, there is contracting or
604,978.78 subcontracting whenever an employer, referred to as the
Attorney's fee 10% principal, farms out the performance of a part of its business
to another, referred to as the contractor or subcontractor, and
60,497.88 for the purpose of undertaking the principal's business that is
Total Award farmed out, the contractor or subcontractor then employs its
own employees. In such an arrangement, the four-fold test
P665.476.66[4] Aggrieved, respondents moved for must be satisfied by the contractor or subcontractor.[10]
reconsideration, alleging that Navarette is not their employee, Otherwise, it is the principal that shall be considered as the
MBI being a legitimate job contractor, as held by the NLRC in employer.
the related case of Manlangit v. MIFFI and/or MCLI and MBI.[5]
The NLRC, however, in its October 19, 2009 Resolution, found Not all forms of contracting arrangements are, however,
no merit therein and sustained its earlier Decision. permitted. In contrast, there is the so-called labor-only
contracting.
Respondents, thus, sought a review of the NLRC Decision and
Resolution before the CA via a Petition for Certiorari under Rule Labor-only contracting exists when: (1) the person supplying
65 of the Rules of Court. Before the CA could dispose of said workers to the purported principal does not have substantial
petition, the Court, on August 31, 2011, in Manlangit, et al. v. capital or investments in the form of tools, equipment,
MIFFI, et al.,[6] issued a Resolution where it dismissed the machineries, work premises, among others; and (2) the
Manlangit petition and upheld the ruling of the CA that MBI's workers recruited and placed by such person/entity perform
contract with MIFF1/MCL1, respondents in said case as well as activities which are directly related to the principal business of
in the case at bar, was one of legitimate job contracting, the alleged principal.[11] Finding that a contractor is engaged
contrary to the assertions of therein petitioners. in labor-only contracting is then equivalent to declaring that
there exists an employer-employee relationship between the
Eventually, the CA, in the present case, ordered the reversal of supposed principal and the employee of the purported
the NLRC Decision and the reinstatement of the Labor Arbiter's contractor.[12] It also results in the following: (1) the
ruling. The dispositive portion of the appellate court's Decision subcontractor will be treated as the agent of the principal
is hereunder quoted: whose acts and representations bind the latter; (2) the
WHEREFORE, the petition is GRANTED. The Decision dated principal, being the employer, will be responsible to the
February 27, 2009 and Resolution dated October 19, 2009 of employees for all their entitlements and benefits under labor
the [NLRC] are REVERSED and SET ASIDE. The Decision of the laws; and (3) the principal and the subcontractor will be
Labor Arbiter dated May 24, 2004, which dismissed the solidarity treated as the employer.
complaint for lack of merit is REINSTATED.
With the mentioned effects of labor-only contracting on
SO ORDERED.[7] employment status, a determination of the legitimacy or
Petitioner's motion for reconsideration was also denied. illegality of the contracting arrangement between the principal
and the contractor is necessary not only to determine who
The Issues between the two entities is the real employer of the employee
but also to determine upon whom liability should be imposed
Petitioner presently seeks a review of the CA Decision on the in the event that the employee is illegally dismissed, as here,
following grounds: among others.
The Honorable [CA] misapplied the law and misapprehended
the facts in ruling that there is absence of employer-employee In this respect, respondents contend that MBI is a legitimate
relationship between the petitioner and the respondent job contractor[13] and consequently, Navarette is MBI's
[MIFFI]. employee, invoking the application of the principle of res
judicata. According to respondents, the Court has already
The Hon. [CA] misapplied the law in ruling that petitioner is not passed upon and ruled on the legitimacy of MBI's contract with
entitled to the reliefs prayed for. them that it is one of permissible job contracting when We
affirmed the contract's status through a Resolution dated

August 31, 2011 in the adverted case of Manlangit, et al. v.
MIFFI, et al., docketed as G.R. No. 196175.
Briefly, Manlangit involved a complaint for regularization,
illegal deduction, wage distortion and attorney's fees, later
amended to include illegal dismissal, filed by Gabriel Manlangit
and thirty six (36) other workers against MIFFI, MLCI, and MBI.
Like Navarette, Manlangit, et al. were also hired by MBI and
assigned to MIFFI.
After due proceedings, the Labor Arbiter found for MIFFI, MLCI
and MBI and dismissed the complaint, ruling that Manlangit, et
al. were project employees of MBI, whose employments were
coterminous with the service agreement between MBI and
MIFFI/MLCI. Therefrom, Manlangit, et al. went to the NLRC
which dismissed their appeal for lack of merit and for non-
perfection in view of their failure to comply with the mandatory
provision on verification and certification of non-forum
shopping. Upon the review of the case, the CA, then later this
Court, veritably affirmed the Decision of the Labor Arbiter, as
effectively upheld by the NLRC.[14]
In light of Manlangit, respondents add, the ruling on the legality
of MBI and respondents' contractual relationship, being one of
permissible job contracting, can no longer be disturbed.
We agree with respondents that Our adjudication in Manlangit
of the issue of the legitimacy of MBI's contract with
respondents and necessarily, the question who between MBI
and MIFFI is Navarette's employer, have already been settled
by the Court and must not be disturbed. Per Manlangit, MBI is
respondents' employer and res judicata by conclusiveness of
judgment bars further challenge on this issue.
For res judicata by conclusiveness of judgment to apply, the
following elements should be present, viz: (1) the judgment
sought to bar the new action must be final; (2) the decision
must have been rendered by a court having jurisdiction over
the subject matter and the parties; (3) the disposition of the
case must be a judgment on the merits; and (4) there must be
as between the first and second action, identity of parties, but
not identity of causes of action.[15]
When applicable, the doctrine of conclusiveness of judgment
has this effect: the prior judgment is conclusive in the second
case only as to those matters actually and directly controverted
and determined and not as to matters merely involved therein.
Stated differently, conclusiveness of judgment finds application
when a fact or question has been squarely put in issue,
judicially passed upon, and adjudged in a former suit by a court
of competent jurisdiction.[16]
As to the first requisite, Manlangit which is being set as a bar
to the instant case is a final judgment. With respect to the
second requisite, the decision was rendered by the Court of
Appeals which was affirmed by this Court, both of which have
jurisdiction over the subject matter and the parties. Anent the
third requisite, the dispositions were judgments on the merit.
Regarding the fourth requisite, there is identity or similarity of
parties but no identity of causes of action. While Navarette is
not a party in Manlangit, there is commonality or similarity of
parties in the two cases. Navarette and the petitioners in
Manlangit are similarly situated, being co-workers performing
the same tasks of packaging, barcoding, and sealing, among
others. Too, their assignment to herein respondents proceeded
from the same job contracting agreement between MBI and
respondents.[17] In fact, it was the petitioners in Manlangit
who supported herein petitioner, Navarette, their leader, when
she filed the complaint for inspection against respondents
before the DOLE which, as previously mentioned, yielded a
finding that there is a labor-only contracting arrangement
between MBI and respondents. It is this complaint for
Labor Law Review | Cases
Dean Ada D. Abad
inspection that triggered the chain of events which eventually
led to the filing by therein petitioners of a complaint for
regularization, later converted into one for illegal
dismissal,[18] as well as Navarette's subsequent filing of her
own complaint for illegal dismissal against MBI and herein
respondents. Thus, based on these circumstances, there is
commonality or similarity of parties. An absolute identity of
parties is not necessary because a shared identity of interest
will suffice for res judicata to apply. A mere substantial identity
of parties or even community of interests between the parties
in the prior and subsequent cases would be sufficient.[19]
With respect to the causes of action, the cause of action in this
petition is for illegal dismissal, while in Manlangit, the causes
of action are for regularization, illegal deduction, wage
distortion and attorney's fees.
Thus, all the requisites of res judicata by conclusiveness of
judgment are present. The Court applies Manlangit to the
instant petition moored on res judicata by conclusiveness of
judgment. To rule otherwise will not enhance and strengthen
stability of judicial decisions.
With the finding that MBI is a legitimate labor contractor and is
the employer of petitioner Navarette, the Court cannot,
however, pass upon the issue of whether MBI is guilty of illegal
dismissal. The antecedents show that while the MBI is a party
respondent in NLRC-NCR Case No. 00-10-11705-03 together
with respondents MIFFI and MLCI, the ruling of Labor Arbiter
Peralta-Beley is to dismiss petitioner's complaint upon a finding
of a valid dismissal grounded on serious misconduct.
Petitioner appealed said adverse decision to the NLRC against
the MBI and herein respondents in NLRC CA No. 040934-04,
and the NLRC found MIFFI and MLCI liable but not MBI. As a
consequence, respondents MIFFI and MLCI filed a petition
under Rule 65 with the CA in CA-G.R. SP No. 112102. MBI did
not join said respondents since it was not adjudged liable by
the NLRC. On the other hand, petitioner did not file a petition
with the CA questioning the NLRC decision declaring MIFFI and
MLCI liable but absolving MBI. Thus, the NLRC decision dated
February 27, 2004 excluding MBI from any liability to petitioner
became FINAL when petitioner no longer challenged said ruling
before the CA.
WHEREFORE, premises considered, the instant petition is
hereby DENIED. Accordingly, the Decision of the Court of
Appeals dated October 4, 2011 and its Resolution dated
January 30, 2012 in CA-G.R. SP No. 112102 are hereby
AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

[18] G.R. Nos. 173254-55 & 173263, January 13, 2016
DIAMOND FARMS, INC., Petitioner,
vs.
SOUTHERN PHILIPPINES FEDERATION OF LABOR
(SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS
AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE
COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL
ROMERO, PATRICIO CAPRECHO, REY DIMACALI, ELESIO
EMANEL, VICTOR SINGSON, NILDA DIMACALI,
PREMITIVO* DIAZ, RUDY VISTAL, ROGER MONTERO,
JOSISIMO GOMEZ and MANUEL MOSQUERA,
Respondents.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review1 under Rule 45 of the
Rules of Court, the issue of who among Diamond Farms, Inc.
("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-
Purpose Cooperative ("DARBMUPCO") and the individual
contractors2 ("respondent-contractors") is the employer of the
400 employees ("respondent-workers").
DFI challenges the March 31, 2006 Decision3 and May 30, 2006
Resolution4 of the Court Appeals, Special Twenty-Second
Division, Cagayan De Oro City for being contrary to law and
jurisprudence. The Decision dismissed DFI’s Petition for
Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted
DARBMUPCO’s Petition for Certiorari in C.A.-G.R. SP No. 59958.
It declared DFI as the statutory employer of the respondent-
workers.
The Facts
DFI owns an 800-hectare banana plantation ("original
plantation") in Alejal, Carmen, Davao.5 Pursuant to Republic
Act No. 6657 or the Comprehensive Agrarian Reform Law of
1988 ("CARL"), commercial farms shall be subject to
compulsory acquisition and distribution,6 thus the original
plantation was covered by the law. However, the Department
of Agrarian Reform ("DAR") granted DFI a deferment privilege
to continue agricultural operations until 1998.7 Due to adverse
marketing problems and observance of the so-called "lay-
follow" or the resting of a parcel of land for a certain period of
time after exhaustive utilization, DFI closed some areas of
operation in the original plantation and laid off its employees.8
These employees petitioned the DAR for the cancellation of
DFI’s deferment privilege alleging that DFI already abandoned
its area of operations.9 The DAR Regional Director recalled
DFI’s deferment privilege resulting in the original plantation’s
automatic compulsory acquisition and distribution under the
CARL.10 DFI filed a motion for reconsideration which was
denied. It then appealed to the DAR Secretary.11
In the meantime, to minimize losses, DFI offered to give up its
rights and interest over the original plantation in favor of the
government by way of a Voluntary Offer to Sell.12 The DAR
accepted DFI’s offer to sell the original plantation. However,
out of the total 800 hectares, the DAR only approved the
disposition of 689.88 hectares. Hence, the original plantation
was split into two: 689.88 hectares were sold to the
government ("awarded plantation") and the remaining 200
hectares, more or less, were retained by DFI ("managed
area").13 The managed area is subject to the outcome of the
appeal on the cancellation of the deferment privilege before the
DAR Secretary.
On January 1, 1996, the awarded plantation was turned over
to qualified agrarian reform beneficiaries ("ARBs") under the
CARL. These ARBs are the same farmers who were working in
Labor Law Review | Cases
Dean Ada D. Abad
the original plantation. They subsequently organized
themselves into a multi-purpose cooperative named
"DARBMUPCO," which is one of the respondents in this case.14
On March 27, 1996, DARBMUPCO entered into a Banana
Production and Purchase Agreement ("BPPA")15 with DFI.16
Under the BPPA, DARBMUPCO and its members as owners of
the awarded plantation, agreed to grow and cultivate only high
grade quality exportable bananas to be sold exclusively to
DFI.17 The BPPA is effective for 10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a
"Supplemental to Memorandum Agreement" ("SMA").19 The
SMA stated that DFI shall take care of the labor cost arising
from the packaging operation, cable maintenance, irrigation
pump and irrigation maintenance that the workers of
DARBMUPCO shall conduct for DFI’s account under the BPPA.20
From the start, DARBMUPCO was hampered by lack of
manpower to undertake the agricultural operation under the
BPPA because some of its members were not willing to work.21
Hence, to assist DARBMUPCO in meeting its production
obligations under the BPPA, DFI engaged the services of the
respondent-contractors, who in turn recruited the respondent-
workers.22
The engagement of the respondent-workers, as will be seen
below, started a series of labor disputes among DARBMUPCO,
DFI and the respondent-contractors.
C.A. G.R. SP No. 53806
On February 10, 1997, respondent Southern Philippines
Federation of Labor ("SPFL")—a legitimate labor organization
with a local chapter in the awarded plantation—filed a petition
for certification election in the Office of the Med-Arbiter in
Davao City.23 SPFL filed the petition on behalf of some 400
workers (the respondent-workers in this petition) "jointly
employed by DFI and DARBMUPCO" working in the awarded
plantation.
DARBMUPCO and DFI denied that they are the employers of
the respondent-workers. They claimed, instead, that the
respondent-workers are the employees of the respondent-
contractors.24
In an Order dated May 14, 1997,25 the Med-Arbiter granted
the petition for certification election. It directed the conduct of
certification election and declared that DARBMUPCO was the
employer of the respondent-workers. The Order stated that
"whether the said workers/employees were hired by
independent contractors is of no moment. What is material is
that they were hired purposely to work on the 689.88 hectares
banana plantation [the awarded plantation] now owned and
operated by DARBMUPCO."26
DARBMUPCO appealed to the Secretary of Labor and
Employment ("SOLE"). In a Resolution dated February 18,
1999,27 the SOLE modified the decision of the Med-Arbiter.
The SOLE held that DFI, through its manager and personnel,
supervised and directed the performance of the work of the
respondentcontractors. The SOLE thus declared DFI as the
employer of the respondent-workers.28
DFI filed a motion for reconsideration which the SOLE denied
in a Resolution dated May 4, 1999.29
On June 11, 1999, DFI elevated the case to the Court of
Appeals ("CA") via a Petition for Certiorari30 under Rule 65 of
the Rules of Court. The case was raffled to the CA’s former
Twelfth Division and was docketed as C.A.-G.R. SP No. 53806.
C.A.-G.R. SP. No. 59958

Meanwhile, on June 20, 199731 and September 15, 1997,32
SPFL, together with more than 300 workers, filed a case for
underpayment of wages, non-payment of 13th month pay and
service incentive leave pay and attorney’s fees against DFI,
DARBMUPCO and the respondent-contractors before the
National Labor Relations Commission ("NLRC") in Davao City.
DARBMUPCO averred that it is not the employer of respondent-
workers; neither is DFI. It asserted that the money claims
should be directed against the true employer—the respondent-
contractors.33
In a Decision dated January 22, 1999,34 the Labor Arbiter
("LA") held that the respondent-contractors are "labor-only
contractors." The LA gave credence to the affidavits of the
other contractors35 of DFI (who are not party-respondents in
this petition) asserting that DFI engaged their services, and
supervised and paid their laborers. The affidavits also stated
that the contractors had no dealings with DARBMUPCO, except
that their work is done in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory
employer of all the respondent-workers.37 The LA dismissed
the case against DARBMUPCO and the respondent-
contractors.38
DFI appealed to the NLRC. In a Resolution dated May 24,
1999,39 the NLRC Fifth Division modified the Decision of the
LA and declared that DARBMUPCO and DFI are the statutory
employers of the workers rendering services in the awarded
plantation and the managed area, respectively.40 It adjudged
DFI and DARBMUPCO as solidarily liable with the respondent-
contractors for the monetary claims of the workers, in
proportion to their net planted area.41
DARBMUPCO filed a motion for reconsideration which was
denied.42 It filed a second motion for reconsideration in the
NLRC, which was also denied for lack of merit and for being
barred under the NLRC Rules of Procedure.43 Hence,
DARBMUPCO elevated the case to the CA by way of a Petition
for Certiorari.44 The case was docketed as C.A.-G.R. SP. No.
59958.
The former Eleventh Division of the CA consolidated C.A. G.R.
SP. No. 59958 and C.A.-G.R. SP No. 53806 in a Resolution
dated January 27, 2001.45
C.A.-G.R. SP No. 61607
Pursuant to the May 4, 1999 Resolution of the SOLE approving
the conduct of certification election, the Department of Labor
and Employment ("DOLE") conducted a certification election on
October 1, 1999.46 On even date, DFI filed an election
protest47 before the Med-Arbiter arguing that the certification
election was premature due to the pendency of a petition for
certiorari before the CA assailing the February 18, 1999 and
May 4, 1999 Resolutions of the SOLE (previously discussed in
C.A.-G.R. SP No. 53806).
In an Order dated December 15, 1999,48 the Med-Arbiter
denied DFI’s election protest, and certified SPFL-Workers
Solidarity of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as
the exclusive bargaining representative of the respondent-
workers. DFI filed a Motion for Reconsideration49 which the
Med-Arbiter treated as an appeal, and which the latter elevated
to the SOLE.
In a Resolution dated July 18, 2000,50 the SOLE dismissed the
appeal. The Resolution stated that the May 4, 1999 Resolution
directing the conduct of certification election is already final
and executory on June 4, 1999. It pointed out that the filing of
the petition for certiorari before the CA assailing the February
18, 1999 and May 4, 1999 Resolutions does not stay the
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Dean Ada D. Abad
conduct of the certification election because the CA did not
issue a restraining order.51 DFI filed a Motion for
Reconsideration but the motion was denied.52
On October 27, 2000, DFI filed a Petition for Certiorari53 before
the CA, docketed as C.A.-G.R. SP No. 61607.
In a Resolution dated August 2, 2005,54 the CA Twenty-Third
Division consolidated C.A.-G.R. SP No. 61607 with C.A.-G.R.
SP. No. 59958 and C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55
(1) "Whether DFI or DARBMUPCO is the statutory employer of
the [respondent-workers] in these petitions; and
(2) Whether or not a certification election may be conducted
pending the resolution of the petition for certiorari filed before
this Court, the main issue of which is the identity of the
employer of the [respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE56
that DFI is the statutory employer of the respondent-workers.
It noted that the DFI hired the respondent-contractors, who in
turn procured their own men to work in the land owned by
DARBMUPCO. Further, DFI admitted that the respondent-
contractors worked under the direction and supervision of DFI’s
managers and personnel. DFI also paid for the respondent-
contractors’ services.57 The CA said that the fact that the
respondent-workers worked in the land owned by DARBMUPCO
is immaterial. "Ownership of the land is not one of the four (4)
elements generally considered to establish employer-employee
relationship."58
The CA also ruled that DFI is the true employer of the
respondent-workers because the respondent-contractors are
not independent contractors.59 The CA stressed that in its
pleadings before the Med-Arbiter, the SOLE, and the CA, DFI
revealed that DARBMUPCO lacks manpower to fulfill the
production requirements under the BPPA. This impelled DFI to
hire contractors to supply labor enabling DARBMUPCO to meet
its quota. The CA observed that while the various agencies
involved in the consolidated petitions sometimes differ as to
who the statutory employer of the respondent-workers is, they
are uniform in finding that the respondent-contractors are
labor-only contractors.60
On the second issue, the CA reiterated the ruling of the SOLE61
that absent an injunction from the CA, the pendency of a
petition for certiorari does not stay the holding of the
certification election.62 The challenged Resolution of the SOLE
is already final and executory as evidenced by an Entry of
Judgment dated July 14, 1999; hence, the merits of the case
can no longer be reviewed.63
The CA thus held in its Decision dated March 31, 2006:
WHEREFORE, premises considered, this Court hereby ORDERS:
(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806
and C.A.-G.R. SP No. 61607; and
(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958
and the SETTING ASIDE of the assailed resolutions of the NLRC
dated 24 May 1999, 30 July 1999 and 26 June 2000,
respectively.
SO ORDERED.64
DFI filed a Motion for Reconsideration of the CA Decision which
was denied in a Resolution dated May 30, 2006.65

DFI is now before us by way of Petition for Review on Certiorari
praying that DARBMUPCO be declared the true employer of the
respondent-workers.
DARBMUPCO filed a Comment66 maintaining that under the
control test, DFI is the true employer of the respondent-
workers.
Respondent-contractors filed a Verified Explanation and
Memorandum67 asserting that they were labor-only
contractors; hence, they are merely agents of the true
employer of the respondent-workers.
SPFL did not file any comment or memorandum on behalf of
the respondent-workers.68
The Issue
The issue before this Court is who among DFI, DARBMUPCO
and the respondent-contractors is the employer of the
respondent-workers.
Our Ruling
We deny the petition.
This case involves job contracting, a labor arrangement
expressly allowed by law. Contracting or subcontracting is an
arrangement whereby a principal (or employer) agrees to put
out or farm out with a contractor or subcontractor the
performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or
completed within or outside the premises of the principal.69 It
involves a trilateral relationship among the principal or
employer, the contractor or subcontractor, and the workers
engaged by the contractor or subcontractor.70
Article 106 of the Labor Code of the Philippines71 (Labor Code)
explains the relations which may arise between an employer, a
contractor, and the contractor’s employees,72 thus:
ART. 106. Contractor or subcontracting. − Whenever an
employer enters into a contract with another person for the
performance of the formers work, the employees of the
contractor and of the latter’s subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay
the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate
regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine
who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed
by such person are performing activities which are directly
related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely
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Dean Ada D. Abad
as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were
directly employed by him.
The Omnibus Rules Implementing the Labor Code73
distinguishes between permissible job contracting (or
independent contractorship) and labor-only contracting. Job
contracting is permissible under the Code if the following
conditions are met:
(a) The contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all
matters connected with the performance of the work except as
to the results thereof; and
(b) The contractor has substantial capital or investment in the
form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of his
business.74
In contrast, job contracting shall be deemed as labor-only
contracting, an arrangement prohibited by law, if a person who
undertakes to supply workers to an employer:
(1) Does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises and other
materials; and
(2) The workers recruited and placed by such person are
performing activities which are directly related to the principal
business or operations of the employer in which workers are
habitually employed.75
As a general rule, a contractor is presumed to be a labor-only
contractor, unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools
and the like.76
Based on the conditions for permissible job contracting, we rule
that respondent-contractors are labor-only contractors.
There is no evidence showing that respondent-contractors are
independent contractors. The respondent-contractors, DFI,
and DARBMUPCO did not offer any proof that respondent-
contractors were not engaged in labor-only contracting. In this
regard, we cite our ruling in Caro v. Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant
company pretends to show through Venancio Nasol's own
testimony that he was an independent contractor who
undertook to construct a railway line between Maropadlusan
and Mantalisay, but as far as the record shows, Nasol did not
testify that the defendant company had no control over him as
to the manner or methods he employed in pursuing his work.
On the contrary, he stated that he was not bonded, and that
he only depended upon the Manila Railroad for money to be
paid to his laborers. As stated by counsel for the plaintiffs, the
word ‘independent contractor’ means 'one who exercises
independent employment and contracts to do a piece of work
according to his own methods and without being subject to
control of his employer except as to result of the work.'
Furthermore, if the employer claims that the workmen is an
independent contractor, for whose acts he is not responsible,
the burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant
has presented practically no evidence to determine whether
Venancio Nasol was in reality an independent contractor or not,
we are inclined to think that he is nothing but an intermediary
between the defendant and certain laborers. It is indeed
difficult to find that Nasol is an independent contractor; a

person who possesses no capital or money of his own to pay
his obligations to them, who files no bond to answer for any
fulfillment of his contract with his employer and specially
subject to the control and supervision of his employer, falls
short of the requisites or conditions necessary for the common
and independent contractor."78 (Citations omitted; emphasis
supplied.)
To support its argument that respondent-contractors are the
employers of respondent-workers, and not merely labor-only
contractors, DFI should have presented proof showing that
respondent-contractors carry on an independent business and
have sufficient capitalization. The record, however, is bereft of
showing of even an attempt on the part of DFI to substantiate
its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as
basis that respondent-contractors are independent contractors.
Nowhere in the NLRC Resolution does it say that the
respondent-contractors are independent contractors. On the
contrary, the NLRC declared that "it was not clearly established
on record that said [respondent-]contractors are independent,
xxx."79
Further, respondent-contractors admit, and even insist that
they are engaged in labor-only contracting. As will be seen
below, respondent-contractors made the admissions and
declarations on two occasions: first was in their Formal
Appearance of Counsel and Motion for Exclusion of Individual
Party-Respondents filed before the LA; and second was in their
Verified Explanation and Memorandum filed before this Court.
Before the LA, respondent-contractors categorically stated that
they are "labor-only" contractors who have been engaged by
DFI and DARBMUPCO.80 They admitted that they do not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials,
and they recruited workers to perform activities directly related
to the principal operations of their employer.81
Before this Court, respondents-contractors again admitted that
they are labor-only contractors. They narrated that:
1. Herein respondents, Voltaire Lopez, Jr., et al., were
commissioned and contracted by petitioner, Diamond Farms,
Inc. (DFI) to recruit farm workers, who are the complaining
[respondent-workers] (as represented by Southern Philippines
Federation of Labor (SPFL) in this appeal by certiorari), in order
to perform specific farm activities, such as pruning, deleafing,
fertilizer application, bud inject, stem spray, drainage, bagging,
etc., on banana plantation lands awarded to private
respondent, Diamond Farms Agrarian Reform Beneficiaries
Multi-Purpose Cooperative (DARBMUPCO) and on banana
planted lands owned and managed by petitioner, DFI.
2. All farm tools, implements and equipment necessary to
performance of such farm activities were supplied by petitioner
DFI to respondents Voltaire Lopez, Jr., et. al. as well as to
respondents-SPFL, et. al. Herein respondents Voltaire Lopez,
Jr. et. al. had no adequate capital to acquire or purchase such
tools, implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. As well as
respondents-SPFL, et. al. were being directly supervised,
controlled and managed by petitioner DFI farm managers and
supervisors, specifically on work assignments and performance
targets. DFI managers and supervisors, at their sole discretion
and prerogative, could directly hire and terminate any or all of
the respondents-SPFL, et. al., including any or all of the herein
respondents Voltaire Lopez, Jr., et. al.
4. Attendance/Time sheets of respondents-SPFL, et. al. were
being prepared by herein respondents Voltaire Lopez, Jr., et.
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Dean Ada D. Abad
al., and correspondingly submitted to petitioner DFI. Payment
of wages to respondents-SPFL, et. al. were being paid for by
petitioner DFI thru herein respondents Voltaire Lopez, [Jr.], et.
al. The latter were also receiving their wages/salaries from
petitioner DFI for monitoring/leading/recruiting the
respondents-SPFL, et. al.
5. No monies were being paid directly by private respondent
DARBMUPCO to respondents-SPFL, et al., nor to herein
respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent
DARBMUPCO directly intervene much less supervise any or all
of [the] respondents-SPFL, et. al. including herein respondents
Voltaire Lopez, Jr., et. al.82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-
contractors.83 Judicial admissions made by parties in the
pleadings, or in the course of the trial or other proceedings in
the same case are conclusive and so does not require further
evidence to prove them.84 Here, the respondent-contractors
voluntarily pleaded that they are labor-only contractors; hence,
these admissions bind them.
A finding that a contractor is a labor-only contractor is
equivalent to a declaration that there is an employer-employee
relationship between the principal, and the workers of the
labor-only contractor; the labor-only contractor is deemed only
as the agent of the principal.85 Thus, in this case, respondent-
contractors are the labor-only contractors and either DFI or
DARBMUPCO is their principal.
We hold that DFI is the principal.
Under Article 106 of the Labor Code, a principal or employer
refers to the person who enters into an agreement with a job
contractor, either for the performance of a specified work or for
the supply of manpower.86 In this regard, we quote with
approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual
[respondent-contractors] who in turn hired their own men to
work in the 689.88 hectares land of DARBMUPCO as well as in
the managed area of the plantation. DFI admits [that] these
[respondent-contractors] worked under the direction and
supervision of the DFI managers and personnel. DFI paid the
[respondent-contractors] for the services rendered in the
plantation and the [respondent-contractors] in turn pay their
workers after they [respondent-contractors] received payment
from DFI. xxx DARBMUPCO did not have anything to do with
the hiring, supervision and payment of the wages of the
workers-respondents thru the contractors-respondents. xxx87
(Emphasis supplied.)
DFI does not deny that it engaged the services of the
respondent-contractors. It does not dispute the claims of
respondent-contractors that they sent their billing to DFI for
payment; and that DFI’s managers and personnel are in close
consultation with the respondent-contractors.88
DFI cannot argue that DARBMUPCO is the principal of the
respondent-contractors because it (DARBMUPCO) owns the
awarded plantation where respondent-contractors and
respondent-workers were working;89 and therefore
DARBMUPCO is the ultimate beneficiary of the employment of
the respondent-workers.90
That DARBMUPCO owns the awarded plantation where the
respondent-contractors and respondent-workers were working
is immaterial. This does not change the situation of the parties.
As correctly found by the CA, DFI, as the principal, hired the
respondent-contractors and the latter, in turn, engaged the
services of the respondent-workers.91 This was also the
unanimous finding of the SOLE,92 the LA,93 and the NLRC.94
Factual findings of the NLRC, when they coincide with the LA
 Labor Law Review | Cases
Dean Ada D. Abad

and affirmed by the CA are accorded with great weight and

respect and even finality by this Court.95 xxx

Alilin v. Petron Corporation96 is applicable. In that case, this
Court ruled that the presence of the power of control on the
part of the principal over the workers of the contractor, under
the facts, prove the employer-employee relationship between
the former and the latter, thus:
[A] finding that a contractor is a ‘labor-only’ contractor is
equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the
supposed contractor." In this case, the employer-employee
relationship between Petron and petitioners becomes all the
more apparent due to the presence of the power of control on
the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of
Appeals that:
This Court has constantly adhered to the "four-fold test" to
determine whether there exists an employer-employee
relationship between the parties.1âwphi1 The four elements of
an employment relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the power to control the
employee’s conduct.
Of these four elements, it is the power to control which is the
most crucial and most determinative factor, so important, in
fact, that, the other elements may even be disregarded.
Hence, the facts that petitioners were hired by Romeo or his
father and that their salaries were paid by them do not detract
from the conclusion that there exists an employer-employee
relationship between the parties due to Petron’s power of
control over the petitioners. One manifestation of the power of
control is the power to transfer employees from one work
assignment to another. Here, Petron could order petitioners to
do work outside of their regular "maintenance/utility" job. Also,
petitioners were required to report for work everyday at the
bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work
schedule, and wear proper uniform and safety helmets as
prescribed by the safety and security measures being
implemented within the bulk plant. All these imply control. In
an industry where safety is of paramount concern, control and
supervision over sensitive operations, such as those performed
by the petitioners, are inevitable if not at all necessary. Indeed,
Petron deals with commodities that are highly volatile and
flammable which, if mishandled or not properly attended to,
may cause serious injuries and damage to property and the
environment. Naturally, supervision by Petron is essential in
every aspect of its product handling in order not to compromise
the integrity, quality and safety of the products that it
distributes to the consuming public.97 (Citations omitted;
emphasis supplied)
3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the
proper conduct, safety, benefits and general welfare of its
members working in the plantation and specifically render free
and harmless the SECOND PARTY [DFI] of any expense, liability
or claims arising therefrom. It is clearly recognized by the
FIRST PARTY that its members and other personnel utilized in
the performance of its function under this agreement are not
employees of the SECOND PARTY.102 (Emphasis supplied)
In labor-only contracting, it is the law which creates an
employer-employee relationship between the principal and the
workers of the labor-only contractor.103
Inasmuch as it is the law that forms the employment ties, the
stipulation in the BPPA that respondent-workers are not
employees of DFI is not controlling, as the proven facts show
otherwise. The law prevails over the stipulations of the parties.
Thus, in Tabas v. California Manufacturing Co., Inc.,104 we
held that:
The existence of an employer-employees relation is a question
of law and being such, it cannot be made the subject of
agreement.1âwphi1 Hence, the fact that the manpower supply
agreement between Livi and California had specifically
designated the former as the petitioners' employer and had
absolved the latter from any liability as an employer, will not
erase either party's obligations as an employer, if an employer-
employee relation otherwise exists between the workers and
either firm. xxx105 (Emphasis supplied.)
Clearly, DFI is the true employer of the respondent-workers;
respondent-contractors are only agents of DFI. Under Article
106 of the Labor Code, DFI shall be solidarily liable with the
respondent-contractors for the rightful claims of the
respondent-workers, to the same manner and extent as if the
latter are directly employed by DFI.106
WHEREFORE, the petition is DENIED for lack of merit. The
March 31, 2006 Decision and the May 30, 2006 Resolution of
the Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and
59958 are hereby AFFIRMED.
SO ORDERED.

That DFI is the employer of the respondent-workers is

bolstered by the CA’s finding that DFI exercises control over
the respondent-workers.98 DFI, through its manager and
supervisors provides for the work assignments and
performance targets of the respondent-workers. The managers
and supervisors also have the power to directly hire and
terminate the respondent-workers.99 Evidently, DFI wields
control over the respondent-workers.

