Republic of the Philippines Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr.

(Ricardo),
SUPREME COURT Eufemia Rosete (Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.),
Manila and Liberato Mangoba (Liberato) were employees of Small and Medium Enterprise
Bank, Incorporated (SME Bank).Originally, the principal shareholders and
EN BANC corporate directors of the bank were Eduardo M. Agustin, Jr. (Agustin) and
Peregrin de Guzman, Jr. (De Guzman).
G.R. No. 184517 October 8, 2013
In June 2001, SME Bank experienced financial difficulties. To remedy the situation,
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO the bank officials proposed its sale to Abelardo Samson(Samson).8
VILLAFLOR, JR., Petitioners,
vs. Accordingly, negotiations ensued, and a formal offer was made to Samson.
PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR., ELICERIO GASPAR, , Through his attorney-in-fact, Tomas S. Gomez IV, Samson then sent formal letters
RICARDO GASPAR JR., EUFEMIA ROSETE, FIDEL ESPIRITU, (Letter Agreements) to Agustin and De Guzman, demanding the following as
SIMEONESPIRITU, JR., and LIBERATO MANGOBA, Respondents. preconditions for the sale of SME Banks shares of stock:

x-----------------------x 4. You shall guarantee the peaceful turn over of all assets as well as the peaceful
transition of management of the bank and shall terminate/retire the employees
G.R. No. 186641 we mutually agree upon, upon transfer of shares in favor of our groups
nominees;
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO
VILLAFLOR, JR., Petitioners, xxxx
vs.
ELICERIO GASPAR, RICARDO GASPAR, JR., EUFEMIA ROSETE, FIDEL 7. All retirement benefits, if any of the above officers/stockholders/board of
ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA, Respondents. directors are hereby waived upon consummation [sic] of the above sale. The
retirement benefits of the rank and file employees including the managers shall
DECISION be honored by the new management in accordance with B.R. No. 10, S. 1997. 9

SERENO, CJ.:
Security of tenure is a constitutionally guaranteed right. 1 Employees may not be
terminated from their regular employment except for just or authorized causes
under the Labor Code2 and other pertinent laws. A mere change in the equity
composition of a corporation is neither a just nor an authorized cause that would
legally permit the dismissal of the corporations employees en masse.
Before this Court are consolidated Rule 45 Petitions for Review on
Certiorari3 assailing the Decision4 and Resolution5 of the Court of Appeals(CA) in
CA-G.R. SP No. 97510 and its Decision6 and Resolution7 in CA-G.R. SP No. 97942.
The facts of the case are as follows:
Agustin and De Guzman accepted the terms and conditions proposed by Samson
and signed the conforme portion of the Letter Agreements.10
Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting
with all the employees of the head office and of the Talaveraand Muoz branches
of SME Bank and persuaded them to tender their resignations, 11 with the promise
that they would be rehired upon reapplication. His directive was allegedly done at
the behest of petitioner Olga Samson.12
Relying on this representation, Elicerio,13 Ricardo,14 Fidel,15 Simeon, Jr.,16 and
Liberato17 tendered their resignations dated 27 August 2001. As for Eufemia, the
records show that she first tendered a resignation letter dated27 August
2001,18 and then a retirement letter dated September 2001.19
Elicerio,20 Ricardo,21 Fidel,22 Simeon, Jr.,23 and Liberato24 submitted application
letters on 11 September 2001. Both the resignation letters and copies of
respondent employees application letters were transmitted by Espiritu to
Samsons representative on 11 September 2001.25
On 11 September 2001, Agustin and De Guzman signified their conformity to the
Letter Agreements and sold 86.365% of the shares of stock of SME Bank to
spouses Abelardo and Olga Samson. Spouses Samson then became the principal
shareholders of SME Bank, while Aurelio Villaflor, Jr. was appointed bank
president. As it turned out, respondent employees, except for Simeon, Jr., 26 were
not rehired. After a month in service, Simeon, Jr. again resigned on October
2001.27
Respondent-employees demanded the payment of their respective separation
pays, but their requests were denied.1wphi1
Aggrieved by the loss of their jobs, respondent employees filed a Complaint
before the National Labor Relations Commission (NLRC) Regional Arbitration
Branch No. III and sued SME Bank, spouses Abelardo and Olga Samson and
Aurelio Villaflor (the Samson Group) for unfair labor practice; illegal dismissal;
illegal deductions; underpayment; and nonpayment of allowances, separation pay
and 13th month pay.28 Subsequently, they amended their Complaint to include
Agustin and De Guzman as respondents to the case.29
On 27 October 2004, the labor arbiter ruled that the buyer of an enterprise is not
bound to absorb its employees, unless there is an express stipulation to the
contrary. However, he also found that respondent employees were illegally
dismissed, because they had involuntarily executed their resignation letters after
relying on representations that they would be given their separation benefits and
rehired by the new management. Accordingly, the labor arbiter decided the case
against Agustin and De Guzman, but dismissed the Complaint against the
Samson Group, as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondents Eduardo Agustin, Jr. and Peregrin De Guzman to pay complainants
separation pay in the total amount of P339,403.00 detailed as follows:
Elicerio B. Gaspar = P 5,837.00
Ricardo B. Gaspar, Jr. = P11,674.00
Liberato B. Mangoba = P64,207.00
Fidel E. Espiritu = P29,185.00
Simeon B. Espiritu, Jr. = P26,000.00
Eufemia E. Rosete = P202,510.00
All other claims including the complaint against Abelardo Samson, Olga Samson
and Aurelio Villaflor are hereby DISMISSED for want of merit.
SO ORDERED.30
Dissatisfied with the Decision of the labor arbiter, respondent employees, Agustin
and De Guzman brought separate appeals to the NLRC. Respondent employees
questioned the labor arbiters failure to award backwages, while Agustin and De
Guzman contended that they should not be held liable for the payment of the
employees claims.
The NLRC found that there was only a mere transfer of shares and therefore, a
mere change of management from Agustin and De Guzman to the Samson
Group. As the change of management was not a valid ground to terminate
respondent bank employees, the NLRC ruled that they had indeed been illegally
dismissed. It further ruled that Agustin, De Guzman and the Samson Group should
be held jointly and severally liable for the employees separation pay and
backwages, as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby
MODIFIED. Respondents are hereby Ordered to jointly and severally pay the
complainants backwages from 11 September 2001 until the finality of this
Decision, separation pay at one month pay for every year of service, P10,000.00
and P5,000.00 moral and exemplary damages, and five (5%) percent attorneys
fees.
Other dispositions are AFFIRMED
SO ORDERED.31
On 28 November 2006, the NLRC denied the Motions for Reconsideration filed by
Agustin, De Guzman and the Samson Group.32
Agustin and De Guzman filed a Rule 65 Petition for Certiorari with the CA,
docketed as CA-G.R. SP No. 97510. The Samson Group likewise filed a separate
Rule 65 Petition for Certiorari with the CA, docketed as CA-G.R. SP No. 97942.
Motions to consolidate both cases were not acted upon by the appellate court.
On 13 March 2008, the CA rendered a Decision in CA-G.R. SP No.97510 affirming
that of the NLRC. The fallo of the CA Decision reads:
WHEREFORE, in view of the foregoing, the petition is DENIED. Accordingly, the
Decision dated May 8, 2006, and Resolution dated November 28, 2006 of the
National Labor Relations Commission in NLRC NCR CA No. 043236-05 (NLRC RAB
III-07-4542-02) are hereby AFFIRMED.
SO ORDERED.33
Subsequently, CA-G.R. SP No. 97942 was disposed of by the appellate court in a
Decision dated 15 January 2008, which likewise affirmed that of the NLRC. The
dispositive portion of the CA Decision states:
WHEREFORE, premises considered, the instant Petition for Certiorari is denied,
and the herein assailed May 8, 2006 Decision and November 28, 2006 Resolution
of the NLRC are hereby AFFIRMED.
SO ORDERED.34
The appellate court denied the Motions for Reconsideration filed by the parties in
Resolutions dated 1 September 200835 and 19 February 2009.36
The Samson Group then filed two separate Rule 45 Petitions questioning the CA
Decisions and Resolutions in CA-G.R. SP No. 97510 and CA-G.R. SP No. 97942. On
17 June 2009, this Court resolved to consolidate both Petitions. 37
THE ISSUES
Succinctly, the parties are asking this Court to determine whether respondent
employees were illegally dismissed and, if so, which of the parties are liable for
the claims of the employees and the extent of the reliefs that may be awarded to
these employees.
THE COURTS RULING
The instant Petitions are partly meritorious.
I
Respondent employees were illegally dismissed.
As to Elicerio Gaspar, Ricardo Gaspar, Jr., Fidel Espiritu, Eufemia Rosete and
Liberato Mangoba
The Samson Group contends that Elicerio, Ricardo, Fidel, and Liberato voluntarily
resigned from their posts, while Eufemia retired from her position. As their
resignations and retirements were voluntary, they were not dismissed from their
employment.38 In support of this argument, it presented copies of their
resignation and retirement letters,39 which were couched in terms of gratitude.
We disagree. While resignation letters containing words of gratitude may indicate
that the employees were not coerced into resignation, 40 this fact alone is not
conclusive proof that they intelligently, freely and voluntarily resigned. To rule
that resignation letters couched in terms of gratitude are, by themselves,
conclusive proof that the employees intended to relinquish their posts would open
the floodgates to possible abuse. In order to withstand the test of validity,
resignations must be made voluntarily and with the intention of relinquishing the
office, coupled with an act of relinquishment.41 Therefore, in order to determine
whether the employees truly intended to resign from their respective posts, we
cannot merely rely on the tenor of the resignation letters, but must take into
consideration the totality of circumstances in each particular case.
Here, the records show that Elicerio, Ricardo, Fidel, and Liberato only tendered
resignation letters because they were led to believe that, upon reapplication, they
would be reemployed by the new management. 42 As it turned out, except for
Simeon, Jr., they were not rehired by the new management. Their reliance on the
representation that they would be reemployed gives credence to their argument
that they merely submitted courtesy resignation letters because it was demanded
of them, and that they had no real intention of leaving their posts. We therefore
conclude that Elicerio, Ricardo, Fidel, and Liberato did not voluntarily resign from
their work; rather, they were terminated from their employment.