Neither can DFI argue that it is only the purchaser of the

bananas produced in the awarded plantation under the
BPPA,100 and that under the terms of the BPPA, no employer-
employee relationship exists between DFI and the respondent-
workers,101 to wit:

UNDERTAKING OF THE FIRST PARTY


[19] G.R. No. 179652 May 8, 2009
PEOPLE'S BROADCASTING (BOMBO RADYO PHILS.,
INC.), Petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION
VII, and JANDELEON JUEZAN, Respondents.
DECISION
TINGA, J.:
The present controversy concerns a matter of first impression,
requiring as it does the determination of the demarcation line
between the prerogative of the Department of Labor and
Employment (DOLE) Secretary and his duly authorized
representatives, on the one hand, and the jurisdiction of the
National Labor Relations Commission, on the other, under
Article 128 (b) of the Labor Code in an instance where the
employer has challenged the jurisdiction of the DOLE at the
very first level on the ground that no employer-employee
relationship ever existed between the parties.
I.
The instant petition for certiorari under Rule 65 assails the
decision and the resolution of the Court of Appeals dated 26
October 2006 and 26 June 2007, respectively, in C.A. G.R.
CEB-SP No. 00855.1
The petition traces its origins to a complaint filed by Jandeleon
Juezan (respondent) against People’s Broadcasting Service,
Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction,
non-payment of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal diminution of
benefits, delayed payment of wages and non-coverage of SSS,
PAG-IBIG and Philhealth before the Department of Labor and
Employment (DOLE) Regional Office No. VII, Cebu City.2 On
the basis of the complaint, the DOLE conducted a plant level
inspection on 23 September 2003. In the Inspection Report
Form,3 the Labor Inspector wrote under the heading
"Findings/Recommendations" "non-diminution of benefits" and
"Note: Respondent deny employer-employee relationship with
the complainant- see Notice of Inspection results." In the
Notice of Inspection Results4 also bearing the date 23
September 2003, the Labor Inspector made the following
notations:
Management representative informed that complainant is a
drama talent hired on a per drama " participation basis" hence
no employer-employeeship [sic] existed between them. As
proof of this, management presented photocopies of cash
vouchers, billing statement, employments of specific
undertaking (a contract between the talent director & the
complainant), summary of billing of drama production etc.
They (mgt.) has [sic] not control of the talent if he ventures
into another contract w/ other broadcasting industries.
On the other hand, complainant Juezan’s alleged violation of
non-diminution of benefits is computed as follows:
@ P 2,000/15 days + 1.5 mos = ₱ 6,000
(August 1/03 to Sept 15/03)
Note: Recommend for summary investigation or whatever
action deem proper.5
Petitioner was required to rectify/restitute the violations within
five (5) days from receipt. No rectification was effected by
petitioner; thus, summary investigations were conducted, with
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Dean Ada D. Abad
the parties eventually ordered to submit their respective
position papers.6
In his Order dated 27 February 2004,7 DOLE Regional Director
Atty. Rodolfo M. Sabulao (Regional Director) ruled that
respondent is an employee of petitioner, and that the former is
entitled to his money claims amounting to ₱203,726.30.
Petitioner sought reconsideration of the Order, claiming that
the Regional Director gave credence to the documents offered
by respondent without examining the originals, but at the same
time he missed or failed to consider petitioner’s evidence.
Petitioner’s motion for reconsideration was denied.8 On appeal
to the DOLE Secretary, petitioner denied once more the
existence of employer-employee relationship. In its Order
dated 27 January 2005, the Acting DOLE Secretary dismissed
the appeal on the ground that petitioner did not post a cash or
surety bond and instead submitted a Deed of Assignment of
Bank Deposit.9
Petitioner elevated the case to the Court of Appeals, claiming
that it was denied due process when the DOLE Secretary
disregarded the evidence it presented and failed to give it the
opportunity to refute the claims of respondent. Petitioner
maintained that there is no employer-employee relationship
had ever existed between it and respondent because it was the
drama directors and producers who paid, supervised and
disciplined respondent. It also added that the case was beyond
the jurisdiction of the DOLE and should have been considered
by the labor arbiter because respondent’s claim exceeded
₱5,000.00.
The Court of Appeals held that petitioner was not deprived of
due process as the essence thereof is only an opportunity to be
heard, which petitioner had when it filed a motion for
reconsideration with the DOLE Secretary. It further ruled that
the latter had the power to order and enforce compliance with
labor standard laws irrespective of the amount of individual
claims because the limitation imposed by Article 29 of the Labor
Code had been repealed by Republic Act No. 7730.10 Petitioner
sought reconsideration of the decision but its motion was
denied.11
Before this Court, petitioner argues that the National Labor
Relations Commission (NLRC), and not the DOLE Secretary,
has jurisdiction over respondent’s claim, in view of Articles 217
and 128 of the Labor Code.12 It adds that the Court of Appeals
committed grave abuse of discretion when it dismissed
petitioner’s appeal without delving on the issues raised therein,
particularly the claim that no employer-employee relationship
had ever existed between petitioner and respondent. Finally,
petitioner avers that there is no appeal, or any plain, speedy
and adequate remedy in the ordinary course of law available to
it.
On the other hand, respondent posits that the Court of Appeals
did not abuse its discretion. He invokes Republic Act No. 7730,
which "removes the jurisdiction of the Secretary of Labor and
Employment or his duly authorized representatives, from the
effects of the restrictive provisions of Article 129 and 217 of
the Labor Code, regarding the confinement of jurisdiction
based on the amount of claims."13 Respondent also claims that
petitioner was not denied due process since even when the
case was with the Regional Director, a hearing was conducted
and pieces of evidence were presented. Respondent stands by
the propriety of the Court of Appeals’ ruling that there exists
an employer-employee relationship between him and
petitioner. Finally, respondent argues that the instant petition
for certiorari is a wrong mode of appeal considering that
petitioner had earlier filed a Petition for Certiorari, Mandamus
and Prohibition with the Court of Appeals; petitioner, instead,
should have filed a Petition for Review.14
II.

The significance of this case may be reduced to one simple
question—does the Secretary of Labor have the power to
determine the existence of an employer-employee
relationship?
To resolve this pivotal issue, one must look into the extent of
the visitorial and enforcement power of the DOLE found in
Article 128 (b) of the Labor Code, as amended by Republic Act
7730. It reads:
Article 128 (b) Notwithstanding the provisions of Articles 129
and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect
to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized
representative shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor
employment and enforcement officer and raises issues
supported by documentary proofs which were not considered
in the course of inspection. (emphasis supplied)
xxx
The provision is quite explicit that the visitorial and
enforcement power of the DOLE comes into play only "in cases
when the relationship of employer-employee still exists." It
also underscores the avowed objective underlying the grant of
power to the DOLE which is "to give effect to the labor standard
provision of this Code and other labor legislation." Of course, a
person’s entitlement to labor standard benefits under the labor
laws presupposes the existence of employer-employee
relationship in the first place.
The clause "in cases where the relationship of employer-
employee still exists" signifies that the employer-employee
relationship must have existed even before the emergence of
the controversy. Necessarily, the DOLE’s power does not apply
in two instances, namely: (a) where the employer-employee
relationship has ceased; and (b) where no such relationship
has ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of
the Rules on the Disposition of Labor Standards Cases15 issued
by the DOLE Secretary. It reads:
Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE
INSPECTION
Sec. 3. Complaints where no employer-employee relationship
actually exists. Where employer-employee relationship no
longer exists by reason of the fact that it has already been
severed, claims for payment of monetary benefits fall within
the exclusive and original jurisdiction of the labor arbiters.
Accordingly, if on the face of the complaint, it can be
ascertained that employer-employee relationship no longer
exists, the case, whether accompanied by an allegation of
illegal dismissal, shall immediately be endorsed by the Regional
Director to the appropriate branch of the National Labor
Relations Commission (NLRC).
In the recent case of Bay Haven, Inc. v. Abuan,16 this Court
recognized the first situation and accordingly ruled that a
complainant’s allegation of his illegal dismissal had deprived
the DOLE of jurisdiction as per Article 217 of the Labor Code.17
In the first situation, the claim has to be referred to the NLRC
because it is the NLRC which has jurisdiction in view of the
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termination of the employer-employee relationship. The same
procedure has to be followed in the second situation since it is
the NLRC that has jurisdiction in view of the absence of
employer-employee relationship between the evidentiary
parties from the start.
Clearly the law accords a prerogative to the NLRC over the
claim when the employer-employee relationship has
terminated or such relationship has not arisen at all. The
reason is obvious. In the second situation especially, the
existence of an employer-employee relationship is a matter
which is not easily determinable from an ordinary inspection,
necessarily so, because the elements of such a relationship are
not verifiable from a mere ocular examination. The intricacies
and implications of an employer-employee relationship
demand that the level of scrutiny should be far above the
cursory and the mechanical. While documents, particularly
documents found in the employer’s
office are the primary source materials, what may prove
decisive are factors related to the history of the employer’s
business operations, its current state as well as accepted
contemporary practices in the industry. More often than not,
the question of employer-employee relationship becomes a
battle of evidence, the determination of which should be
comprehensive and intensive and therefore best left to the
specialized quasi-judicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial
and enforcement power somehow has to make a determination
of the existence of an employer-employee relationship. Such
prerogatival determination, however, cannot be coextensive
with the visitorial and enforcement power itself. Indeed, such
determination is merely preliminary, incidental and collateral
to the DOLE’s primary function of enforcing labor standards
provisions. The determination of the existence of employer-
employee relationship is still primarily lodged with the NLRC.
This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article
128, two important questions must be resolved: (1) Does the
employer-employee relationship still exist, or alternatively, was
there ever an employer-employee relationship to speak of; and
(2) Are there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a
statutory prerequisite to and a limitation on the power of the
Secretary of Labor, one which the legislative branch is entitled
to impose. The rationale underlying this limitation is to
eliminate the prospect of competing conclusions of the
Secretary of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by the quasi-
judicial body, which is the NRLC, rather than an administrative
official of the executive branch of the government. If the
Secretary of Labor proceeds to exercise his visitorial and
enforcement powers absent the first requisite, as the dissent
proposes, his office confers jurisdiction on itself which it cannot
otherwise acquire.
The approach suggested by the dissent is frowned upon by
common law. To wit:
[I]t is a general rule, that no court of limited jurisdiction can
give itself jurisdiction by a wrong decision on a point collateral
to the merits of the case upon which the limit to its jurisdiction
depends; and however its decision may be final on all
particulars, making up together that subject matter which, if
true, is within its jurisdiction, and however necessary in many
cases it may be for it to make a preliminary inquiry, whether
some collateral matter be or be not within the limits, yet, upon
this preliminary question, its decision must always be open to
inquiry in the superior court.18

A more liberal interpretative mode, "pragmatic or functional
analysis," has also emerged in ascertaining the jurisdictional
boundaries of administrative agencies whose jurisdiction is
established by statute. Under this approach, the Court
examines the intended function of the tribunal and decides
whether a particular provision falls within or outside that
function, rather than making the provision itself the
determining centerpiece of the analysis.19 Yet even under this
more expansive approach, the dissent fails.
A reading of Art. 128 of the Labor Code reveals that the
Secretary of Labor or his authorized representatives was
granted visitorial and enforcement powers for the purpose of
determining violations of, and enforcing, the Labor Code and
any labor law, wage order, or rules and regulations issued
pursuant thereto. Necessarily, the actual existence of an
employer-employee relationship affects the complexion of the
putative findings that the Secretary of Labor may determine,
since employees are entitled to a different set of rights under
the Labor Code from the employer as opposed to non-
employees. Among these differentiated rights are those
accorded by the "labor standards" provisions of the Labor Code,
which the Secretary of Labor is mandated to enforce. If there
is no employer-employee relationship in the first place, the
duty of the employer to adhere to those labor standards with
respect to the non-employees is questionable.
This decision should not be considered as placing an undue
burden on the Secretary of Labor in the exercise of visitorial
and enforcement powers, nor seen as an unprecedented
diminution of the same, but rather a recognition of the
statutory limitations thereon. A mere assertion of absence of
employer-employee relationship does not deprive the DOLE of
jurisdiction over the claim under Article 128 of the Labor Code.
At least a prima facie showing of such absence of relationship,
as in this case, is needed to preclude the DOLE from the
exercise of its power. The Secretary of Labor would not have
been precluded from exercising the powers under Article 128
(b) over petitioner if another person with better-grounded
claim of employment than that which respondent had.
Respondent, especially if he were an employee, could have
very well enjoined other employees to complain with the DOLE,
and, at the same time, petitioner could ill-afford to disclaim an
employment relationship with all of the people under its aegis.
Without a doubt, petitioner, since the inception of this case had
been consistent in maintaining that respondent is not its
employee. Certainly, a preliminary determination, based on the
evidence offered, and noted by the Labor Inspector during the
inspection as well as submitted during the proceedings before
the Regional Director puts in genuine doubt the existence of
employer-employee relationship. From that point on, the
prudent recourse on the part of the DOLE should have been to
refer respondent to the NLRC for the proper dispensation of his
claims. Furthermore, as discussed earlier, even the evidence
relied on by the Regional Director in his order are mere self-
serving declarations of respondent, and hence cannot be relied
upon as proof of employer-employee relationship.
III.
Aside from lack of jurisdiction, there is another cogent reason
to to set aside the Regional Director’s 27 February 2004 Order.
A careful study of the case reveals that the said Order, which
found respondent as an employee of petitioner and directed the
payment of respondent’s money claims, is not supported by
substantial evidence, and was even made in disregard of the
evidence on record.
It is not enough that the evidence be simply considered. The
standard is substantial evidence as in all other quasi-judicial
agencies. The standard employed in the last sentence of Article
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128(b) of the Labor Code that the documentary proofs be
"considered in the course of inspection" does not apply. It
applies only to issues other than the fundamental issue of
existence of employer-employee relationship. A contrary rule
would lead to controversies on the part of labor officials in
resolving the issue of employer-employee relationship. The
onset of arbitrariness is the advent of denial of substantive due
process.
As a general rule, the Supreme Court is not a trier of facts. This
applies with greater force in cases before quasi-judicial
agencies whose findings of fact are accorded great respect and
even finality. To be sure, the same findings should be
supported by substantial evidence from which the said
tribunals can make its own independent evaluation of the facts.
Likewise, it must not be rendered with grave abuse of
discretion; otherwise, this Court will not uphold the tribunals’
conclusion.20 In the same manner, this Court will not hesitate
to set aside the labor tribunal’s findings of fact when it is clearly
shown that they were arrived at arbitrarily or in disregard of
the evidence on record or when there is showing of fraud or
error of law.21
At the onset, it is the Court’s considered view that the existence
of employer- employee relationship could have been easily
resolved, or at least prima facie determined by the labor
inspector, during the inspection by looking at the records of
petitioner which can be found in the work premises.
Nevertheless, even if the labor inspector had noted petitioner’s
manifestation and documents in the Notice of Inspection
Results, it is clear that he did not give much credence to said
evidence, as he did not find the need to investigate the matter
further. Considering that the documents shown by petitioner,
namely: cash vouchers, checks and statements of account,
summary billings evidencing payment to the alleged real
employer of respondent, letter-contracts denominated as
"Employment for a Specific Undertaking," prima facie negate
the existence of employer-employee relationship, the labor
inspector could have exerted a bit more effort and looked into
petitioner’s payroll, for example, or its roll of employees, or
interviewed other employees in the premises. After all, the
labor inspector, as a labor regulation officer is given "access to
employer’s records and premises at any time of day or night
whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any
fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and
of any labor law, wage order or rules and regulations pursuant
thereto."22 Despite these far-reaching powers of labor
regulation officers, records reveal that no additional efforts
were exerted in the course of the inspection.
The Court further examined the records and discovered to its
dismay that even the Regional Director turned a blind eye to
the evidence presented by petitioner and relied instead on the
self-serving claims of respondent.
In his position paper, respondent claimed that he was hired by
petitioner in September 1996 as a radio talent/spinner,
working from 8:00 am until 5 p.m., six days a week, on a gross
rate of ₱60.00 per script, earning an average of ₱15,0000.00
per month, payable on a semi-monthly basis. He added that
the payment of wages was delayed; that he was not given any
service incentive leave or its monetary commutation, or his
13th month pay; and that he was not made a member of the
Social Security System (SSS), Pag-Ibig and PhilHealth. By
January 2001, the number of radio programs of which
respondent was a talent/spinner was reduced, resulting in the
reduction of his monthly income from ₱15,000.00 to only
₱4,000.00, an amount he could barely live on. Anent the claim
of petitioner that no employer-employee relationship ever
existed, respondent argued that that he was hired by
petitioner, his wages were paid under the payroll of the latter,

he was under the control of petitioner and its agents, and it
was petitioner who had the power to dismiss him from his
employment.23 In support of his position paper, respondent
attached a photocopy of an identification card purportedly
issued by petitioner, bearing respondent’s picture and name
with the designation "Spinner"; at the back of the I.D., the
following is written: " This certifies that the card holder is a
duly Authorized MEDIA Representative of BOMBO RADYO
PHILIPPINES … THE NO.1 Radio Network in the Country
***BASTA RADYO BOMBO***"24 Respondent likewise
included a Certification which reads:
This is to certify that MR. JANDELEON JUEZAN is a program
employee of PEOPLE’S BROADCASTING SERVICES, INC.
(DYMF- Bombo Radyo Cebu) since 1990 up to the present.
Furtherly certifies that Mr. Juezan is receiving a monthly salary
of FIFTEEN THOUSAND (₱15,000.00) PESOS.
This certification is issued upon the request of the above stated
name to substantiate loan requirement.
Given this 18th day of April 2000, Cebu City , Philippines.
(signed)
GREMAN B. SOLANTE
Station Manager
On the other hand, petitioner maintained in its position paper
that respondent had never been its employee. Attached as
annexes to its position paper are photocopies of cash vouchers
it issued to drama producers, as well as letters of employment
captioned "Employment for a Specific Undertaking", wherein
respondent was appointed by different drama directors as
spinner/narrator for specific radio programs.25
In his Order, the Regional Director merely made a passing
remark on petitioner’s claim of lack of employer-employee
relationship—a token paragraph—and proceeded to a detailed
recitation of respondent’s allegations. The documents
introduced by petitioner in its position paper and even those
presented during the inspection were not given an iota of
credibility. Instead, full recognition and acceptance was
accorded to the claims of respondent—from the hours of work
to his monthly salary, to his alleged actual duties, as well as to
his alleged "evidence." In fact, the findings are anchored
almost verbatim on the self-serving allegations of respondent.
Furthermore, respondent’s pieces of evidence—the
identification card and the certification issued by petitioner’s
Greman Solante— are not even determinative of an employer-
employee relationship. The certification, issued upon the
request of respondent, specifically stated that "MR.
JANDELEON JUEZAN is a program employee of PEOPLE’S
BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo
Cebu)," it is not therefore "crystal clear that complainant is a
station employee rather than a program employee hence
entitled to all the benefits appurtenant thereto,"26 as found by
the DOLE Regional Director. Respondent should be bound by
his own evidence. Moreover, the classification as to whether
one is a "station employee" and "program employee," as lifted
from Policy Instruction No. 40,27 dividing the workers in the
broadcast industry into only two groups is not binding on this
Court, especially when the classification has no basis either in
law or in fact.28
Even the identification card purportedly issued by petitioner is
not proof of employer-employee relationship since it only
identified respondent as an "Authorized Representative of
Bombo Radyo…," and not as an employee. The phrase gains
significance when compared vis a vis the following notation in
the sample identification cards presented by petitioner in its
motion for reconsideration:
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Dean Ada D. Abad
1. This is to certify that the person whose picture and signature
appear hereon is an employee of Bombo Radio Philippines.
2. This ID must be worn at all times within Bombo Radyo
Philippines premises for proper identification and security.
Furthermore, this is the property of Bombo Radyo Philippines
and must be surrendered upon separation from the company.
HUMAN RESOURCE DEPARMENT
(Signed)
JENALIN D. PALER
HRD HEAD
Respondent tried to address the discrepancy between his
identification card and the standard identification cards issued
by petitioner to its employees by arguing that what he annexed
to his position paper was the old identification card issued to
him by petitioner. He then presented a photocopy of another
"old" identification card, this time purportedly issued to one of
the employees who was issued the new identification card
presented by petitioner.29 Respondent’s argument does not
convince. If it were true that he is an employee of petitioner,
he would have been issued a new identification card similar to
the ones presented by petitioner, and he should have
presented a copy of such new identification card. His failure to
show a new identification card merely demonstrates that what
he has is only his "Media" ID, which does not constitute proof
of his employment with petitioner.
It has long been established that in administrative and quasi-
judicial proceedings, substantial evidence is sufficient as a
basis for judgment on the existence of employer-employee
relationship. Substantial evidence, which is the quantum of
proof required in labor cases, is "that amount of relevant
evidence which a reasonable mind might accept as adequate
to justify a conclusion."30 No particular form of evidence is
required to prove the existence of such employer-employee
relationship. Any competent and relevant evidence to prove the
relationship may be admitted.31 Hence, while no particular
form of evidence is required, a finding that such relationship
exists must still rest on some substantial evidence. Moreover,
the substantiality of the evidence depends on its quantitative
as well as its qualitative aspects.32
In the instant case, save for respondent’s self-serving
allegations and self-defeating evidence, there is no substantial
basis to warrant the Regional Director’s finding that respondent
is an employee of petitioner. Interestingly, the Order of the
Secretary of Labor denying petitioner’s appeal dated 27
January 2005, as well as the decision of the Court of Appeals
dismissing the petition for certiorari, are silent on the issue of
the existence of an employer-employee relationship, which
further suggests that no real and proper determination the
existence of such relationship was ever made by these
tribunals. Even the dissent skirted away from the issue of the
existence of employer-employee relationship and conveniently
ignored the dearth of evidence presented by respondent.
Although substantial evidence is not a function of quantity but
rather of quality, the peculiar environmental circumstances of
the instant case demand that something more should have
been proffered.33 Had there been other proofs of employment,
such as respondent’s inclusion in petitioner’s payroll, or a clear
exercise of control, the Court would have affirmed the finding
of employer-employee relationship. The Regional Director,
therefore, committed grievous error in ordering petitioner to
answer for respondent’s claims. Moreover, with the conclusion
that no employer-employee relationship has ever existed
between petitioner and respondent, it is crystal-clear that the
DOLE Regional Director had no jurisdiction over respondent’s
complaint. Thus, the improvident exercise of power by the

Secretary of Labor and the Regional Director behooves the
court to subject their actions for review and to invalidate all the
subsequent orders they issued.
IV.
The records show that petitioner’s appeal was denied because
it had allegedly failed to post a cash or surety bond. What it
attached instead to its appeal was the Letter Agreement34
executed by petitioner and its bank, the cash voucher,35 and
the Deed of Assignment of Bank Deposits.36 According to the
DOLE, these documents do not constitute the cash or surety
bond contemplated by law; thus, it is as if no cash or surety
bond was posted when it filed its appeal.
The Court does not agree.
The provision on appeals from the DOLE Regional Offices to the
DOLE Secretary is in the last paragraph of Art. 128 (b) of the
Labor Code, which reads:
An order issued by the duly authorized representative of the
Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involves a monetary
award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Secretary of Labor
and Employment in the amount equivalent to the monetary
award in the order appealed from. (emphasis supplied)
While the requirements for perfecting an appeal must be
strictly followed as they are considered indispensable
interdictions against needless delays and for orderly discharge
of judicial business, the law does admit exceptions when
warranted by the circumstances. Technicality should not be
allowed to stand in the way of equitably and completely
resolving the rights and obligations of the parties.37 Thus, in
some cases, the bond requirement on appeals involving
monetary awards had been relaxed, such as when (i) there was
substantial compliance with the Rules; (ii) the surrounding
facts and circumstances constitute meritorious ground to
reduce the bond; (iii) a liberal interpretation of the requirement
of an appeal bond would serve the desired objective of
resolving controversies on the merits; or (iv) the appellants, at
the very least exhibited their willingness and/or good faith by
posting a partial bond during the reglementary period.38
A review of the documents submitted by petitioner is called for
to determine whether they should have been admitted as or in
lieu of the surety or cash bond to sustain the appeal and serve
the ends of substantial justice.
The Deed of Assignment reads:
DEED OF ASSIGNMENT OF BANK DEPOSIT
WITH SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GREMAN B. SOLANTE in my capacity as Station Manager
of DYMF Cebu City, PEOPLE’S BROADCASTING SERVICES,
INC., a corporation duly authorized and existing under and by
virtue of the laws of the Philippines, for and in consideration of
the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN
HUNDRED TWENTY SIX PESOS & 30/100 ONLY (₱203,726.30)
Phil. Currency, as CASH BOND GUARANTEE for the monetary
award in favor to the Plaintiff in the Labor Case docketed as
LSED Case No. R0700-2003-09-CI-09, now pending appeal.
That Respondent-Appellant do hereby undertake to guarantee
available and sufficient funds covered by Platinum Savings
Deposit (PSD) No. 010-8-00038-4 of PEOPLE’S
BROADCASTING SERVICES, INC. in the amount of PESOS:
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Dean Ada D. Abad
TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY
SIX PESOS & 30/100 ONLY (₱203,726.30) payable to Plaintiff-
Appellee/Department of Labor and Employment Regional Office
VII at Queen City Development Bank, Cebu Branch,
Sanciangko St. Cebu City.
It is understood that the said bank has the full control of
Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and
after this date and that said sum cannot be withdrawn by the
Plaintiff-Appellee/ Department of Labor and Employment
Regional Office VII until such time that a Writ of Execution shall
be ordered by the Appellate Office.
FURTHER, this Deed of Assignment is limited to the principal
amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN
HUNDRED TWENTY SIX PESOS & 30/100 ONLY (₱203,726.30)
Phil. Currency, therefore, any interest to be earned from the
said Deposit will be for the account holder.
IN WITNESS WHEREOF, I have hereunto affixed my signature
this 18th day if June, 2004, in the City of Cebu, Philippines.
PEOPLE’S BROADCASTING SERVICES, INC.
By:
(Signed)
GREMAN B. SOLANTE
Station Manager
As priorly mentioned, the Deed of Assignment was
accompanied by a Letter Agreement between Queen City
Development Bank and petitioner concerning Platinum Savings
Deposit (PSD) No. 010-8-00038-4,39 and a Cash Voucher
issued by petitioner showing the amount of ₱203,726.30
deposited at the said bank.
Casting aside the technical imprecision and inaptness of words
that mark the three documents, a liberal reading reveals the
documents petitioner did assign, as cash bond for the monetary
award in favor of respondent in LSED Case NO. RO700-2003-
CI-09, the amount of ₱203,726.30 covered by petitioner’s PSD
Account No. 010-8-00038-4 with the Queen City Development
Bank at Sanciangko St. Cebu City, with the depositary bank
authorized to remit the amount to, and upon withdrawal by
respondent and or the Department of Labor and Employment
Regional Office VII, on the basis of the proper writ of execution.
The Court finds that the Deed of Assignment constitutes
substantial compliance with the bond requirement.
The purpose of an appeal bond is to ensure, during the period
of appeal, against any occurrence that would defeat or diminish
recovery by the aggrieved employees under the judgment if
subsequently affirmed.40 The Deed of Assignment in the
instant case, like a cash or surety bond, serves the same
purpose. First, the Deed of Assignment constitutes not just a
partial amount, but rather the entire award in the appealed
Order. Second, it is clear from the Deed of Assignment that the
entire amount is under the full control of the bank, and not of
petitioner, and is in fact payable to the DOLE Regional Office,
to be withdrawn by the same office after it had issued a writ of
execution. For all intents and purposes, the Deed of
Assignment in tandem with the Letter Agreement and Cash
Voucher is as good as cash. Third, the Court finds that the
execution of the Deed of Assignment, the Letter Agreement
and the Cash Voucher were made in good faith, and constituted
clear manifestation of petitioner’s willingness to pay the
judgment amount.
The Deed of Assignment must be distinguished from the type
of bank certification submitted by appellants in Cordova v.
Keysa’s Boutique,41 wherein this Court found that such bank
certification did not come close to the cash or surety bond

required by law. The bank certification in Cordova merely
stated that the employer maintains a depository account with
a balance of ₱23,008.19, and that the certification was issued
upon the depositor’s request for whatever legal purposes it
may serve. There was no indication that the said deposit was
made specifically for the pending appeal, as in the instant case.
Thus, the Court ruled that the bank certification had not in any
way ensured that the award would be paid should the appeal
fail. Neither was the appellee in the case prevented from
making withdrawals from the savings account. Finally, the
amount deposited was measly compared to the total monetary
award in the judgment.42
V.
Another question of technicality was posed against the instant
petition in the hope that it would not be given due course.
Respondent asserts that petitioner pursued the wrong mode of
appeal and thus the instant petition must be
dismissed.1avvphi1.zw+ Once more, the Court is not
convinced.
A petition for certiorari is the proper remedy when any tribunal,
board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction
and there is no appeal, nor any plain speedy, and adequate
remedy at law. There is "grave abuse of discretion" when
respondent acts in a capricious or whimsical manner in the
exercise of its judgment as to be equivalent to lack of
jurisdiction.43
Respondent may have a point in asserting that in this case a
Rule 65 petition is a wrong mode of appeal, as indeed the writ
of certiorari is an extraordinary remedy, and certiorari
jurisdiction is not to be equated with appellate jurisdiction.
Nevertheless, it is settled, as a general proposition, that the
availability of an appeal does not foreclose recourse to the
extraordinary remedies, such as certiorari and prohibition,
where appeal is not adequate or equally beneficial, speedy and
sufficient, as where the orders of the trial court were issued in
excess of or without jurisdiction, or there is need to promptly
relieve the aggrieved party from the injurious effects of the
acts of an inferior court or tribunal, e.g., the court has
authorized execution of the judgment.44 This Court has even
recognized that a recourse to certiorari is proper not only where
there is a clear deprivation of petitioner’s fundamental right to
due process, but so also where other special circumstances
warrant immediate and more direct action.45
In one case, it was held that the extraordinary writ of certiorari
will lie if it is satisfactorily established that the tribunal acted
capriciously and whimsically in total disregard of evidence
material to or even decisive of the controversy,46 and if it is
shown that the refusal to allow a Rule 65 petition would result
in the infliction of an injustice on a party by a judgment that
evidently was rendered whimsically and capriciously, ignoring
and disregarding uncontroverted facts and familiar legal
principles without any valid cause whatsoever.47
It must be remembered that a wide breadth of discretion is
granted a court of justice in certiorari proceedings.48 The Court
has not too infrequently given due course to a petition for
certiorari, even when the proper remedy would have been an
appeal, where valid and compelling considerations would
warrant such a recourse.49 Moreover, the Court allowed a Rule
65 petition, despite the availability of plain, speedy or adequate
remedy, in view of the importance of the issues raised
therein.50 The rules were also relaxed by the Court after
considering the public interest involved in the case;51 when
public welfare and the advancement of public policy dictates;
when the broader interest of justice so requires; when the writs
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Dean Ada D. Abad
issued are null and void; or when the questioned order
amounts to an oppressive exercise of judicial authority.52
"The peculiar circumstances of this case warrant, as we held in
Republic v. Court of Appeals, 107 SCRA 504, 524, the ‘exercise
once more of our exclusive prerogative to suspend our own
rules or to exempt a particular case from its operation as in x
x Republic of the Philippines v. Court of Appeals, et al., (83
SCRA 453, 478-480 [1978]), thus: ‘ x x The Rules have been
drafted with the primary objective of enhancing fair trials and
expediting justice. As a corollary, if their applications and
operation tend to subvert and defeat instead of promote and
enhance it, their suspension is justified."53
The Regional Director fully relied on the self-serving allegations
of respondent and misinterpreted the documents presented as
evidence by respondent. To make matters worse, DOLE denied
petitioner’s appeal based solely on petitioner’s alleged failure
to file a cash or surety bond, without any discussion on the
merits of the case. Since the petition for certiorari before the
Court of Appeals sought the reversal of the two aforesaid
orders, the appellate court necessarily had to examine the
evidence anew to determine whether the conclusions of the
DOLE were supported by the evidence presented. It appears,
however, that the Court of Appeals did not even review the
assailed orders and focused instead on a general discussion of
due process and the jurisdiction of the Regional Director. Had
the appellate court truly reviewed the records of the case, it
would have seen that there existed valid and sufficient grounds
for finding grave abuse of discretion on the part of the DOLE
Secretary as well the Regional Director. In ruling and acting as
it did, the Court finds that the Court of Appeals may be properly
subjected to its certiorari jurisdiction. After all, this Court has
previously ruled that the extraordinary writ of certiorari will lie
if it is satisfactorily1avvphi1
established that the tribunal had acted capriciously and
whimsically in total disregard of evidence material to or even
decisive of the controversy.54
The most important consideration for the allowance of the
instant petition is the opportunity for the Court not only to set
the demarcation between the NLRC’s jurisdiction and the
DOLE’s prerogative but also the procedure when the case
involves the fundamental challenge on the DOLE’s prerogative
based on lack of employer-employee relationship. As
exhaustively discussed here, the DOLE’s prerogative hinges on
the existence of employer-employee relationship, the issue is
which is at the very heart of this case. And the evidence clearly
indicates private respondent has never been petitioner’s
employee. But the DOLE did not address, while the Court of
Appeals glossed over, the issue. The peremptory dismissal of
the instant petition on a technicality would deprive the Court of
the opportunity to resolve the novel controversy.1avvphi1
WHEREFORE, the petition is GRANTED. The Decision dated 26
October 2006 and the Resolution dated 26 June 2007 of the
Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED
and SET ASIDE. The Order of the then Acting Secretary of the
Department of Labor and Employment dated 27 January 2005
denying petitioner’s appeal, and the Orders of the Director,
DOLE Regional Office No. VII, dated 24 May 2004 and 27
February 2004, respectively, are ANNULLED. The complaint
against petitioner is DISMISSED.
SO ORDERED.

[20] G.R. No. 171212 August 4, 2014
INDOPHIL TEXTILE MILLS, INC., Petitioner,
vs.
ENGR. SALVADOR ADVIENTO, Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule
45 of the Revised Rules of Court which seeks to review, reverse
and set-aside the Decision1 of the Court of Appeals (CA), dated
May 30, 2005, and its Resolution2 dated January 10, 2006 in
the case entitled Jndophil Textile Mills, Inc. v. Hon. Rolando R.
Velasco and Engr. Salvador Adviento, docketed as CA-G.R. SP
No. 83099.
The facts are not disputed.
Petitioner Indophil Textile Mills, Inc. is a domestic corporation
engaged in the business of manufacturing thread for weaving.3
On August 21, 1990, petitioner hired respondent Engr.
Salvador Adviento as Civil Engineer to maintain its facilities in
Lambakin, Marilao, Bulacan.4 On August 7, 2002, respondent
consulted a physician due to recurring weakness and
dizziness.5 Few days later, he was diagnosed with Chronic Poly
Sinusitis, and thereafter, with moderate, severe and persistent
Allergic Rhinitis.6 Accordingly, respondent was advised by his
doctor to totally avoid house dust mite and textile dust as it
will transmute into health problems.7
Distressed, respondent filed a complaint against petitioner with
the National Labor Relations Commission (NLRC), San
Fernando, Pampanga, for alleged illegal dismissal and for the
payment of backwages, separation pay, actual damages and
attorney’s fees. The said case, docketed as NLRC Case No.
RAB-III-05-5834-03, is still pending resolution with the NLRC
at the time the instant petition was filed.8
Subsequently, respondent filed another Complaint9 with the
Regional Trial Court (RTC) of Aparri, Cagayan, alleging that he
contracted such occupational disease by reason of the gross
negligence of petitioner to provide him with a safe, healthy and
workable environment.
In his Complaint, respondent alleged that as part of his job
description, he conductsregular maintenance check on
petitioner’s facilities including its dye house area, which is very
hot and emits foul chemical odor with no adequate safety
measures introduced by petitioner.10 According to respondent,
the air washer dampers and all roof exhaust vests are blown
into open air, carrying dust thereto.11 Concerned, respondent
recommended to management to place roof insulation to
minimize, if not, eradicate the health hazards attendant in the
work place.12 However, said recommendation was turned
down by management due to high cost.13 Respondent further
suggested to petitioner’s management that the engineering
office be relocated because ofits dent prone location, such that
even if the door of the office is sealed, accumulated dust creeps
in outside the office.14 This was further aggravated by the
installation of new filters fronting the office.15 However, no
action was taken by management.16 According to respondent,
these healthhazards have been the persistent complaints of
most, if not all, workers of petitioner.17 Nevertheless, said
complaints fell on deaf ears as petitioner callously ignored the
health problems of its workers and even tended to be apathetic
to their plight, including respondent.18
Respondent averred that, being the only breadwinner in the
family, he made several attempts to apply for a new job, but
to his dismay and frustration, employers who knew ofhis
present health condition discriminated against him and turned
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Dean Ada D. Abad
down his application.19 By reason thereof, respondent suffered
intense moral suffering, mental anguish, serious anxiety and
wounded feelings, praying for the recovery of the following: (1)
Five Million Pesos (₱5,000,000.00) asmoral damages; (2) Two
Million Pesos (₱2,000,000.00) as exemplary damages; and (3)
Seven Million Three Thousand and Eight Pesos (₱7,003,008.00)
as compensatory damages.20 Claiming to be a pauper litigant,
respondent was not required to pay any filing fee.21
In reply, petitioner filed a Motion to Dismiss22 on the ground
that: (1) the RTC has no jurisdiction over the subject matter of
the complaint because the same falls under the original and
exclusive jurisdiction of the Labor Arbiter (LA) under Article
217(a)(4) of the Labor Code; and (2) there is another action
pending with the Regional Arbitration Branch III of the NLRC in
San Fernando City, Pampanga, involving the same parties for
the same cause.
On December 29, 2003, the RTC issued a Resolution23 denying
the aforesaid Motion and sustaining its jurisdiction over the
instant case. It held that petitioner’s alleged failure to provide
its employees with a safe, healthy and workable environment
is an act of negligence, a case of quasi-delict. As such, it is not
within the jurisdiction of the LA under Article 217 of the Labor
Code. On the matter of dismissal based on lis pendencia, the
RTC ruled that the complaint before the NLRC has a different
cause of action which is for illegal dismissal and prayer for
backwages, actual damages, attorney’s fees and separation
pay due to illegal dismissal while in the present case, the cause
of action is for quasi-delict.24 The falloof the Resolution is
quoted below:
WHEREFORE, finding the motion to dismiss to be without merit,
the Court deniesthe motion to dismiss.
SO ORDERED.25
On February 9, 2004, petitioner filed a motion for
reconsideration thereto, which was likewise denied in an Order
issued on even date.
Expectedly, petitioner then filed a Petition for Certiorariwith the
CA on the ground that the RTC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in
upholding that it has jurisdiction over the subject matter of the
complaint despite the broad and clear terms of Article 217 of
the Labor Code, as amended.26
After the submission by the parties of their respective
Memoranda, the CA rendered a Decision27 dated May 30, 2005
dismissing petitioner’s Petition for lack of merit, the dispositive
portion of which states:
WHEREFORE, premises considered, petition for certiorari is
hereby DISMISSEDfor lack of merit. SO ORDERED.28
From the aforesaid Decision, petitioner filed a Motion for
Reconsideration which was nevertheless denied for lack of
merit in the CA’s Resolution29 dated January 10, 2006. Hence,
petitioner interposed the instant petition upon the solitary
ground that "THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF
THE HONORABLE SUPREME COURT."30 Simply, the issue
presented before us is whether or not the RTC has jurisdiction
over the subject matter of respondent’s complaint praying for
moral damages,exemplary damages, compensatory damages,
anchored on petitioner’s alleged gross negligence in failing to
provide a safe and healthy working environment for
respondent.
The delineation between the jurisdiction of regular courts and
labor courts over cases involving workers and their employers

has always been a matter of dispute.31 It is up to the Courts
to lay the line after careful scrutiny of the factual milieu of each
case. Here, we find that jurisdiction rests on the regular courts.
In its attempt to overturn the assailed Decision and Resolution
of the CA, petitioner argues that respondent’sclaim for
damages is anchored on the alleged gross negligence of
petitioner as an employer to provide its employees, including
herein respondent, with a safe, healthy and workable
environment; hence, it arose from an employer-employee
relationship.32 The fact of respondent’s employment
withpetitioner as a civil engineer is a necessary element of his
cause ofaction because without the same, respondent cannot
claim to have a rightto a safe, healthy and workable
environment.33 Thus, exclusive jurisdiction over the same
should be vested in the Labor Arbiter and the NLRC pursuant
to Article 217(a)(4) of the Labor Code of the Philippines (Labor
Code), as amended.34
We are not convinced.
The jurisdiction of the LA and the NLRC is outlined in Article
217 of the Labor Code, as amended by Section 9 of Republic
Act (R.A.) No. 6715, to wit:
ART. 217. Jurisdiction of Labor Arbiters and the Commission--
(a) Except as otherwise provided under this Code the Labor
Arbiter shall have original and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days after the submission of
the case by the parties for decision without extension, even in
the absence of stenographic notes, the following cases
involving all workers, whether agricultural or nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involvingwages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code
including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service,involving an amount exceeding
five thousand pesos (₱5,000.00) regardless of whether
accompanied with a claim for reinstatement.
x x x.35
While we have upheld the present trend to refer worker-
employer controversies to labor courts in light of the
aforequoted provision, we have also recognized that not all
claims involving employees can be resolved solely by our labor
courts, specifically when the law provides otherwise.36 For this
reason, we have formulated the "reasonable causal connection
rule," wherein if there is a reasonable causal connection
between the claim asserted and the employer-employee
relations, then the case is within the jurisdiction of the labor
courts; and in the absence thereof, it is the regular courts that
have jurisdiction.37 Such distinction is apt since it cannot be
presumed that money claims of workers which do not arise out
of or in connection with their employer-employee relationship,
and which would therefore fall within the general jurisdiction of
the regular courts of justice, were intended by the legislative
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Dean Ada D. Abad
authority to be taken away from the jurisdiction of the courts
and lodged with Labor Arbiters on an exclusive basis.38
In fact, as early as Medina vs. Hon. Castro-Bartolome,39 in
negating the jurisdiction of the LA, although the parties
involved were an employer and two employees, the Court
succinctly held that:
The pivotal question to Our mind iswhether or not the Labor
Code has any relevance to the reliefs sought by the plaintiffs.
For if the Labor Code has no relevance, any discussion
concerning the statutes amending it and whether or not they
have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not
alleged any unfair labor practice. Theirs is a simple action for
damages for tortious acts allegedly committed by the
defendants. Such being the case, the governing statute is the
Civil Code and not the Labor Code. It results that the orders
under revieware based on a wrong premise.40
Similarly, we ruled in the recent case of Portillo v. Rudolf Lietz,
Inc.41 that not all disputes between an employer and his
employees fall within the jurisdiction of the labor tribunals
suchthat when the claim for damages is grounded on the
"wanton failure and refusal" without just cause of an employee
to report for duty despite repeated notices served upon him of
the disapproval of his application for leave ofabsence, the same
falls within the purview of Civil Law, to wit:
As early as Singapore Airlines Limited v. Paño, we established
that not all disputes between an employer and his employee(s)
fall within the jurisdiction of the labor tribunals. We
differentiated between abandonment per seand the manner
and consequent effects of such abandonment and ruled that
the first, is a labor case, while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the
present controversy must be held to belong to the civil Courts.
While seemingly petitioner's claim for damages arises from
employer-employee relations, and the latest amendment to
Article 217 of the Labor Code under PD No. 1691 and BP Blg.
130 provides that all other claimsarising from employer-
employee relationship are cognizable by Labor Arbiters
[citation omitted], in essence, petitioner's claim for damages is
grounded on the "wanton failure and refusal"without just cause
of private respondent Cruz to report for duty despite repeated
notices served upon him of the disapproval of his application
for leave of absence without pay. This, coupled with the further
averment that Cruz "maliciously and with bad faith" violated
the terms and conditions of the conversion training course
agreement to the damage of petitioner removes the present
controversy from the coverage of the Labor Code and brings it
within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment
per seby private respondent Cruz of his job—as the latter was
not required in the Complaint to report back to work—but on
the manner and consequent effects of such abandonmentof
work translated in terms of the damages which petitioner had
to suffer. x x x.42
Indeed, jurisprudence has evolved the rule that claims for
damages under Article 217(a)(4) of the Labor Code, to be
cognizable by the LA, must have a reasonable causal
connection withany of the claims provided for in that article.43
Only if there is such a connection with the other claims can a
claim for damages be considered as arising from employer-
employee relations.44
In the case at bench, we find that such connection is nil.

True, the maintenance of a safe and healthy workplace is
ordinarily a subject of labor cases. More, the acts complained
of appear to constitute matters involving employee-employer
relations since respondent used to be the Civil Engineer of
petitioner. However, it should be stressed that respondent’s
claim for damages is specifically grounded on petitioner’s gross
negligenceto provide a safe, healthy and workable environment
for its employees −a case of quasi-delict. This is easily
ascertained from a plain and cursory reading of the
Complaint,45 which enumerates the acts and/or omissions of
petitioner relative to the conditions in the workplace, to wit:
1. Petitioner’s textile mills have excessive flying textile dust
and waste in its operations and no effort was exerted by
petitioner to minimize or totally eradicate it;
2. Petitioner failed to provide adequate and sufficient dust
suction facilities;
3. Textile machines are cleaned with air compressors
aggravating the dusty work place;
4. Petitioner has no physician specializing in respiratoryrelated
illness considering it is a textile company;
5. Petitioner has no device to detectthe presence or density of
dust which is airborne;
6. The chemical and color room are not equipped with proper
safety chemical nose mask; and
7. The power and boiler plant emit too much smoke with solid
particles blown to the air from the smoke stack of the power
plant emitting a brown rust color which engulfs the entire
compound.46
In addition, respondent alleged that despite his earnest efforts
to suggest to management to place roof insulation to minimize,
if not, eradicate the health hazards attendant in the workplace,
the same was not heeded.47
It is a basic tenet that jurisdiction over the subject matter is
determined upon the allegations made in the complaint,
irrespective of whether or not the plaintiff is entitled to recover
upon the claim asserted therein, which is a matter resolved
only after and as a result of a trial.48 Neither can jurisdiction
of a court bemade to depend upon the defenses made by a
defendant in his answer or motion to dismiss.49 In this case, a
perusal of the complaint would reveal that the subject matter
is one of claim for damages arising from quasi-delict, which is
within the ambit of the regular court's jurisdiction.
The pertinent provision of Article 2176 of the Civil Code which
governs quasi-delictprovides that: Whoever by act or
omissioncauses damageto another, there being fault or
negligence, is obliged to pay for the damagedone. Such fault
or negligence, if there is no pre-existing contractual relation
between the parties, is called quasi-delict.50
Thus, to sustain a claim liability under quasi-delict, the
following requisites must concur: (a) damages suffered by the
plaintiff; (b) fault or negligence of the defendant, or someother
person for whose acts he must respond; and (c) the connection
of causeand effect between the fault or negligence of the
defendant and the damages incurred by the plaintiff.51
In the case at bar, respondent alleges that due to the continued
and prolonged exposure to textile dust seriously inimical to his
health, he suffered work-contracted disease which is now
irreversible and incurable, and deprived him of job
opportunities.52 Clearly, injury and damages were allegedly
suffered by respondent, an element of quasi-delict. Secondly,
the previous contract of employment between petitioner and
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Dean Ada D. Abad
respondent cannot be used to counter the element of "no pre-
existing contractual relation" since petitioner’s alleged gross
negligence in maintaining a hazardous work environment
cannot be considered a mere breach of such contract of
employment, but falls squarely within the elements of quasi-
delictunder Article 2176 of the Civil Code since the negligence
is direct, substantive and independent.53 Hence, we ruled in
Yusen Air and Sea Services Phils., Inc. v. Villamor54 that:
When, as here, the cause of action is based on a quasi-delictor
tort, which has no reasonable causal connection with any of the
claims provided for in Article 217, jurisdiction over the action
is with the regular courts.55
It also bears stressing that respondent is not praying for any
relief under the Labor Code of the Philippines. He neither claims
for reinstatement nor backwages or separation pay resulting
from an illegal termination. The cause of action herein pertains
to the consequence of petitioner’s omission which led to a
work-related disease suffered by respondent, causing harm or
damage to his person. Such cause of action is within the realm
of Civil Law, and jurisdiction over the controversy belongs to
the regular courts.56
Our ruling in Portillo, is instructive, thus:
There is no causal connection between private respondent’s
claim for damages and the respondent employers’ claim for
damages for the alleged "Goodwill Clause" violation. Portillo’s
claim for unpaid salaries did not have anything to do with her
alleged violation of the employment contract as, in fact, her
separation from employmentis not "rooted" in the alleged
contractual violation. She resigned from her employment. She
was not dismissed. Portillo’s entitlementto the unpaid salaries
is not even contested. Indeed, Lietz Inc.’s argument about legal
compensation necessarily admits that it owesthe money
claimed by Portillo.57
Further, it cannot be gainsaid that the claim for damages
occurred afterthe employer-employee relationship of petitioner
and respondent has ceased. Given that respondent no longer
demands for any relief under the Labor Code as well as the
rules and regulations pertinent thereto, Article 217(a)(4) of the
Labor Code is inapplicable to the instant case, as emphatically
held in Portillo, to wit:
It is clear, therefore, that while Portillo’s claim for unpaid
salaries is a money claim that arises out ofor in connection with
an employeremployee relationship, Lietz Inc.’s claim against
Portillo for violation of the goodwill clause is a money claim
based on an act done after the cessation of the employment
relationship. And, while the jurisdiction over Portillo’s claim is
vested in the labor arbiter, the jurisdiction over Lietz Inc.’s
claim rests on the regular courts. Thus:
As it is, petitioner does not ask for any relief under the Labor
Code. It merely seeks to recover damages based on the parties'
contract of employment as redress for respondent's breach
thereof. Such cause of action is within the realm of Civil Law,
and jurisdiction over the controversy belongs to the regular
courts. More so must this be in the present case, what with the
reality that the stipulation refers to the post-employment
relations of the parties.58
Where the resolution of the dispute requires expertise, not in
labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the
application of the general civil law, such claim falls outside the
area of competence of expertise ordinarily ascribed to the LA
and the NLRC.59
Guided by the aforequoted doctrines, we find no reason to
reverse the findings of the CA.1âwphi1 The RTC has jurisdiction
 Labor Law Review | Cases
Dean Ada D. Abad

over the subject matter of respondent's complaint praying for

moral damages, exemplary damages, compensatory damages,
anchored on petitioner's alleged gross negligence in failing to
provide a safe and healthy working environment for
respondent. WHEREFORE, the petition is DENIED. The Decision
of the Court of Appeals, dated May 30, 2005, and its Resolution
dated January 10, 2006 in CA-G.R. SP No. 83099 are hereby
AFFIRMED.

SO ORDERED.

[21] G.R. No. 148132 January 28, 2008
SMART COMMUNICATIONS, INC., petitioner,
vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151079 January 28, 2008
SMART COMMUNICATIONS, INC., petitioner,
vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151372 January 28, 2008
REGINA M. ASTORGA, petitioner,
vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO,
respondents.
DECISION
NACHURA, J.:
For the resolution of the Court are three consolidated petitions
for review on certiorari under Rule 45 of the Rules of Court.
G.R. No. 148132 assails the February 28, 2000 Decision1 and
the May 7, 2001 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372
question the June 11, 2001 Decision3 and the December 18,
2001 Resolution4 in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent
Smart Communications, Incorporated (SMART) on May 8, 1997
as District Sales Manager of the Corporate Sales Marketing
Group/ Fixed Services Division (CSMG/FSD). She was receiving
a monthly salary of P33,650.00. As District Sales Manager,
Astorga enjoyed additional benefits, namely, annual
performance incentive equivalent to 30% of her annual gross
salary, a group life and hospitalization insurance coverage, and
a car plan in the amount of P455,000.00.5
In February 1998, SMART launched an organizational
realignment to achieve more efficient operations. This was
made known to the employees on February 27, 1998.6 Part of
the reorganization was the outsourcing of the marketing and
sales force. Thus, SMART entered into a joint venture
agreement with NTT of Japan, and formed SMART-NTT
Multimedia, Incorporated (SNMI). Since SNMI was formed to
do the sales and marketing work, SMART abolished the
CSMG/FSD, Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb
the CSMG personnel who would be recommended by SMART.
SMART then conducted a performance evaluation of CSMG
personnel and those who garnered the highest ratings were
favorably recommended to SNMI. Astorga landed last in the
performance evaluation, thus, she was not recommended by
SMART. SMART, nonetheless, offered her a supervisory
position in the Customer Care Department, but she refused the
offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued
reporting for work. But on March 3, 1998, SMART issued a
memorandum advising Astorga of the termination of her
employment on ground of redundancy, effective April 3, 1998.
Astorga received it on March 16, 1998.7
The termination of her employment prompted Astorga to file a
Complaint8 for illegal dismissal, non-payment of salaries and
other benefits with prayer for moral and exemplary damages
against SMART and Ann Margaret V. Santiago (Santiago). She
claimed that abolishing CSMG and, consequently, terminating
her employment was illegal for it violated her right to security
of tenure. She also posited that it was illegal for an employer,
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Dean Ada D. Abad
like SMART, to contract out services which will displace the
employees, especially if the contractor is an in-house agency.9
SMART responded that there was valid termination. It argued
that Astorga was dismissed by reason of redundancy, which is
an authorized cause for termination of employment, and the
dismissal was effected in accordance with the requirements of
the Labor Code. The redundancy of Astorga’s position was the
result of the abolition of CSMG and the creation of a specialized
and more technically equipped SNMI, which is a valid and
legitimate exercise of management prerogative.10
In the meantime, on May 18, 1998, SMART sent a letter to
Astorga demanding that she pay the current market value of
the Honda Civic Sedan which was given to her under the
company’s car plan program, or to surrender the same to the
company for proper disposition.11 Astorga, however, failed and
refused to do either, thus prompting SMART to file a suit for
replevin with the Regional Trial Court of Makati (RTC) on
August 10, 1998. The case was docketed as Civil Case No. 98-
1936 and was raffled to Branch 57.12
Astorga moved to dismiss the complaint on grounds of (i) lack
of jurisdiction; (ii) failure to state a cause of action; (iii) litis
pendentia; and (iv) forum-shopping. Astorga posited that the
regular courts have no jurisdiction over the complaint because
the subject thereof pertains to a benefit arising from an
employment contract; hence, jurisdiction over the same is
vested in the labor tribunal and not in regular courts.13
Pending resolution of Astorga’s motion to dismiss the replevin
case, the Labor Arbiter rendered a Decision14 dated August 20,
1998, declaring Astorga’s dismissal from employment illegal.
While recognizing SMART’s right to abolish any of its
departments, the Labor Arbiter held that such right should be
exercised in good faith and for causes beyond its control. The
Arbiter found the abolition of CSMG done neither in good faith
nor for causes beyond the control of SMART, but a ploy to
terminate Astorga’s employment. The Arbiter also ruled that
contracting out the functions performed by Astorga to an in-
house agency like SNMI was illegal, citing Section 7(e), Rule
VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the
dismissal of [Astorga] to be illegal and unjust. [SMART and
Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a
substantially equivalent position, without loss of seniority
rights and other privileges, with full backwages, inclusive of
allowances and other benefits from the time of [her] dismissal
to the date of reinstatement, which computed as of this date,
are as follows:
(a)
Astorga
BACKWAGES; (P33,650.00 x 4 months)
= P134,600.00
UNPAID SALARIES (February 15, 1998-April 3, 1998
February 15-28, 1998
= P 16,823.00
March 1-31, [1998]
= P 33,650.00

April 1-3, 1998
= P 3,882.69
CAR MAINTENANCE ALLOWANCE
(P2,000.00 x 4)
= P 8,000.00
FUEL ALLOWANCE
(300 liters/mo. x 4 mos. at P12.04/liter)
= P 14,457.83
TOTAL
= P211,415.52
xxxx
3. Jointly and severally pay moral damages in the amount of
P500,000.00 x x x and exemplary damages in the amount of
P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as
attorney’s fees.
SO ORDERED.15
Subsequently, on March 29, 1999, the RTC issued an Order16
denying Astorga’s motion to dismiss the replevin case. In so
ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds no
merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of
possession over a company car assigned to the defendant
under a car plan privilege arrangement. The car is registered
in the name of the plaintiff. Recovery thereof via replevin suit
is allowed by Rule 60 of the 1997 Rules of Civil Procedure,
which is undoubtedly within the jurisdiction of the Regional
Trial Court.
In the Complaint, plaintiff claims to be the owner of the
company car and despite demand, defendant refused to return
said car. This is clearly sufficient statement of plaintiff’s cause
of action.
Neither is there forum shopping. The element of litis
penden[t]ia does not appear to exist because the judgment in
the labor dispute will not constitute res judicata to bar the filing
of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack
of merit.
SO ORDERED.17
Astorga filed a motion for reconsideration, but the RTC denied
it on June 18, 1999.18
Astorga elevated the denial of her motion via certiorari to the
CA, which, in its February 28, 2000 Decision,19 reversed the
RTC ruling. Granting the petition and, consequently, dismissing
the replevin case, the CA held that the case is intertwined with
Astorga’s complaint for illegal dismissal; thus, it is the labor
tribunal that has rightful jurisdiction over the complaint.
SMART’s motion for reconsideration having been denied,20 it
elevated the case to this Court, now docketed as G.R. No.
148132.
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Dean Ada D. Abad
Meanwhile, SMART also appealed the unfavorable ruling of the
Labor Arbiter in the illegal dismissal case to the National Labor
Relations Commission (NLRC). In its September 27, 1999
Decision,21 the NLRC sustained Astorga’s dismissal. Reversing
the Labor Arbiter, the NLRC declared the abolition of CSMG and
the creation of SNMI to do the sales and marketing services for
SMART a valid organizational action. It overruled the Labor
Arbiter’s ruling that SNMI is an in-house agency, holding that
it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose
of increasing efficiency are allowed under the law. The NLRC
further found erroneous the Labor Arbiter’s disquisition that
redundancy to be valid must be impelled by economic reasons,
and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby
reversed and set aside. [Astorga] is further ordered to
immediately return the company vehicle assigned to her.
[Smart and Santiago] are hereby ordered to pay the final
wages of [Astorga] after [she] had submitted the required
supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied
it on December 21, 1999.23
Astorga then went to the CA via certiorari. On June 11, 2001,
the CA rendered a Decision24 affirming with modification the
resolutions of the NLRC. In gist, the CA agreed with the NLRC
that the reorganization undertaken by SMART resulting in the
abolition of CSMG was a legitimate exercise of management
prerogative. It rejected Astorga’s posturing that her non-
absorption into SNMI was tainted with bad faith. However, the
CA found that SMART failed to comply with the mandatory one-
month notice prior to the intended termination. Accordingly,
the CA imposed a penalty equivalent to Astorga’s one-month
salary for this non-compliance. The CA also set aside the
NLRC’s order for the return of the company vehicle holding that
this issue is not essentially a labor concern, but is civil in
nature, and thus, within the competence of the regular court
to decide. It added that the matter had not been fully ventilated
before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought
partial reconsideration, of the Decision. On December 18,
2001, the CA resolved the motions, viz.:
WHEREFORE, [Astorga’s] motion for reconsideration is hereby
PARTIALLY GRANTED. [Smart] is hereby ordered to pay
[Astorga] her backwages from 15 February 1998 to 06
November 1998. [Smart’s] motion for reconsideration is
outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions
for review assailing the CA ruling, docketed as G.R Nos. 151079
and 151372. On February 27, 2002, this Court ordered the
consolidation of these petitions with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY
OF ASTORGA’S DISMISSAL DESPITE THE FACT THAT HER
DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE
CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR
HER DISMISSAL.

II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE
PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF
THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES
DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT
THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER
THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA
ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following
issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED
A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE
HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER
OF SUPERVISION WHEN IT RULED THAT SMART DID NOT
COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO
TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND
THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE
SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL
LABOR RELATIONS COMMISSION FINDS APPLICATION IN THE
CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE
THERE WAS ABSOLUTELY NO NOTICE AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED
A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF
THE HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF
THE POWER OF SUPERVISION WHEN IT RULED THAT THE
REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION
OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO
RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER
EMPLOYEE WHO WAS LEGALLY DISMISSED.
V xxxx
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED
TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE
IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT
SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED
TO APPRECIATE THAT ASTORGA CAN NO LONGER BE
CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR
CODE.29
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Dean Ada D. Abad
The Court shall first deal with the propriety of dismissing the
replevin case filed with the RTC of Makati City allegedly for lack
of jurisdiction, which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to
repossession of goods or chattels may recover those goods or
chattels from one who has wrongfully distrained or taken, or
who wrongfully detains such goods or chattels. It is designed
to permit one having right to possession to recover property in
specie from one who has wrongfully taken or detained the
property.30 The term may refer either to the action itself, for
the recovery of personalty, or to the provisional remedy
traditionally associated with it, by which possession of the
property may be obtained by the plaintiff and retained during
the pendency of the action.31
That the action commenced by SMART against Astorga in the
RTC of Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the
case for lack of jurisdiction, the CA made the following
disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by
[Smart] as part of the employment package. We doubt that
[SMART] would extend [to Astorga] the same car plan privilege
were it not for her employment as district sales manager of the
company. Furthermore, there is no civil contract for a loan
between [Astorga] and [Smart]. Consequently, We find that
the car plan privilege is a benefit arising out of employer-
employee relationship. Thus, the claim for such falls squarely
within the original and exclusive jurisdiction of the labor
arbiters and the NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC
rightfully assumed jurisdiction over the suit and acted well
within its discretion in denying Astorga’s motion to dismiss.
SMART’s demand for payment of the market value of the car
or, in the alternative, the surrender of the car, is not a labor,
but a civil, dispute. It involves the relationship of debtor and
creditor rather than employee-employer relations.33 As such,
the dispute falls within the jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the
jurisdiction of the RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is
the return of the property in specie wrongfully detained by
another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property.
The question of whether or not a party has the right of
possession over the property involved and if so, whether or not
the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale
of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.
The labor dispute involved is not intertwined with the issue in
the Replevin Case. The respective issues raised in each forum
can be resolved independently on the other. In fact in 18
November 1986, the NLRC in the case before it had issued an
Injunctive Writ enjoining the petitioners from blocking the free
ingress and egress to the Vessel and ordering the petitioners
to disembark and vacate. That aspect of the controversy is
properly settled under the Labor Code. So also with petitioners’
right to picket. But the determination of the question of who
has the better right to take possession of the Vessel and
whether petitioners can deprive the Charterer, as the legal
possessor of the Vessel, of that right to possess in addressed
to the competence of Civil Courts.

In thus ruling, this Court is not sanctioning split jurisdiction but
defining avenues of jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it
overturned the RTC ruling and ordered the dismissal of the
replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity
of Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the
authorized causes for the dismissal of an employee. The nature
of redundancy as an authorized cause for dismissal is explained
in the leading case of Wiltshire File Co., Inc. v. National Labor
Relations Commission,35 viz:
x x x redundancy in an employer’s personnel force necessarily
or even ordinarily refers to duplication of work. That no other
person was holding the same position that private respondent
held prior to termination of his services does not show that his
position had not become redundant. Indeed, in any well
organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work
of one person. We believe that redundancy, for purposes of the
Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is
redundant where it is superfluous, and superfluity of a position
or positions may be the outcome of a number of factors, such
as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.
The characterization of an employee’s services as superfluous
or no longer necessary and, therefore, properly terminable, is
an exercise of business judgment on the part of the employer.
The wisdom and soundness of such characterization or decision
is not subject to discretionary review provided, of course, that
a violation of law or arbitrary or malicious action is not
shown.36
Astorga claims that the termination of her employment was
illegal and tainted with bad faith. She asserts that the
reorganization was done in order to get rid of her. But except
for her barefaced allegation, no convincing evidence was
offered to prove it. This Court finds it extremely difficult to
believe that SMART would enter into a joint venture agreement
with NTT, form SNMI and abolish CSMG/FSD simply for the sole
purpose of easing out a particular employee, such as Astorga.
Moreover, Astorga never denied that SMART offered her a
supervisory position in the Customer Care Department, but she
refused the offer because the position carried a lower salary
rank and rate. If indeed SMART simply wanted to get rid of her,
it would not have offered her a position in any department in
the enterprise.
Astorga also states that the justification advanced by SMART is
not true because there was no compelling economic reason for
redundancy. But contrary to her claim, an employer is not
precluded from adopting a new policy conducive to a more
economical and effective management even if it is not
experiencing economic reverses. Neither does the law require
that the employer should suffer financial losses before he can
terminate the services of the employee on the ground of
redundancy. 37
We agree with the CA that the organizational realignment
introduced by SMART, which culminated in the abolition of
CSMG/FSD and termination of Astorga’s employment was an
honest effort to make SMART’s sales and marketing
departments more efficient and competitive. As the CA had
taken pains to elucidate:
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Dean Ada D. Abad
x x x a careful and assiduous review of the records will yield no
other conclusion than that the reorganization undertaken by
SMART is for no purpose other than its declared objective – as
a labor and cost savings device. Indeed, this Court finds no
fault in SMART’s decision to outsource the corporate sales
market to SNMI in order to attain greater productivity.
[Astorga] belonged to the Sales Marketing Group under the
Fixed Services Division (CSMG/FSD), a distinct sales force of
SMART in charge of selling SMART’s telecommunications
services to the corporate market. SMART, to ensure it can
respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly thereafter
assigned its functions to newly-created SNMI Multimedia
Incorporated, a joint venture company of SMART and NTT of
Japan, for the reason that CSMG/FSD does not have the
necessary technical expertise required for the value added
services. By transferring the duties of CSMG/FSD to SNMI,
SMART has created a more competent and specialized
organization to perform the work required for corporate
accounts. It is also relieved SMART of all administrative costs
– management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business
judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in
life, this Court has inclined towards the worker and upheld his
cause in most of his conflicts with his employer. This favored
treatment is consonant with the social justice policy of the
Constitution. But while tilting the scales of justice in favor of
workers, the fundamental law also guarantees the right of the
employer to reasonable returns for his investment.38 In this
light, we must acknowledge the prerogative of the employer to
adopt such measures as will promote greater efficiency, reduce
overhead costs and enhance prospects of economic gains,
albeit always within the framework of existing laws.
Accordingly, we sustain the reorganization and redundancy
program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply
with the mandated one (1) month notice prior to termination.
The record is clear that Astorga received the notice of
termination only on March 16, 199839 or less than a month
prior to its effectivity on April 3, 1998. Likewise, the
Department of Labor and Employment was notified of the
redundancy program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel.
— The employer may also terminate the employment of any
employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one
(1) month before the intended date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of
notice because the organizational realignment was made
known to all the employees as early as February 1998 fails to
persuade. Astorga’s actual knowledge of the reorganization
cannot replace the formal and written notice required by the
law. In the written notice, the employees are informed of the
specific date of the termination, at least a month prior to the
effectivity of such termination, to give them sufficient time to
find other suitable employment or to make whatever
arrangements are needed to cushion the impact of termination.
In this case, notwithstanding Astorga’s knowledge of the
reorganization, she remained uncertain about the status of her
 Labor Law Review | Cases
Dean Ada D. Abad

employment until SMART gave her formal notice of
termination. But such notice was received by Astorga barely
two (2) weeks before the effective date of termination, a period
very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render
the termination of Astorga’s employment illegal. The validity of
termination can exist independently of the procedural infirmity
of the dismissal.41 In DAP Corporation v. CA,42 we found the
dismissal of the employees therein valid and for authorized
cause even if the employer failed to comply with the notice
requirement under Article 283 of the Labor Code. This Court
upheld the dismissal, but held the employer liable for non-
compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining
Astorga’s dismissal and at the same time, awarding indemnity
for violation of Astorga's statutory rights.
Case No. 98-1936 and render its Decision with reasonable
dispatch.
On the other hand, the petitions of SMART and Astorga
docketed as G.R. Nos. 151079 and 151372 are DENIED. The
June 11, 2001 Decision and the December 18, 2001 Resolution
in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION.
Astorga is declared validly dismissed. However, SMART is
ordered to pay Astorga P50,000.00 as indemnity for its non-
compliance with procedural due process, her separation pay
equivalent to one (1) month pay, and her salary from February
15, 1998 until the effective date of her termination on April 3,
1998. The award of backwages is DELETED for lack of basis.
SO ORDERED.