As to Eufemia, both the CA and the NLRC discussed her case together with the
cases of the rest of respondent-employees. However, a review of the records
shows that, unlike her co-employees, she did not resign; rather, she submitted a
letter indicating that she was retiring from her former position. 43
The fact that Eufemia retired and did not resign, however, does not change our
conclusion that illegal dismissal took place.
Retirement, like resignation, should be an act completely voluntary on the part of
the employee. If the intent to retire is not clearly established or if the retirement
is involuntary, it is to be treated as a discharge.44
In this case, the facts show that Eufemias retirement was not of her own volition.
The circumstances could not be more telling. The facts show that Eufemia was
likewise given the option to resign or retire in order to fulfill the precondition in
the Letter Agreements that the seller should "terminate/retire the employees
[mutually agreed upon] upon transfer of shares" to the buyers. 45 Thus, like her
other co-employees, she first submitted a letter of resignation dated 27 August
2001.46 For one reason or another, instead of resigning, she chose to retire and
submitted a retirement letter to that effect. 47 It was this letter that was
subsequently transmitted to the representative of the Samson Group on 11
September 2001.48
In San Miguel Corporation v. NLRC, 49 we have explained that involuntary
retirement is tantamount to dismissal, as employees can only choose the means
and methods of terminating their employment, but are powerless as to the status
of their employment and have no choice but to leave the company. This rule
squarely applies to Eufemias case. Indeed, she could only choose between
resignation and retirement, but was made to understand that she had no choice
but to leave SME Bank. Thus, we conclude that, similar to her other co-
employees, she was illegally dismissed from employment.
The Samson Group further argues50 that, assuming the employees were
dismissed, the dismissal is legal because cessation of operations due to serious
business losses is one of the authorized causes of termination under Article 283
of the Labor Code.51
Again, we disagree.
The law permits an employer to dismiss its employees in the event of closure of
the business establishment.52However, the employer is required to serve written
notices on the worker and the Department of Labor at least one month before the
intended date of closure.53 Moreover, the dismissed employees are entitled to
separation pay, except if the closure was due to serious business losses or
financial reverses.54 However, to be exempt from making such payment, the
employer must justify the closure by presenting convincing evidence that it
actually suffered serious financial reverses.55
In this case, the records do not support the contention of SME Bank that it
intended to close the business establishment. On the contrary, the intention of
the parties to keep it in operation is confirmed by the provisions of the Letter
Agreements requiring Agustin and De Guzman to guarantee the "peaceful
transition of management of the bank" and to appoint "a manager of [the Samson
Groups] choice x x x to oversee bank operations."
Even assuming that the parties intended to close the bank, the records do not
show that the employees and the Department of Labor were given written notices
at least one month before the dismissal took place. Moreover, aside from their
bare assertions, the parties failed to substantiate their claim that SME Bank was
suffering from serious financial reverses.
In fine, the argument that the dismissal was due to an authorized cause holds no
water.
Petitioner bank also argues that, there being a transfer of the business
establishment, the innocent transferees no longer have any obligation to continue
employing respondent employees,56 and that the most that they can do is to give
preference to the qualified separated employees; hence, the employees were
validly dismissed.57
The argument is misleading and unmeritorious. Contrary to petitioner banks
argument, there was no transfer of the business establishment to speak of, but
merely a change in the new majority shareholders of the corporation.
There are two types of corporate acquisitions: asset sales and stock sales. 58 In
asset sales, the corporate entity 59 sells all or substantially all of its assets 60 to
another entity. In stock sales, the individual or corporate shareholders 61 sell a
controlling block of stock62 to new or existing shareholders.
In asset sales, the rule is that the seller in good faith is authorized to dismiss the
affected employees, but is liable for the payment of separation pay under the
law.63 The buyer in good faith, on the other hand, is not obliged to absorb the
employees affected by the sale, nor is it liable for the payment of their
claims.64 The most that it may do, for reasons of public policy and social justice, is
to give preference to the qualified separated personnel of the selling firm. 65
In contrast with asset sales, in which the assets of the selling corporation are
transferred to another entity, the transaction in stock sales takes place at the
shareholder level. Because the corporation possesses a personality separate and
distinct from that of its shareholders, a shift in the composition of its shareholders
will not affect its existence and continuity. Thus, notwithstanding the stock sale,
the corporation continues to be the employer of its people and continues to be
liable for the payment of their just claims. Furthermore, the corporation or its new
majority share holders are not entitled to lawfully dismiss corporate employees
absent a just or authorized cause.
In the case at bar, the Letter Agreements show that their main object is the
acquisition by the Samson Group of 86.365% of the shares of stock of SME
Bank.66 Hence, this case involves a stock sale, whereby the transferee acquires
the controlling shares of stock of the corporation. Thus, following the rule in stock
sales, respondent employees may not be dismissed except for just or authorized
causes under the Labor Code.
Petitioner bank argues that, following our ruling in Manlimos v. NLRC, 67 even in
cases of stock sales, the new owners are under no legal duty to absorb the
sellers employees, and that the most that the new owners may do is to give
preference to the qualified separated employees.68 Thus, petitioner bank argues
that the dismissal was lawful.
We are not persuaded.
Manlimos dealt with a stock sale in which a new owner or management group
acquired complete ownership of the corporation at the shareholder level. 69 The
employees of the corporation were later "considered terminated, with their
conformity"70 by the new majority shareholders. The employees then re-applied
for their jobs and were rehired on a probationary basis. After about six months,
the new management dismissed two of the employees for having abandoned
their work, and it dismissed the rest for committing "acts prejudicial to the
interest of the new management."71 Thereafter, the employees sought
reinstatement, arguing that their dismissal was illegal, since they "remained
regular employees of the corporation regardless of the change of management." 72
In disposing of the merits of the case, we upheld the validity of the second
termination, ruling that "the parties are free to renew the contract or not [upon
the expiration of the period provided for in their probationary contract of
employment]."73 Citing our pronouncements in Central Azucarera del Danao v.
Court of Appeals,74 San Felipe Neri School of Mandaluyong, Inc. v. NLRC, 75 and
MDII Supervisors & Confidential Employees Association v. Presidential Assistant on
Legal Affairs,76 we likewise upheld the validity of the employees first separation
from employment, pronouncing as follows:
A change of ownership in a business concern is not proscribed bylaw. In Central
Azucarera del Danao vs. Court of Appeals, this Court stated:
There can be no controversy for it is a principle well-recognized, that it is within
the employers legitimate sphere of management control of the business to adopt
economic policies or make some changes or adjustments in their organization or
operations that would insure profit to itself or protect the investment of its
stockholders. As in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sellor dispose all or
substantially all of its assets and properties which may bring about the dismissal
or termination of its employees in the process. Such dismissal or termination
should not however be interpreted in such a manner as to permit the employer to
escape payment of termination pay. For such a situation is not envisioned in the
law. It strikes at the very concept of social justice.
In a number of cases on this point, the rule has been laid down that the sale or
disposition must be motivated by good faith as an element of exemption from
liability. Indeed, an innocent transferee of a business establishment has no
liability to the employees of the transfer or to continue employer them. Nor is the
transferee liable for past unfair labor practices of the previous owner, except,
when the liability therefor is assumed by the new employer under the contract of
sale, or when liability arises because of the new owners participation in thwarting
or defeating the rights of the employees.
Where such transfer of ownership is in good faith, the transferee is under no legal
duty to absorb the transferors employees as there is no law compelling such
absorption. The most that the transferee may do, for reasons of public policy and
social justice, is to give preference to the qualified separated employees in the
filling of vacancies in the facilities of the purchaser.
Since the petitioners were effectively separated from work due to a bona fide
change of ownership and they were accordingly paid their separation pay, which
they freely and voluntarily accepted, the private respondent corporation was
under no obligation to employ them; it may, however, give them preference in
the hiring. x x x. (Citations omitted)
We take this opportunity to revisit our ruling in Manlimos insofar as it applied a
doctrine on asset sales to a stock sale case. Central Azucarera del Danao, San
Felipe Neri School of Mandaluyong and MDII Supervisors &Confidential Employees
Association all dealt with asset sales, as they involved a sale of all or substantially
all of the assets of the corporation. The transactions in those cases were not
made at the shareholder level, but at the corporate level. Thus, applicable to
those cases were the rules in asset sales: the employees may be separated from
their employment, but the seller is liable for the payment of separation pay; on
the other hand, the buyer in good faith is not required to retain the affected
employees in its service, nor is it liable for the payment of their claims.
The rule should be different in Manlimos, as this case involves a stock sale. It is
error to even discuss transfer of ownership of the business, as the business did
not actually change hands. The transfer only involved a change in the equity
composition of the corporation. To reiterate, the employees are not transferred to
a new employer, but remain with the original corporate employer,
notwithstanding an equity shift in its majority shareholders. This being so, the
employment status of the employees should not have been affected by the stock
sale. A change in the equity composition of the corporate shareholders should not
result in the automatic termination of the employment of the corporations
employees. Neither should it give the new majority shareholders the right to
legally dismiss the corporations employees, absent a just or authorized cause.
The right to security of tenure guarantees the right of employees to continue in
their employment absent a just or authorized cause for termination. This
guarantee proscribes a situation in which the corporation procures the severance
of the employment of its employees who patently still desire to work for the
corporation only because new majority stockholders and a new management
have come into the picture. This situation is a clear circumvention of the
employees constitutionally guaranteed right to security of tenure, an act that
cannot be countenanced by this Court.
It is thus erroneous on the part of the corporation to consider the employees as
terminated from their employment when the sole reason for so doing is a change
of management by reason of the stock sale. The conformity of the employees to
the corporations act of considering them as terminated and their subsequent
acceptance of separation pay does not remove the taint of illegal dismissal.
Acceptance of separation pay does not bar the employees from subsequently
contesting the legality of their dismissal, nor does it estop them from challenging
the legality of their separation from the service.77
We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it
upheld that, in a stock sale, the buyer in good faith has no obligation to retain the
employees of the selling corporation; and that the dismissal of the affected
employees is lawful, even absent a just or authorized cause.