However, we find the need to modify, by increasing, the

indemnity awarded by the CA to Astorga, as a sanction on
SMART for non-compliance with the one-month mandatory
notice requirement, in light of our ruling in Jaka Food
Processing Corporation v. Pacot,43 viz.:

[I]f the dismissal is based on a just cause under Article 282 but
the employer failed to comply with the notice requirement, the
sanction to be imposed upon him should be tempered because
the dismissal process was, in effect, initiated by an act
imputable to the employee, and (2) if the dismissal is based on
an authorized cause under Article 283 but the employer failed
to comply with the notice requirement, the sanction should be
stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative.

We deem it proper to increase the amount of the penalty on

SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is,

likewise, entitled to separation pay equivalent to at least one
(1) month salary or to at least one (1) month’s pay for every
year of service, whichever is higher. The records show that
Astorga’s length of service is less than a year. She is, therefore,
also entitled to separation pay equivalent to one (1) month
pay.

Finally, we note that Astorga claimed non-payment of wages

from February 15, 1998. This assertion was never rebutted by
SMART in the proceedings a quo. No proof of payment was
presented by SMART to disprove the allegation. It is settled
that in labor cases, the burden of proving payment of monetary
claims rests on the employer.44 SMART failed to discharge the
onus probandi. Accordingly, it must be held liable for Astorga’s
salary from February 15, 1998 until the effective date of her
termination, on April 3, 1998.

However, the award of backwages to Astorga by the CA should

be deleted for lack of basis. Backwages is a relief given to an
illegally dismissed employee. Thus, before backwages may be
granted, there must be a finding of unjust or illegal dismissal
from work.45 The Labor Arbiter ruled that Astorga was illegally
dismissed. But on appeal, the NLRC reversed the Labor
Arbiter’s ruling and categorically declared Astorga’s dismissal
valid. This ruling was affirmed by the CA in its assailed
Decision. Since Astorga’s dismissal is for an authorized cause,
she is not entitled to backwages. The CA’s award of backwages
is totally inconsistent with its finding of valid dismissal.

WHEREFORE, the petition of SMART docketed as G.R. No.

148132 is GRANTED. The February 28, 2000 Decision and the
May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP.
No. 53831 are SET ASIDE. The Regional Trial Court of Makati
City, Branch 57 is DIRECTED to proceed with the trial of Civil

[22] G.R. No. 181393 July 28, 2009
GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC. and
ABELARDO M. GONZALES, Petitioners,
vs.
EDNA MARGALLO, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision1 dated 21 January 2008
of the Court of Appeals in CA-G.R. SP No. 100012, which
affirmed the Decision2 dated 18 October 2006, as modified by
the Resolution3 dated 21 May 2007, of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 045888-05.
The NLRC effectively reversed the Decision4 dated 11 July 2005
of the Labor Arbiter in NLRC NCR Case No. 00-09-10803-04,
which entirely dismissed the Complaint filed by respondent
Edna Margallo (Margallo) against petitioners Grandteq
Industrial Steel Products, Inc. (Grandteq) and Abelardo M.
Gonzales (Gonzales); and, instead, ordered Grandteq and
Gonzales to refund to Margallo her car loan payments, as well
as to pay the latter sales commission and attorney’s fees.
Grandteq is a domestic corporation engaged in the business of
selling welding electrodes, alloy steels, aluminum and copper
alloys.5 Gonzales is the President/Owner of Grandteq.6
Grandteq employed Margallo as Sales Engineer beginning 3
August 1999.7
Margallo claimed that on an unstated date, she availed herself
of the car loan program offered to her by Grandteq as a reward
for being "Salesman of the Year." She paid the down payment
on a brand new Toyota Corolla,8 amounting to ₱201,000.00,
out of her own pocket. The monthly amortization for the car
was ₱10,302.00, of which ₱5,302.00 was to be her share and
₱5,000.00 was to be the share of Grandteq.
On 29 December 2003, Margallo received a letter9 signed by
Gonzales and Rolando de Leon (De Leon), Vice-President for
Administration of Grandteq, which reads:
Mrs. Edna E. Margallo
c/o Grandteq Industrial
Steel Products, Inc.
#2 Cooper St., cor. Benitez
SFDM, Quezon City
Dear Mrs. Margallo:
This is to inform you that our records show the following:
1) That, last December 18, 2003, you instructed our company
driver and helper to load 4 pcs. tool steel to be delivered at
circle freight.
2) That together with Mr. Steve Rivera, on or about 12:00
noon, you went at (sic) Eagle Global Logistics at Circle Freight,
NAIA, Parañaque City to ship the following items to Moog
Control Corp. Phils. Branch located at Baguio Ecozone, Baguio
City, using the Sales Invoice of JVM Industrial Supply and Allied
Services.
a) 2 pcs. tool steel 4140 – ¾" x 2’x 3’
b) 2 pcs. tool steel 4140 – 1"x 2’ x 3’
3) That you are working with JVM Industrial Supply and Allied
Services concurrent with your being employed with Grandteq
Industrial Steel Products, Inc.
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Dean Ada D. Abad
4) That JVM Industrial Supply and Allied Services are supplying
steel products to Moog Control Corp. Phils. Branch which is also
a client of Grandteq and which you are the authorized salesman
of the company.
Because of this, you are given a (sic) twenty-four (24) hours
upon receipt of this letter to submit a written explanation on
why you should not be given a disciplinary action for allegedly
violating/committing:
a) Moonlighting
b) Sabotage
c) Breach of trust and confidence (labor code).
You are also invited to attend a meeting with regards to the
allegations on Jan. 5, 2004 at 10:00 a.m. You may bring with
you a lawyer or any representative to assist you on (sic) the
said meeting.
Failure on your part to submit a written explanation on the
specified period and failure to attend the hearing would mean
that you are waiving your rights to be heard and the
appropriate action will be taken against you.
Moreover, to protect the evidences and witnesses against you,
management has decided to place you under preventive
suspension effective December 29, 2003.
Very truly yours,
(Signed)
Abelardo M. Gonzales
President (Signed)
Ronaldo A. de Leon
VP - Administration
Responding to the foregoing letter, Margallo wrote the
following letter-reply dated 30 December 2003:
December 30, 2003
To: Mr. Abelardo M. Gonzales
President
Thru: Mr. Ronald A. de Leon
VP – Administration
Dear Sir,
Last December 18, 2003, Mr. Steve D. Rivera instructed me to
tell to our delivery people to bring the said item to circle freight.
Which I did that (sic) I thought it was ok because it was inside
the company. Sir I was just following orders from Mr. D. Rivera
who is one of my boss (sic). Sir, what I did is the same thing
that I’ve been doing with my other bosses. That i[f] they
instructed me to do things I immediately follow. Because I am
only an employee. Sir never that I work with JVM (sic).
Sir im (sic) sorry if I did wrong by not asking what to do. Which
I think an ordinary employee like me would do is to follow
orders from my superiors.
IM SO SORRY SIR IF I FAIL YOU.
(Signed)
Edna E. Margallo10
Margallo then averred that in January 2004, De Leon asked her
to just resign, promising that if she did, she would still be paid
her commissions and other benefits, as well as be reimbursed
her car loan payments. Relying on De Leon’s promise, Margallo
tendered on 13 January 2004, her irrevocable resignation,
effective immediately.11

Margallo, however, alleged that she was never paid her money
claims. Grandteq failed to pay her commissions in the sum of
₱87,508.00, equivalent to 5% of the total sales that she
collected as of January 2004, which amounted to
₱1,750,148.84. Grandteq likewise failed to refund the "sales
accommodations" or advances she gave her customers. In
addition, after Margallo’s resignation, Grandteq sold her car to
Annaliza Estrella, another employee, for ₱550,000.00.12 These
events prompted her to file before the Labor Arbiter a
Complaint13 against Grandteq and Gonzales, for recovery of
sales commission, cash incentive and car loan payment,
damages and attorney fees, which was docketed as NLRC Case
No. 0009-108-03-04.
Grandteq and Gonzales opposed Margallo’s claims. They
maintained that Margallo was not entitled to sales commissions
because the computation thereof, according to company policy,
should be based on actual collections within 180 days from
invoice date. All of Margallo’s credit sales transactions were
unpaid, outstanding, and past due. Margallo was also not
entitled to any sales incentive, because said benefit was
intended for customers, and not for the sales personnel.14
Grandteq and Gonzales further insisted that Margallo had no
right to the refund of her car loan payments under the car loan
agreement she executed with Grandteq, which expressly
provided that in the event that Margallo resigned or was
terminated for cause during the effectivity of said agreement,
her car loan payments would be forfeited in favor of Grandteq,
and Grandteq would regain possession of the car.
The Labor Arbiter rendered a Decision on 11 July 2005,
dismissing all of Margallo’s claims, thus:
WHEREFORE, premises considered, judgment is hereby
rendered dismissing the instant case for lack of merit.15
The Labor Arbiter held that Margallo was not able to prove by
substantial evidence her entitlement to the sales commission:
After a careful review of the records, this Office finds that
considering [Margallo] already receives a basic salary plus
allowances, her claim for sales commission is therefore an
added benefit wholly dependent upon her sales performance
based on existing company policy. As such, it is an affirmative
allegation or claim that is not normally included in the regular
course of business and for which law presumes that an
employee is generally not entitled to. Thus, it behooves, upon
the employee to prove that he is entitled to said affirmative
allegations and the onus is upon him to establish his right
thereto (see Eternit Employees and Workers Unions vs. De
Veyra, 189 SCRA 752 and Nucum vs. Inciong, 204 SCRA 697).
In the instant case, this Office finds [Margallo] to have failed
to substantially discharge her burden of proving that she is
entitled to the ₱87,508.00 in sales commissions since other
than her bare allegations, [Margallo] did not show any other
proof, including prior payment of said sales commissions, to
justify her claim.
And, quite noteworthy too is that under the [Grandteq]’s policy,
rules and regulations on the grant of sales commissions, the
computation thereof shall be based on actual collection against
all sales on credit and the validity of the said commission shall
be 180 days from invoice dates; otherwise, the salesman shall
not be entitled thereto and forfeits any right to demand
payment of the commission thereon as the sales are considered
bad debts as uncollectible. Since the records of [Grandteq]
showed that [Margallo]’s credit sales remain unpaid and
outstanding for over 180 days, [Margallo] is therefore not
entitled to sales commissions.
No denial whatsoever of the above-discussed company policy
was made by [Margallo] in her Reply.
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Dean Ada D. Abad
Thus, having failed to establish entitlement to said sales
commission, the same is hereby denied.16
For a similar reason, the Labor Arbiter denied Margallo’s claim
for payment of cash incentive:
As regards to cash incentives, once again this Office finds that
the same is also an affirmative allegation and the burden of
proving entitlement thereto rests upon the employee. And
having failed to even mention how much of the alleged cash
incentive she is entitled to in Annexes "A" and "2-a" of her
position paper, the same is hereby denied.17
Finally, the Labor Arbiter found that Margallo had no right to
the reimbursement of her car loan payments under her car loan
agreement with Grandteq:
And as regards of (sic) the car loan, the same should be
governed by the undisputed terms and conditions of the
Agreement between complainant and respondent company
(Annex "A" of respondents’ position paper). And page 2 of said
Agreement clearly stipulates that in case of resignation, all
payments made by the personnel shall be forfeited in favor of
the company. Thus, the claim for refund of the car loan should
likewise be denied.18
Margallo filed an appeal with the NLRC, docketed as NLRC NCR
CA No. 045888-05. Although the NLRC, in its Decision dated
18 October 2006, stated that it merely "modified" the Decision
dated 11 July 2005 of the Labor Arbiter, it effectively reversed
the same by granting Margallo her claims for sales commission,
reimbursement of her car loan payments, and attorney’s fees.
The fallo of the NLRC Decision is quoted below:
WHEREFORE, the decision appealed from is hereby MODIFIED.
[Herein petitioners] Grandteq Industrial Products, Inc. and/or
its President/General Manager, [petitioner] Abelardo M.
Gonzales, are hereby ordered to refund to the [herein
respondent Margallo] her car loan payments amounting to
₱217,815.94 and to pay her the amount of ₱10,870.79
representing her unpaid sales commissions plus ten percent
(10%) of the total monetary award as attorney’s fees.19
In ordering that Grandteq and Gonzales reimburse the car loan
payments made by Margallo, the NLRC reasoned:
It is unlikely for an employee who has invested his time and
industry in a particular job to simply give it up after being
accused of violating company rules and regulations. It is more
likely that he did so upon the expectation that she would derive
a certain benefit from it. Thus, the claim that the [herein
respondent Margalllo] resigned because she was promised that
she would be paid her money claims if she did, is more credible
than the contention that she did so without any prodding from
the [herein petitioners Grandteq and Gonzales].
It would therefore appear that the provision, in the agreement
(records, pp. 32-340) executed by the parties, that "in case of
resignation of the PERSONNEL from the COMPANY, all
payments made by the PERSONNEL shall be forfeited in favor
of the COMPANY" has been superseded by the above-
mentioned subsequent agreement between the parties.
Besides, it is uncontroverted that the car loan program was
offered to the complainant as a reward for being the "Salesman
of the Year." Moreover, nowhere in their pleadings did the
[petitioners Grandteq and Gonzales] controvert the claim that
the [respondent Margallo] paid the down payment, entire first
amortization, insurance, and her share in the monthly
amortizations for seventeen months, or the total amount of
₱214,395.90 for the car. It is also uncontroverted that after the
[respondent Margallo]’s negotiated resignation, her car was

resold to another employee for the original price. Under the
circumstances, the above-quoted contractual provision is null
and void for being contrary to morals, good customs, and public
policy. The law overrides contracts which are prepared by
employers to circumvent the rights of their employees (Baguio
Country Club vs. NLRC, 206 SCRA 643). Thus, the above-
quoted contractual provision does not bar the [respondent
Margallo] from recovering her car loan payments from the
[petitioners Grandteq and Gonzales].20
As for Margallo’s other claims, the NLRC affirmed her
entitlement to the unpaid sales commission, but not to the cash
incentive:
Insofar as the [respondent Margallo]’s claim for unpaid sales
commission is concerned, it is noteworthy that in the list
(records, pp. 16-18) of sales she adduced in evidence, the
column bearing the heading "collected" indicates that, as of
January 2004, the total collections from her sales amount to
only ₱217,815.94. Since it is undisputed hat her sales
commission are equivalent to 5% of her collections, she may
recover unpaid sales commissions amounting to ₱10,890.79.
Finally, since there is no showing that the [respondent
Margallo]’s claim for cash incentive is based on a particular
contract or company practice, it was correctly dismissed for
lack of merit.21
Grandteq and Gonzales filed a Motion for Reconsideration,22
while Margallo also filed an Omnibus Motion for Partial
Reconsideration and Issuance of Subpoena.23 The NLRC
denied the Motions for Reconsideration of all parties in a
Resolution dated 21 May 2007, but modified the NLRC Decision
dated 18 October 2006 by slightly reducing the amount of car
loan payments to be refunded to Margallo:
WHEREFORE, the Motions for Reconsideration are hereby
DENIED for lack of merit. However, the dispositive portion of
this Commission’s (2nd Division) October 18, 2006 Decision is
hereby corrected to read:
WHEREFORE, the decision appealed from is hereby MODIFIED.
[Herein petitioners] Grandteq Industrial Products, Inc. and/or
its President/General Manager, [petitioner] Abelardo M.
Gonzales, are hereby ordered to refund to [herein respondent
Margallo] her car loan payments amounting to ₱214,395.90
and to pay her the amount of ₱10,870.79 representing her
unpaid sales commissions plus ten percent (10%) of the total
monetary award as attorney’s fees.24
Grandteq and Gonzales elevated the case to the Court of
Appeals by way of a Petition for Certiorari, under Rule 65 of the
Rules of Court, which was docketed as CA-G.R. SP No.
100012.lawphil
In its Decision dated 21 January 2008, the Court of Appeals
agreed with the NLRC, dismissing the therein Petition of
Grandteq and Gonzales in this wise:
WHEREFORE, premises considered, the Petition is DENIED for
lack of merit. Costs against petitioners.25
Like the NLRC, the Court of Appeals found that Margallo had a
right to be reimbursed her car loan payments, and the terms
of the car loan agreement between Margallo and Grandteq
should not be applied for being highly prejudicial to the
employee’s interest:
Truly, the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their
agreement would have the force of law between them.
However, those terms and conditions agreed upon must not be
contrary to law, morals, customs, public policy or public order.
Precisely, the law overrides such conditions which are
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Dean Ada D. Abad
prejudicial to the interest of the worker. The law affords
protection to an employee, and it will not countenance any
attempt to subvert its spirit and intent. The sheer inequality
that characterizes employer-employee relations, where the
scales generally tip against the employee, often scarcely
provides him real and better options. Moreover, in
controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation
of agreements and writing should be resolved in the former’s
favor.26
The Court of Appeals likewise affirmed the order of the NLRC
that Grandteq and Gonzales pay Margallo her sales
commission, placing the burden upon the employer to prove
that the employee’s money claims had been paid:
With respect to the unpaid sales commissions of ₱10,870.79 to
be paid by petitioners in favor of private respondent, it is
incumbent upon petitioner employer to prove that said money
claim has been paid. This is in tune with the general precept
that: "one who pleads payment has the burden of proving it,
and even where the employees must allege nonpayment, the
general rule is that the burden rests on the defendant to prove
(payment), rather than on the plaintiff to prove non-payment."
The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents –
which will show that overtime, differentials, service incentive
leave and other claims of workers have been paid – are not in
the possession of the worker but in the custody and absolute
control of the employer. In the present case, petitioners
[Grandteq and Gonzales] failed to discharge the burden of
proving that the amount of ₱10,870.79 representing [herein
respondent Margallo]’s sales commissions has already been
paid to the latter. Thus, the NLRC (Second Division) did not
commit grave abuse of discretion in awarding said money claim
in favor of [respondent Margallo].27
Assiduous, Grandteq and Gonzales are now before this Court
via the Petition at bar.
Grandteq and Gonzales assert that the Court of Appeals erred
in declaring the car loan agreement between Grandteq and
Margallo, particularly the provision therein on the forfeiture of
car loan payments in favor of Grandteq should Margallo resign
from the company, as null and void.28
The Court, however, is in agreement with the Court of Appeals
and the NLRC.
Generally speaking, contracts are respected as the law
between the contracting parties. The contracting parties may
establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.29
The questionable provision in the car loan agreement between
Grandteq and Margallo provides: "In case of resignation, of the
personnel from the company, all payments made by the
personnel shall be forfeited in favor of the company."30
Connected thereto is the provision in the same car loan
agreement, which reads:
1. The COMPANY shall have the right to regain the possession
of the car before the expiration of the term of the loan in the
event of any of the following:
a. The PERSONNEL resigns from the COMPANY during the
effectivity of this agreement.31
Said provisions plainly are contrary to the fundamental
principles of justice and fairness. It must be remembered that
Margallo herself paid for the down payment and her share in
the monthly amortization of the car. However, she did not get

to leave with the car when she resigned from Grandteq. In
effect, Margallo parted with her hard-earned money for
nothing, being left, as she is, with an empty bag. The
inequitableness in the conduct of Grandteq and Gonzales is
heightened by the fact that after they regained possession of
the car, they resold the same to another employee under a
similar contract bearing the same terms and conditions signed
by Margallo.
The principle that no person may unjustly enrich oneself at the
expense of another (Nemo cum alteris detrimento locupletari
potest) is embodied in Article 22 of the New Civil Code, to wit:
ART. 22. Every person who through an act of performance by
another, or any other means, acquires or comes into
possession of something at the expense of the latter without
just or legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code
on Human Relations, the provisions of which were formulated
as "basic principles to be observed for the rightful relationship
between human beings and for the stability of the social order;
designed to indicate certain norms that spring from the
fountain of good conscience; [are] guides for human conduct
that should run as golden threads through society to the end
that law may approach its supreme ideal, which is the sway
and dominance of justice." There is unjust enrichment when a
person unjustly retains a benefit at the loss of another, or when
a person retains the money or property of another against the
fundamental principles of justice, equity and good
conscience.32
As can be gleaned from the foregoing, there is unjust
enrichment when (1) a person is unjustly benefited, and (2)
such benefit is derived at the expense of or with damages to
another. The main objective of the principle of unjust
enrichment is to prevent one from enriching oneself at the
expense of another. It is commonly accepted that this doctrine
simply means that a person shall not be allowed to profit or
enrich himself inequitably at another’s expense. One condition
for invoking this principle is that the aggrieved party has no
other action based on a contract, quasi-contract, crime, quasi-
delict, or any other provision of law.
This is not a case of equity overruling or supplanting a positive
provision of law or judicial rule. Rather, equity is exercised in
this case "as the complement of legal jurisdiction [that] seeks
to reach and to complete justice where courts of law, through
the inflexibility of their rules and want of power to adapt their
judgments to the special circumstances of cases, are
incompetent to do so."33
The principle against unjust enrichment obliges Grandteq and
Gonzales to refund to Margallo the car loan payments she had
made, since she has not actually acquired the car. To relieve
Grandteq and Gonzales of their obligation to reimburse
Margallo would, indeed, be to sanction unjust enrichment in
favor of the first two and cause unjust poverty to the latter.34
The Court rigorously disapproves contracts that demonstrate a
clear attempt to exploit the employee and deprive him of the
protection sanctioned by both the Constitution and the Labor
Code.
The Constitution and the Labor Code mandate the protection of
labor. Hence, as a matter of judicial policy, this Court has, in a
number of instances, leaned backwards to protect labor and
the working class against the machinations and incursions of
their more financially entrenched employers.35
Although not strictly a labor contract, the car loan agreement
herein involves a benefit extended by the employers, Grandteq
and Gonzales, to their employee, Margallo. It should benefit,
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Dean Ada D. Abad
and not unduly burden, Margallo. The Court cannot, in any way,
uphold a car loan agreement that threatens the employee with
the forfeiture of all the car loan payments he/she had
previously made, plus loss of the possession of the car, should
the employee wish to resign; otherwise, said agreement can
then be used by the employer as an instrument to either hold
said employee hostage to the job or punish him/her for
resigning.
The Court further finds no error in the grant by the Court of
Appeals and the NLRC of Margallo’s claim for sales commission.
In cases involving money claims of employees, the employer
has the burden of proving that the employees did receive their
wages and benefits and that the same were paid in accordance
with law.36
It is settled that once the employee has set out with
particularity in his complaint, position paper, affidavits and
other documents the labor standard benefits he is entitled to,
and which the employer allegedly failed to pay him, it becomes
the employer’s burden to prove that it has paid these money
claims. One who pleads payment has the burden of proving it;
and even where the employees must allege nonpayment, the
general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove nonpayment.37
Under the terms and conditions of Margallo’s employment with
Grandteq, it is provided that she "will do field sales with
commission on sales made after a month’s training."38 On this
basis, Margallo’s entitlement to sales commission is
unrebutted.
Hence, it was actually the Labor Arbiter who erred in denying
Margallo’s claim for sales commission "for failure to state the
particulars to substantiate the same." Grandteq and Gonzales
have the burden of proof to show, by substantial evidence,
their claim that Margallo was not entitled to sales commissions
because the sales made by the latter remained outstanding and
unpaid, rendering these sales as bad debts and thus nullifying
Margallo’s right to this monetary benefit. Grandteq and
Gonzales could have presented pertinent company records to
prove this claim. It is a rule that failure of employers to submit
the necessary documents that are in their possession as
employers gives rise to the presumption that the presentation
thereof is prejudicial to its cause.39
WHEREFORE, premises considered, the Petition is DENIED for
lack of merit. The Decision dated 21 January 2008 of the Court
of Appeals in CA-GR SP No. 100012 is AFFIRMED. Costs against
petitioners Grandteq Industrial Steel Products, Inc. and
Abelardo M. Gonzales.
SO ORDERED.

[23] G.R. No. 154376 September 30, 2005
ROBERTO T. DOMONDON, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, VAN
MELLE PHILS., INC. and NIELS H.B. HAVE, Respondent.
DECISION
PUNO, J.:
This is a petition for review on certiorari seeking the reversal
of the February 28, 2002 Decision1 of the Court of Appeals in
CA-G.R. SP No. 65130 and its July 17, 2002 Resolution,2
denying petitioner’s motion for reconsideration. The assailed
Decision affirmed the rulings of the National Labor Relations
Commission (NLRC) and the Labor Arbiter, which held that
petitioner was not illegally dismissed but voluntarily resigned.
On November 20, 1998, petitioner Roberto T. Domondon filed
a complaint before the Regional Arbitration Branch of the NLRC,
Quezon City, against private respondent Van Melle Phils., Inc.
(VMPI) and its President and General Manager, private
respondent Niels H.B. Have. He claimed illegal dismissal and
prayed for reinstatement, payment of full backwages inclusive
of allowances, 14th month pay, sick and vacation leaves, share
in the profits, moral and exemplary damages and attorney’s
fees.3
Petitioner alleged that on January 8, 1997, private respondent
VMPI, a manufacturing company engaged in the production and
distribution of confectionaries and related products, hired him
as Materials Manager through its then President and General
Manager Victor M. Endaya. He was tasked to supervise the
Inventory Control, Purchasing, and Warehouse and Distribution
Sections of the company. He was given a guaranteed monthly
salary of ninety-eight thousand (₱98,000.00) pesos for
fourteen (14) months with annual merit adjustment, profit
sharing bonus from 0-2 months based on individual, company
and corporate performance,4 and a brand new
1600cc Honda VTEC5 with 300 liters monthly gas allowance.6
Petitioner claimed that things worked out well for him in the
beginning until Endaya was transferred to China in August 1997
and was replaced by private respondent Have, a Dutch
national. According to petitioner, private respondent Have
immediately set a one-on-one meeting with him and requested
his courtesy resignation. Alleging that the decision came from
the Asia Regional Office, private respondent Have wanted to
reorganize and put his people in management. Petitioner
refused to resign and life got difficult for him. His decisions
were always questioned by private respondent Have. He was
subjected to verbal abuse. His competence was undermined by
baseless and derogatory memos, which lay the bases for his
removal from the company. He also did not receive his 14th
month pay.7
Petitioner further stated that the final straw came on June 10,
1998, in another one-on-one meeting with private respondent
Have. Private respondent Have informed petitioner that things
would get more difficult for him if he does not resign. Private
respondent Have threw a veiled threat at petitioner to the
effect that "a dignified resignation would be infinitely better
than being fired for a fabricated lawful cause." Private
respondent Have offered financial assistance if petitioner would
leave peacefully but the offer must be accepted immediately or
it would be withdrawn. Thus, petitioner signed a "ready-made"
resignation letter without deliberation and evaluation of the
consequences. His main concern then was to prevent the "end
of his professional career."8
Petitioner stated that on the same day that he handed in his
resignation letter, private respondent VMPI posted a
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Dean Ada D. Abad
memorandum with information of his replacement. He claimed
that to lend a semblance of credibility to his forced resignation,
private respondents released to him a portion of the offered
financial package.9
On their part, private respondents admitted hiring petitioner
under the circumstances set forth by him but denied illegally
dismissing him. They maintained that with his educational and
professional background, petitioner could not have been
coerced and intimidated into resigning from the company.
Instead, they claimed that he voluntarily resigned "to embark
on management consultancy in the field of strategic planning
and import/export."10 They stated that petitioner informed
them about his intention to resign and requested a "soft
landing" financial support in the amount of three hundred
thousand (₱300,000.00) pesos on top of accrued benefits due
him upon resignation. Private respondents granted the request.
Subsequently, however, petitioner proposed the transfer of
ownership of the car assigned to him in lieu of the financial
assistance from the company. Since company policy prohibits
disposition of assets without valuable consideration, the parties
agreed that petitioner shall pay for the car with the
₱300,000.00 "soft landing" financial assistance from private
respondent VMPI.
Private respondents averred that petitioner, who was then in
charge of the disposition of the assets of the company, effected
the registration of the car in his name.11 Joannes Cornelis
Kuiten, then Vice-President for Finance, signed for the
company.12 On July 30, 1998, ₱300,000.00 was credited to
petitioner’s payroll account13 but he did not use it to pay for
the car as agreed upon. Repeated demands for payment were
unheeded. In its letter of demand dated October 28, 1998,
private respondent VMPI gave petitioner an option to apply the
₱169,368.32 total cash conversion of his sick and vacation
leave credits, 13th and 14th months’ pay less taxes as partial
payment for the car and pay the balance of ₱130,631.68, or
return the car to the company.14 Petitioner did not exercise
either option. Instead, on November 20, 1998, he filed a
complaint for illegal dismissal against private respondents.
On June 14, 1999, the Labor Arbiter15 ruled for private
respondents, viz:
WHEREFORE, premises considered, the complaint for illegal
dismissal is hereby dismissed for lack of merit, and the claim
for damages and attorney’s fees denied.
The complainant has the option to reconvey to respondents the
car sold to him and thus retain full credit of the ₱300,000.00
"soft landing" assistance, or retain ownership of the car by
paying respondents the purchase price of ₱300,000.00 minus
any amount due him corresponding to his accrued benefits that
has been applied by respondents as partial payment for the
car.
The NLRC affirmed the Decision of the Labor Arbiter16 on
January 26, 2001 and denied petitioner’s motion for
reconsideration on March 5, 2001. Petitioner went to the Court
of Appeals on a special civil action for certiorari but failed for
the third time. The appellate court dismissed the petition on
February 28, 2002 and denied petitioner’s motion for
reconsideration on July 17, 2002; hence, this petition for
review on certiorari.
Petitioner raises as error the failure of the appellate court to
apply the rule in termination of employment that the burden
rests upon the employer to prove by substantial evidence that
the employee was removed for lawful or authorized cause. He
also questions the jurisdiction of the Labor Arbiter to resolve
the issue of the transfer of car-ownership by private
respondents.

I.
The first issue raises factual matters which may not be
reviewed by the Court. Our jurisdiction is limited to reviewing
errors of law. Not being a trier of facts, the Court cannot re-
examine and re-evaluate the probative value of evidence
presented to the Labor Arbiter, the NLRC and the Court of
Appeals, which formed the basis of the questioned decision and
resolution.17 Indeed, their findings when in absolute
agreement are accorded not only respect but even finality as
long as they are supported by substantial evidence.18
In any event, we combed the records of the case at bar and
found no compelling reason to disturb the uniform findings and
conclusions of the Court of Appeals, the NLRC and the Labor
Arbiter. There was no arbitrary disregard or misapprehension
of evidence of such nature as to compel a contrary conclusion
if properly appreciated. Petitioner’s letter of
resignation, his educational attainment, and the circumstances
antecedent and contemporaneous to the filing of the complaint
for illegal dismissal are substantial proof of petitioner’s
voluntary resignation.
Petitioner’s letter of resignation was categorical that he was
resigning "to embark on management consultancy in the field
of strategic planning and import/export."19 Petitioner was
holding a managerial position at private respondent VMPI and
he was previously Vice-President for strategic planning at LG
Collins Electronics. Thus, "management consultancy in the field
of strategic planning" was a logical reason for the resignation,
which either petitioner or private respondents may provide.
"Import/export," whether inclusive or exclusive of the clause
"managerial consultancy," on the other hand, could neither be
inferred from petitioner’s nature of work with private
respondent VMPI nor from his past work experiences. Thus,
even if petitioner was correct in arguing that he could not have
considered it given the state of the country’s economy, anyone
may provide it as reason for the resignation, including him and
private respondents.
But assuming that private respondents prepared the letter of
resignation for petitioner to sign as claimed, the Court is not
convinced that petitioner was coerced and intimidated into
signing it. Petitioner is no ordinary employee with limited
education. He has a Bachelor of Arts Degree in Economics from
the University of Santo Tomas, has completed academic
requirements for Masters of Business Economics from the
University of Asia and the Pacific, and studied law for two (2)
years at Adamson University. He also has a good professional
record, which highlights his marketability. Thus, his reliance on
the case of Molave Tours Corporation v. NLRC,20 where the
employee found to have been forced to resign was a mere
garage custodian, is clearly misplaced.
In termination cases, the employer decides for the employee.
It is different in resignation cases for resignation is a formal
pronouncement of relinquishment of an office. It is made with
the intention of relinquishing the office accompanied by an act
of relinquishment.21 In the instant case, petitioner
relinquished his position when he submitted his letter of
resignation. His subsequent act of receiving and keeping his
requested "soft landing" financial assistance of ₱300,000.00,
and his retention and use of the car subject of his arrangement
with private respondents showed his resolve to relinquish his
post.
Thus, we affirm the findings of the Labor Arbiter, the NLRC and
the Court of Appeals that private respondents were able to
prove through substantial evidence that petitioner was not
illegally dismissed.22
II.
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Dean Ada D. Abad
The next issue involves the jurisdiction of the Labor Arbiter to
hear and decide the question on the transfer of ownership of
the car assigned to petitioner. He contends that it is the regular
courts that have jurisdiction over the question and not the
Labor Arbiter.
This is not an issue of first impression. The jurisdiction of Labor
Arbiters is provided under Article 217(a) of the Labor Code, as
amended, viz:
(a) Except as otherwise provided under this Code the Labor
Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts;
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
In all these instances, the matrix is the existence of an
employer-employee relationship. In the case at bar, there is no
dispute that petitioner is an employee of the respondents. In
Bañez v. Valdevilla,23 we held:
x x x Presently, and as amended by R.A. 6715, the jurisdiction
of Labor Arbiters and the NLRC in Article 217 is comprehensive
enough to include claims for all forms of damages "arising from
the employer-employee relations."
Whereas this Court in a number of occasions had applied the
jurisdictional provisions of Article 217 to claims of damages
filed by employees,24 we hold that by the designating clause
"arising from the employer-employee relations" Article 217
should apply with equal force to the claim of an employer for
actual damages against its dismissed employee, where the
basis for the claim arises from or is necessarily connected with
the fact of termination, and should be entered as a
counterclaim in the illegal dismissal case.
Bañez is in accord with paragraph 6 of Article 217(a), which
covers "all other claims, arising from employer-employee
relations," viz:
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.
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Dean Ada D. Abad

In the case at bar, petitioner claims illegal dismissal and prays

for reinstatement, payment of full backwages inclusive of
allowances, 14th month pay, sick and vacation leaves, share in
the profits, moral and exemplary damages and attorney’s
fees.25 These causes of action clearly fall within the jurisdiction
of the Labor Arbiter, specifically under paragraphs 2,
3 and 4 of Article 217(a). On the other hand, private
respondents made a counterclaim involving the transfer of
ownership of a company car to petitioner. They maintain that
he failed to pay for the car in accordance with their agreement.
The issue is whether this claim of private respondents arose
from the employer-employee relationship of the parties
pursuant to paragraph 6 of Article 217(a) under the general
clause as quoted above.

The records show that the initial agreement of the parties was
that petitioner would be extended a "soft-landing" financial
assistance in the amount of ₱300,000.00 on top of his accrued
benefits at the time of the effectivity of his resignation.
However, petitioner later changed his mind. He requested that
he be allowed to keep the car assigned to him in lieu of the
financial assistance. However, company policy prohibits
transfer of ownership of property without valuable
consideration. Thus, the parties agreed that petitioner shall still
be extended the ₱300,000.00 financial support, which he shall
use to pay for the subject car. On July 30, 1998, private
respondent VMPI deposited the agreed amount in petitioner’s
account.26 Despite having registered the car in his name and
repeated demands from private respondents, petitioner failed
to pay for it as agreed upon. Petitioner did not also return the
car. Without doubt, the transfer of the ownership of the
company car to petitioner is connected with his resignation and
arose out of the parties’ employer-employee relations.
Accordingly, private respondents’ claim for damages falls
within the jurisdiction of the Labor Arbiter.

III.

Petitioner was not illegally dismissed but voluntarily resigned.

His claims for reinstatement, payment of full backwages
inclusive of allowances, moral and exemplary damages and
attorney’s fees must necessarily fail. However, he is entitled to
his 14th month pay, cash conversion of accrued sick and
vacation leaves and profit share in the aggregate amount of
₱169,368.32, the total of which is not disputed. The amount
shall be applied to his obligation to pay ₱300,000.00 for the
company car, which ownership was transferred to him. The
return of the company car to private respondents, given the
period that has lapsed from the offer, ceased to be an option
open to petitioner.

IN VIEW WHEREOF, the decision of the Court of Appeals is

AFFIRMED with MODIFICATION. Petitioner Roberto T.
Domondon is ORDERED to pay private respondent Van Melle
Phils., Inc. the amount of ₱130,631.68, representing the
balance of the purchase price of the car in his custody after
deducting his entitlement to 14th month pay, cash conversion
of accrued sick and vacation leaves and profit share in the total
amount of ₱169,368.32 from the ₱300,000.00 "soft-landing"
financial assistance he received from private respondent.

SO ORDERED.

[24] G.R. No. 141093 February 20, 2001
PRUDENTIAL BANK and TRUST COMPANY, petitioner,
vs.
CLARITA T. REYES, respondent.
GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the
Decision,1 dated October 15, 1999 of the Court of Appeals in
C.A.-G.R. SP No. 30607 and of its Resolution, dated December
6, 1999 denying petitioner's motion for reconsideration of said
decision. The Court of Appeals reversed and set aside the
resolution2 of the National Labor Relations Commission (NLRC)
in NLRC NCR CA No.009364-95, reversing and setting aside the
labor arbiter's decision and dismissing for lack of merit private
respondent's complaint.3
The case stems from NLRC NCR Case No.00-06-03462-92,
which is a complaint for illegal suspension and illegal dismissal
with prayer for moral and exemplary damages, gratuity, fringe
benefits and attorney's fees filed by Clarita Tan Reyes against
Prudential Bank and Trust Company (the Bank) before the
labor arbiter. Prior to her dismissal, private respondent Reyes
held the position of Assistant Vice President in the foreign
department of the Bank, tasked with the duties, among others,
to collect checks drawn against overseas banks payable in
foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters
covering the same.
After proceedings duly undertaken by the parties, judgment
was rendered by labor Arbiter Cornelio L. Linsangan, the
dispositive portion of which reads:
"WHEREFORE, finding the dismissal of complainant to be
without factual and legal basis, judgment is hereby rendered
ordering the respondent bank to pay her back wages for three
(3) years in the amount of P540,000.00 (P15,000.00 x 36
mos.). In lieu of reinstatement, the respondent is also ordered
to pay complainant separation pay equivalent to one month
salary for every year of service, in the amount of P420,000.00
(P15,000 x 28 mos.). In addition, the respondent should. also
pay complainant profit sharing and unpaid fringe benefits.
Attorney's fees equivalent to ten (10%) percent of the total
award should likewise be paid by respondent.
SO ORDERED."4
Not satisfied, the Bank appealed to the NLRC which, as
mentioned at the outset, reversed the Labor Arbiter's decision
in its Resolution dated 24 March 1997. Private respondent
sought reconsideration which, however, was denied by the
NLRC in its Resolution of 28 July 1998. Aggrieved, private
respondent commenced on October 28, 1998, a petition for
certiorari before the Supreme Court.5 The subject petition was
referred to the Court of Appeals for appropriate action and
disposition per resolution of this Court dated November 25,
1998, in accordance with the ruling in St. Marlin Funeral Homes
vs. NLRC.6
In its assailed decision, the Court of Appeals adopted the
following antecedent facts leading to Reyes's dismissal as
summarized by the NLRC:
"The auditors of the Bank discovered that two checks,
No.011728-7232-146, in the amount of US$109,650.00, and
No. 011730-7232-146, in the amount of US$115,000.00,
received by the Bank on April 6, 1989, drawn ,by the Sanford
Trading against Hongkong and Shanghai Banking Corporation,
Jurong Branch, Singapore, in favor of Filipinas Tyrom, were not
sent out for collection to Hongkong Shanghai Banking
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Dean Ada D. Abad
Corporation on the alleged order of the complainant until the
said checks became stale.
The Bank created a committee to investigate the findings of the
auditors involving the two checks which were not collected and
became stale.
On March 8, 1991, the president of the Bank issued a
memorandum to the complainant informing her of the findings
of the auditors and asked her to give her side. In reply,
complainant requested for an extension of one week to submit
her explanation. In a "subsequent letter, dated March 14,
1991, to the president, complainant stated that in view of the
refusal of the Bank that she be furnished copies of the pertinent
documents she is requesting and the refusal to grant her a
reasonable period to prepare her answer, she was constrained
to make a general denial of any misfeasance or malfeasance
on her part and asked that a formal investigation be made.
As the complainant failed to attend and participate in the
formal investigation conducted by the Committee on May 24,
1991, despite due notice, the Committee proceeded with its
hearings and heard the testimonies of several witnesses.
The Committee's findings were:
'a) The two (2) HSBC checks were received by the Foreign
Department on 6 April 1989. On the same day, complainant
authorized the crediting of the account of Filipinas Tyrom in the
amount of P4,780,102.70 corresponding to the face value of
the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the
following day, a transmittal letter was prepared by Ms. Cecilia
Joven, a remittance clerk then assigned in the Foreign
Department, for the purpose of sending out the two (2) HSBC
checks for collection. She then requested complainant to sign
the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
March 1993, pp. 42-52), as it is complainant who gives her
instructions directly concerning the transmittal of foreign bills
purchased. All other transmittal letters are in fact signed by
complainant.
b) After Ms. Joven delivered the transmittal letters and the
checks to the Accounting Section of the Foreign Department,
complainant instructed her to withdraw the same for the
purpose of changing the addressee thereon from American
Express Bank to Bank of Hawaii (ibid.) under a special
collection scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainant's instruction, Ms. Joven
then returned to complainant for the latter to sign the new
transmittal letters. However, complainant told Ms. Joven to just
hold on to the letters and checks and await further instructions
(ibid.). Thus, the new transmittal letters remained unsigned.
(See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another
department. Hence, her duties, responsibilities and functions,
including the responsibility over the two (2) HSBC checks, were
turned over to another remittance clerk, Ms. Analisa Castillo
(Exhibit 14; TSN, 4 June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC checks,
Ms. Joven relayed to the latter complainant's instruction
(Exhibit 14; TSN, 4 June 1993, p. 42).
f) About fifteen (15) months after the HSBC checks were
received by the Bank, the said checks were discovered in the
course of an audit conducted by the Bank's auditors. Atty.
Pablo Magno, the Bank's legal counsel, advised complainant to
send the checks for collection despite the lapse of fifteen (15)
months.

g) Complainant, however, deliberately withheld Atty. Magno's
advice from her superior, the Senior Vice-President, Mr. Renato
Santos and falsely informed the latter that Atty . Magno
advised that a demand letter be sent instead, thereby further
delaying the collection of the HSBC checks.
h) On 10 July 1990, the HSBC checks were finally sent for
collection, but were returned on 16 July 1990 for the reason
'account closed' (Exhibits 2-A and 3-A).'
After a review of the Committee's findings, the Board of
Directors of the Bank resolved not to re-elect complainant any
longer to the position of assistant president pursuant to the
Bank's By-laws.
On July 19, 1991, complainant was informed of her termination
of employment from the Bank by Senior Vice President
Benedicto L. Santos, in a letter the text of which is quoted in
full:
'Dear Mrs. Reyes:
After a thorough investigation and appreciation of the charges
against you as contained in the Memorandum of the President
dated March 8, 1991, the Fact Finding Committee which was
created to investigate the commission and/or omission of the
acts alluded therein, has found the following:
1. You have deliberately held the clearing of Checks Nos. 11728
and 11730 of Hongkong and Shanghai Banking Corporation in
the total amount of US$224,650.00 by giving instructions to
the collection clerk not to send the checks for collection. In view
thereof, when the said checks were finally sent to clearing after
the lapse of 15 months from receipt of said checks, they were
returned for the reason 'Account closed.' To date, the value of
said checks have not been paid by Filipinas Tyrom, which as
payee of the checks, had been credited with their peso
equivalent;
2. You tried to influence the decision of Atty. Pablo P. Magno,
Bank legal counsel, by asking him to do something allegedly
upon instructions of a Senior Vice President of the Bank or else
lose his job when in truth and in fact no such instructions was
given; and
3. You deliberately withheld from Mr. Santos, Senior Vice
President, the advice given by the legal counsel of the Bank
which Mr. Santos had asked you to seek. As a matter of fact,
you even relayed a false advice which delayed further the
sending of the two checks for collection. Likewise, you refused
to heed the advice of the Bank's legal counsel to send the
checks for collection.
These findings have given rise to the Bank's loss of trust and
confidence in you, the same being acts of serious misconduct
in the performance of your duties resulting in monetary loss to
the Bank. In view thereof, the Board has resolved not to re-
elect you to the position of Assistant Vice President of the Bank.
Accordingly, your services are terminated effective
immediately. In relation thereto, your monetary and retirement
benefits are forfeited except those that have vested in you.'
In her position paper, complainant alleged that the real reason
for her dismissal was her filing of the criminal cases against the
bank president, the vice president and the auditors of the Bank,
such filing not being a valid ground for her dismissal.
Furthermore, she alleged that it would be self-serving for the
respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two
dollar checks. She further alleged that she was not afforded
due process as she was not given the chance to refute the
charges mentioned in the letter of dismissal. Hence, she was
illegally dismissed.
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Dean Ada D. Abad
On the other hand, respondent argues that there were
substantial bases for the bank to lose its trust and confidence
on the complainant and, accordingly, had just cause for
terminating her services. Moreover, for filing the clearly
unfounded suit against the respondent's officers, complainant
is liable to pay moral and exemplary damages and attorney's
fees."7
The Court of Appeals found that the NLRC committed grave
abuse of discretion in ruling that the dismissal of Reyes is valid.
In effect, the Court of Appeals reinstated the judgment of the
labor arbiter with modification as follows:
"WHEREFORE, in the light of the foregoing, the decision
appealed from is hereby REVERSED and SET ASIDE. In lieu
thereof, judgment is hereby rendered ordering respondent
Bank as follows:
1. To pay petitioner full backwages and other benefits from July
19, 1991 up to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1) month
salary for every year of service in lieu of reinstatement; and
3. To pay attorney's fee equivalent to ten (10%) percent of the
total award.
SO ORDERED."8
Hence, the Bank's recourse to this Court contending in its
memorandum that:
"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997
AND THE RESOLUTION DATED 28 JULY 1998 OF THE NLRC AND
REINSTATING WITH MODIFICATION THE DECISION DATED 20
JULY 1995 OF LABOR ARBITER CORNELIO L. LINSANGAN, THE
HONORABLE COURT OF APPEALS SERIOUSLY ERRED, IN VIEW
OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT
THE NLRC WHICH HAS ORIGINAL AND EXCLUSIVE
JURISDICTION OVER CASES INVOLVING THE REMOVAL FROM
OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS
JURISDICTION, THERE WAS SUBSTANTIAL EVIDENCE OF
RESPONDENT'S MISCONDUCT JUSTIFYING THE BANK'S LOSS
OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS
ENTITLED TO BACKWAGES, THE HONORABLE COURT OF
APPEALS ERRED IN AWARDING UNLIMITED AND UNQUALIFIED
BACKWAGES THEREBY GOING FAR BEYOND THE LABOR
ARBITER'S DECISION LIMITING THE SAME TO THREE YEARS,
WHICH DECISION RESPONDENT HERSELF SOUGHT TO
EXECUTE."9
In sum, the resolution of this petition hinges on (1) whether
the NLRC has jurisdiction over the complaint for illegal
dismissal; (2) whether complainant Reyes was illegally
dismissed; and (3) whether the amount of back wages awarded
was proper.
On the first issue, petitioner seeks refuge behind the argument
that the dispute is an intra-corporate controversy concerning
as it does the non-election of private respondent to the position

of Assistant Vice-President of the Bank which falls under the
exclusive and original, jurisdiction of the Securities and
Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically,
petitioner contends that complainant is a corporate officer, an
elective position under the corporate by-laws and her non-
election is an intra-corporate controversy cognizable by the
SEC invoking lengthily a number of this Court's decisions.10
Petitioner Bank can no longer raise the issue of jurisdiction
under the principle of estoppel. The Bank participated in the
proceedings from start to finish. It filed its position paper with
the Labor Arbiter. When the decision of the Labor Arbiter was
adverse to it, the Bank appealed to the NLRC. When the NLRC
decided in its favor, the bank said nothing about jurisdiction.
Even before the Court of Appeals, it never questioned the
proceedings on the ground of lack of jurisdiction. It was only
when the Court of Appeals ruled in favor of private respondent
did it raise the issue of jurisdiction. The Bank actively
participated in the proceedings before the Labor Arbiter, the
NLRC and the Court of Appeals. While it is true that jurisdiction
over the subject matter of a case may be raised at any time of
the proceedings, this rule presupposes that laches or estoppel
has not supervened. In this regard, Bañaga vs. Commission on
the Settlement of Land Problems,11 is most enlightening. The
Court therein stated:
"This Court has time and again frowned upon the undesirable
practice of a party submitting his case for decision and then
accepting the judgment, only if favorable, and attacking it for
lack of jurisdiction when adverse. Here, the principle of
estoppel lies. Hence, a party may be estopped or barred from
raising the question of jurisdiction for the first time in a petition
before the Supreme Court when it failed to do so in the early
stages of the proceedings."
Undeterred, the Bank also contends that estoppel cannot lie
considering that "from the beginning, petitioner Bank has
consistently asserted in all its pleadings at all stages of the
proceedings that respondent held the position of Assistant Vice
President, an elective position which she held by virtue of her
having been elected as such by the Board of Directors." As far
as the records before this Court reveal however, such an
assertion was made only in the appeal to the NLRC and raised
again before the Court of Appeals, not for purposes of
questioning jurisdiction but to establish that private
respondent's tenure was subject to the discretion of the Board
of Directors and that her non-reelection was a mere expiration
of her term. The Bank insists that private respondent was
elected Assistant Vice President sometime in 1990 to serve as
such for only one year. This argument will not do either and
must be rejected.
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From that position she rose
to become supervisor. Then in 1982, she was appointed
Assistant Vice-President which she occupied until her illegal
dismissal on July 19, 1991. The bank's contention that she
merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her
length of service with the Bank. As earlier stated, she rose from
the ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As Assistant
Vice President of the foreign department of the Bank, she is
tasked, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the
signing of transmittal letters covering the same. It has been
stated that "the primary standard of determining regular
employment is the reasonable connection between the
particular activity performed by the employee in relation to the
usual trade or business of the employer.12 Additionally, "an
employee is regular because of the nature of work and the
Labor Law Review | Cases
Dean Ada D. Abad
length of service, not because of the mode or even the reason
for hiring them."13 As Assistant Vice-President of the Foreign
Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank
totaling 28 years speaks volumes of her status as a regular
employee of the bank. In fine, as a regular employee, she is
entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause.14 This being in
truth a case of illegal dismissal, it is no wonder then that the
Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail.
This brings us to the second issue wherein the Bank insists that
it has presented substantial evidence to prove the breach of
trust on the part of private respondent warranting her
dismissal. On this point, the Court of Appeals disagreed and set
aside the findings of the NLRC that Reyes deliberately withheld
the release of the two dollar checks; that she is guilty of conflict
of interest that she waived her right to due process for not
attending the hearing; and that she was dismissed based on
loss of trust and confidence. We quote pertinent portions of the
decision, to wit:
"FIRST: Respondent Bank heavily relied on the testimony and
affidavit of Remittance Clerk Joven' in trying to establish loss
of confidence. However, Joven's allegation that petitioner
instructed her to hold the subject two dollar checks amounting
to $224,650.00 falls short of the requisite proof to warrant
petitioner's dismissal. Except for Joven's bare assertion to
withhold the dollar checks per petitioner's instruction,
respondent Bank failed to adduce convincing evidence to prove
bad faith and malice. It bears emphasizing that respondent
Bank's witnesses merely corroborate Joven's testimony.
Upon this point, the rule that proof beyond reasonable doubt is
not required to terminate an employee on the charge of loss of
confidence and that it is sufficient that there is some basis for
such loss of confidence, is not absolute. The right of an
employer to dismiss employees on the ground that it has lost
its trust and confidence in him must not be exercised arbitrarily
and without just cause. For loss of trust and confidence to be
valid ground for an employee's dismissal, it must be substantial
and not arbitrary, and must be founded on clearly established
facts sufficient to warrant the employee's separation from work
(Labor vs. NLRC, 248 SCRA 183).
SECOND. Respondent Bank's charge of deliberate withholding
of the two dollar checks finds no support in the testimony of
Atty. Jocson, Chairman of the Investigating Committee. On
cross examination, Atty. Jocson testified that the documents
themselves do not show any direct withholding (pp. 186-187,
Rollo). There being conflict in the statement of witnesses, the
court must adopt the testimony which it believes to be true
(U.S. vs. Losada, 18 Phil. 90).
THIRD. Settled is the rule that when the conclusions of the
Labor Arbiter are sufficiently substantiated by the evidence on
record, the same should be respected by appellate tribunals
since he is in a better position to assess and evaluate the
credibility of the contending parties (Ala Mode Garments, Inc.
vs. NLRC, 268 SCRA 497). In this regard, the Court quotes with
approval the following disquisition of Labor Arbiter Linsangan,
thus:
This Office has repeatedly gone over the records of the case
and painstakingly examined the testimonies of respondent
bank's witnesses. One thing was clearly established: that the
legality of complainant's dismissal based on the first ground
stated in respondent's letter of termination (exh. 25-J, supra)
will rise or fall on the credibility of Miss Joven who undisputedly
is the star witness for the bank. It will be observed that the
testimonies of the bank's other witnesses, Analiza Castillo,

Dante Castor and Antonio Ragasa pertaining to the non-release
of the dollar checks and their corresponding transmittal letters
were all anchored on what was told them by Ms. Joven, that is:
she was instructed by complainant to hold the release of
subject checks. In a nutshell, therefore, the issue boils down
to who between complainant and Ms. Joven is more credible.
After painstakingly examining the testimonies of Ms. Joven and
respondent's other witnesses' this Office finds the evidence still
wanting in proof of complainant's guilt. This Office had closely
observed the demeanor of Ms. Joven while testifying on the
witness stand and was not impressed by her assertions. The
allegation of Ms. Joven in that her non-release of the dollar
checks was upon the instruction of complainant Reyes is
extremely doubtful. In the first place, the said instruction
constitutes a gross violation of the bank's standard operating
procedure. Moreover, Ms. Joven was fully aware that the
instruction, if carried out, will greatly prejudice her employer
bank. It was incumbent upon Ms. Joven not only to disobey the
instruction but even to report the matter to management, if
same was really given to her by complainant.
Our doubt on the veracity of Ms. Joven's allegation even
deepens as we consider the fact that when the non-release of
the checks was discovered by Ms. Castillo the former contented
herself by continuously not taking any action on the two dollar
checks. Worse, Ms. Joven even impliedly told by Ms. Castillo
(sic) to ignore the two checks and just withhold their release.
In her affidavit Ms. Castillo said:
'4. When I asked Cecille Joven what I was supposed to do with
those checks, she said the same should be held as per
instruction of Mrs. Reyes.' (Exh. "14", supra).
The evidence shows that it was only on 16 May 1990 that Ms.
Joven broke her silence on the matter despite the fact that on
15 November 1989, at about 8:00 p.m. the complainant,
accompanied by driver Celestino Banito, went to her residence
and confronted her regarding the non-release of the dollar
checks. It took Ms. Joven eighteen (18) months before she
explained her side on the controversy. As to what prompted
her to make her letter of explanation was not even mentioned.
On the other hand, the actions taken by the complainant were
spontaneous. When complainant was informed by Mr. Castor
and Ms. Castillo regarding the non-release of the checks
sometime in November, 1989 she immediately reported the
matter to Vice President Santos, Head of the Foreign
Department. And as earlier mentioned, complainant went to
the residence of Ms. Joven to confront her. In this regard,
Celestino Bonito, complainant's driver, stated in his affidavit,
thus:
'1. Sometime on November 15, 1989 at about 7:00 o'clock in
the evening, Mrs. Clarita Tan Reyes and I were in the residence
of one Ms. Cecille Joven, then a Processing Clerk in the Foreign
Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan
Reyes were seated in the sala when the latter asked the former,
Ms. Cecille Joven, how it came about that the two dollar checks
which she was then holding with the transmittal letters, were
found in a plastic envelope kept day-to-day by the former;
3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan Reyes
had been intimately called Mother in the Bank) akala ko
bouncing checks yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was
surprised and she said: "Ano, papaano mong alam na bouncing
na hindi mo pa pinadadala:
5. Mrs. Cecille Joven turned pale and was not able to answer.'
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Dean Ada D. Abad
There are other factors that constrain this Office to doubt even
more the legality of complainant's dismissal based on the first
ground stated in the letter of dismissal. The non-release of the
dollar checks was reported to top management sometime on
15 November 1989 when complainant, accompanied by
Supervisor Dante Castor and Analiza Castillo, reported the
matter to Vice President Santos. And yet, it was only on 08
March 1991, after a lapse of sixteen (16) months from the time
the non-release of the checks was reported to the Vice
President, that complainant was issued a memorandum
directing her to submit an explanation. And it took the bank
another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant
lends credence to the assertion of the latter that her dismissal
was a mere retaliation to the criminal complaints she filed
against the bank's top officials.
It clearly appears from the foregoing that the complainant
herein has no knowledge of, much less participation in, the
non-release of the dollar checks under discussion. Ms. Joven is
solely responsible for the same. Incidentally, she was not even
reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner
necessary documents imputing loss of confidence, petitioner
was not amply afforded opportunity to prepare an intelligent
answer. The Court finds nothing confidential in the auditor's
report and the affidavit of Transmittal Clerk Joven. Due process
dictates that management accord the employees every kind of
assistance to enable him to prepare adequately for his defense,
including legal representation.
The issue of conflict of interest not having been covered by the
investigation, the Court finds it irrelevant to the charge."15
We uphold the findings of the Court of Appeals that the
dismissal of private respondent on the ground of loss of trust
and confidence was without basis. The charge was predicated
on the testimony of Ms. Joven and we defer to the findings of
the Labor Arbiter as confirmed and adopted by the Court of
Appeals on the credibility of said witness. This Court is not a
trier of facts and will not weigh anew the evidence already
passed upon by the Court of Appeals.16
On the third issue, the Bank questions the award of full
backwages and other benefits from July 19, 1991 up to the
finality of this judgment; separation pay equivalent to one (1)
month salary for every year of service in lieu of reinstatement;
and attorney's fees equivalent to ten (10%) percent of the total
award. The Bank argues, in the main, that private respondent
is not entitled to full backwages in view of the fact that she did
not bother to appeal that portion of the labor arbiter's
judgment awarding back wages limited to three years. It must
be stressed that private respondent filed a special civil action
for certiorari to review the decision of the NLRC17 and not an
ordinary appeal. An ordinary appeal is distinguished from the
remedy of certiorari under Rule 65 of the Revised Rules of
Court in that in ordinary appeals it is settled that a party who
did not appeal cannot seek affirmative relief other than the
ones granted in the decision of the court below.18 On the other
hand, resort to a judicial review of the decisions of the National
Labor Relations Commission in a petition for certiorari under
Rule 65 of Rules of Court is confined to issues of want or excess
of jurisdiction and grave abuse of discretion.19 In the instant
case, the Court of Appeals found that the NLRC gravely abused
its discretion in finding that the private respondent's dismissal
was valid and so reversed the same. Corollary to the foregoing,
the appellate court awarded backwages in accordance with
current jurisprudence.
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Dean Ada D. Abad

Indeed, jurisprudence is clear on the amount of backwages

recoverable in cases of illegal dismissal. Employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989 are entitled to backwages up to three (3) years
without deduction or qualification, while those illegally
dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent
from the time their actual compensation was withheld from
them up to the time of their actual reinstatement.20
Considering that private respondent was terminated on July 19,
1991, she is entitled to full backwages from the time her actual
compensation was withheld from her (which, as a rule, is from
the time of her illegal dismissal) up to the finality of this
judgment (instead of reinstatement) considering that
reinstatement is no longer feasible as correctly pointed out by
the Court of Appeals on account of the strained relations
brought about by the litigation in this case. Since reinstatement
is no longer viable, she is also entitled to separation pay
equivalent to one (1) month salary for every year of service.21
Lastly, since private respondent was compelled to file an action
for illegal dismissal with the labor arbiter, she is likewise
entitled to attorney's fees22 at the rate above-mentioned.
There is no room to argue, as the Bank does here, that its
liability should be mitigated on account of its good faith and
that private respondent is not entirely blameless. There is no
showing that private respondent is partly at fault or that the
Bank acted in good faith in terminating an employee of twenty-
eight years. In any event, Article 279 of Republic Act No.
671523 clearly and plainly provides for "full backwages" to
illegally dismissed employees.1âwphi1.nêt

WHEREFORE, the instant petition for review on certiorari is

DENIED, and the assailed Decision of the Court of Appeals,
dated October 15, 1999, is AFFIRMED.

SO ORDERED.

[25] G.R. No. 168757 January 19, 2011
RENATO REAL, Petitioner,
vs.
SANGU PHILIPPINES, INC. and/ or KIICHI ABE,
Respondents.
DECISION
DEL CASTILLO, J.:
The perennial question of whether a complaint for illegal
dismissal is intra-corporate and thus beyond the jurisdiction of
the Labor Arbiter is the core issue up for consideration in this
case.
This Petition for Review on Certiorari assails the Decision1
dated June 28, 2005 of the Court of Appeals (CA) in CA-G.R.
SP. No. 86017 which dismissed the petition for certiorari filed
before it.
Factual Antecedents
Petitioner Renato Real was the Manager of respondent
corporation Sangu Philippines, Inc., a corporation engaged in
the business of providing manpower for general services, like
janitors, janitresses and other maintenance personnel, to
various clients. In 2001, petitioner, together with 29 others
who were either janitors, janitresses, leadmen and
maintenance men, all employed by respondent corporation,
filed their respective Complaints2 for illegal dismissal against
the latter and respondent Kiichi Abe, the corporation’s Vice-
President and General Manager. These complaints were later
on consolidated.
With regard to petitioner, he was removed from his position as
Manager through Board Resolution 2001-033 adopted by
respondent corporation’s Board of Directors. Petitioner
complained that he was neither notified of the Board Meeting
during which said board resolution was passed nor formally
charged with any infraction. He just received from respondents
a letter4 dated March 26, 2001 stating that he has been
terminated from service effective March 25, 2001 for the
following reasons: (1) continuous absences at his post at Ogino
Philippines Inc. for several months which was detrimental to
the corporation’s operation; (2) loss of trust and confidence;
and, (3) to cut down operational expenses to reduce further
losses being experienced by respondent corporation.
Respondents, on the other hand, refuted petitioner’s claim of
illegal dismissal by alleging that after petitioner was appointed
Manager, he committed gross acts of misconduct detrimental
to the company since 2000. According to them, petitioner
would almost always absent himself from work without
informing the corporation of his whereabouts and that he would
come to the office only to collect his salaries. As he was almost
always absent, petitioner neglected to supervise the employees
resulting in complaints from various clients about employees’
performance. In one instance, petitioner together with a few
others, while apparently drunk, went to the premises of one of
respondents’ clients, Epson Precision (Phils.) Inc., and engaged
in a heated argument with the employees therein. Because of
this, respondent Abe allegedly received a complaint from
Epson’s Personnel Manager concerning petitioner’s conduct.
Respondents likewise averred that petitioner established a
company engaged in the same business as respondent
corporation’s and even submitted proposals for janitorial
services to two of the latter’s clients. Because of all these, the
Board of Directors of respondent corporation met on March 24,
2001 and adopted Board Resolution No. 2001-03 removing
petitioner as Manager. Petitioner was thereafter informed of his
removal through a letter dated March 26, 2001 which he,
however, refused to receive.
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Dean Ada D. Abad
Further, in what respondents believed to be an act of
retaliation, petitioner allegedly encouraged the employees who
had been placed in the manpower pool to file a complaint for
illegal dismissal against respondents. Worse, he later incited
those assigned in Epson Precision (Phils.) Inc., Ogino
Philippines Corporation, Hitachi Cable Philippines Inc. and
Philippine TRC Inc. to stage a strike on April 10 to 16, 2001.
Not satisfied, petitioner together with other employees also
barricaded the premises of respondent corporation. Such acts
respondents posited constitute just cause for petitioner’s
dismissal and that same was validly effected.
Rulings of the Labor Arbiter and the National Labor Relations
Commission
The Labor Arbiter in a Decision5 dated June 5, 2003 declared
petitioner and his co-complainants as having been illegally
dismissed and ordered respondents to reinstate complainants
to their former positions without loss of seniority rights and
other privileges and to pay their full backwages from the time
of their dismissal until actually reinstated and furthermore, to
pay them attorney’s fees. The Labor Arbiter found no
convincing proof of the causes for which petitioner was
terminated and noted that there was complete absence of due
process in the manner of his termination.
Respondents thus appealed to the National Labor Relations
Commission (NLRC) and raised therein as one of the issues the
lack of jurisdiction of the Labor Arbiter over petitioner’s
complaint. Respondents claimed that petitioner is both a
stockholder and a corporate officer of respondent corporation,
hence, his action against respondents is an intra-corporate
controversy over which the Labor Arbiter has no jurisdiction.
The NLRC found such contention of respondents to be
meritorious. Aside from petitioner’s own admission in the
pleadings that he is a stockholder and at the same time
occupying a managerial position, the NLRC also gave weight to
the corporation’s General Information Sheet6 (GIS) dated
October 27, 1999 listing petitioner as one of its stockholders,
consequently his termination had to be effected through a
board resolution. These, the NLRC opined, clearly established
petitioner’s status as a stockholder and as a corporate officer
and hence, his action against respondent corporation is an
intra-corporate controversy over which the Labor Arbiter has
no jurisdiction. As to the other complainants, the NLRC ruled
that there was no dismissal. The NLRC however, modified the
appealed decision of the Labor Arbiter in a Decision7 dated
February 13, 2004, the dispositive portion of which reads:
WHEREFORE, all foregoing premises considered, the appealed
Decision dated June 5, 2003 is hereby MODIFIED. Accordingly,
judgment is hereby rendered DISMISSING the complaint of
Renato Real for lack of jurisdiction. As to the rest of the
complainants, they are hereby ordered to immediately report
back to work but without the payment of backwages.
All other claims against respondents including attorney’s fees
are DISMISSED for lack of merit.
SO ORDERED.
Still joined by his co-complainants, petitioner brought the case
to the CA by way of petition for certiorari.
Ruling of the Court of Appeals
Before the CA, petitioner imputed upon the NLRC grave abuse
of discretion amounting to lack or excess of jurisdiction in
declaring him a corporate officer and in holding that his action
against respondents is an intra-corporate controversy and thus
beyond the jurisdiction of the Labor Arbiter.