As to Simeon Espiritu, Jr.
The CA and the NLRC discussed the case of Simeon, Jr. together with that of the
rest of respondent-employees. However, a review of the records shows that the
conditions leading to his dismissal from employment are different. We thus
discuss his circumstance separately.
The Samson Group contends that Simeon, Jr., likewise voluntarily resigned from
his post.78 According to them, he had resigned from SME Bank before the share
transfer took place.79
Upon the change of ownership of the shares and the management of the
company, Simeon, Jr. submitted a letter of application to and was rehired by the
new management.80 However, the Samson Group alleged that for purely personal
reasons, he again resigned from his employment on 15 October 2001. 81
Simeon, Jr., on the other hand, contends that while he was reappointed by the
new management after his letter of application was transmitted, he was not given
a clear position, his benefits were reduced, and he suffered a demotion in
rank.82 These allegations were not refuted by the Samson Group.
We hold that Simeon, Jr. was likewise illegally dismissed from his employment.
Similar to our earlier discussion, we find that his first courtesy resignation letter
was also executed involuntarily. Thus, it cannot be the basis of a valid resignation;
and thus, at that point, he was illegally terminated from his employment. He was,
however, rehired by SME Bank under new management, although based on his
allegations, he was not reinstated to his former position or to a substantially
equivalent one.83 Rather, he even suffered a reduction in benefits and a demotion
in rank.84 These led to his submission of another resignation letter effective 15
October 2001.85
We rule that these circumstances show that Simeon, Jr. was constructively
dismissed. In
Peaflor v. Outdoor Clothing Manufacturing Corporation,86 we have defined
constructive dismissal as follows:
Constructive dismissal is an involuntary resignation by the employee due to the
harsh, hostile, and unfavorable conditions set by the employer and which arises
when a clear discrimination, insensibility, or disdain by an employer exists and
has become unbearable to the employee.87
Constructive dismissal exists where there is cessation of work, because
"continued employment is rendered impossible, unreasonable or unlikely, as an
offer involving a demotion in rank or a diminution in pay" and other benefits. 88
These circumstances are clearly availing in Simeon, Jr.s case. He was made to
resign, then rehired under conditions that were substantially less than what he
was enjoying before the illegal termination occurred. Thus, for the second time,
he involuntarily resigned from his employment. Clearly, this case is illustrative of
constructive dismissal, an act prohibited under our labor laws.
II
SME Bank, Eduardo M. Agustin, Jr. and Peregrin de Guzman, Jr. are liable for illegal
dismissal.
Having ruled on the illegality of the dismissal, we now discuss the issue of liability
and determine who among the parties are liable for the claims of the illegally
dismissed employees.
The settled rule is that an employer who terminates the employment of its
employees without lawful cause or due process of law is liable for illegal
dismissal.89
None of the parties dispute that SME Bank was the employer of respondent
employees. The fact that there was a change in the composition of its
shareholders did not affect the employer-employee relationship between the
employees and the corporation, because an equity transfer affects neither the
existence nor the liabilities of a corporation. Thus, SME Bank continued to be the
employer of respondent employees notwithstanding the equity change in the
corporation. This outcome is in line with the rule that a corporation has a
personality separate and distinct from that of its individual shareholders or
members, such that a change in the composition of its shareholders or members
would not affect its corporate liabilities.
Therefore, we conclude that, as the employer of the illegally dismissed employees
before and after the equity transfer, petitioner SME Bank is liable for the
satisfaction of their claims.
Turning now to the liability of Agustin, De Guzman and the Samson Group for
illegal dismissal, at the outset we point out that there is no privity of employment
contracts between Agustin, De Guzman and the Samson Group, on the one hand,
and respondent employees on the other. Rather, the employment contracts were
between SME Bank and the employees. However, this fact does not mean that
Agustin, De Guzman and the Samson Group may not be held liable for illegal
dismissal as corporate directors or officers. In Bogo-Medellin Sugarcane Planters
Association, Inc. v. NLRC,90 we laid down the rule as regards the liability of
corporate directors and officers in illegal dismissal cases, as follows:
Unless they have exceeded their authority, corporate officers are, as a general
rule, not personally liable for their official acts, because a corporation, by legal
fiction, has a personality separate and distinct from its officers, stockholders and
members. However, this fictional veil may be pierced whenever the corporate
personality is used as a means of perpetuating a fraud or an illegal act, evading
an existing obligation, or confusing a legitimate issue. In cases of illegal dismissal,
corporate directors and officers are solidarily liable with the corporation, where
terminations of employment are done with malice or in bad faith. 91 (Citations
omitted)
Thus, in order to determine the respective liabilities of Agustin, De Guzman and
the Samson Group under the afore-quoted rule, we must determine, first, whether
they may be considered as corporate directors or officers; and, second, whether
the terminations were done maliciously or in bad faith.
There is no question that both Agustin and De Guzman were corporate directors
of SME Bank. An analysis of the facts likewise reveals that the dismissal of the
employees was done in bad faith. Motivated by their desire to dispose of their
shares of stock to Samson, they agreed to and later implemented the
precondition in the Letter Agreements as to the termination or retirement of SME
Banks employees. However, instead of going through the proper procedure, the
bank manager induced respondent employees to resign or retire from their
respective employments, while promising that they would be rehired by the new
management. Fully relying on that promise, they tendered courtesy resignations
or retirements and eventually found themselves jobless. Clearly, this sequence of
events constituted a gross circumvention of our labor laws and a violation of the
employees constitutionally guaranteed right to security of tenure. We therefore
rule that, as Agustin and De Guzman are corporate directors who have acted in
bad faith, they may be held solidarily liable with SME Bank for the satisfaction of
the employees lawful claims.
As to spouses Samson, we find that nowhere in the records does it appear that
they were either corporate directors or officers of SME Bank at the time the illegal
termination occurred, except that the Samson Group had already taken over as
new management when Simeon, Jr. was constructively dismissed. Not being
corporate directors or officers, spouses Samson were not in legal control of the
bank and consequently had no power to dismiss its employees.
Respondent employees argue that the Samson Group had already taken over and
conducted an inventory before the execution of the share purchase
agreement.92 Agustin and De Guzman likewise argued that it was at Olga
Samsons behest that the employees were required to resign from their
posts.93 Even if this statement were true, it cannot amount to a finding that
spouses Samson should be treated as corporate directors or officers of SME Bank.
The records show that it was Espiritu who asked the employees to tender their
resignation and or retirement letters, and that these letters were actually
tendered to him.94 He then transmitted these letters to the representative of the
Samson Group.95 That the spouses Samson had to ask Espiritu to require the
employees to resign shows that they were not in control of the corporation, and
that the former shareholders through Espiritu were still in charge thereof. As
the spouses Samson were neither corporate officers nor directors at the time the
illegal dismissal took place, we find that there is no legal basis in the present case
to hold them in their personal capacities solidarily liable with SME Bank for
illegally dismissing respondent employees, without prejudice to any liabilities that
may have attached under other provisions of law.
Furthermore, even if spouses Samson were already in control of the corporation at
the time that Simeon, Jr. was constructively dismissed, we refuse to pierce the
corporate veil and find them liable in their individual steads. There is no showing
that his constructive dismissal amounted to more than a corporate act by SME
Bank, or that spouses Samson acted maliciously or in bad faith in bringing about
his constructive dismissal.
Finally, as regards Aurelio Villaflor, while he may be considered as a corporate
officer, being the president of SME Bank, the records are bereft of any evidence
that indicates his actual participation in the termination of respondent employees.
Not having participated at all in the illegal act, he may not be held individually
liable for the satisfaction of their claims.
III
Respondent employees are entitled to separation pay, full backwages, moral
damages, exemplary damages and attorneys fees.
The rule is that illegally dismissed employees are entitled to (1) either
reinstatement, if viable, or separation pay if reinstatement is no longer viable;
and (2) backwages.96
Courts may grant separation pay in lieu of reinstatement when the relations
between the employer and the employee have been so severely strained; when
reinstatement is not in the best interest of the parties; when it is no longer
advisable or practical to order reinstatement; or when the employee decides not
to be reinstated.97 In this case, respondent employees expressly pray for a grant
of separation pay in lieu of reinstatement. Thus, following a finding of illegal
dismissal, we rule that they are entitled to the payment of separation pay
equivalent to their one-month salary for every year of service as an alternative to
reinstatement.
Respondent employees are likewise entitled to full backwages notwithstanding
the grant of separation pay. In Santos v. NLRC, 98 we explained that an award of
backwages restores the income that was lost by reason of the unlawful dismissal,
while separation pay "provides the employee with 'the wherewithal during the
period that he is looking for another employment." 99 Thus, separation pay is a
proper substitute only for reinstatement; it is not an adequate substitute for both
reinstatement and backwages.100 Hence, respondent employees are entitled to
the grant of full backwages in addition to separation pay.
As to moral damages, exemplary damages and attorney's fees, we uphold the
appellate court's grant thereof based on our finding that the forced resignations
and retirement were fraudulently done and attended by bad faith.

WHEREFORE, premises considered, the instant Petitions for Review are PARTIALLY
GRANTED.

The assailed Decision and Resolution of the Court of Appeals in CA G.R. SP No.
97510 dated 13 March 2008 and 1 September 2008,respectively, are hereby
REVERSED and SET ASIDE insofar as it held Abelardo P. Samson, Olga Samson and
Aurelio Villaflor, Jr. solidarily liable for illegal dismissal.

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

We REVERSE our ruling in Manlimos v. NLRC insofar as it upheld that, in a stock

sale, the buyer in good faith has no obligation to retain the employees of the
selling corporation, and that the dismissal of the affected employees is lawful
even absent a just or authorized cause.

SO ORDERED.