While admitting that he is indeed a stockholder of respondent
corporation, petitioner nevertheless disputed the declaration of
the NLRC that he is a corporate officer thereof. He posited that
his being a stockholder and his being a managerial employee
do not ipso facto confer upon him the status of a corporate
officer. To support this contention, petitioner called the CA’s
attention to the same GIS relied upon by the NLRC when it
declared him to be a corporate officer. He pointed out that
although said information sheet clearly indicates that he is a
stockholder of respondent corporation, he is not an officer
thereof as shown by the entry "N/A" or "not applicable"
opposite his name in the officer column. Said column requires
that the particular position be indicated if the person is an
officer and if not, the entry "N/A". Petitioner further argued that
the fact that his dismissal was effected through a board
resolution does not likewise mean that he is a corporate officer.
Otherwise, all that an employer has to do in order to avoid
compliance with the requisites of a valid dismissal under the
Labor Code is to dismiss a managerial employee through a
board resolution. Moreover, he insisted that his action for illegal
dismissal is not an intra-corporate controversy as same
stemmed from employee-employer relationship which is well
within the jurisdiction of the Labor Arbiter. This can be deduced
and is bolstered by the last paragraph of the termination letter
sent to him by respondents stating that he is entitled to
benefits under the Labor Code, to wit:
In this connection (his dismissal) you are entitled to separation
pay and other benefits provided for under the Labor Code of
the Philippines.8 (Emphasis supplied)
In contrast, respondents stood firm that the action against
them is an intra-corporate controversy. It cited Tabang v.
National Labor Relations Commission9 wherein this Court
declared that "an intra-corporate controversy is one which
arises between a stockholder and the corporation;" that
"[t]here is no distinction, qualification, nor any exemption
whatsoever;" and that it is "broad and covers all kinds of
controversies between stockholders and corporations." In view
of this ruling and since petitioner is undisputedly a stockholder
of the corporation, respondents contended that the action
instituted by petitioner against them is an intra-corporate
controversy cognizable only by the appropriate regional trial
court. Hence, the NLRC correctly dismissed petitioner’s
complaint for lack of jurisdiction.
In the assailed Decision10 dated June 28, 2005, the CA sided
with respondents and affirmed the NLRC’s finding that aside
from being a stockholder of respondent corporation, petitioner
is also a corporate officer thereof and consequently, his
complaint is an intra-corporate controversy over which the
labor arbiter has no jurisdiction. Said court opined that if it was
true that petitioner is a mere employee, the respondent
corporation would not have called a board meeting to pass a
resolution for petitioner’s dismissal considering that it was very
tedious for the Board of Directors to convene and to adopt a
resolution every time they decide to dismiss their managerial
employees. To support its finding, the CA likewise cited
Tabang. As to petitioner’s co-complainants, the CA likewise
affirmed the NLRC’S finding that they were never dismissed
from the service. The dispositive portion of the CA Decision
reads:
WHEREFORE, the instant petition is hereby DISMISSED.
Accordingly, the assailed decision and resolution of the public
respondent National Labor Relations Commission in NLRC NCR
CA No. 036128-03 NLRC SRAB-IV-05-6618-01-B/05-6619-02-
B/05-6620-02-B/10-6637-01-B/10-6833-01-B, STANDS.
SO ORDERED.
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Now alone but still undeterred, petitioner elevated the case to
us through this Petition for Review on Certiorari.
The Parties’ Arguments
Petitioner continues to insist that he is not a corporate officer.
He argues that a corporate officer is one who holds an elective
position as provided in the Articles of Incorporation or one who
is appointed to such other positions by the Board of Directors
as specifically authorized by its By-Laws. And, since he was
neither elected nor is there any showing that he was appointed
by the Board of Directors to his position as Manager, petitioner
maintains that he is not a corporate officer contrary to the
findings of the NLRC and the CA.
Petitioner likewise contends that his complaint for illegal
dismissal against respondents is not an intra-corporate
controversy. He avers that for an action or suit between a
stockholder and a corporation to be considered an intra-
corporate controversy, same must arise from intra-corporate
relations, i.e., an action involving the status of a stockholder
as such. He believes that his action against the respondents
does not arise from intra-corporate relations but rather from
employer-employee relations. This, according to him, was even
impliedly recognized by respondents as shown by the earlier
quoted portion of the termination letter they sent to him.
For their part, respondents posit that what petitioner is
essentially assailing before this Court is the finding of the NLRC
and the CA that he is a corporate officer of respondent
corporation. To the respondents, the question of whether
petitioner is a corporate officer is a question of fact which, as
held in a long line of jurisprudence, cannot be the subject of
review under this Petition for Review on Certiorari. At any rate,
respondents insist that petitioner who is undisputedly a
stockholder of respondent corporation is likewise a corporate
officer and that his action against them is an intra-corporate
dispute beyond the jurisdiction of the labor tribunals. To
support this, they cited several jurisprudence such as Pearson
& George (S.E. Asia), Inc. v. National Labor Relations
Commission,11 Philippine School of Business Administration v.
Leano,12 Fortune Cement Corporation v. National Labor
Relations Commission13 and again, Tabang v. National Labor
Relations Commission.14
Moreover, in an attempt to demolish petitioner’s claim that the
present controversy concerns employer-employee relations,
respondents enumerated the following facts and
circumstances: (1) Petitioner was an incorporator, stockholder
and manager of respondent company; (2) As an incorporator,
he was one of only seven incorporators of respondent
corporation and one of only four Filipino members of the Board
of Directors; (3) As stockholder, he has One Thousand (1,000)
of the Ten Thousand Eight Hundred (10,800) common shares
held by Filipino stockholders, with a par-value of One Hundred
Thousand Pesos (₱100,000.00); (4) His appointment as
manager was by virtue of Section 1, Article IV of respondent
corporation’s By-Laws; (5) As manager, he had direct
management and authority over all of respondent corporation’s
skilled employees; (6) Petitioner has shown himself to be an
incompetent manager, unable to properly supervise the
employees and even causing friction with the corporation’s
clients by engaging in unruly behavior while in client’s
premises; (7) As if his incompetence was not enough, in a
blatant and palpable act of disloyalty, he established another
company engaged in the same line of business as respondent
corporation; (8) Because of these acts of incompetence and
disloyalty, respondent corporation through a Resolution
adopted by its Board of Directors was finally constrained to
remove petitioner as Manager and declare his office vacant; (9)
After his removal, petitioner urged the employees under him
to stage an unlawful strike by leading them to believe that they
have been illegally dismissed from employment.15 Apparently,

respondents intended to show from this enumeration that
petitioner’s removal pertains to his relationship with
respondent corporation, that is, his utter failure to advance its
interest and the prejudice caused by his acts of disloyalty. For
this reason, respondents see the action against them not as a
case between an employer and an employee as what petitioner
alleges, but one by an officer and at same time a major
stockholder seeking to be reinstated to his former office against
the corporation that declared his position vacant.
Finally, respondents state that the fact that petitioner is being
given benefits under the Labor Code as stated in his
termination letter does not mean that they are recognizing the
employer-employee relations between them. They explain that
the benefits provided under the Labor Code were merely made
by respondent corporation as the basis in determining
petitioner’s compensation package and that same are merely
part of the perquisites of petitioner’s office as a director and
manager. It does not and it cannot change the intra-corporate
nature of the controversy. Hence, respondents pray that this
petition be dismissed for lack of merit.
Issues
From the foregoing and as earlier mentioned, the core issue to
be resolved in this case is whether petitioner’s complaint for
illegal dismissal constitutes an intra-corporate controversy and
thus, beyond the jurisdiction of the Labor Arbiter.
Our Ruling
Two-tier test in determining the existence of intra-corporate
controversy
Respondents strongly rely on this Court’s pronouncement in
the 1997 case of Tabang v. National Labor Relations
Commission, to wit:
[A]n intra-corporate controversy is one which arises between a
stockholder and the corporation. There is no distinction,
qualification nor any exemption whatsoever. The provision is
broad and covers all kinds of controversies between
stockholders and corporations.16
In view of this, respondents contend that even if petitioner
challenges his being a corporate officer, the present case still
constitutes an intra-corporate controversy as petitioner is
undisputedly a stockholder and a director of respondent
corporation.
It is worthy to note, however, that before the promulgation of
the Tabang case, the Court provided in Mainland Construction
Co., Inc. v. Movilla17 a "better policy" in determining which
between the Securities and Exchange Commission (SEC) and
the Labor Arbiter has jurisdiction over termination disputes,18
or similarly, whether they are intra-corporate or not, viz:
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders
and the corporation does not necessarily place the dispute
within the ambit of the jurisdiction of the SEC (now the
Regional Trial Court19). The better policy to be followed in
determining jurisdiction over a case should be to consider
concurrent factors such as the status or relationship of the
parties or the nature of the question that is subject of their
controversy. In the absence of any one of these factors, the
SEC will not have jurisdiction. Furthermore, it does not
necessarily follow that every conflict between the corporation
and its stockholders would involve such corporate matters as
only SEC (now the Regional Trial Court20) can resolve in the
exercise of its adjudicatory or quasi-judicial powers. (Emphasis
ours)
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Dean Ada D. Abad
And, while Tabang was promulgated later than Mainland
Construction Co., Inc., the "better policy" enunciated in the
latter appears to have developed into a standard approach in
classifying what constitutes an intra-corporate controversy.
This is explained lengthily in Reyes v. Regional Trial Court of
Makati, Br. 142,21 to wit:
Intra-Corporate Controversy
A review of relevant jurisprudence shows a development in the
Court’s approach in classifying what constitutes an intra-
corporate controversy. Initially, the main consideration in
determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-
corporate relationship existing between or among the parties.
The types of relationships embraced under Section 5(b) x x x
were as follows:
a) between the corporation, partnership or association and the
public;
b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
c) between the corporation, partnership or association and the
State as far as its franchise, permit or license to operate is
concerned; and
d) among the stockholders, partners or associates themselves.
The existence of any of the above intra-corporate relations was
sufficient to confer jurisdiction to the SEC (now the RTC),
regardless of the subject matter of the dispute. This came to
be known as the relationship test.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol
Mountain Reserve, Inc., the Court introduced the nature of the
controversy test. We declared in this case that it is not the
mere existence of an intra-corporate relationship that gives
rise to an intra-corporate controversy; to rely on the
relationship test alone will divest the regular courts of their
jurisdiction for the sole reason that the dispute involves a
corporation, its directors, officers, or stockholders. We saw that
there is no legal sense in disregarding or minimizing the value
of the nature of the transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that
relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the
enforcement of the parties’ correlative rights and obligations
under the Corporation Code and the internal and intra-
corporate regulatory rules of the corporation. If the relationship
and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist,
then no intra-corporate controversy exists.
The Court then combined the two tests and declared that
jurisdiction should be determined by considering not only the
status or relationship of the parties, but also the nature of the
question under controversy. This two-tier test was adopted in
the recent case of Speed Distribution Inc. v. Court of Appeals:
‘To determine whether a case involves an intra-corporate
controversy, and is to be heard and decided by the branches of
the RTC specifically designated by the Court to try and decide
such cases, two elements must concur: (a) the status or
relationship of the parties, and (2) the nature of the question
that is the subject of their controversy.
The first element requires that the controversy must arise out
of intra-corporate or partnership relations between any or all

of the parties and the corporation, partnership, or association
of which they are not stockholders, members or associates,
between any or all of them and the corporation, partnership or
association of which they are stockholders, members or
associates, respectively; and between such corporation,
partnership, or association and the State insofar as it concerns
the individual franchises. The second element requires that the
dispute among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the controversy
involves matters that are purely civil in character, necessarily,
the case does not involve an intra-corporate controversy.’
[Citations omitted.]
Guided by this recent jurisprudence, we thus find no merit in
respondents’ contention that the fact alone that petitioner is a
stockholder and director of respondent corporation
automatically classifies this case as an intra-corporate
controversy. To reiterate, not all conflicts between the
stockholders and the corporation are classified as intra-
corporate. There are other factors to consider in determining
whether the dispute involves corporate matters as to consider
them as intra-corporate controversies.
What then is the nature of petitioner’s Complaint for Illegal
Dismissal? Is it intra-corporate and thus beyond the jurisdiction
of the Labor Arbiter? We shall answer this question by using
the standards set forth in the Reyes case.
No intra-corporate relationship between the parties
As earlier stated, petitioner’s status as a stockholder and
director of respondent corporation is not disputed. What the
parties disagree on is the finding of the NLRC and the CA that
petitioner is a corporate officer. An examination of the
complaint for illegal dismissal, however, reveals that the root
of the controversy is petitioner’s dismissal as Manager of
respondent corporation, a position which respondents claim to
be a corporate office. Hence, petitioner is involved in this case
not in his capacity as a stockholder or director, but as an
alleged corporate officer. In applying the relationship test,
therefore, it is necessary to determine if petitioner is a
corporate officer of respondent corporation so as to establish
the intra-corporate relationship between the parties. And albeit
respondents claim that the determination of whether petitioner
is a corporate officer is a question of fact which this Court
cannot pass upon in this petition for review on certiorari, we
shall nonetheless proceed to consider the same because such
question is not the main issue to be resolved in this case but is
merely collateral to the core issue earlier mentioned.
Petitioner negates his status as a corporate officer by pointing
out that although he was removed as Manager through a board
resolution, he was never elected to said position nor was he
appointed thereto by the Board of Directors. While the By-Laws
of respondent corporation provides that the Board may from
time to time appoint such officers as it may deem necessary or
proper, he avers that respondents failed to present any board
resolution that he was appointed pursuant to said By-Laws. He
instead alleges that he was hired as Manager of respondent
corporation solely by respondent Abe. For these reasons,
petitioner claims to be a mere employee of respondent
corporation rather than as a corporate officer.
We find merit in petitioner’s contention.
"‘Corporate officers’ in the context of Presidential Decree No.
902-A are those officers of the corporation who are given that
character by the Corporation Code or by the corporation’s by-
laws. There are three specific officers whom a corporation must
have under Section 25 of the Corporation Code. These are the
president, secretary and the treasurer. The number of officers
is not limited to these three. A corporation may have such other
officers as may be provided for by its by-laws like, but not
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Dean Ada D. Abad
limited to, the vice-president, cashier, auditor or general
manager. The number of corporate officers is thus limited by
law and by the corporation’s by-laws."22
Respondents claim that petitioner was appointed Manager by
virtue of Section 1, Article IV of respondent corporation’s By-
Laws which provides:
ARTICLE IV
OFFICER
Section 1. Election/Appointment – Immediately after their
election, the Board of Directors shall formally organize by
electing the President, Vice-President, the Secretary at said
meeting.
The Board, may from time to time, appoint such other officers
as it may determine to be necessary or proper. Any two (2) or
more positions may be held concurrently by the same person,
except that no one shall act as President and Treasurer or
Secretary at the same time.
x x x x23 (Emphasis ours)
We have however examined the records of this case and we
find nothing to prove that petitioner’s appointment was made
pursuant to the above-quoted provision of respondent
corporation’s By-Laws. No copy of board resolution appointing
petitioner as Manager or any other document showing that he
was appointed to said position by action of the board was
submitted by respondents. What we found instead were mere
allegations of respondents in their various pleadings24 that
petitioner was appointed as Manager of respondent corporation
and nothing more. "The Court has stressed time and again that
allegations must be proven by sufficient evidence because
mere allegation is definitely not evidence."25
It also does not escape our attention that respondents made
the following conflicting allegations in their Memorandum on
Appeal26 filed before the NLRC which cast doubt on petitioner’s
status as a corporate officer, to wit:
xxxx
24. Complainant-appellee Renato Real was appointed as the
manager of respondent-appellant Sangu on November 6, 1998.
Priorly [sic], he was working at Atlas Ltd. Co. at Mito-shi,
Ibaraki-ken Japan. He was staying in Japan as an illegal alien
for the past eleven (11) years. He had a problem with his family
here in the Philippines which prompted him to surrender
himself to Japan’s Bureau of Immigration and was deported
back to the Philippines. His former employer, Mr. Tsutomo
Nogami requested Mr. Masahiko Shibata, one of respondent-
appellant Sangu’s Board of Directors, if complainant-appellee
Renato Real could work as one of its employees here in the
Philippines because he had been blacklisted at Japan’s
Immigration Office and could no longer go back to Japan. And
so it was arranged that he would serve as respondent-appellant
Sangu’s manager, receiving a salary of ₱25,000.00. As such,
he was tasked to oversee the operations of the company. x x x
(Emphasis ours)
xxxx
As earlier stated, complainant-appellee Renato Real was hired
as the manager of respondent-appellant Sangu. As such, his
position was reposed with full trust and confidence. x x x
While respondents repeatedly claim that petitioner was
appointed as Manager pursuant to the corporation’s By-Laws,
the above-quoted inconsistencies in their allegations as to how
petitioner was placed in said position, coupled by the fact that
they failed to produce any documentary evidence to prove that

petitioner was appointed thereto by action or with approval of
the board, only leads this Court to believe otherwise. It has
been consistently held that "[a]n ‘office’ is created by the
charter of the corporation and the officer is elected (or
appointed) by the directors or stockholders."27 Clearly here,
respondents failed to prove that petitioner was appointed by
the board of directors. Thus, we cannot subscribe to their claim
that petitioner is a corporate officer. Having said this, we find
that there is no intra-corporate relationship between the
parties insofar as petitioner’s complaint for illegal dismissal is
concerned and that same does not satisfy the relationship test.
Present controversy does not relate to intra-corporate dispute
We now go to the nature of controversy test. As earlier stated,
respondents terminated the services of petitioner for the
following reasons: (1) his continuous absences at his post at
Ogino Philippines, Inc; (2) respondents’ loss of trust and
confidence on petitioner; and, (3) to cut down operational
expenses to reduce further losses being experienced by the
corporation. Hence, petitioner filed a complaint for illegal
dismissal and sought reinstatement, backwages, moral
damages and attorney’s fees. From these, it is not difficult to
see that the reasons given by respondents for dismissing
petitioner have something to do with his being a Manager of
respondent corporation and nothing with his being a director or
stockholder. For one, petitioner’s continuous absences in his
post in Ogino relates to his performance as Manager. Second,
respondents’ loss of trust and confidence in petitioner stemmed
from his alleged acts of establishing a company engaged in the
same line of business as respondent corporation’s and
submitting proposals to the latter’s clients while he was still
serving as its Manager. While we note that respondents also
claim these acts as constituting acts of disloyalty of petitioner
as director and stockholder, we, however, think that same is a
mere afterthought on their part to make it appear that the
present case involves an element of intra-corporate
controversy. This is because before the Labor Arbiter,
respondents did not see such acts to be disloyal acts of a
director and stockholder but rather, as constituting willful
breach of the trust reposed upon petitioner as Manager.28 It
was only after respondents invoked the Labor Arbiter’s lack of
jurisdiction over petitioner’s complaint in the Supplemental
Memorandum of Appeal29 filed before the NLRC that
respondents started considering said acts as such. Third, in
saying that they were dismissing petitioner to cut operational
expenses, respondents actually want to save on the salaries
and other remunerations being given to petitioner as its
Manager. Thus, when petitioner sought for reinstatement, he
wanted to recover his position as Manager, a position which we
have, however, earlier declared to be not a corporate position.
He is not trying to recover a seat in the board of directors or to
any appointive or elective corporate position which has been
declared vacant by the board. Certainly, what we have here is
a case of termination of employment which is a labor
controversy and not an intra-corporate dispute. In sum, we
hold that petitioner’s complaint likewise does not satisfy the
nature of controversy test.
With the elements of intra-corporate controversy being absent
in this case, we thus hold that petitioner’s complaint for illegal
dismissal against respondents is not intra-corporate. Rather, it
is a termination dispute and, consequently, falls under the
jurisdiction of the Labor Arbiter pursuant to Section 21730 of
the Labor Code.
We take note of the cases cited by respondents and find them
inapplicable to the case at bar. Fortune Cement Corporation v.
National Labor Relations Commission31 involves a member of
the board of directors and at the same time a corporate officer
who claims he was illegally dismissed after he was stripped of
his corporate position of Executive Vice-President because of
loss of trust and confidence. On the other hand, Philippine
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Dean Ada D. Abad
School of Business Administration v. Leano32 and Pearson &
George v. National Labor Relations Commission33 both
concern a complaint for illegal dismissal by corporate officers
who were not re-elected to their respective corporate positions.
The Court declared all these cases as involving intra-corporate
controversies and thus affirmed the jurisdiction of the SEC
(now the RTC)34 over them precisely because they all relate to
corporate officers and their removal or non-reelection to their
respective corporate positions. Said cases are by no means
similar to the present case because as discussed earlier,
petitioner here is not a corporate officer.
With the foregoing, it is clear that the CA erred in affirming the
decision of the NLRC which dismissed petitioner’s complaint for
lack of jurisdiction. In cases such as this, the Court normally
remands the case to the NLRC and directs it to properly dispose
of the case on the merits. "However, when there is enough
basis on which a proper evaluation of the merits of petitioner’s
case may be had, the Court may dispense with the time-
consuming procedure of remand in order to prevent further
delays in the disposition of the case."35 "It is already an
accepted rule of procedure for us to strive to settle the entire
controversy in a single proceeding, leaving no root or branch
to bear the seeds of litigation. If, based on the records, the
pleadings, and other evidence, the dispute can be resolved by
us, we will do so to serve the ends of justice instead of
remanding the case to the lower court for further
proceedings."36 We have gone over the records before us and
we are convinced that we can now altogether resolve the issue
of the validity of petitioner’s dismissal and hence, we shall
proceed to do so.
Petitioner’s dismissal not in accordance with law
"In an illegal dismissal case, the onus probandi rests on the
employer to prove that [the] dismissal of an employee is for a
valid cause."37 Here, as correctly observed by the Labor
Arbiter, respondents failed to produce any convincing proof to
support the grounds for which they terminated petitioner.
Respondents contend that petitioner has been absent for
several months, yet they failed to present any proof that
petitioner was indeed absent for such a long time. Also, the
fact that petitioner was still able to collect his salaries after his
alleged absences casts doubts on the truthfulness of such
charge. Respondents likewise allege that petitioner engaged in
a heated argument with the employees of Epson, one of
respondents’ clients. But just like in the charge of absenteeism,
there is no showing that an investigation on the matter was
done and that disciplinary action was imposed upon petitioner.
At any rate, we have reviewed the records of this case and we
agree with the Labor Arbiter that under the circumstances, said
charges are not sufficient bases for petitioner’s termination. As
to the charge of breach of trust allegedly committed by
petitioner when he established a new company engaged in the
same line of business as respondent corporation’s and
submitted proposals to two of the latter’s clients while he was
still a Manager, we again observe that these are mere
allegations without sufficient proof. To reiterate, allegations
must be proven by sufficient evidence because mere allegation
is definitely not evidence.38
Moreover, petitioner’s dismissal was effected without due
process of law.lawphi1 "The twin requirements of notice and
hearing constitute the essential elements of due process. The
law requires the employer to furnish the employee sought to
be dismissed with two written notices before termination of
employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions for
which his dismissal is sought in order to afford him an
opportunity to be heard and to defend himself with the
assistance of counsel, if he desires, and (2) a subsequent notice
informing the employee of the employer’s decision to dismiss
him. This procedure is mandatory and its absence taints the
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Dean Ada D. Abad

dismissal with illegality."39 Since in this case, petitioner’s

dismissal was effected through a board resolution and all that
petitioner received was a letter informing him of the board’s
decision to terminate him, the abovementioned procedure was
clearly not complied with. All told, we agree with the findings
of the Labor Arbiter that petitioner has been illegally dismissed.
And, as an illegally dismissed employee is entitled to the two
reliefs of backwages and reinstatement,40 we affirm the Labor
Arbiter’s judgment ordering petitioner’s reinstatement to his
former position without loss of seniority rights and other
privileges and awarding backwages from the time of his
dismissal until actually reinstated. Considering that petitioner
has to secure the services of counsel to protect his interest and
necessarily has to incur expenses, we likewise affirm the award
of attorney’s fees which is equivalent to 10% of the total
backwages that respondents must pay petitioner in accordance
with this Decision.

WHEREFORE, the petition is hereby GRANTED. The assailed

June 28, 2005 Decision of the Court of Appeals insofar as it
affirmed the National Labor Relations Commission’s dismissal
of petitioner’s complaint for lack of jurisdiction, is hereby
REVERSED and SET ASIDE. The June 5, 2003 Decision of the
Labor Arbiter with respect to petitioner Renato Real is
AFFIRMED and this case is ordered REMANDED to the National
Labor Relations Commission for the computation of petitioner’s
backwages and attorney’s fees in accordance with this
Decision.

SO ORDERED.

[26] G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO,
Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari1 under
Rule 45 of the Rules of Court, which assails the Decision2 dated
November 24, 2011 and Resolution3 dated March 26, 2012 of
the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein
the CA ruled that the Regional Trial Court (RTC), and not the
Labor Arbiter (LA), had the jurisdiction over petitioner Raul C.
Cosare's (Cosare) complaint for illegal dismissal against
Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo),
the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal,
illegal suspension and monetary claims filed with the National
Capital Region Arbitration Branch of the National Labor
Relations Commission (NLRC) by Cosare against the
respondents.
Cosare claimed that sometime in April 1993, he was employed
as a salesman by Arevalo, who was then in the business of
selling broadcast equipment needed by television networks and
production houses. In December 2000, Arevalo set up the
company Broadcom, still to continue the business of trading
communication and broadcast equipment. Cosare was named
an incorporator of Broadcom, having been assigned 100 shares
of stock with par value of ₱1.00 per share.5 In October 2001,
Cosare was promoted to the position of Assistant Vice President
for Sales (AVP for Sales) and Head of the Technical
Coordination, having a monthly basic net salary and average
commissions of ₱18,000.00 and ₱37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as
Broadcom’s Vice President for Sales and thus, became Cosare’s
immediate superior. On March 23, 2009, Cosare sent a
confidential memo7 to Arevalo to inform him of the following
anomalies which were allegedly being committed by Abiog
against the company: (a) he failed to report to work on time,
and would immediately leave the office on the pretext of client
visits; (b) he advised the clients of Broadcom to purchase
camera units from its competitors, and received commissions
therefor; (c) he shared in the "under the-table dealings" or
"confidential commissions" which Broadcom extended to its
clients’ personnel and engineers; and (d) he expressed his
complaints and disgust over Broadcom’s uncompetitive salaries
and wages and delay in the payment of other benefits, even in
the presence of office staff. Cosare ended his memo by
clarifying that he was not interested in Abiog’s position, but
only wanted Arevalo to know of the irregularities for the
corporation’s sake.
Apparently, Arevalo failed to act on Cosare’s accusations.
Cosare claimed that he was instead called for a meeting by
Arevalo on March 25, 2009, wherein he was asked to tender
his resignation in exchange for "financial assistance" in the
amount of ₱300,000.00.8 Cosare refused to comply with the
directive, as signified in a letter9 dated March 26, 2009 which
he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal
(Villareal), Broadcom’s Manager for Finance and
Administration, a memo10 signed by Arevalo, charging him of
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Dean Ada D. Abad
serious misconduct and willful breach of trust, and providing in
part:
1. A confidential memo was received from the VP for Sales
informing me that you had directed, or at the very least tried
to persuade, a customer to purchase a camera from another
supplier. Clearly, this action is a gross and willful violation of
the trust and confidence this company has given to you being
its AVP for Sales and is an attempt to deprive the company of
income from which you, along with the other employees of this
company, derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402
was found abandoned in another place outside of the office
without proper turnover from you to this office which had
assigned said vehicle to you. The vehicle was found to be
inoperable and in very bad condition, which required that the
vehicle be towed to a nearby auto repair shop for extensive
repairs.
3. You have repeatedly failed to submit regular sales reports
informing the company of your activities within and outside of
company premises despite repeated reminders. However, it
has been observed that you have been both frequently absent
and/or tardy without proper information to this office or your
direct supervisor, the VP for Sales Mr. Alex Abiog, of your
whereabouts.
4. You have been remiss in the performance of your duties as
a Sales officer as evidenced by the fact that you have not
recorded any sales for the past immediate twelve (12) months.
This was inspite of the fact that my office decided to relieve
you of your duties as technical coordinator between
Engineering and Sales since June last year so that you could
focus and concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the
memo within which to present his explanation on the charges.
He was also "suspended from having access to any and all
company files/records and use of company assets effective
immediately."12 Thus, Cosare claimed that he was precluded
from reporting for work on March 31, 2009, and was instead
instructed to wait at the office’s receiving section. Upon the
specific instructions of Arevalo, he was also prevented by
Villareal from retrieving even his personal belongings from the
office.
On April 1, 2009, Cosare was totally barred from entering the
company premises, and was told to merely wait outside the
office building for further instructions. When no such
instructions were given by 8:00 p.m., Cosare was impelled to
seek the assistance of the officials of Barangay San Antonio,
Pasig City, and had the incident reported in the barangay
blotter.13
On April 2, 2009, Cosare attempted to furnish the company
with a Memo14 by which he addressed and denied the
accusations cited in Arevalo’s memo dated March 30, 2009. The
respondents refused to receive the memo on the ground of late
filing, prompting Cosare to serve a copy thereof by registered
mail. The following day, April 3, 2009, Cosare filed the subject
labor complaint, claiming that he was constructively dismissed
from employment by the respondents. He further argued that
he was illegally suspended, as he placed no serious and
imminent threat to the life or property of his employer and co-
employees.15
In refuting Cosare’s complaint, the respondents argued that
Cosare was neither illegally suspended nor dismissed from
employment. They also contended that Cosare committed the
following acts inimical to the interests of Broadcom: (a) he
failed to sell any broadcast equipment since the year 2007; (b)
he attempted to sell a Panasonic HMC 150 Camera which was

to be sourced from a competitor; and (c) he made an
unauthorized request in Broadcom’s name for its principal,
Panasonic USA, to issue an invitation for Cosare’s friend, one
Alex Paredes, to attend the National Association of
Broadcasters’ Conference in Las Vegas, USA.16 Furthermore,
they contended that Cosare abandoned his job17 by continually
failing to report for work beginning April 1, 2009, prompting
them to issue on April 14, 2009 a memorandum18 accusing
Cosare of absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese)
rendered his Decision19 dismissing the complaint on the
ground of Cosare’s failure to establish that he was dismissed,
constructively or otherwise, from his employment. For the LA,
what transpired on March 30, 2009 was merely the
respondents’ issuance to Cosare of a show-cause memo, giving
him a chance to present his side on the charges against him.
He explained:
It is obvious that [Cosare] DID NOT wait for respondents’
action regarding the charges leveled against him in the show-
cause memo. What he did was to pre-empt that action by filing
this complaint just a day after he submitted his written
explanation. Moreover, by specifically seeking payment of
"Separation Pay" instead of reinstatement, [Cosare’s] motive
for filing this case becomes more evident.20
It was also held that Cosare failed to substantiate by
documentary evidence his allegations of illegal suspension and
non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21
reversing the Decision of LA Menese. The dispositive portion of
the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is
REVERSED and the Respondents are found guilty of Illegal
Constructive Dismissal. Respondents BROADCOM ASIA, INC.
and Dante Arevalo are ordered to pay [Cosare’s] backwages,
and separation pay, as well as damages, in the total amount of
₱1,915,458.33, per attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due
weight and credence is accorded to [Cosare’s] contention that
he was constructively dismissed by Respondent Arevalo when
he was asked to resign from his employment."23 The fact that
Cosare was suspended from using the assets of Broadcom was
also inconsistent with the respondents’ claim that Cosare opted
to abandon his employment.
Exemplary damages in the amount of ₱100,000.00 was
awarded, given the NLRC’s finding that the termination of
Cosare’s employment was effected by the respondents in bad
faith and in a wanton, oppressive and malevolent manner. The
claim for unpaid commissions was denied on the ground of the
failure to include it in the prayer of pleadings filed with the LA
and in the appeal.
The respondents’ motion for reconsideration was denied.24
Dissatisfied, they filed a petition for certiorari with the CA
founded on the following arguments: (1) the respondents did
not have to prove just cause for terminating the employment
of Cosare because the latter’s complaint was based on an
alleged constructive dismissal; (2) Cosare resigned and was
thus not dismissed from employment; (3) the respondents
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Dean Ada D. Abad
should not be declared liable for the payment of Cosare’s
monetary claims; and (4) Arevalo should not be held solidarily
liable for the judgment award.
In a manifestation filed by the respondents during the
pendency of the CA appeal, they raised a new argument, i.e.,
the case involved an intra-corporate controversy which was
within the jurisdiction of the RTC, instead of the LA.25 They
argued that the case involved a complaint against a corporation
filed by a stockholder, who, at the same time, was a corporate
officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed
Decision26 granting the respondents’ petition. It agreed with
the respondents’ contention that the case involved an intra-
corporate controversy which, pursuant to Presidential Decree
No. 902-A, as amended, was within the exclusive jurisdiction
of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of
[Broadcom], and that he was listed as one of its directors.
Moreover, he held the position of [AVP] for Sales which is listed
as a corporate office. Generally, the president, vice-president,
secretary or treasurer are commonly regarded as the principal
or executive officers of a corporation, and modern corporation
statutes usually designate them as the officers of the
corporation. However, it bears mentioning that under Section
25 of the Corporation Code, the Board of Directors of
[Broadcom] is allowed to appoint such other officers as it may
deem necessary. Indeed, [Broadcom’s] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their
election, the Board of Directors shall formally organize by
electing the President, the Vice-President, the Treasurer, and
the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers
as it may determine to be necessary or proper. x x x
We hold that [the respondents] were able to present
substantial evidence that [Cosare] indeed held a corporate
office, as evidenced by the General Information Sheet which
was submitted to the Securities and Exchange Commission
(SEC) on October 22, 2009.27 (Citations omitted and emphasis
supplied)
Thus, the CA reversed the NLRC decision and resolution, and
then entered a new one dismissing the labor complaint on the
ground of lack of jurisdiction, finding it unnecessary to resolve
the main issues that were raised in the petition. Cosare filed a
motion for reconsideration, but this was denied by the CA via
the Resolution28 dated March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as
follows: (1) whether or not the case instituted by Cosare was
an intra-corporate dispute that was within the original
jurisdiction of the RTC, and not of the LAs; and (2) whether or
not Cosare was constructively and illegally dismissed from
employment by the respondents.
The Court’s Ruling
The petition is impressed with merit.
Jurisdiction over the controversy

As regards the issue of jurisdiction, the Court has determined
that contrary to the ruling of the CA, it is the LA, and not the
regular courts, which has the original jurisdiction over the
subject controversy. An intra-corporate controversy, which
falls within the jurisdiction of regular courts, has been regarded
in its broad sense to pertain to disputes that involve any of the
following relationships: (1) between the corporation,
partnership or association and the public; (2) between the
corporation, partnership or association and the state in so far
as its franchise, permit or license to operate is concerned; (3)
between the corporation, partnership or association and its
stockholders, partners, members or officers; and (4) among
the stockholders, partners or associates, themselves.29
Settled jurisprudence, however, qualifies that when the dispute
involves a charge of illegal dismissal, the action may fall under
the jurisdiction of the LAs upon whose jurisdiction, as a rule,
falls termination disputes and claims for damages arising from
employer-employee relations as provided in Article 217 of the
Labor Code. Consistent with this jurisprudence, the mere fact
that Cosare was a stockholder and an officer of Broadcom at
the time the subject controversy developed failed to
necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30
the Court distinguished between a "regular employee" and a
"corporate officer" for purposes of establishing the true nature
of a dispute or complaint for illegal dismissal and determining
which body has jurisdiction over it. Succinctly, it was explained
that "[t]he determination of whether the dismissed officer was
a regular employee or corporate officer unravels the
conundrum" of whether a complaint for illegal dismissal is
cognizable by the LA or by the RTC. "In case of the regular
employee, the LA has jurisdiction; otherwise, the RTC exercises
the legal authority to adjudicate.31
Applying the foregoing to the present case, the LA had the
original jurisdiction over the complaint for illegal dismissal
because Cosare, although an officer of Broadcom for being its
AVP for Sales, was not a "corporate officer" as the term is
defined by law. We emphasized in Real v. Sangu Philippines,
Inc.32 the definition of corporate officers for the purpose of
identifying an intra-corporate controversy. Citing Garcia v.
Eastern Telecommunications Philippines, Inc.,33 we held:
" ‘Corporate officers’ in the context of Presidential Decree No.
902-A are those officers of the corporation who are given that
character by the Corporation Code or by the corporation’s by-
laws. There are three specific officers whom a corporation must
have under Section 25 of the Corporation Code. These are the
president, secretary and the treasurer. The number of officers
is not limited to these three. A corporation may have such other
officers as may be provided for by its by-laws like, but not
limited to, the vice-president, cashier, auditor or general
manager. The number of corporate officers is thus limited by
law and by the corporation’s by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following
pronouncement on the nature of corporate offices:
It has been held that an "office" is created by the charter of the
corporation and the officer is elected by the directors and
stockholders. On the other hand, an "employee" usually
occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid
to such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two
circumstances which must concur in order for an individual to
be considered a corporate officer, as against an ordinary
employee or officer, namely: (1) the creation of the position is
under the corporation’s charter or by-laws; and (2) the election
of the officer is by the directors or stockholders. It is only when
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Dean Ada D. Abad
the officer claiming to have been illegally dismissed is classified
as such corporate officer that the issue is deemed an intra-
corporate dispute which falls within the jurisdiction of the trial
courts.
To support their argument that Cosare was a corporate officer,
the respondents referred to Section 1, Article IV of Broadcom’s
by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their
election, the Board of Directors shall formally organize by
electing the President, the Vice-President, the Treasurer, and
the Secretary at said meeting.
The Board may, from time to time, appoint such other officers
as it may determine to be necessary or proper. Any two (2) or
more compatible positions may be held concurrently by the
same person, except that no one shall act as President and
Treasurer or Secretary at the same time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was
an intra-corporate dispute that was within the trial courts’
jurisdiction.
The Court disagrees with the respondents and the CA. As may
be gleaned from the aforequoted provision, the only officers
who are specifically listed, and thus with offices that are
created under Broadcom’s by-laws are the following: the
President, Vice-President, Treasurer and Secretary. Although a
blanket authority provides for the Board’s appointment of such
other officers as it may deem necessary and proper, the
respondents failed to sufficiently establish that the position of
AVP for Sales was created by virtue of an act of Broadcom’s
board, and that Cosare was specifically elected or appointed to
such position by the directors. No board resolutions to establish
such facts form part of the case records. Further, it was held in
Marc II Marketing, Inc. v. Joson38 that an enabling clause in a
corporation’s by-laws empowering its board of directors to
create additional officers, even with the subsequent passage of
a board resolution to that effect, cannot make such position a
corporate office. The board of directors has no power to create
other corporate offices without first amending the corporate
by-laws so as to include therein the newly created corporate
office.39 "To allow the creation of a corporate officer position
by a simple inclusion in the corporate by-laws of an enabling
clause empowering the board of directors to do so can result in
the circumvention of that constitutionally well-protected right
[of every employee to security of tenure]."40
The CA’s heavy reliance on the contents of the General
Information Sheets41, which were submitted by the
respondents during the appeal proceedings and which plainly
provided that Cosare was an "officer" of Broadcom, was clearly
misplaced. The said documents could neither govern nor
establish the nature of the office held by Cosare and his
appointment thereto. Furthermore, although Cosare could
indeed be classified as an officer as provided in the General
Information Sheets, his position could only be deemed a
regular office, and not a corporate office as it is defined under
the Corporation Code. Incidentally, the Court noticed that
although the Corporate Secretary of Broadcom, Atty. Efren L.
Cordero, declared under oath the truth of the matters set forth
in the General Information Sheets, the respondents failed to
explain why the General Information Sheet officially filed with
the Securities and Exchange Commission in 2011 and
submitted to the CA by the respondents still indicated Cosare
as an AVP for Sales, when among their defenses in the charge
of illegal dismissal, they asserted that Cosare had severed his
relationship with the corporation since the year 2009.

Finally, the mere fact that Cosare was a stockholder of
Broadcom at the time of the case’s filing did not necessarily
make the action an intra- corporate controversy. "Not all
conflicts between the stockholders and the corporation are
classified as intra-corporate. There are other facts to consider
in determining whether the dispute involves corporate matters
as to consider them as intra-corporate controversies."42 Time
and again, the Court has ruled that in determining the
existence of an intra-corporate dispute, the status or
relationship of the parties and the nature of the question that
is the subject of the controversy must be taken into account.43
Considering that the pending dispute particularly relates to
Cosare’s rights and obligations as a regular officer of
Broadcom, instead of as a stockholder of the corporation, the
controversy cannot be deemed intra-corporate. This is
consistent with the "controversy test" explained by the Court
in Reyes v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that
relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate.
The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the
enforcement of the parties’ correlative rights and obligations
under the Corporation Code and the internal and intra-
corporate regulatory rules of the corporation. If the relationship
and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist,
then no intra-corporate controversy exists.45 (Citation
omitted)
It bears mentioning that even the CA’s finding46 that Cosare
was a director of Broadcom when the dispute commenced was
unsupported by the case records, as even the General
Information Sheet of 2009 referred to in the CA decision to
support such finding failed to provide such detail.
All told, it is then evident that the CA erred in reversing the
NLRC’s ruling that favored Cosare solely on the ground that the
dispute was an intra-corporate controversy within the
jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it
appropriate to rule on the correctness of the NLRC’s ruling
finding Cosare to have been illegally dismissed from
employment.
In filing his labor complaint, Cosare maintained that he was
constructively dismissed, citing among other circumstances the
charges that were hurled and the suspension that was imposed
against him via Arevalo’s memo dated March 30, 2009. Even
prior to such charge, he claimed to have been subjected to
mental torture, having been locked out of his files and records
and disallowed use of his office computer and access to
personal belongings.47 While Cosare attempted to furnish the
respondents with his reply to the charges, the latter refused to
accept the same on the ground that it was filed beyond the 48-
hour period which they provided in the memo.
Cosare further referred to the circumstances that allegedly
transpired subsequent to the service of the memo, particularly
the continued refusal of the respondents to allow Cosare’s
entry into the company’s premises. These incidents were cited
in the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He
asked Villareal if he could retrieve his personal belongings, but
the latter said that x x x Arevalo directed her to deny his
request, so [Cosare] again waited at the receiving section of
the office. On April 1, 2009, [Cosare] was not allowed to enter
the office premises. He was asked to just wait outside of the
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Dean Ada D. Abad
Tektite (PSE) Towers, where [Broadcom] had its offices, for
further instructions on how and when he could get his personal
belongings. [Cosare] waited until 8 p.m. for instructions but
none were given. Thus, [Cosare] sought the assistance of the
officials of Barangay San Antonio, Pasig who advised him to file
a labor or replevin case to recover his personal belongings. x x
x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance
of the memo dated March 30, 2009, Cosare was allegedly
summoned to Arevalo’s office and was asked to tender his
immediate resignation from the company, in exchange for a
financial assistance of ₱300,000.00.49 The directive was said
to be founded on Arevalo’s choice to retain Abiog’s employment
with the company.50 The respondents failed to refute these
claims.
Given the circumstances, the Court agrees with Cosare’s claim
of constructive and illegal dismissal. "[C]onstructive dismissal
occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable, or unlikely
as when there is a demotion in rank or diminution in pay or
when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee leaving the
latter with no other option but to quit."51 In Dimagan v.
Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable
person in the employee’s position would have felt compelled to
give up his position under the circumstances. It is an act
amounting to dismissal but is made to appear as if it were not.
Constructive dismissal is therefore a dismissal in disguise. The
law recognizes and resolves this situation in favor of employees
in order to protect their rights and interests from the coercive
acts of the employer.53 (Citation omitted)
It is clear from the cited circumstances that the respondents
already rejected Cosare’s continued involvement with the
company. Even their refusal to accept the explanation which
Cosare tried to tender on April 2, 2009 further evidenced the
resolve to deny Cosare of the opportunity to be heard prior to
any decision on the termination of his employment. The
respondents allegedly refused acceptance of the explanation as
it was filed beyond the mere 48-hour period which they granted
to Cosare under the memo dated March 30, 2009. However,
even this limitation was a flaw in the memo or notice to explain
which only further signified the respondents’ discrimination,
disdain and insensibility towards Cosare, apparently resorted
to by the respondents in order to deny their employee of the
opportunity to fully explain his defenses and ultimately, retain
his employment. The Court emphasized in King of Kings
Transport, Inc. v. Mamac54 the standards to be observed by
employers in complying with the service of notices prior to
termination:
[T]he first written notice to be served on the employees should
contain the specific causes or grounds for termination against
them, and a directive that the employees are given the
opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that
management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed
as a period of at least five (5) calendar days from receipt of the
notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the
employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the
facts and circumstances that will serve as basis for the charge
against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which
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Dean Ada D. Abad

company rules, if any, are violated and/or which among the The Decision dated August 24, 2010 of the National Labor
grounds under Art. 282 is being charged against the Relations Commission in favor of petitioner Raul C. Cosare is
employees.55 (Citation omitted, underscoring ours, and AFFIRMED.
emphasis supplied)
SO ORDERED.
In sum, the respondents were already resolute on a severance
of their working relationship with Cosare, notwithstanding the
facts which could have been established by his explanations
and the respondents’ full investigation on the matter. In
addition to this, the fact that no further investigation and final
disposition appeared to have been made by the respondents
on Cosare’s case only negated the claim that they actually
intended to first look into the matter before making a final
determination as to the guilt or innocence of their employee.
This also manifested from the fact that even before Cosare was
required to present his side on the charges of serious
misconduct and willful breach of trust, he was summoned to
Arevalo’s office and was asked to tender his immediate
resignation in exchange for financial assistance.

The clear intent of the respondents to find fault in Cosare was

also manifested by their persistent accusation that Cosare
abandoned his post, allegedly signified by his failure to report
to work or file a leave of absence beginning April 1, 2009. This
was even the subject of a memo56 issued by Arevalo to Cosare
on April 14, 2009, asking him to explain his absence within 48
hours from the date of the memo. As the records clearly
indicated, however, Arevalo placed Cosare under suspension
beginning March 30, 2009. The suspension covered access to
any and all company files/records and the use of the assets of
the company, with warning that his failure to comply with the
memo would be dealt with drastic management action. The
charge of abandonment was inconsistent with this imposed
suspension. "Abandonment is the deliberate and unjustified
refusal of an employee to resume his employment. To
constitute abandonment of work, two elements must concur:
‘(1) the employee must have failed to report for work or must
have been absent without valid or justifiable reason; and (2)
there must have been a clear intention on the part of the
employee to sever the employer- employee relationship
manifested by some overt act.’"57 Cosare’s failure to report to
work beginning April 1, 2009 was neither voluntary nor
indicative of an intention to sever his employment with
Broadcom. It was illogical to be requiring him to report for
work, and imputing fault when he failed to do so after he was
specifically denied access to all of the company’s assets. As
correctly observed by the NLRC:

[T]he Respondent[s] had charged [Cosare] of abandoning his

employment beginning on April 1, 2009. However[,] the show-
cause letter dated March 3[0], 2009 (Annex "F", ibid)
suspended [Cosare] from using not only the equipment but the
"assets" of Respondent [Broadcom]. This insults rational
thinking because the Respondents tried to mislead us and
make [it appear] that [Cosare] failed to report for work when
they had in fact had [sic] placed him on suspension. x x x.58

Following a finding of constructive dismissal, the Court finds no

cogent reason to modify the NLRC's monetary awards in
Cosare's favor. In Robinsons Galleria/Robinsons Supermarket
Corporation v. Ranchez,59 the Court reiterated that an illegally
or constructively dismissed employee is entitled to: (1) either
reinstatement, if viable, or separation pay, if reinstatement is
no longer viable; and (2) backwages.60 The award of
exemplary damages was also justified given the NLRC's finding
that the respondents acted in bad faith and in a wanton,
oppressive and malevolent manner when they dismissed
Cosare. It is also by reason of such bad faith that Arevalo was
correctly declared solidarily liable for the monetary awards.

WHEREFORE, the petition is GRANTED. The Decision dated

November 24, 2011 and Resolution dated March 26, 2012 of
the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE.

[27] G.R. No. 197011 January 28, 2015
ESSENCIA Q. MANARPIIS, Petitioner,
vs.
TEXAN PHILIPPINES, INC., RICHARD TAN and
CATHERINE P. RIALUBIN-TAN, Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45
assailing the Decision1 dated March 24, 2010, and Resolution2
dated May 19, 2011 of the Court of Appeals (CA) in CA-G.R. SP
No. 106661. The CA reversed and set aside the Decision3 dated
January 25, 2008 and Resolution4 dated September 22, 2008
of the First Division of the National Labor Relations Commission
(NLRC) in NLRC CA No. 029806-01, which affirmed the
Decision5 dated June 28, 2001 of the Labor Arbiter (LA) in
NLRC Case No. 00-08-04110-2000.
Texan Philippines, Inc. (TPI), which is owned and managed by
Catherine Rialubin-Tan and her Singaporean husband Richard
Tan (respondents), is a domestic corporation engaged in the
importation, distribution and marketing of imported fragrances
and aroma and other specialized products and services. In July
1999, respondents hired Essencia Q. Manarpiis (petitioner) as
Sales and Marketing Manager of the company's Aroma Division
with a monthly salary of ₱33,800.00.6
Claiming insurmountable losses, respondents served a written
notice (July 27, 2000) addressed to all their employees that
TPI will cease operations by August 31, 2000.7
On August 7, 2000, petitioner filed a complaint for illegal
dismissal, non-payment of overtime pay, holiday pay, service
incentive leave pay, unexpired vacation leave and 13th month
pay and with prayer for moral and actual damages.
Subsequently, petitioner amended her complaint to state the
true date of her dismissal which is July 27, 2000 and not August
31, 2000. She averred that on the same day she was served
with notice of company closure, respondents barred her from
reporting for work and paid her last salary up to the end of July
2000.8
On September 18, 2000, petitioner received the following
Memorandum9:
September 15, 2000
MEMO TO : MS. ESSENCIA MANARPIIS
Sales and Marketing Manager
Aroma Division
SUBJECT : Notice Of Investigation And Grounding
Dear Ms. Manarpiis,
You are hereby notified that an investigation will be conducted
on 20 September 2000 at 2:00 p.m. in our office regarding
your alleged violation of company rules and regulations,
specifically: I (par. B) - - Fraudulent Expense/Disbursement
expenses
I (par. G) - - Collusion/Connivance with Intent to Defraud
II (Section 6) - - Sabotage
II (Section 12) - - Loss of Confidence
III (Section 2) - - Libel/Slander
III (Section 8 par. e) - - Other acts of Insubordination
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Dean Ada D. Abad
V (par. C & D) - - AWOL/Abandonment
V (par. I) - - Committing other acts of gross inefficiency or
incompetence said acts constitutive of gross misconduct, gross
insubordination and dishonesty. You may bring your witnesses
and counsel if you so desire. In the meantime, you will not be
allowed to perform your usual functions, but will instead report
to the undersigned.
Additionally, you are directed to submit to the undersigned
your explanation in writing, within (72) hours from receipt
hereof (but in no case later than 20 September 2000), why no
appropriate disciplinary action and/or penalties may be
imposed against you relative to the foregoing.
Failure to submit said written explanation within the prescribed
period and/or attend the investigation hearing on 20
September 2000 shall constitute an implied admission of the
charges and waiver on your part to due process.
For your information and compliance.
(SGD.) RICHARD TAN
(President)
Petitioner alleged that assales and marketing manager, she
received the agreed commission based on actual sales
collection on the first quarter of 2000 and was expecting to also
receive such commission on the 2nd , 3rd and 4th quarters.
However, on July 27, 2000, after receiving a text message from
respondent Richard Tan, she proceeded to her office and
learned that her table drawers were forcibly opened and her
files confiscated. She protested the company closure asserting
that the alleged business losses were belied by TPI’s financial
documents. But despite her pleas, she was asked to pack up
her things and by the end of the month her salary was
discontinued. She then received the memorandum regarding
the company closure and was required to turn over the
company car, pager and cellphone. She was told not to report
for work anymore.10
After receiving the September 15,2000 memorandum,
petitioner’s counsel sent a reply stating that there was no point
in the investigation because respondents already dismissed
petitioner purportedly on the ground of cessation of business
due to insurmountable losses, and also it was impossible for
petitioner to respond tothe charges which are devoid of
particulars as to the alleged irregularities she committed. It
was pointed out that respondents should have investigated the
supposed violations of company rules and fraudulent acts
earlier and not when petitioner had filed an illegal dismissal
complaint.11
Subsequently, petitioner received the following
memorandum12:
September 25, 2000
TO : MS. ESSENCIA MANARPIIS
Sales and Marketing Manager
Aroma Division
SUBJECT : NOTICE OF TERMINATION
Ms. Manarpiis,
This is to inform you that your employment with the Company
is terminated effective today, September 25, 2000, due to
Dishonesty, Loss of Confidence, and Abandonment of Work.
An internal audit of the Company shows that several
obligations of the Company were paid twice to the same

supplier. Considering the level of your position, the inescapable
conclusion is that you have colluded with the Company supplier
to defraud the Company of its finances. Moreover, you have
fraudulently caused to be reimbursed representation expenses
and other expense statements purporting to be that of your
sales representatives while in truth and in fact they were yours,
and you received the corresponding payments therefor.
Also, your attendance record showed that you have been
absent without official leave (AWOL)since August 3, 2000 up to
date.
A notice of AWOL dated September 14, 2000 has been sent to
you but you refused to accept the same, much less, refused to
act on it.
For your information and guidance
(SGD.) RICHARD TAN
President
Believing that her dismissal was without just cause, petitioner
prayed for reinstatement if still viable, and if not, award of
separation pay with back wages from August 1, 2000, and
payment of her monetary claims for sales commissions, pro-
rated 13th month pay, five days service incentive leave pay
and sick leaves, as well as moral and exemplary damages plus
attorney’s fees.13
Respondents denied the charge of illegal dismissal and
explained that TPI’s closure was averted by a new financing
package obtained by respondent Richard Tan. They asserted
that the requisite notices of business closure to government
authorities and to their employees were complied with, and
notwithstanding that TPI has in fact continued its operations,
petitioner was found to have committed infractions resulting in
loss of confidence which was the ground for the termination of
her employment. They likewise averred that respondent
Rialubin-Tan gave specific instructions to petitioner for her to
continue reporting for work even after August 31, 2000 but she
instead went AWOL and subsequently abandoned her job, to
the utmost prejudice of the company.14
On June 28, 2001, LA Melquiades Sol D. Del Rosario rendered
a Decision declaring the dismissal of petitioner as illegal:
CONFORMABLY WITH THE FOREGOING, judgment is hereby
rendered finding complainant’s dismissal to be illegal.
Consequently, she should be paid in solidum by respondents
the following:
a) ₱304,200.00 as backwages as of May 31, 2001[;]
b) ₱101,400.00 as separation pay for 3 years[;]
c) 1% of the gross sales of complainant and .75% on other
sales as determined by the parties as complainant’s
commissions;
d) 10% for and as attorney’s fees of the money awards.
SO ORDERED.15
Respondents appealed to the NLRC which affirmed the LA’s
decision. Their motion for reconsideration was also denied.
In a petition for certiorari filed with the CA, respondents argued
that the subsequent termination of petitioner on the grounds
of dishonesty, loss of confidence and abandonment, after TPI
was able to regain financial viability, was made in view of the
fact that commission of the said offenses surfaced only during
the audit investigation conducted after notice of cessation of
business operation was sent to the employees. Despite advice
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Dean Ada D. Abad
for her to continue reporting for work after August 31, 2000,
the effectivity date of the intended closure, petitioner just
stopped doing so and instead filed the complaint for illegal
dismissal and likewise failed to turn over all company
documents and records in her possession. They also discovered
that petitioner put up her own company "Vita VSI Scents,"
enticing clients to buy the same products they used to purchase
from TPI.
By Decision dated March 24, 2010, the CA reversed the NLRC
and ruled that petitioner was validly dismissed:
WHEREFORE, the petition is hereby GRANTED. The assailed
Decision dated January 25, 2008 and the Resolution dated
September 22, 2008 of the National Labor Relations
Commission are hereby REVERSED and SET ASIDE.
Resultantly, Essencia Manarpiis’ complaint for illegal dismissal
against Texan Philippines, Inc., Richard Tan and Catherine
Realubin-Tan is hereby DISMISSEDfor lack of merit. No costs.
SO ORDERED.16
Petitioner filed a motion for reconsideration but it was denied
by the CA.
Hence, this petition arguing that the CA committed patent
reversible errors when it: (1) granted the unverified/unsworn
certification of non-forum shopping accompanying
respondents’ petition for certiorari; (2) granted respondents’
petition for certiorari without finding any grave abuse of
discretion on the part of NLRC; (3) disturbed the consistent
factual findings of the LA and NLRC which were duly supported
by substantial evidence and devoid of any unfairness and
arbitrariness; and (4) substituted its own findings of facts to
those of the LA and NLRC, the CA’s findings being unsupported
by substantial evidence.17
The petition is meritorious.
We first address petitioner’s contention on the alleged formal
infirmity of the petition for certiorari filed before the CA.
Petitioner argued that the same was defective as the jurat
therein was based on the mere community tax certificate of
respondent Rialubin-Tan, instead of a government-issued
identification card required under the 2004 Rules on Notarial
Practice. Such ground was never raised by herein petitioner in
her comment on the CA petition, thus, it cannot be validly
raised by the petitioner at this stage.18
Furthermore, we have consistently held that verification of a
pleading is a formal, not a jurisdictional, requirement intended
to secure the assurance that the matters alleged in a pleading
are true and correct. Thus, the court may simply order the
correction of unverified pleadings or act on them and waive
strict compliance withthe rules. It is deemed substantially
complied with when one who has ample knowledge to swear to
the truth of the allegations in the complaint or petition signs
the verification; and when matters alleged in the petition have
beenmade in good faith or are true and correct.19
Under the Rules of Court and settled doctrine, a petition for
review on certiorari under Rule 45 of the Rules of Court is
limited to questions of law. As a rule, the findings of fact of the
CA are final and conclusive, and this Court will not review them
on appeal.20
However, there are instances in which factual issues may be
resolved by this Court, to wit: (1) the conclusion is a finding
grounded entirely on speculation, surmise and conjecture; (2)
the inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are
conflicting; (6) the CA goes beyond the issues of the case and

its findings are contrary to the admissions of both appellant
and appellee;(7) the findings of fact of the CA are contrary to
those of the trial court; (8) said findings of facts are conclusions
without citation of specific evidence on which they are based;
(9) the facts set forth in the petition aswell as in the petitioner’s
main and reply briefs are not disputed by the respondent; and
(10) the findings of fact of the CA are premised on the
supposed absence of evidence and contradicted by the
evidence on record.21
Considering that the findings of facts and the conclusions of the
CA are contrary to those of the LA and the NLRC, we find it
necessary to evaluate such findings.
On the issue of illegal dismissal, both the LA and NLRC found
no just or authorized cause for the termination of petitioner’s
employment.
LA Del Rosario observed that respondents flip-flopped on the
issue of petitioner’s termination as when they claimed she was
dismissed due to insurmountable losses so that TPI’s personnel
were notified of the company closure effective August 31,
2000, and at the same time they accused petitioner of
fraudulent acts and abandonment of work resulting in loss of
trust and confidence which caused her dismissal. He also found
there was no compliance with the legal requisites of the said
grounds for dismissal under Article 283 (business closure)
suchas the lack of termination report sent to the Department
of Labor and Employment (DOLE), financial documents which
are audited and signed by an independent auditor, and the two-
notice requirement sent to the last known address of the
employee alleged to have abandoned work under Book V,
RuleXIV, Section 2 of the Omnibus Rules Implementing the
Labor Code. It was noted that while TPI’s financial documents
have BIR stampmark, they were not shown to have been
prepared by an independent auditor.
The NLRC upheld the LA’s ruling that petitioner’s dismissal was
not valid, viz:
As between the above, conflicting allegations, We find the
version of the complainant more credible. Record of the instant
case would provide that other than respondents’ bare
allegations that complainant was instructed to continue
working even beyond 31 August 2000, no evidence was
presented to substantiate the same. If respondents could easily
issue a notice of business closure to all its employees, and at
the same time, immediately require the complainant to
surrender all company properties assigned to her, We could not
understand why they could not easily issue another letter, this
time, intended only for the complainant informing her that her
employment was still necessary.
Relative to the company’s closure due to business losses,
prevailing jurisprudence would dictate that the same should be
substantiated by competent evidence. Financial statements
audited by independent external auditors constitute the normal
method of proof of the profit and loss performance of the
company. To exempt an employer [from] the payment of
separation pay, he or she must establish by sufficient and
convincing evidence that the losses were serious, substantial
and actual x x x.
In the instant case, respondents may have presented before
the Labor Arbiter its Statement of Income for the year 1999.
While its preparation may be in compliance with the
requirements of the Bureau of Internal Revenue for taxation
purposes, based on the jurisprudence provided above, the
same would not suffice for purposes of respondents’ defense in
the instant case. In their appeal, respondents alleged that on
the basis of the audited Statement of Income and Retained
Earnings For the Year Ending 31 December 2000, the company
incurred a net loss of almost half a million pesos. Assuming the
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Dean Ada D. Abad
same to be true since we cannot find a copy of said statement
attached to [the] record, it would appear that the company had
attained a better position in year 2000 as compared to year
1999 when they incurred a net loss of more than Two Million
Pesos. Furthermore, said evidence is already immaterial
considering that the company’s intended closure did not
actually take effect.
Upon a finding that complainant was not instructed to continue
working even beyond 31 August 2000 butwas told not to report
to work upon receipt of the notice of company’s closure, it
certainly follows that respondents would no longer inform
complainant of the company’s continued operation after
respondent Tan had allegedly succeeded in searching for funds.
In fact, We are not even persuaded that the company’s closure
was prevented by the new funds sought by respondent Tan
when in the first place, there was no intended closure at all but
only a decision to dismiss complainant in a manner that would
enable respondents evade liabilities under the Labor Code.
With regard to the alleged violation of company rules and
regulations, We agree with the finding that respondent[s’] acts
of issuing the two notices setting the case [for] investigation
were mere afterthoughts. As highlighted in the assailed
Decision, the first notice was issued after respondents had
already received the summons in the instant case. More
importantly, the above discussion would provide that prior to
issuance of said first notice, complainant was already illegally
dismissed. Furthermore, assuming for the sake of argument
that complainant was not yet terminated, a reading of the said
first notice would show that it does not conform with the
requirements of due process. The same had failed to discuss
the circumstances under which each of the charges therein was
committed by the complainant. As can be noted from the letter
dated 19 September 2000 sent by complainant’s counsel to
respondent Tan, it was impossible for his client to submit a
written explanation thereto since the notice to explain is devoid
of particulars regarding the alleged irregularities.
As a consequence of complainant[’s] double termination,
initially through the purported cessation of business
operations, and thereafter, by imputing offenses violative of
company rules and regulations, we agree with the finding
[that] she was illegally dismissed, and as such, entitled to
backwages. She would have been entitled to reinstatement but
we believe that the charges lodged by the respondents against
the complainant had rendered reinstatement non-viable. Thus,
she should be granted separation pay instead.22 (Citations
omitted)
The CA, however, considered the evidence of respondents
sufficient to prove the alleged business losses and their good
faith in resorting to closure of the company. It cited the 1999
Annual Income Tax Return showing a net loss of ₱2,290,580.48
and financial statement indicating a net loss of ₱2,301,228.61
for the year ended December 31, 1999; respondents’ claim
that it was forced to sell six company cars; and the DOLE
termination report.
On the other grounds invoked by respondents to justify
petitioner’s termination, the CA cited the following infractions:
(a) several company obligations towards a supplier which were
paid twice during her term as Marketing and Sales Manager;
(b) company funds procured by petitioner, represented to be
"under the table" expenditures for the Bureau of Customs
which she cannot explain when queried; (c) divulging
confidential company matters to the customers; and (d)
establishing her own company while still employed with TPI.
We reverse the CA and reinstate the LA’s decision as affirmed
by the NLRC.

Closure or cessation of business is the complete or partial
cessation of the operations and/or shut-down of the
establishment of the employer. It is carried out to either stave
off the financial ruin or promote the business interest of the
employer. Closure ofbusiness as an authorized cause for
termination of employment is governed by Article 28323 of the
Labor Code, as amended.
If the business closure is due to serious losses or financial
reverses, the employer must present sufficient proof of its
actual or imminent losses; it must show proof that the
cessation of or withdrawal from business operations was bona
fidein character.24 A written notice tothe DOLE thirty days
before the intended date of closure is also required, the
purpose of which is to inform the employees of the specific date
of termination or closure of business operations, and which
must be served upon each and every employee of the company
one month before the date of effectivity to give them sufficient
time to make the necessary arrangement.25
The ultimate test of the validity of closure or cessation of
establishment or undertaking is that it must be bona fidein
character.1âwphi1 And the burden of proving such falls upon
the employer.26 After evaluating the evidence on record, we
uphold the factual findings and conclusions of the labor
tribunals that petitioner was dismissed without just or
authorized cause, and that the announced cessation of
business operations was a subterfuge for getting rid of
petitioner. While the introduction of additional evidence before
the NLRC is not proscribed, the said tribunal was still not
persuaded by the company closure purportedly averted only by
the alleged fresh funding procured by respondent Tan, for the
latter claim remained unsubstantiated. The CA’s finding of
serious business losses is not borne by the evidence on record.
The financial statements supposedly bearing the stamp mark
of BIR were not signed by an independent auditor. Besides, the
non-compliance with the requirements under Article 283 of the
Labor Code, as amended, gains relevance in this case not for
the purpose of proving the illegality of the company closure or
cessation of business, which did not materialize, butas an
indication of bad faith on the part of respondents inhastily
terminating petitioner’s employment. Under the
circumstances, the subsequent investigation and termination
of petitioner on grounds of dishonesty, loss of confidence and
abandonment of work, clearlyappears as an afterthought as it
was done only after petitioner had filed an illegal dismissal case
and respondents have been summoned for hearing before the
LA.
We have laid down the two elements which must concur for a
valid abandonment, viz: (1) the failure to report to work or
absence without valid or justifiable reason, and (2) a clear
intention to sever the employer employee relationship, with the
second element as the more determinative factor being
manifested by some overt acts.27 Abandonment as a just
ground for dismissal requires the deliberate, unjustified
refusalof the employee to perform his employment
responsibilities. Mere absence or failure to work, even after
notice to return, is not tantamount to abandonment.28
Furthermore, it is well-settled that the filing by an employee of
a complaint for illegal dismissal with a prayer for reinstatement
is proof enough of his desire to return to work, thus, negating
the employer’s charge of abandonment.29 An employee who
takes steps to protest his dismissal cannot logically be said to
have abandoned his work.30
Abandonment in this case was a trumped up charge,
apparently to make it appear that petitioner was not yet
terminated when she filed the illegal dismissal complaint and
to give a semblance of truth to the belated investigation against
the petitioner. Petitioner did not abandon her work but was told
not to report for work anymore after being served a written
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Dean Ada D. Abad
notice of termination of company closure on July 27, 2000 and
turning over company properties to respondent Rialubin-Tan.
On the issue of loss of confidence, we have held that proof
beyond reasonable doubt is not needed to justify the loss as
long as the employer has reasonable ground to believe that the
employee is responsible for the misconduct and his
participation therein renders him unworthy of the trust and
confidence demanded of his position.31 Nonetheless, the right
of an employer to dismiss employees on the ground of loss of
trust and confidence, however, must not be exercised
arbitrarily and without just cause. Unsupported by sufficient
proof, loss of confidence is without basis and may not be
successfully invoked as a ground for dismissal. Loss of
confidence as a ground for dismissal has never been intended
to afford an occasion for abuse by the employer of its
prerogative, as it can easily be subject to abuse because of its
subjective nature, as in the case at bar, and the loss must be
founded on clearly established facts sufficient to warrant the
employee’s separation from work.32
Here, loss of confidence was belatedly raised by the
respondents who initiated an investigation on the alleged
irregularities committed by petitioner only after the latter had
questioned the legality of her earlier dismissal due to the
purported company closure. As correctly observed by the
NLRC, assuming to be true that respondents had not yet
actually dismissed the petitioner, the notice of cessation of
operations (memo dated July 27, 2000) addressed to all
employees never mentioned the supposed charges against the
petitioner who was also never issued a separate memorandum
to that effect. Moreover, the turn over of company properties
by petitioner on the same date as demanded by respondent
Rialubin-Tan belies the latter’s claim that she verbally
instructed the former to continue reporting for work in view of
the audit of the company’s finances. Indeed, considering the
gravity of the accusations of fraud against the petitioner, it is
strange that respondents have not at least issued her a
separate memorandum on her accountability for the alleged
business losses.
To prove the dishonesty imputed to petitioner, respondents
submitted before the NLRC a letter dated August 4, 2000 from
one of TPI’s suppliers advising the company of a supposed
double payment made in February and March 2000. However,
there is no showing that such payment was made or ordered
by petitioner, and neither was it shown that this overpayment
was reflected in the account books of TPI. Respondents likewise
failed to prove their accusation that petitioner put up a
competing business while she was still employed with TPI, and
their bare allegation thatpetitioner divulged confidential
company matters to customers. As to the supposed failure of
petitioner to account for funds intended for "under the table"
transactions at the Bureau of Customs, the same was never
raised before the labor tribunals and not a shred of evidence
was presented by respondent to prove this allegation.
Apropos we recall our pronouncement in Lima Land, Inc., et al.
v. Cuevas33:
As a final note, the Court is wont to reiterate that while an
employer has its own interest to protect, and pursuant thereto,
it may terminate a managerial employee for a just cause, such
prerogative to dismiss or lay off an employee mustbe exercised
without abuse of discretion. Its implementation should be
tempered with compassion and understanding. The employer
should bear in mind that, in the execution of the said
prerogative, whatis at stake is not only the employee’s
position, but his very livelihood, his very breadbasket. Indeed,
the consistent rule is that if doubts exist between the evidence
presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter. The employer must
affirmatively show rationally adequate evidence that the
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Dean Ada D. Abad

dismissal was for justifiable cause. Thus, when the breach of

trust or loss of confidence alleged is not borne by clearly
established facts, as in this case, such dismissal on the cited
grounds cannot be allowed.34 (Emphasis supplied)

The normal consequences of petitioner’s illegal dismissal are

reinstatement without loss of seniority rights, and payment of
back wages computed from the time compensation was
withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay
equivalent to one month salary for every year of service should
be awarded as an alternative. The payment of separation pay
is in addition to payment of back wages.35 Given the strained
relations between the parties, the award of separation pay, in
lieu of reinstatement, is in order.