SECOND DIVISION
G.R. No. 208908, March 11, 2015
THE COFFEE BEAN AND TEA LEAF PHILIPPINES, INC. AND WALDEN CHU,
Petitioners, v. ROLLY P. ARENAS, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the Court of
Appeals (CA) decision2 dated March 26, 2013 and resolution3 dated August 30,
2013 in CA-G.R. SP No. 117822. These assailed CA rulings affirmed the National
Labor Relations Commissions (NLRC) decision4 dated August 13, 2010, which
also affirmed the Labor Arbiters (LA) February 28, 2010 decision.
The Antecedent Facts
On April 1, 2008, the Coffee Bean and Tea Leaf Philippines, Inc. (CBTL) hired Rolly
P. Arenas (Arenas) to work as a barista at its Paseo Center Branch. His principal
functions included taking orders from customers and preparing their ordered food
and beverages.5 Upon signing the employment contract,6 Arenas was informed
of CBTLs existing employment policies.
To ensure the quality of its crews services, CBTL regularly employs a mystery
guest shopper who poses as a customer, for the purpose of covertly inspecting
the baristas job performance.7
In April 2009, a mystery guest shopper at the Paseo Center Branch submitted a
report stating that on March 30, 2009, Arenas was seen eating non-CBTL products
at CBTLs al fresco dining area while on duty. As a result, the counter was left
empty without anyone to take and prepare the customers orders.8
On another occasion, or on April 28, 2009, Katrina Basallo (Basallo), the duty
manager of CBTL, conducted a routine inspection of the Paseo Center Branch.
While inspecting the stores products, she noticed an iced tea bottle being chilled
inside the bin where the ice for the customers drinks is stored; thus, she called
the attention of the staff on duty. When asked, Arenas muttered, kaninong iced
tea? and immediately picked the bottle and disposed it outside the store.9
After inspection, Basallo prepared a store managers report which listed Arenas
recent infractions, as follows:
Leaving the counter unattended and eating chips in an unauthorized area while
on duty (March 30, 2009);
Reporting late for work on several occasions (April 1, 3 and 22); and
Placing an iced tea bottle in the ice bin despite having knowledge of company
policy prohibiting the same (April 28, 2009).10
Based on the mystery guest shopper and duty managers reports, Arenas was
required to explain his alleged violations. However, CBTL found Arenas written
explanation unsatisfactory, hence CBTL terminated his employment.11
Arenas filed a complaint for illegal dismissal. After due proceedings, the LA ruled
in his favor, declaring that he had been illegally dismissed. On appeal, the NLRC
affirmed the LAs decision.
CBTL filed a petition for certiorari under Rule 65 before the CA. CBTL insisted that
Arenas infractions amounted to serious misconduct or willful disobedience, gross
and habitual neglect of duties, and breach of trust and confidence. To support
these allegations, CBTL presented Arenas letter12 where he admitted his
commission of the imputed violations.
On March 26, 2013, the CA issued its decision dismissing the petition. The CA
ruled that Arenas offenses fell short of the required legal standards to justify his
dismissal; and that these do not constitute serious misconduct or willful
disobedience, and gross negligence, to merit his termination from service. The CA
denied CBTLs motion for reconsideration opening the way for this present appeal
via a petition for review on certiorari.
The main issue before us is whether CBTL illegally dismissed Arenas from
employment.
The Petition
CBTL argues that under the terms and conditions of the employment contract,
Arenas agreed to abide and comply with CBTLs policies, procedures, rules and
regulations, as provided for under CBTLs table of offenses and penalties
and/or employee handbook.13 CBTL cites serious misconduct as the primary
reason for terminating Arenas employment. CBTL also imputes dishonesty on
the part of Arenas for not immediately admitting that he indeed left his bottled
iced tea inside the ice bin.
Our Ruling
We DENY the petition.
As a rule, in certiorari proceedings under Rule 65 of the Rules of Court, the CA
does not assess and weigh each piece of evidence introduced in the case. The CA
only examines the factual findings of the NLRC to determine whether its
conclusions are supported by substantial evidence, whose absence points to
grave abuse of discretion amounting to lack or excess of jurisdiction.14 In the
case of Mercado v. AMA Computer College,15 we emphasized that:
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court,
the appellate court does not assess and weigh the sufficiency of evidence upon
which the Labor Arbiter and the NLRC based their conclusion. The query in this
proceeding is limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction or with grave abuse of discretion in
rendering its decision. x x x16 [Italics supplied]
Our review of the records shows that the CA did not err in affirming the LA and
the NLRCs rulings. No grave abuse of discretion tainted these rulings, thus, the
CAs decision also warrants this Courts affirmation. The infractions which Arenas
committed do not justify the application of the severe penalty of termination from
service.
First, Arenas was found eating non-CBTL products inside the stores premises
while on duty. Allegedly, he left the counter unattended without anyone to
entertain the incoming customers. Second, he chilled his bottled iced tea inside
the ice bin, in violation of CBTLs sanitation and hygiene policy. CBTL argues that
these violations constitute willful disobedience, thus meriting dismissal from
employment.
We disagree with CBTL.
For willful disobedience to be a valid cause for dismissal, these two elements
must concur: (1) the employees assailed conduct must have been willful, that is,
characterized by a wrongful and perverse attitude; and (2) the order violated
must have been reasonable, lawful, made known to the employee, and must
pertain to the duties which he had been engaged to discharge.17
Tested against these standards, it is clear that Arenas alleged infractions do not
amount to such a wrongful and perverse attitude. Though Arenas may have
admitted these wrongdoings, these do not amount to a wanton disregard of
CBTLs company policies. As Arenas mentioned in his written explanation, he was
on a scheduled break when he was caught eating at CBTLs al fresco dining area.
During that time, the other service crews were the one in charge of manning the
counter. Notably, CBTLs employee handbook imposes only the penalty of written
warning for the offense of eating non-CBTL products inside the stores premises.
CBTL also imputes gross and habitual neglect of duty to Arenas for coming in late
in three separate instances.
Gross negligence implies a want or absence of, or failure to exercise even a slight
care or diligence, or the entire absence of care. It evinces a thoughtless disregard
of consequences without exerting any effort to avoid them.18 There is habitual
neglect if based on the circumstances, there is a repeated failure to perform ones
duties for a period of time.19
In light of the foregoing criteria, we rule that Arenas three counts of tardiness
cannot be considered as gross and habitual neglect of duty. The infrequency of his
tardiness already removes the character of habitualness. These late attendances
were also broadly spaced out, negating the complete absence of care on Arenas
part in the performance of his duties. Even CBTL admitted in its notice to explain
that this violation does not merit yet a disciplinary action and is only an
aggravating circumstance to Arenas other violations.20
To further justify Arenas dismissal, CBTL argues that he committed serious
misconduct when he lied about using the ice bin as cooler for his bottled iced tea.
Under CBTLs employee handbook, dishonesty, even at the first instance,
warrants the penalty of termination from service.21
For misconduct or improper behavior to be a just cause for dismissal, (a) it must
be serious; (b) it must relate to the performance of the employees duties; and (c)
it must show that the employee has become unfit to continue working for the
employer.22
However, the facts on record reveal that there was no active dishonesty on the
part of Arenas. When questioned about who placed the bottled iced tea inside the
ice bin, his immediate reaction was not to deny his mistake, but to remove the
bottle inside the bin and throw it outside. More importantly, when he was asked to
make a written explanation of his action, he admitted that the bottled iced tea
was his.
Thus, even if there was an initial reticence on Arenas part, his subsequent act of
owing to his mistake only shows the absence of a deliberate intent to lie or
deceive his CBTL superiors. On this score, we conclude that Arenas action did not
amount to serious misconduct.
Moreover, the imputed violations of Arenas, whether taken singly or as a whole,
do not necessitate the imposition of the strict and harsh penalty of dismissal from
service. The LA, NLRC and the CA all consistently ruled that these offenses are not
grave enough to qualify as just causes for dismissal. Factual findings of the labor
tribunals especially if affirmed by the CA must be given great weight, and merit
the Courts respect.
As a final remark, we note that petitioner Walden Chu (Chu) should not be held
jointly and severally liable with CBTL for Arenas adjudged monetary awards. The
LA and the NLRC ruled for their solidary liability but the CA failed to dispose this
issue in its decision.
A corporation is a juridical entity with a legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people comprising
it.23 Thus, as a general rule, an officer may not be held liable for the
corporations labor obligations unless he acted with evident malice and/or bad
faith in dismissing an employee.24
In the present case, there was no showing of any evident malice or bad faith on
Chus part as CBTLs president. His participation in Arenas termination was not
even sufficiently alleged and argued. Hence, he cannot be held solidarily liable for
CBTLs liabilities to Arenas.
WHEREFORE, in light of these considerations, we hereby DENY the petition for
lack of merit. The Court of Appeals committed no grave abuse of discretion in its
decision of March 26, 2013 and its resolution of August 30, 2013 in CA-G.R. SP No.
117822, except with respect to the liability of petitioner Walden Chu. We thus
absolve petitioner Walden Chu from paying in his personal capacity the monetary
awards of respondent Rolly P. Arenas. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 208321 July 30, 2014
WESLEYAN UNIVERSITY PHILIPPINES, Petitioner,
vs.
NOWELLA REYES, Respondent.
DECISION
VELASCO, JR., J.:
Nature of the Case
The issue in this petition boils down to the legality of respondent Nowella Reyes'
termination as University Treasurer of petitioner Wesleyan University - Philippines
(WUP) on the ground of loss of trust and confidence. Petitioner prays in this
recourse that We reverse the February 28, 2013 Decision of the Court of Appeals
(CA) in CA-G.R. SP No. 122536 which declared respondent's termination illegal.
The Facts
On March 16, 2004, respondent Nowella Reyes was appointed as WUP's University
Treasurer on probationary basis. A little over a year after, she was appointed as
full time University Treasurer.
On April 27, 2009, a new WUP Board of Trustees was constituted. Among its first
acts was to engage the services of Nepomuceno Suner & Associates Accounting
Firm (External Auditor) to investigate circulating rumors on alleged anomalies in
the contracts entered into by petitioner and in its finances.