Finally, on the solidary liabilityof respondents Richard Tan and

Catherine Rialubin-Tan for the monetary awards.1âwphi1 It is
basic that a corporation being a juridical entity, may act only
through its directors, officers and employees. Obligations
incurred by them, acting as such corporate agents are not
theirs butthe direct accountabilities of the corporation they
represent. However,in certain exceptional situations, solidary
liability may be incurred by corporate officers. In labor cases
for instance, this Court has held corporate directors and officers
solidarily liable with the corporation for the termination of
employment of employees done with malice or bad faith.36 We
sustain the NLRC’s conclusion that the schemes implemented
by the respondents to justify petitioner’s baseless dismissal,
and the manner by which such schemes were effected showed
malice and bad faith on their part. Consequently, its affirmance
of the order of the LA that the amounts awarded to petitioner
are "payable in solidum by respondents"is proper. The NLRC
likewise correctly upheld the award of attorney’s fees
considering that petitioner was assisted by a private counsel to
prosecute her illegal dismissal complaint and enforce her rights
under our labor laws.

WHEREFORE, the petition is GRANTED. The Decision dated

March 24, 2010 and Resolution dated May 19, 2011 of the
Court of Appeals in CA-G.R. SP No. 106661 are hereby
REVERSED and SET ASIDE.

The Decision dated June 28, 2001 of the Labor Arbiter in NLRC
Case No. 00-08-04110-2000, as affirmed by the Decision dated
January 25, 2008 of the National Labor Relations Commission
in NLRC CA No. 029806-01, is hereby REINSTATED.

No pronouncement as to costs.

SO ORDERED.

[28] G.R. No. 208908
THE COFFEE BEAN and TEA LEAF PILIPPINES, INC. and
WALDEN CU, Petitioners,
vs.
ROLLY P. ARENAS, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the
challenge to the Court of Appeals' (CA) decision2 dated March
26, 2013 and resolution3 dated August 30, 2013 in CA-G.R. SP
No. 117822. These assailed CA rulings affirmed the National
Labor Relations Commission's (NLRC) decision4 dated August
13, 2010, which also affirmed the Labor Arbiter's (LA) February
28, 2010 decision.
The Antecedent Facts
On April 1, 2008, the Coffee Bean and Tea Leaf Philippines, Inc.
(CBTL) hired Rolly P. Arenas (Arenas) to work as a "barista" at
its Paseo Center Branch. His principal functions included taking
orders from customers and preparing their ordered food and
beverages.5 Upon signing the employment contract,6 Arenas
was informed of CBTL’s existing employment policies.
To ensure the quality of its crew’s services, CBTL regularly
employs a "mystery guest shopper" who poses as a customer,
for the purpose of covertly inspecting the baristas’ job
performance.7
In April 2009, a mystery guest shopper at the Paseo Center
Branch submitted a report stating that on March 30, 2009,
Arenas was seen eating non-CBTL products at CBTL’s al fresco
dining area while on duty. As a result, the counter was left
empty without anyone to take and prepare the customers’
orders.8
On another occasion, or on April 28, 2009, Katrina Basallo
(Basallo), the duty manager of CBTL, conducted a routine
inspection of the Paseo Center Branch. While inspecting the
store’s products, she noticed an iced tea bottle being chilled
inside the bin where the ice for the customers’ drinks is stored;
thus, she called the attention of the staff on duty. When asked,
Arenas muttered, "kaninong iced tea?" and immediately picked
the bottle and disposed it outside the store.9
After inspection, Basallo prepared a store manager’s report
which listed Arenas’ recent infractions, as follows:
1.Leaving the counter unattended and eating chips in an
unauthorized area while on duty (March 30, 2009);
2.Reporting late for work on several occasions (April 1, 3 and
22); and
3.Placing an iced tea bottle in the ice bin despite having
knowledge of company policy prohibiting the same (April 28,
2009).10
Based on the mystery guest shopper and duty manager’s
reports, Arenas was required to explain his alleged violations.
However, CBTL found Arenas’ written explanation
unsatisfactory, hence CBTL terminated his employment.11
Arenas filed a complaint for illegal dismissal. After due
proceedings, the LA ruled in his favor, declaring that he had
been illegally dismissed. On appeal, the NLRC affirmed the LA’s
decision.
Labor Law Review | Cases
Dean Ada D. Abad
CBTL filed a petition for certiorari under Rule 65 before the CA.
CBTL insisted that Arenas’ infractions amounted to serious
misconduct or willful disobedience, gross and habitual neglect
of duties, and breach of trust and confidence. To support these
allegations, CBTL presented Arenas’ letter12 where he
admitted his commission of the imputed violations.
On March 26, 2013, the CA issued its decision dismissing the
petition. The CA ruled that Arenas’ offenses fell short of the
required legal standards to justify his dismissal; and that these
do not constitute serious misconduct or willful disobedience,
and gross negligence, to merit his termination from service.
The CA denied CBTL’s motion for reconsideration opening the
way for this present appeal via a petition for review on
certiorari.
The main issue before us is whether CBTL illegally dismissed
Arenas from employment.
The Petition
CBTL argues that under the terms and conditions of the
employment contract, Arenas agreed to abide and comply with
CBTL’s policies, procedures, rules and regulations, as provided
for under CBTL’s table of offenses and penalties and/or
employee handbook.13 CBTL cites serious misconduct as the
primary reason for terminating Arenas’ employment. CBTL also
imputes dishonesty on the part of Arenas for not immediately
admitting that he indeed left his bottled iced tea inside the ice
bin.
Our Ruling
We DENY the petition.
As a rule, in certiorari proceedings under Rule 65 of the Rules
of Court, the CA does not assess and weigh each piece of
evidence introduced in the case. The CA only examines the
factual findings of the NLRC to determine whether its
conclusions are supported by substantial evidence, whose
absence points to grave abuse of discretion amounting to lack
or excess of jurisdiction.14 In the case of Mercado v. AMA
Computer College,15 we emphasized that:
As a general rule, in certiorari proceedings under Rule 65 of the
Rules of Court, the appellate court does not assess and weigh
the sufficiency of evidence upon which the Labor Arbiter and
the NLRC based their conclusion. The query in this proceeding
is limited to the determination of whether or not the NLRC
acted without or in excess of its jurisdiction or with grave abuse
of discretion in rendering its decision. x x x16 [Italics supplied]
Our review of the records shows that the CA did not err in
affirming the LA and the NLRC’s rulings. No grave abuse of
discretion tainted these rulings, thus, the CA’s decision also
warrants this Court’s affirmation. The infractions which Arenas
committed do not justify the application of the severe penalty
of termination from service.
First, Arenas was found eating non-CBTL products inside the
store’s premises while on duty. Allegedly, he left the counter
unattended without anyone to entertain the incoming
customers. Second, he chilled his bottled iced tea inside the ice
bin, in violation of CBTL’s sanitation and hygiene policy. CBTL
argues that these violations constitute willful disobedience,
thus meriting dismissal from employment.
We disagree with CBTL.
For willful disobedience to be a valid cause for dismissal, these
two elements must concur: (1) the employee’s assailed
conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated
 Labor Law Review | Cases
Dean Ada D. Abad

must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which he had been
engaged to discharge.17
Tested against these standards, it is clear that Arenas’ alleged
infractions do not amount to such a wrongful and perverse
attitude. Though Arenas may have admitted these
wrongdoings, these do not amount to a wanton disregard of
CBTL’s company policies. As Arenas mentioned in his written
explanation, he was on a scheduled break when he was caught
eating at CBTL’s al fresco dining area. During that time, the
other service crews were the one in charge of manning the
counter. Notably, CBTL’s employee handbook imposes only the
penalty of written warning for the offense of eating non-CBTL
products inside the store’s premises.
CBTL also imputes gross and habitual neglect of duty to Arenas
for coming in late in three separate instances.
As a final remark, we note that petitioner Walden Chu (Chu)
should not be held jointly and severally liable with CBTL for
Arenas’ adjudged monetary awards.1âwphi1 The LA and the
NLRC ruled for their solidary liability but the CA failed to
dispose this issue in its decision.
A corporation is a juridical entity with a legal personality
separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it.23 Thus, as a
general rule, an officer may not be held liable for the
corporation's labor obligations unless he acted with evident
malice and/or bad faith in dismissing an employee.24
In the present case, there was no showing of any evident
malice or bad faith on Chu's part as CBTL's president. His
participation in Arenas' termination was not even sufficiently
alleged and argued. Hence, he cannot be held solidarily liable
for CBTL' s liabilitiesArenasto .

Gross negligence implies a want or absence of, or failure to WHEREFORE, in light of these considerations, we hereby DENY
exercise even a slight care or diligence, or the entire absence the petition for lack of merit. The Court of Appeals committed
of care.1avvphi1 It evinces a thoughtless disregard of no grave abuse of discretion in its decision of March 26, 2013
consequences without exerting any effort to avoid them.18 and its resolution of August 30, 2013 in CA-G.R. SP No.
There is habitual neglect if based on the circumstances, there 117822, except with respect to the liability of petitioner Walden
is a repeated failure to perform one’s duties for a period of Chu. We thus absolve petitioner Walden Chu from paying in his
time.19 personal capacity the monetary awards of respondent Rolly P.
Arenas. No costs.
In light of the foregoing criteria, we rule that Arenas’ three
counts of tardiness cannot be considered as gross and habitual SO ORDERED.
neglect of duty. The infrequency of his tardiness already
removes the character of habitualness. These late attendances
were also broadly spaced out, negating the complete absence
of care on Arenas’ part in the performance of his duties. Even
CBTL admitted in its notice to explain that this violation does
not merit yet a disciplinary action and is only an aggravating
circumstance to Arenas’ other violations.20

To further justify Arenas’ dismissal, CBTL argues that he

committed serious misconduct when he lied about using the ice
bin as cooler for his bottled iced tea. Under CBTL’s employee
handbook, dishonesty, even at the first instance, warrants the
penalty of termination from service.21

For misconduct or improper behavior to be a just cause for

dismissal,

(a) it must be serious; (b) it must relate to the performance of

the employee’s duties; and (c) it must show that the employee
has become unfit to continue working for the employer.22

However, the facts on record reveal that there was no active

dishonesty on the part of Arenas. When questioned about who
placed the bottled iced tea inside the ice bin, his immediate
reaction was not to deny his mistake, but to remove the bottle
inside the bin and throw it outside. More importantly, when he
was asked to make a written explanation of his action, he
admitted that the bottled iced tea was his.

Thus, even if there was an initial reticence on Arenas’ part, his

subsequent act of owing to his mistake only shows the absence
of a deliberate intent to lie or deceive his CBTL superiors. On
this score, we conclude that Arenas’ action did not amount to
serious misconduct.

Moreover, the imputed violations of Arenas, whether taken

singly or as a whole, do not necessitate the imposition of the
strict and harsh penalty of dismissal from service. The LA, NLRC
and the CA all consistently ruled that these offenses are not
grave enough to qualify as just causes for dismissal. Factual
findings of the labor tribunals especially if affirmed by the CA
must be given great weight, and merit the Court’s respect.

[29] G.R. No. 92598 May 20, 1994
PURIFICACION Y. MANLIGUEZ, ANTONINA Y. LUIS and
BENJAMIN C. YBANEZ, petitioners,
vs.
THE COURT OF APPEALS, ET AL., respondents.
Rufino L. Remoreras for petitioners.
Danilo L. Pilapil for private respondents.
PUNO, J.:
This is an appeal by certiorari from the Decision of the Court of
Appeals,1 dated November 16, 1989, denying due course to
and dismissing the petition in CA-G.R. SP NO. 18017.2
The case at bench finds its roots in the Decision of the
Department of Labor and Employment (Region VII), ordering
Inductocast Cebu, a partnership based in Mandaue City, to pay
its former employees a total of P232,908.00. As a consequence
of the judgment, the labor department's regional sheriff levied
the buildings and improvements standing on Lot 109, Plan 11-
5121-Amd., at Tipolo, Mandaue City. The levied properties
(hereinafter referred to as the "Tipolo properties") were
subsequently sold at public auction to said employees.
On May 25, 1988, petitioners filed with the RTC of Cebu City,
7th Judicial Branch, a Complaint3 which sought the lifting of
the levy over, and annulment of the sale of, the Tipolo
properties. The Complaint was docketed as Civil Case No. Ceb-
6917, and raffled to Branch 8 of the trial court. Petitioners
therein alleged that: they are the owners of the Lot 109; they
entered into a lease agreement with Inductocast Cebu over Lot
109; the lease contract provided that, except for machineries
and equipment, all improvements introduced in the leased
premises shall automatically be owned by the Lessor
(petitioners) upon the expiration/termination of the contract;4
the lease agreement was terminated by petitioners in
November, 1980 due to non-payment of rentals by Inductocast
Cebu;5 thereafter, petitioners took actual possession of and
occupied the Tipolo properties. Petitioners likewise alleged in
their Complaint that they became aware of the labor dispute
involving Inductocast only after the impugned public auction
sale.6
Atty. Danilo Pilapil, claiming to be the John Doe named in the
Complaint, filed a motion to dismiss on the ground that the trial
court had no jurisdiction over the case. The buyers of the Tipolo
properties, as intervenors, also filed a motion to dismiss on the
same ground. Both motions, which were opposed by
petitioners, were denied.
The intervenors, however, moved for reconsideration of the
denial. In an Order dated April 18, 1989, the trial court granted
the motion and dismissed Civil Case No. Ceb-6917. It held that
the civil case "is actually in the nature of a quashal of the levy
and the certificate of sale, a case arising out of a dispute that
was instituted by the previous employees of Inductocast before
the Department of Labor and Employment, Region 7."7 Citing
Pucan vs. Bengzon, 155 SCRA 692 (1987), it held it had no
jurisdiction over the case since the levy and sale "are
connected with the case within the exclusive jurisdiction of the
Department of Labor and Employment."8
Petitioners questioned the dismissal of their Complaint to the
respondent Court of Appeals, through a petition for certiorari
and preliminary injunction.9 The appellate court, in its
impugned Decision, denied the petition as it held:
To Our minds, the issue on what forum the case must be tried
or heard is a settled one. The Department of Labor is the
Labor Law Review | Cases
Dean Ada D. Abad
agency upon which devolves the jurisdiction over disputes
emanating from and in relation with labor controversies to the
exclusion of the regular courts.
The issue in the case at bar concerns the levy of a property in
pursuance to a writ of execution, arising out of labor disputes.
There can be no doubt that jurisdiction pertains to the
Department of Labor.
xxx xxx xx
x
In the light of the factual antecedents and incidents that
transpired in the hearing of this case at bar, the (trial court)
correctly ruled that indeed the Department of Labor has
jurisdiction over the case. Consequently, WE see no abuse of
discretion let alone a grave one, amounting to lack or in excess
of its jurisdiction correctible with a writ of certiorari.
Indeed, the issue of granting or denying a motion to dismiss is
addressed to the sound discretion of the court, and in the
absence of a capricious and whimsical exercise of power,
certiorari will not lie.
Thus, this appeal where petitioners contend:
THE RESPONDENT APPELLATE COURT ERRED IN HOLDING
THAT THE DEPARTMENT OF LABOR HAS JURISDICTION ON THE
SUBJECT MATTER AND NATURE OF THE CASE AS AGAINST THE
CIVIL COURT.
We find merit in the appeal. Firstly, respondent court erred in
holding that the trial court does not have jurisdiction over the
case filed by petitioners. It is at once evident that the Civil Case
No. Ceb-6917 is not a labor case. No employer-employee
relationship exists between petitioners and the other parties,
and no issue is involved which may be resolved by reference to
the Labor Code, other labor statutes, or any collective
bargaining agreement. Neither can we characterize petitioner's
action before the trial court as arising out of a labor dispute. It
was not brought to reverse or modify the judgment of the
Department of Labor and Employment (DOLE). Neither did it
question the validity of, or pray for, the quashal of the writ of
execution against Inductocast.
What is to be litigated in Civil Case No. Ceb-6917 is the issue
of ownership over the Tipolo properties. Clearly, it is the RTC
and not the labor department which can take cognizance of the
case, as provided by B.P. Blg. 129 ("An Act Reorganizing the
Judiciary, Appropriating Funds Therefor, and For Other
Purposes"), thus:
Sec. 19.Jurisdiction in civil case. — Regional Trial Courts shall
exercise exclusive original jurisdiction:
xxx xxx xx
x
(2)In all civil actions which involve the title to, or possession of
real property, or any interest therein, except actions for forcible
entry into and unlawful detainer of lands or buildings, original
jurisdiction over which is conferred upon Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts;
xxx xxx xx
x
The action taken by petitioners before the RTC asserting their
ownership over the levied properties is mandated by Section
17, Rule 39 of the Revised Rules of Court. Time and again, we
have held that:
 Labor Law Review | Cases
Dean Ada D. Abad

Under Section 17, Rule 39, a third person who claims property
levied upon on execution may vindicate such claim by action. .
. . The right of a person who claims to be the owner of property
levied upon on execution to file a third-party claim with the
sheriff is not exclusive, and he may file an action to vindicate
his claim even if the judgment creditor files an indemnity bond
in favor of the sheriff to answer for any damages that may be
suffered by the third-party claimant. By "action", as stated in
the Rule, what is meant is a separate and independent
action.10
Secondly, it is incorrect to argue that the trial court cannot take
cognizance of Civil Case No. Ceb-6917 without interfering with
the writ of attachment and writ of execution of a co-equal body.
It is settled that the levy and sale of property by virtue of a
writ of attachment is lawful only when the levied property
indubitably belongs to the defendant. If property other than
those of the defendant is attached and sold by the sheriff, he
acts beyond the limits of his and the court's authority.11 In this
regard, we held in the case of Uy, Jr. vs. Court of Appeals, 191
SCRA 275 (1991) that:
The main issue in this case is whether or not properties levied
and seized by virtue of a writ of attachment and later by a writ
of execution, were under custodia legis and therefore not
subject to the jurisdiction of another co-equal court where a
third party claimant claimed ownership of the same properties.
The issue has long been laid to rest in the case of Manila Herald
Publishing Co., Inc. v. Ramos (88 Phil. 94 [1951]) where the
Court ruled that while it is true that property in custody of the
law may not be interfered with, without the permission of the
proper court, this rule is confined to cases where the property
belongs to the defendant or one in which the defendant has
proprietary interests. But when the Sheriff, acting beyond the
bounds of his office seizes a stranger's property, the rule does
not apply and interference with his custody is not interference
with another court's order of attachment.
Also, in the more recent case of Santos vs. Bayhon, 199 SCRA
525 (1991), we stated, viz.:
to the Labor Ministry, now Department and not the regular
courts. This conclusion is evident, not only from the provisions
of Article 224(b) of the Labor Code, but also of
Article 218, as amended by Batas Pambansa Blg. 227 in
connection with Article 255 of the same Code.
xxx xxx xx
x
Apparently, Saulog Transit, Inc. was misled by its own prayer
for actual, moral and exemplary damages. It believed that such
additional cause of action could clothe the petition with the
mantle of a regular action cognizable by the regular courts. It
was, of course, mistaken for the fact remains that the acts
complained of are mere incidents of a labor dispute. Such
prayer therefore did not alter the complexion of the case as
one arising from a labor dispute, but was subsumed by the
nature of the main case, over which the regular courts had no
jurisdiction, much less the power to issue a temporary or
permanent injunction or restraining order. . . .12
In fine, we prohibited the action before the trial court in Pucan
because it attacked the regularity of the issuance of the alias
writ of execution in the labor case, which is but an incident of
the labor dispute. This is not so in the case at bench where the
civil case filed by petitioners does not even collaterally attack
the validity of the DOLE's writ of attachment. On the contrary,
petitioners in Civil Case No. Ceb-6917 pray for the trial court's
ruling that the DOLE's judgment could not be validly executed
on the Tipolo properties, which allegedly do not belong to
Inductocast.
IN VIEW WHEREOF, the petition for review is GRANTED. The
Decision of the Court of Appeals in CA-G.R. SP No. 18017,
dated November 16, 1989, is REVERSED and SET ASIDE. The
Regional Trial Court of Cebu City, Branch 8 is ordered to try
Civil Case Ceb-6917 on its merit. No costs.
SO ORDERED.

The general rule that no court has the power to interfere by

injunction with the judgments or decrees of another court with
concurrent or coordinate jurisdiction possessing equal power to
grant injunctive relief, applies only when no third-party
claimant is involved. . . . When a third party, or stranger to the
action, asserts a claim over the property levied upon, the
claimant may vindicate his claim by an independent action in
the proper civil court which may stop the execution of the
judgment on property not belonging to the judgment debtor
(Citations omitted.)

Finally, it must be noted that the Pucan case relied upon by

respondent court is inapplicable to the case at bench which
involves a third-party claim over property levied on execution.
In Pucan, we enjoined the Regional Trial Court from acting on
the petition for damages and prohibition against the
enforcement of the writ of execution issued by the NCR director
of the then Ministry of Labor and Employment in a labor case
for the following reason:

A perusal of the petition for damages and prohibition filed by

Saulog Transit, Inc., in the lower court reveals that basically,
what was being questioned was the legality or propriety of the
alias writ of execution dated March 1, 1985, as well as the acts
performed by the Ministry officials in implementing the same.
In other words, the petition was actually in the nature of a
motion to quash the writ; and with respect to the acts of the
Ministry officials, a case growing out of a labor dispute, as the
acts complained of, were perpetrated during the execution of a
decision of the then Minister of Labor and Employment.
However characterized, jurisdiction over the petition pertains

[30] G.R. No. 109272 August 10, 1994
GEORG GROTJAHN GMBH & CO., petitioner,
vs.
HON. LUCIA VIOLAGO ISNANI, Presiding Judge,
Regional Trial Court, Makati, Br. 59; ROMANA R.
LANCHINEBRE; and TEOFILO A. LANCHINEBRE,
respondents.
A.M. Sison, Jr. & Associates for petitioner.
Pedro L. Laso for private respondents.
PUNO, J.:
Petitioner impugns the dismissal of its Complaint for a sum of
money by the respondent judge for lack of jurisdiction and lack
of capacity to sue.
The records show that petitioner is a multinational company
organized and existing under the laws of the Federal Republic
of Germany. On July 6, 1983, petitioner filed an application,
dated July 2, 1983, 1 with the Securities and Exchange
Commission (SEC) for the establishment of a regional or area
headquarters in the Philippines, pursuant to Presidential
Decree No. 218. The application was approved by the Board of
Investments (BOI) on September 6, 1983. Consequently, on
September 20, 1983, the SEC issued a Certificate of
Registration and License to petitioner. 2
Private respondent Romana R. Lanchinebre was a sales
representative of petitioner from 1983 to mid-1992. On March
12, 1992, she secured a loan of twenty-five thousand pesos
(P25,000.00) from petitioner. On March 26 and June 10, 1992,
she made additional cash advances in the sum of ten thousand
pesos (P10,000.00). Of the total amount, twelve thousand one
hundred seventy pesos and thirty-seven centavos
(P12,170.37) remained unpaid. Despite demand, private
respondent Romana failed to settle her obligation with
petitioner.
On July 22, 1992, private respondent Romana Lanchinebre
filed with the Arbitration Branch of the National Labor Relations
Commission (NLRC) in Manila, a Complaint for illegal
suspension, dismissal and non-payment of commissions
against petitioner. On August 18, 1992, petitioner in turn filed
against private respondent a Complaint for damages
amounting to one hundred twenty thousand pesos
(P120,000.00) also with the NLRC Arbitration Branch (Manila).
3 The two cases were consolidated.
On September 2, 1992, petitioner filed another Complaint for
collection of sum of money against private respondents
spouses Romana and Teofilo Lanchinebre which was docketed
as Civil Case No. 92-2486 and raffled to the sala of respondent
judge. Instead of filing their Answer, private respondents
moved to dismiss the Complaint. This was opposed by
petitioner.
On December 21, 1992, respondent judge issued the first
impugned Order, granting the motion to dismiss. She held, viz:
Jurisdiction over the subject matter or nature of the action is
conferred by law and not subject to the whims and caprices of
the parties.
Under Article 217 of the Labor Code of the Philippines, the
Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision, the following
cases involving all workers, whether agricultural or non-
agricultural:
Labor Law Review | Cases
Dean Ada D. Abad
(4)claims for actual, moral, exemplary and other forms of
damages arising from an employer-employee relations.
xxx xxx xx
x
(6)Except claims for employees compensation, social security,
medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (P5,000.00) regardless of whether or not
accompanied with a claim for reinstatement.
In its complaint, the plaintiff (petitioner herein) seeks to
recover alleged cash advances made by defendant (private
respondent herein) Romana Lanchinebre while the latter was
in the employ of the former. Obviously the said cash advances
were made pursuant to the employer-employee relationship
between the (petitioner) and the said (private respondent) and
as such, within the original and exclusive jurisdiction of the
National Labor Relations Commission.
Again, it is not disputed that the Certificate of Registration and
License issued to the (petitioner) by the Securities and
Exchange Commission was merely "for the establishment of a
regional or area headquarters in the Philippines, pursuant to
Presidential Decree No. 218 and its implementing rules and
regulations." It does not include a license to do business in the
Philippines. There is no allegation in the complaint moreover
that (petitioner) is suing under an isolated transaction. It must
be considered that under Section 4, Rule 8 of the Revised Rules
of Court, facts showing the capacity of a party to sue or be
sued or the authority of a party to sue or be sued in a
representative capacity or the legal existence of an organized
association of persons that is made a party must be averred.
There is no averment in the complaint regarding (petitioner's)
capacity to sue or be sued.
Finally, (petitioner's) claim being clearly incidental to the
occupation or exercise of (respondent) Romana Lanchinebre's
profession, (respondent) husband should not be joined as party
defendant. 4
On March 8, 1993, the respondent judge issued a minute Order
denying petitioner's Motion for Reconsideration.
Petitioner now raises the following assignments of errors:
I
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE
REGULAR COURTS HAVE NO JURISDICTION OVER DISPUTES
BETWEEN AN EMPLOYER AND AN EMPLOYEE INVOLVING THE
APPLICATION PURELY OF THE GENERAL CIVIL LAW.
II
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT
PETITIONER HAS NO CAPACITY TO SUE AND BE SUED IN THE
PHILIPPINES DESPITE THE FACT THAT PETITIONER IS DULY
LICENSED BY THE SECURITIES AND EXCHANGE COMMISSION
TO SET UP AND OPERATE A REGIONAL OR AREA
HEADQUARTERS IN THE COUNTRY AND THAT IT HAS
CONTINUOUSLY OPERATED AS SUCH FOR THE LAST NINE (9)
YEARS.
III
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE
ERRONEOUS INCLUSION OF THE HUSBAND IN A COMPLAINT
IS A FATAL DEFECT THAT SHALL RESULT IN THE OUTRIGHT
DISMISSAL OF THE COMPLAINT.

IV
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE
HUSBAND IS NOT REQUIRED BY THE RULES TO BE JOINED AS
A DEFENDANT IN A COMPLAINT AGAINST THE WIFE.
There is merit to the petition.
Firstly, the trial court should not have held itself without
jurisdiction over Civil Case No. 92-2486. It is true that the loan
and cash advances sought to be recovered by petitioner were
contracted by private respondent Romana Lanchinebre while
she was still in the employ of petitioner. Nonetheless, it does
not follow that Article 217 of the Labor Code covers their
relationship.
Not every dispute between an employer and employee involves
matters that only labor arbiters and the NLRC can resolve in
the exercise of their adjudicatory or quasi-judicial powers. The
jurisdiction of labor arbiters and the NLRC under Article 217 of
the Labor Code is limited to disputes arising from an employer-
employee relationship which can only be resolved by reference
to the Labor Code, other labor statutes, or their collective
bargaining agreement. In this regard, we held in the earlier
case of Molave Motor Sales, Inc. vs. Laron, 129 SCRA 485
(1984), viz:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor
Arbiters, under paragraph 5 of Article 217 of the Labor Code
had jurisdiction over "all other cases arising from employer-
employee relation, unless expressly excluded by this Code."
Even then, the principal followed by this Court was that,
although a controversy is between an employer and an
employee, the Labor Arbiters have no jurisdiction if the Labor
Code is not involved. In Medina vs. Castro-Bartolome, 116
SCRA 597, 604 in negating jurisdiction of the Labor Arbiter,
although the parties were an employer and two employees, Mr.
Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor
Code has any relevance to the reliefs sought by plaintiffs. For
if the Labor Code has no relevance, any discussion concerning
the statutes amending it and whether or not they have
retroactive effect is unnecessary.
xxx xxx xx
x affiliates in Singapore, and in the process has named its local
And in Singapore Airlines Limited vs. Paño, 122 SCRA 671, 677,
the following was said:
Stated differently, petitioner seeks protection under the civil
laws and claims no benefits under the Labor Code. The primary
relief sought is for liquidated damages for breach of a
contractual obligation. The other items demanded are not labor
benefits demanded by workers generally taken cognizance of
in labor disputes, such as payment of wages, overtime
compensation or separation pay. The items claimed are the
natural consequences flowing from breach of an obligation,
intrinsically a civil dispute.
xxx xxx xxx
In San Miguel Corporation vs. NLRC, 161 SCRA 719 (1988), we
crystallized the doctrines set forth in the Medina, Singapore
Airlines, and Molave Motors cases, thus:
. . . The important principle that runs through these three (3)
cases is that where the claim to the principal relief sought is to
be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by
the general civil law, the jurisdiction over the dispute belongs
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Dean Ada D. Abad
to the regular courts of justice and not to the Labor Arbiter and
the NLRC. In such situations, resolutions of the dispute requires
expertise, not in labor management relations nor in wage
structures and other terms and conditions of employment, but
rather in the application of the general civil law. Clearly, such
claims fall outside the area of competence or expertise
ordinarily ascribed to Labor Arbiters and the NLRC and the
rationale for granting jurisdiction over such claims to these
agencies disappears.
Civil Case No. 92-2486 is a simple collection of a sum of money
brought by petitioner, as creditor, against private respondent
Romana Lanchinebre, as debtor. The fact that they were
employer and employee at the time of the transaction does not
negate the civil jurisdiction of the trial court. The case does not
involve adjudication of a labor dispute but recovery of a sum
of money based on our civil laws on obligation and contract.
Secondly, the trial court erred in holding that petitioner does
not have capacity to sue in the Philippines. It is clear that
petitioner is a foreign corporation doing business in the
Philippines. Petitioner is covered by the Omnibus Investment
Code of 1987. Said law defines "doing business," as follows:
. . . shall include soliciting orders, purchases, service contracts,
opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors who are domiciled in
the Philippines or who in any calendar year stay in the
Philippines for a period or periods totalling one hundred eighty
(180) days or more; participating in the management,
supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that
imply a continuity of commercial dealings or arrangements and
contemplate to that extent the performance of acts or works,
or the exercise of some of the functions normally incident to,
and in progressive prosecution of, commercial gain or of the
purpose and object of the business organization. 5
There is no general rule or governing principle as to what
constitutes "doing" or "engaging in" or "transacting" business
in the Philippines. Each case must be judged in the light of its
peculiar circumstances. 6 In the case at bench, petitioner does
not engage in commercial dealings or activities in the country
because it is precluded from doing so by P.D. No. 218, under
which it was established. 7 Nonetheless, it has been
continuously, since 1983, acting as a supervision,
communications and coordination center for its home office's
agent and has employed Philippine nationals like private
respondent Romana Lanchinebre. From this uninterrupted
performance by petitioner of acts pursuant to its primary
purposes and functions as a regional/area headquarters for its
home office, it is clear that petitioner is doing business in the
country. Moreover, private respondents are estopped from
assailing the personality of petitioner. So we held in Merrill
Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, 837
(1992):
The rule is that a party is estopped to challenge the personality
of a corporation after having acknowledged the same by
entering into a contract with it. And the "doctrine of estoppel
to deny corporate existence applies to foreign as well as to
domestic corporations;" "one who has dealth with a corporation
of foreign origin as a corporate entity is estopped to deny its
corporate existence and capacity." The principle "will be applied
to prevent a person contracting with a foreign corporation from
later taking advantage of its noncompliance with the statutes
chiefly in cases where such person has received the benefits of
the contract, . . . (Citations omitted.)
Finally, the trial court erred when it dismissed Civil Case No.
92-2486 on what it found to be the misjoinder of private
respondent Teofilo Lanchinebre as party defendant. It is a basic
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Dean Ada D. Abad

rule that "(m)isjoinder or parties is not ground for dismissal of

an action."8 Moreover, the Order of the trial court is based on
Section 4(h), Rule 3 of the Revised Rules of Court, which
provides:

A married woman may not . . . be sued alone without joining

her husband, except . . . if the litigation is incidental to the
profession, occupation or business in which she is engaged,

Whether or not the subject loan was incurred by private

respondent as an incident to her profession, occupation or
business is a question of fact. In the absence of relevant
evidence, the issue cannot be resolved in a motion to dismiss.

IN VIEW WHEREOF, the instant Petition is GRANTED. The

Orders, dated December 21, 1992 and March 8, 1993, in Civil
Case No. 92-2486 are REVERSED AND SET ASIDE. The RTC of
Makati, Br. 59, is hereby ordered to hear the reinstated case
on its merits. No costs.

SO ORDERED.