Discovered following an audit were irregularities in the handling of petitioners
finances, mainly, the encashment by its Treasury Department of checks issued to
WUP personnel, a practice purportedly in violation of the imprest system of cash
management, and the encashment of various crossed checks payable to the
University Treasurer by Chinabank despite managements intention to merelyhave
the funds covered thereby transferred from one of petitioners bankaccounts to
another. The External Auditors report embodied the following findings and
recommendations:1
Treasury Department (Cash Management):
Findings:
1. It was noted that checks consisting of various checks payable to teachers,
staffs and other third parties had been the subject of encashment directly with
the Treasury Department under the stewardship of Mrs. Nowella A. Reyes,the
University Treasurer. This practice is a clear violation of imprest system of cash
management, hence, resulting to unsound accounting practice. This laxity in cash
management of those checks were paid as intended for them. Recommendations:
For internal control reasons, the treasury should not accept any check
encashment from its daily collections. Checks are being issued for encashment
with our depository bank for security reasons. The mere acceptance of checks
from the collections is tantamount to cash disbursement out of collections.
Findings:
2. It was also noted that various checks payable to the Treasurer of WUP x x x had
been negotiated for encashment directly to China Bank Cabanatuan Branch,
while the intention of the management for these checks were merely for fund
transfer with the other account maintained at China Bank. This practice is a
violation not only in the practice of accounting/cash custodianship but had been
mingled with spurious elements. Unfortunately, check vouchers relating to this
exception are nowhere to be found or not on file.
Findings:
3. A crossed check payable to the Treasurer [WUP] x x x had been negotiated for
encashment to China Bank Cabanatuan Branch despite of the restriction
indicated in the face of the check. Unfortunately, the used check was no longer
found on file.
As a result of said audit, petitioner served respondent a Show Cause Order and
placed her under preventive suspension.2 The said Show Cause Order required
her to explain the following matters found by the External Auditors:
(a) your encashment of Php300,000.00 ofa crossed check you issued payable to
yourself (Chinabank Check No. 000873613 dated 26 November 2008) x x x;
(b) the encashment of various checks without any supporting vouchers x x x;
(c) unliquidated cash advances in the aggregate amount of Php9.7 million x x x.3
On June 18, 2009, respondent submitted her Explanation. Following which, WUPs
Human Resources Development Office (HRDO) conducted an investigation.
Finding respondents Explanation unsatisfactory, the HRDO, on July 2, 2009,
submitted an Investigation Report4 to the University President containing its
findings and recommending respondents dismissal as University Treasurer.
Upon receipt of her notice of termination on July 9, 2009, respondent post-haste
filed a complaint for illegal dismissal with the Arbitration Branch of the National
Labor Relations Commission. She contended that her dismissal was illegal, void
and unjust, for the following reasons:
First,her 60-day preventive suspension violated the Labor Code provisions
prohibiting such suspensions tolast for more than thirty (30) days. Thus, the fact
that she was not reinstated to her former position before the lapse of thirty (30)
days, amounted to constructive dismissal;5 Second,there was a violation of her
right to substantive and procedural due process, as evidencedby petitioners
failure to apply the pertinent due process provisions under its Administrative and
Personnel Policy Manual;6 and
Finally,the charges against her werebased on mere suspicion and speculations
and unsupported by evidence.7
Petitioner, for its part, predicated its defense on the contention that respondent
was a highly confidential employee who handled significant amounts of money as
University Treasurer and that the irregularities attributed to her in the
performance ofher duties justify her dismissal on the basis of loss of trust and
confidence.8
Petitioner also averred that the 60-day preventive suspension thus imposed does
not necessarily make suchsuspension void, inasmuch as the law merely requires
that after a 30-day preventive suspension, the affected employee shall
automatically be reinstated. But in the case of respondent, there was no need for
her automatic reinstatement inasmuch as she was duly terminated within the 30-
day period of her preventive suspension.9 Moreover, respondent was duly
afforded her right to due process since WUP substantially complied with the twin-
notice rule.
Ruling of the Labor Arbiter
On December 15, 2010, Labor Arbiter Reynaldo V. Abdon rendered a Decision
finding for respondent. The dispositive portion of the Labor Arbiter Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, DECLARING
that complainant Nowella Reyes x x x [was] illegally dismissed by respondent
Wesleyan University Philippines.
Accordingly, respondent Wesleyan University Philippines through its President is
hereby DIRECTED to:
(1) Reinstate complainant Nowella Reyes to her former or equivalent position
without loss of seniority right;
(1.1) Since reinstatement is immediately executory, to render a Report of
Compliance to this Office within ten (10) days from receipt of this Decision.
(2) Pay complainant Reyes her backwages, from the time of her dismissal until
reinstatement, the present sum of which is P429,000.00;
(3) Pay complainant Reyes, her 13th month pay in the sum of P52,000; her shared
(sic) in related learning experience fee, P12,000.00; clothing allowance,
P6,000.00; Honorarium as member of standing committees, P4,000.00; and her
vacation leave credits in the sum of P17,862.59;
(4) Pay complainant Reyes, moral damages in the sum of P150,000.00, exemplary
damages in the amount of P100,000.00, and 10% attorneys fees in the sum of
P77,086.25;
xxxx
SO ORDERED.10
The Labor Artbiter noted, as respondent has insisted, that the charges against the
latter were based on mere rumors and speculations. As observed too by the Labor
Arbiter, petitioner itself was in the wrong because it had no proper policies on its
accounting and financial procedures and that the encashment and
accommodation of checks to personnel, especially after banking hours, had been
the practice of its previous and present administrations. Thus, it was unfair to put
all the blame on respondent without any evidence that her actionswere highly
irregular, unfair or unjustified.11
As regards petitionersfindings on the alterations in the Check Disbursement
Voucher (CDV), unliquidated cash advances and duplicate checks, the Labor
Arbiter found and wrote:
Anent the alleged finding of the university that there was material alteration on
the documents as regards the Check Disbursement Voucher (CDV), for allegedly
there was an absence of Board Resolution entry in the CDV filed in the Accounting
while the copy submitted by the Treasurer has a Board Resolution entry as well as
the word ATM on the payee portion on the photocopy as crossed out while in the
original it was not crossed out, respondent cannot summarily state that
complainant was at fault. The Human Resource should have conducted an in-
depth investigation on this matter. Unfortunately, respondent just followed the
twin-notice rule, and did not conduct a thorough administrative investigation in
accordance with their own internal rules and policies in the Manual. Consequently,
this Office has serious doubt that such matter was the fault of the complainant for
the blame may fall on the accounting personnel who is handling the CDV.
With respect to the unliquidated cash advances, it is not likewise the fault of the
complainant. She pointed out that follow ups of the liquidation is [sic] being
handled by the auditor, while respondent claims that she was previously handling
the same before it was transferred to Accounting Office in August 2008. We see
no evidence to prove that the liquidation is being handled by the complainant
prior to August 2008. Moreover, it is common practice thatthe Treasurer disburses
the funds such as cash advances but the liquidation must be done by the
beneficiary of the fund, and the responsible people who should follow up the
liquidation is the accounting office.
With respect to the duplicate checks, the same were done by a syndicate or
individuals not connectedwith the University. The bank has already admitted
responsibility in the encashment of these checks and had returned the amounts
to the respondent University, thus complainant has no fault about this incident.12
Ruling of the NLRC
Petitioner filed an appeal withthe National Labor Relations Commission (NLRC)
which was granted in the tribunals Decision dated July 11, 2011, declaring that
respondentwas legally dismissed. However, petitioner was ordered to pay
respondent her proportionate 13th month pay, the monetary value of her
vacation leave, and attorneys fees.
Adopting a stance entirely opposite to that of the Labor Arbiter, the NLRC held
that respondent failed to controvert and disprove the established charges of
petitioner (as appellant-respondent) and insteadconveniently put the blame on
other departments for her inculpatory acts. The NLRC opined that her termination
was not motivated by the change of petitioners officers but by the Universitys
goal to promote the economy and efficiency of its Treasury Department.13
In net effect, the NLRC found petitioners contention of loss of trust and
confidence in respondent with sufficient basis. While respondent, so the NLRC
notes, may not have been guilty ofwillful breach of trust, the fact that she held a
highly confidential position, and considering that anomalous transactions
transpired under her command responsibility, provided petitioner with ample
ground todistrust and dismiss her.14 The NLRC explained:
In this case, complainant-appellee [herein respondent] may not have been guilty
of willful breach of trust. But as Treasurer of [WUP] who handles and supervises all
monetary transactions in the University and being a highly confidential employee
at that, holding trust and confidence and after considering the series of irregular
and anomalous transactions that transpired under complainant-appellees
command responsibility, respondent has basis or ample reason to distrust
complainant-appellee. Thus, we cannot justly deny [WUP] the authority to dismiss
complainant-appellee.
The principle of respondent (sic) superior or command responsibility may be cited
as basis for the termination of employment of managerial employees based on
loss of trust and confidence. In the Etcuban case (Ibid) the Supreme Court in
upholding the validity of petitioner-employees dismissal on the ground of loss of
trust and confidence, ruled that even if the employee x x x had no actual and
direct participation in the alleged anomalies, his failure to detect any anomaly
that would normally fall withinthe scope of his work reflects his ineffectiveness
and amounts to gross negligence and incompetence which are likewise justifiable
grounds for his irregularity, for what is material is that his actuations were more
than sufficient to sow in his employer the seed of mistrust and loss of confidence.
As found by the External Auditor, complainant-appellee should have implemented
an imprest system of cash management in order to secure the indicated payees
in those checks and they were paid of the checks as intended for them. It appears
that checks payable to teachers, staffs and other third parties had beenthe
subject of encashment directly with the Treasury Department x x x and this is an
unsound accounting practice.
Moreover, the External Auditors found that various checks payable to the
Treasurer of Wesleyan University has been negotiated for encashment directly to
China Bank-Cabanatuan Branch while the intention of the management for those
checks weremerely for fund transfer with the other account maintained at China
Bank. That this practice violated accounting or cash custodianship and check
vouchers are nowhere to be found.
Further, the crossed check payable to the Treasurer (complainantappellee) in the
amount of P300,000.00 dated 26 November 2008 had been negotiated for
encashment to China Bank Cabanatuan Branch despite of restriction indicated
in the face of the check and that the used check was no longer found on file.
There is a need for a clear policy when to issue crossed-checks or otherwise and
the use of debit/credit memo to transfer one account to another with the same
bank. That these acts of violation of cash and check custodianship by
complainant-appellee resulted in the loss of respondent-appellant thus affecting
the economy of the respondent-appellant institution.
In view of our finding that respondents-appellants (sic) has validly terminated
complainant-appellee the latters claim for damages and attorneys fees lacks
sufficient factual and legal basis. Accordingly, the Labor Arbiters decision
directing the reinstatement of complainantappellee with full backwages ishereby
vacated and set aside.15
The NLRC denied respondents motion for reconsideration in a Resolution dated
September 29, 2011.Therefrom, respondent went on Certiorari to the CA, inCA-
G.R. SP No. 122536.
Ruling of the Court of Appeals
On February 28, 2013, the CA, through its assailed Decision,16 found the NLRCs
ruling tainted with grave abuse of discretion and reinstated the Decision of the
Labor Arbiter. The fallo of the CA Decision reads:
WHEREFORE, premises considered, the assailed Decision and Resolution of the
National Labor Relations Commission dated July 11, 2011 and September 29,
2011 are REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated
December 15, 2010 is hereby REINSTATED, subject to the modification that if
reinstatement is no longer feasible, petitioner shall be awarded separation pay
equivalent to one month salary for every year ofservice reckoned from the time of
employment to the finality of this decision.17
Holding that respondents termination was unjust, the CA, in virtual restoration of
the findings and conclusions of the Labor Arbiter, pointed out, among others, that:
(1) respondent sufficiently countered all charges against her; (2) it had been the
practice of the previous and present administrations of petitioner to encash and
accommodate checks of WUP personnel; thus, it would be unjust to penalize
respondent for observing a practice already in place when she assumed office; (3)
the duty to liquidate cash advances is assigned to the internal auditor; (4) it has
been established that the encashments of spurious duplicate checks were
perpetrated by individuals not connected with WUP, and that the bank admitted
responsibility therefor and had returned the amount involved to petitioner; (5)
there was no imputation of any violation of the Universitys Administration and
Personnel Policy Manual; (6) while the acts complained of violated the imprest
system of cash management, there was no showing that the said system had
been adopted and observed in the schools accounting and financial procedures;
and (7) there was no showing that respondent had the responsibility to implement
changes in petitioners accounting system even if it were not in accordance with
the generally accepted principles of accounting.18
Hence, the instant petition.
The Issues
For consideration herein are the following issues raised by petitioner:
1. Whether or not the CA over-reached its power of review under Rule 65 of the
Rules of Court when it reversed the judgment of the NLRC; and
2. Whether or not the CA erred in finding respondent illegally dismissed by
petitioner on the ground of loss of trust and confidence.
The Courts Ruling
The petition is impressed with merit. The CA erred in reinstating the Labor
Arbiters Decision and in finding that respondent was illegally dismissed.
The CAs power of review
We first resolve the procedural issue raised in this recourse. Petitioner contends
that the CA over-reached its power of review under Rule 65 when it substituted its
own judgment over errors of judgment that it found in the NLRC Decision,
stressing that the province of a writ of certiorari is to correct only errors of
jurisdiction and not errors of judgment.
This contention is misplaced. It is settled that under Section 9 of Batas Pambansa
Blg.129,19 as amended by Republic Act No. 7902,20 the CA, pursuant to the
exercise of its original jurisdiction over petitions for certiorari, is specifically given
the power to pass upon the evidence, if and when necessary, to resolve factual
issues. Sec. 9 clearly states:
The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues
raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. x x x
Hence, the appellate court acted within its sound discretion when it re-evaluated
the NLRCs factual findings and substituted the latters own judgment.
Loss of trust and confidence as a ground for termination
We now proceed to the substantive issue on the propriety of respondents
dismissal due to loss of trust and confidence.As provided in Art. 282(c) of
Presidential Decree No. 442, otherwise known as the Labor Code of the
Philippines:
Article 282. Termination by employer.An employer may terminate an employment
for any of the following causes:
xxxx
c. Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
We explained in M+W Zander Philippines, Inc. v. Enriquez21 the requisites of a
valid dismissal based on loss of trust and confidence. As the case elucidates:
Article 282 (c) of the Labor Code allows an employer to terminate the services of
an employee for loss of trust and confidence. Certain guidelines must be
observed for the employer to terminate an employee for loss of trust and
confidence. We held in General Bank and Trust Company v. Court of Appeals, viz.:
[L]oss of confidence should not be simulated. It should not be used as a
subterfuge for causes which are improper, illegal, or unjustified. Loss of
confidence may not be arbitrarily asserted in the face of overwhelming evidence
to the contrary. It must be genuine, not a mere afterthought tojustify earlier
action taken in bad faith.
The first requisite for dismissal on the ground of loss of trust and confidence is
that the employee concerned must be one holding a position of trust and
confidence.
There are two classes of positions of trust: managerial employees and fiduciary
rank-and-file employees.
Managerial employees are defined as those vested with the powers or
prerogatives to lay down management policies and to hire, transfer, suspend, lay-
off, recall, discharge,assign or discipline employees or effectively recommend
such managerialactions. They refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department
or a subdivision thereof, and to other officers or members of the managerialstaff.
Officers and members of the managerial staff perform work directlyrelated to
management policies of their employer and customarily and regularly exercise
discretion and independent judgment.
The second class or fiduciary rank-and-file employees consist of cashiers,
auditors, property custodians, etc., or those who, in the normal exercise of their
functions, regularlyhandle significant amounts of money or property. These
employees, though rank-and-file, are routinely charged with the care and custody
of the employers money or property, and are thus classified as occupying
positions of trust and confidence.22
xxxx
The second requisite of terminating an employee for loss of trust and confidence
is that there must be an act that would justify the loss of trust and confidence. To
be a valid cause for dismissal, the loss of confidence must be based on a willful
breach of trust and founded on clearly established facts.23
To summarize, the first requisite is that the employee concerned must be one
holding a position of trust and confidence, thus, one who is either: (1) a
managerial employee; or (2) a fiduciary rank-and-file employee, who, in the
normal exercise of his or her functions, regularly handles significant amounts of
money or property of the employer. The secondrequisite is that the loss of
confidence must be based on a willful breach of trust and founded on clearly
established facts.
In Lima Land, Inc. v. Cuevas,24 We discussed the difference between the criteria
for determining the validity of invoking loss of trust and confidence as a ground
for terminating a managerial employee on the one hand and a rank-and-file
employee on the other. In the said case, We held that with respect to rank-and-file
personnel, loss of trust and confidence, as ground for valid dismissal,requires
proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer would not suffice.
Withrespect to a managerial employee, the mere existence of a basis for
believing that such employee has breached the trust of his employer would
suffice for his dismissal. The following excerpts from Lima Land are instructive:
As firmly entrenched in our jurisprudence, loss of trust and confidence, as a just
cause for termination of employment, is premised on the fact that an employee
concerned holds a position where greater trust is placed by management and
from whom greater fidelity to duty is correspondingly expected. This includes
managerial personnel entrusted with confidence on delicate matters, such as the
custody, handling, or care and protection of the employers property.The betrayal
of this trust is the essence of the offense for which an employee is penalized.
It must be noted, however, that ina plethora of cases, this Court has distinguished
the treatment of managerial employees from that of rank-and-file personnel,
insofar as the application of the doctrine of loss of trust and confidence is
concerned. Thus, with respect to rank-and-file personnel, loss of trust and
confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as regards a managerial
employee, the mere existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his dismissal. Hence, in the
case of managerial employees, proof beyond reasonable doubt is not required, it
being sufficient that there is some basis for such loss of confidence, such as when
the employer has reasonableground to believe that the employee concerned is
responsible for the purported misconduct, and the nature of his participation
therein renders him unworthy of the trust and confidence demanded of his
position.
On the other hand, loss of trust and confidence as a ground of dismissal has
never been intended to afford an occasion for abuse because of its subjective
nature. It should not be used as a subterfuge for causes which are illegal,
improper, and unjustified. It must be genuine, not a mere afterthought intended
to justify an earlier action taken in bad faith. Let it not be forgotten that what is at
stake is the means of livelihood, the name, and the reputation of the employee.
To countenance an arbitrary exercise of that prerogative is to negate the
employees constitutional right to security of tenure.25
Respondents employment classification is irrelevant in light of her proven willful
breach
There is no doubt that respondent held a position of trust; thus, greater fidelity is
expected of her. She was not an ordinary rank-and-file employee but an employee
occupying a very sensitive position. As University Treasurer, she handled and
supervised all monetary transactions and was the highest custodian of funds
belonging to WUP.26 To be sure, in the normal exercise of her functions, she
regularly handled significant amounts of money of her employer and managed a
critical department.
1. That the alleged crossed check issued by her payable to THE TREASURER
WUP was done in the exercise of her duty and function as such, and not with her
name and not to herself and personal favor, and that said check had been
prepared passing through the usual system; 2. That the University heads were the
beneficiaries of said amount who strongly requested that their love giftbe given,
hence, the encashment;
3. That the amount of the check was properly disposed of as evidenced by the
document bearing the signatures of recipients;
4. That the Office to pointto if vouchers and supporting documents will have to be
checked concerning payments made is the Accounting Office;
5. That cash advances to various University personnel pass through her office in
the exercise of her duties assuch but the office who follow up the liquidation of
payments received is the Office of the University Auditor;

The presence of the first requisite iscertain. So is as regards the second requisite.
Indeed, the Court finds that petitioner adequately proved respondents dismissal
was for a just cause, based on a willful breach of trust and founded on clearly
established facts as required by jurisprudence. At the end of the day, the question
of whether she was a managerial or rank-andfile employee does not matter in this
case because not only is there basis for believing that she breached the trust of
her employer, her involvement in the irregularities attending
petitionersfinances has also been proved.
To recall, petitioner, per its account, allegedly lost trust and confidence in
respondent owing to any or an interplay of the following events: (1) she encashed
a check payable to the University Treasurer in the amount of three hundred
thousand pesos (PhP 300,000); (2) she encashed crossed checks payable to the
University Treasurer, when the intention of management in this regard was to
merely transfer funds from one of petitioners accounts to another in the same
bank; (3) she allowed the Treasury Department to encash the checks issued to
WUP personnel rather than requiring the latter to have said checks encashed by
the bank, in violation of the imprest system of accounting; (4) she caused the
disbursement of checks without supporting check vouchers; (5) there were
unliquidated cash advances; and (6) spurious duplicate checks bearing her
signature were encashed causing damage to petitioner.
We disagree with the CAs finding that respondent has sufficiently countered all
inculpatory allegations and accusations against her. On the contrary, We find that
here, there was anadmitted, actual and real breach of duty committed by
respondent, which translates into a breach of trust and confidence in her. For
perspective, respondents explanation as to the charges against her is as follows:
6. That respondent Reyes adopted her reply on the show-cause order in the
investigation previously conducted by Dr. Jeremias Garcia about the duplicated
checks alleging among others:
a) She and her staff confirmed that only the checks issued to General Capulong
and Leodigario David were encashed by the University Teller;
to
b) The check issued to Norma de Jesus was encashed by the Pick-up Chinabank
Teller on December 5, 2008 while collecting deposits from the University with the
assistance of the University teller;
c) That the check issued to Mercedes was not encashed with the University teller
but with WEMCOOP;
d) As to the encashment and accommodation of checks to personnel, it has been
the practice of previousand present administration moreso when employees
cannot anymore go to Chinabank to transact business as it is mostly beyond
banking hours when checks are ready for disbursement;
e) That Respondents department has no control over fraudulent transactions
done outside the University, that it is the Banks duty to protect its clients as
tothe proper procedures to secure our account;
f) That the computer system program of the Universitys depository bank has very
limited capabilities to detect fraudulent entries;
g) That the signature verifier also had been remiss in carefully checking the
authenticity ofprevious signatories.27
a. Respondents encashment of checks
As it were, respondent did not deny, in fact admitted, the encashment of the
three hundred thousand peso (PhP 300,000) crossed check payable to the
University Treasurer which covered the total amount of the "love gift" for
administrative and academic officials of WUP. Neither did she deny the fact that
the Treasury Department encashed checks issued to WUP personnel rather than
requiring them to have the checks encashed by the bank. Instead, she explained
that the beneficiaries of the amounts strongly requested that their love gifts be
given in cash, hence the encashment of the PhP 300,000 crossed check and,
thereafter, the accommodation and encashment of their checks directly by the
Treasury Department. Moreover, she submitted a document bearing the
signatures of the recipients of the "love gift" as proof that the amount was
disposed properly.28 She further insisted that this was the usual practice of the
University and that she merely accommodated the requests of WUP personnel
especially when Chinabank was already closed.
Jurisprudence has pronounced that the crossing of a check means that the check
may not be encashed but only deposited in the bank.29 As Treasurer, respondent
knew or is at least expected to be aware of and abide by this basic banking
practice and commercial custom. Clearly, the issuance of a crossed check reflects
managements intention to safeguard the funds covered thereby, its special
instruction to have the same deposited to another account and its restriction on
its encashment.
Here, respondent, as aptly detailed inthe auditors report, disregarded
managements intentions and ignored the measures in place to secure the
handling of WUPs funds. By encashing the crossed checks, respondent put the
funds covered thereby under the riskof being lost, stolen, co-mingled with other
funds or spent for other purposes. Furthermore, the accommodation and
encashment by the Treasury Department of checks issued to WUP personnel were
highly irregular. First, WUP, not being a bank, had no business encashing the
checks of its personnel.30 More importantly, in encashing the said checks, the
Treasury Department made disbursements contrary to the wishes ofmanagement
because, in issuing said checks, management has madeclear its intention that
monies therefor would be sourced from petitioners deposit with Chinabank,
under a specific account, and not from the cash available in the Treasury
Department.
That the encashment of crossed checks and payment of checks directly to WUP
personnel had been the practice of the previous and present administration of
petitioner is of no moment. To Our mind, this was simply respondents convenient
excuse, a poorlydisguised afterthought, when her unbecoming carelessness in
managing WUPs finances was exposed. Moreover, the prevalence of this practice
could have been contained if only respondent consistently observed the regular
procedure for encashing crossed checks and properly handled requests for
accommodation of checks issued to the WUP personnel.
b. Unliquidated cash advances
On the matter of unliquidated cash advances in the aggregate amount of nine
million seven hundred thousand pesos (PhP 9,700,000), respondent explained
that while it was true that cash advances to WUP personnel passed through her
office in the exercise of her duties as University Treasurer, the office that follows
up the liquidation of advances received is the office of the University Auditor.31
However, granting that the responsibility of handling the liquidation of cash
advances is no longer lodged in her office, there is proof showing that before the
Treasury Department was relieved of said responsibility, the total unliquidated
cash advances was even bigger, amounting to eleven million five hundred thirty-
three thousand two hundred thirty pesos and thirty-seven centavos (PhP
11,533,230.37). There is nothing in the records before us showing that
respondent denied the following findings in the Investigation Report of the WUPs
Human Resource Development Office (HRDO)on this matter, to wit:
In the matter of unliquidated cash advances in the aggregate amount of
Php9.7million as found by the External Auditors, respondents contention was that
cash advances tovarious University personnel pass through her office in the
exercise of her duties as such but the office who follows up the liquidation of
payments received is the Office of the University Auditor.
On the inquiry done x x x of the Internal Auditor, Treasury and Accounting officer
on July 1, 2009, it was found out that the responsibility of handling cash advances
and liquidation report was transferred from Treasury Office to Accounting Office
on August 2008, when Ms. Luzviminda Torres, the personnel handling the same
detailed at the Treasury Office went on leave. It was transferred to Ms. Julieta
Mateo. What was surprising was that as per certification and summary submitted
by Ms. Mateo, the amount of unliquidated cash advances previous to August
2008, when the same was under the responsibility of the Treasury Office, was
even bigger with the total amount of ELEVEN MILLION FIVE HUNDRED THIRTY
THREE THOUSAND, TWO HUNDRED THIRTY PESOS AND THIRTY SEVEN CENTAVOS
(Attached as Annex "G")
Even if there is truth in the contention of herein Respondent that she was no
longer the one in charge of the liquidation proceedings, the same would not
absolve her from gross negligence of duties. The fact that the said function was
with her office until August 2008, with unliquidated cash advances even bigger,
still showed that she reneged in her duties which she had overlooked for so long.
She now mistakenly points the responsibility to the Office of the University
Auditor. These informations are enough to be considered as Respondents acts
constitutive of breach of trust and confidence.32
xxx
c. Other irregularities inrespondents performance
In all, We find the Investigation Report of the HRDO a credible, extensive and
thorough account of respondents involvementin incidents which are sufficient
grounds for petitioners loss of trust and confidence in her, to wit:
Respondent Nowella C. Reyes has committed breach of trust and confidence in
the conduct of her office.
In her answer, Respondent admitted the encashment of the crossed check with
the defense that the same was done in the performance of her duty, not for her
personal use but because of the request of University heads who wanted their
love gifts begiven. She alsoadmitted habitual encashment of checks issued by the
University to its personnel on the basis of practice of previous administration.
The charge against Respondent of the act of improper encashment of a check,
which aside from being irregular is clearly violative of imprest system of cash
management. Moreover, the same being a crossed check, should not be
negotiated for encashment to Chinabank Cabanatuan Branch because of the
restriction indicated on its face, which Mrs. Reyes, by reason of her office knew
very well.
During the investigation conducted, it was revealed that the check disbursement
voucher attached by Respondent on her answer to justify the regularity of its
issuance and eventual encashment was not exactly the same as the one filed at
the Accounting Office. It showed that the photocopy of the original CDV which was
attached by Respondent (attached as Annex "E"of this report) bear some material
alterations, namely:
1. The absence of entry of the Board Resolution which was reflected as a sort of
inquiry by the Internal Auditor, and which at present was left blank on the
original, as compared to the photocopy submitted by respondent bearing an entry
of the Board Resolution number;
2. The word ATM on the payee portion of the CDV in the original as compared to
the photocopy wherein the entry ATM was crossed out.
During a discussion with the external auditors, it was categorically stated by them
that during the courseof external audit, said document was inexistent in the
records presented by the Accounting and Treasurers Offices. The production of
the photocopy by Respondent already altered only after the suspension was
effected cast doubt on the regularity of its issuance, negating her otherwise
claim. Another significant observation was that the original copy of CDV (attached
as Annex "F" of this report) and corresponding signatures of administrative heads
who received payments showed folded marks halfways, with the fastener holes
unmatched, showing that those two documents were not really filed together, as
regularly done, and the same were not filed in the regular course and must have
been kept previously on a different manner in possession of person other than the
office which must file the same.
xxxx
On the last charge in the show cause order specifically the existence of duplicate
checks in the account of the University amounting to Php 1.050 Million, included
in Respondents defenses were that among the checks duplicated, only two of
them were encashed with the University Teller, and the check originally named to
Norma de Jesus as payee was paid by the pick-up teller only through the
assistance of the University teller.
Again, Respondents defense were void of truth and merit. The act of encashing
checks issued by the Treasury Office, clearly violative of imprest system of cash
management which Mrs. Reyes by reason of her office knew very well, showed
that Respondent directly reneged in her duty to observe economic security
measures.
As found on the documents attachedto the Investigation report of Dr. Garcia
which had been expressly adopted by herein respondent in her answer is an
Affidavit of Norma de Jesus stating that she actually encashed the check with the
personnel of the Treasury Office particularly Shirley Punay, who gave her the
amountequivalent days after the check was handed to the Treasury office.
However noble the intention of herein Respondent in helping her fellow workers in
the University by her acts of accommodation by encashing their checks directly
withthe Treasury Office when Chinabank was already closed, the same still
reneged in her duty to protect the economic security of the University. An act of
misconduct which caused [sic]33
An employer cannot be compelled toretain an employee who is guilty of acts
inimical to the interests of the employer. A company has the right to dismiss its
employees if only as a measure of self-protection. This is all the more true in the
case of supervisors or personnel occupying positions of responsibility.34 In this
case, let it be remembered that respondent was not an ordinary rank-and-file
employee as she was no less the Treasurer who was in charge of the coffers of the
University. It would be oppressive to require petitioner to retain in their
management an officer who has admitted to knowingly and intentionally
committing acts which jeopardized its finances and who was untrustworthy in the
handling and custody of University funds.
WHEREFORE, premises considered, we GRANTthe petition. The assailed Decision
of the Court of Appeals in CA-G.R. SP No. 122536 is, thus, SET ASIDE. The
Decision of the National Labor Relations Commission in NLRC RAB III Case No. 07-
15131-09 is REINSTATED.
SO ORDERED.
THIRD DIVISION
G.R. No. 213934, November 09, 2016
MARY ANN G. VENZON, EDDIE D. GUTIERREZ, JOSE M. GUTIERREZ, JR. AND MONA
LIZA L. CABAL, Petitioners, v. ZAMECO II ELECTRIC COOPERATIVE, INC. AND ENGR.
FIDEL S. CORREA, GENERAL MANAGER, Respondents.
DECISION
PERALTA,** J.:
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court which seeks the reversal of the Resolution2 dated July 31, 2014 of the Court
of Appeals (CA) in CA-G.R. SP No. 125798. The CA affirmed the Decision3 of the
National Labor Relations Commission (NLRC), Special Third Division, in NLRC Case
No. RAB-III-10-15467-09 reversing, on reconsideration, the Decision4 of the NLRC
Third Division which held that, while there was illegal dismissal of petitioners
contrary to the Decision5 of the Labor Arbiter (LA), the case has been mooted due
to the reinstatement of petitioners.
Petitioners were regular employees of ZAMECO II Electric Cooperative, Inc.
(ZAMECO II) occupying managerial and rank-and-file positions. They filed a case
for illegal dismissal from employment claiming that they were mere victims of a
power struggle between the two (2) factions fighting to control the management
of ZAMECO II.
The Factual Antecedents relating to ZAMECO II:
On November 21, 2002, Castillejos Consumers Associations, Inc. (CASCONA), an
organization of electric consumers from the Municipality of Castillejos, Zambales
under the coverage area of ZAMECO II and represented by Engr. Dominador
Gallardo, filed a letter-complaint with the National Electrification Administration
(NEA). The complaint sought to remove the Board of Directors of ZAMECO II
headed by the Board President, Jose S. Dominguez, for mismanagement of funds
and expiration of their term of office.6chanrobleslaw
On November 24, 2004, the NEA issued a Resolution removing from office all the
members of the Board of Directors of ZAMECO II with perpetual disqualification to
run for the same position in any future district elections of the cooperative, and
ordered the immediate conduct of district elections. On December 21, 2004, the
NEA issued an Office Order designating Engr. Paulino T. Lopez as Project
Supervisor of ZAMECO II who was tasked to perform his duty until such time that
a new set of Board of Directors shall have been constituted.7chanrobleslaw
The Board of Directors headed by Dominguez appealed to the CA on the ground
that Republic Act (R.A.) No. 9136, or the Electric Power Industry Reform Act
(EPIRA), abrogated the regulatory and disciplinary power of the NEA over electric
cooperatives.8chanrobleslaw
On February 7, 2005, the CA issued a Temporary Restraining Order (TRO) valid for
sixty (60) days enjoining the NEA and CASCONA from enforcing or implementing
the aforementioned NEA Resolution and Office Order. On April 5, 2005, a Writ of
Preliminary Injunction was issued by the CA. On October 4, 2006, the CA upheld
the authority of the NEA in the supervision of electric cooperatives such as
ZAMECO II, and the power to undertake preventive and/or disciplinary directors,
measures against the board of directors, officers and employees of electric
cooperatives.9chanrobleslaw
On March 22, 2007, the Board of Directors of ZAMECO II headed by Dominguez
appealed the CA Decision with this Court. They manifested that they had
registered ZAMECO II as a cooperative under the Cooperative Development
Authority (CDA), and, thus, it was the CDA which had regulatory powers over
ZAMECO II.10chanrobleslaw
Meanwhile, by virtue of the aforesaid NEA Resolution dated November 24, 2004,
NEA installed an Interim Board of Directors led by Gallardo as Interim President to
function within an un-extendible period of 100 days beginning November 10,
2008 until February 18, 2009.11chanrobleslaw
On March 13, 2009, this Court promulgated its Decision (G.R. No. 176935-36)12
which held that the passage of the EPIRA did not affect the power of the NEA
particularly over administrative cases involving the board of directors, officers
and employees of electric cooperatives.13 This Court further ruled that there was
substantial evidence to justify the penalty of removal from office imposed by NEA
against the incumbent Board of Directors of ZAMECO II.14chanrobleslaw
With respect to the issue of ZAMECO II being under the regulatory powers of the
CDA in view of its registration, this Court declared that the matter could not then
be adjudicated yet. This Court stated that the EPIRA provides that an electric
cooperative must first convert into either a stock cooperative or stock corporation
before it could register under the CDA. This Court further stated that whether
ZAMECO II complied with the provisions particularly on the conduct of a
referendum and obtainment of a simple majority vote prior to its conversion into
a stock cooperative, was a question of fact which this Court could not then review.
The evidence on record did not afford this Court sufficient basis to make a ruling
on the matter. Thus, this Court remanded the case to the CA. The dispositive
portion of the Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, the instant case is hereby REMANDED to the Court of Appeals for
further proceedings in order to determine whether the procedure outlined in
Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act
of 2001, and its Implementing Rules for the conversion of an electric cooperative
into a stock cooperative under the Cooperative Development Authority had been
complied with. The Court of Appeals is directed to raffle this case immediately
upon receipt of this Decision and to proceed accordingly with all deliberate
dispatch. Thereafter, it is directed to forthwith transmit its findings to this Court
for final adjudication. No pronouncement as to costs.
SO ORDERED.15chanroblesvirtuallawlibrary
On March 22, 2009, Republic Act No. 9520 otherwise known as the Philippine
Cooperative Code of 2008 took effect.16chanrobleslaw
On April 28, 2009, NEA issued a Resolution reappointing the members of the
Interim Board Directors for 180 days or until the regular Board of Directors of
ZAMECO II have been elected and qualified.17chanrobleslaw
On June 22, 2009, the CDA through a Board Resolution, issued a confirmation as
to the registration of ZAMECO II. A Task Force for ZAMECO II was created headed
by Atty. Fulgencio A. Vigare, Jr., who was the CDA Administrator for Luzon and the
Oversight Administrator for Electric Cooperatives.18 The Task Force was created
primarily to reinstate the duly-recognized incumbent members of the board of
directors who should perform their functions until such time as elections were
conducted, and their successors should have been elected and
qualified.19chanrobleslaw
On August 27, 2009, the NEA Administrator recalled the designation of Engr.
Lopez as Project Supervisor of ZAMECO II effective September 1,
2009.20chanrobleslaw
On September 1, 2009, Vigare issued a Memorandum stating that the CDA should
assume jurisdiction over ZAMECO II. It also stated that in the August 26, 2009
hearing of the House of Representatives Committee on Cooperative Development
(August 26, 2009 House Committee Hearing), the NEA readily acceded that the
CDA should assume jurisdiction over ZAMECO II.21 It recognized the incumbent
Board of Directors of ZAMECO II headed by Dominguez and the Management Staff
headed by General Manager Fidel S. Correa.22chanrobleslaw
On September 19, 2009, a Special Annual General Membership Assembly was
called and conducted by the Interim Board of Directors headed by Gallardo.
In a letter dated October 12, 2009, NEA informed the Interim Board of Directors
that their previous reappointment for 180 days had expired on the said
date.23chanrobleslaw
On October 19, 2009, pursuant to the said Memorandum issued by Vigare, the
CDA issued a Resolution which created a team composed of the officers of the
CDA. The team was mandated to meet with the ZAMECO II management who was
then headed by Gallardo to talk about some issues and concerns; to pave the way
for the conduct of the election of officers; and to seek the opinion of the
Department of Justice (DOJ) about the jurisdiction of the CDA over electric
cooperatives. The said Resolution was implemented through a Special Order
issued on October 20, 2009.24chanrobleslaw
According to CASCONA, on October 22, 2009, Correa, who was installed by the
CDA as General Manager, and his companions entered the ZAMECO II premises
and refused to leave. Come night fall, members of the Philippine National Police
(PNP) and security guards assembled outside the gates of ZAMECO II but were not
allowed inside the premises.25cralawredchanrobleslaw
The next day, on October 23, 2009, the PNP members asked Gallardo, the Interim
President of the Board of Directors of ZAMECO II, for a discussion. When the latter
opened the gates, the PNP members and security guards forcefully entered the
grounds of ZAMECO II. The Interim Board of Directors did not surrender the
management of ZAMECO II to the group of Correa.26chanrobleslaw

On October 24, 2009, Dominguez, who was installed as President of the Board by
the CDA, and two other former board members arrived at the ZAMECO II
premises. Tensions only de-escalated when the PNP members left the scene
through the intervention of Governor Amor Deloso.27chanrobleslaw
On October 30, 2009, petitioners Mary Ann Venzon, Eddie Gutierrez, Jose
Gutierrez, Jr., Correa and another employee filed a complaint for damages with
the Regional Trial Court (RTC) of Olongapo City with an application for a TRO and a
writ of preliminary injunction against the Interim Board of Directors and General
Manager Engr. Alvin Farrales. On November 24, 2009, a Preliminary Injunction was
granted by the RTC28 and ordered the Interim Board of Directors and General
Manager Engr. Alvin Farrales to vacate their positions, and prevented them from
interfering in the performance of the functions of General Manager Fidel S. Correa
who was designated by the CDA.
On November 27, 2009, the CA annulled the aforesaid NEA Resolution dated April
28, 2009.
On February 15, 2010, the RTC of Olongapo City, set aside the Writ of Injunction it
had previously issued. The RTC took into consideration the Resolutions that were
passed on October 30, 2008 which were affirmed in the Annual General Assembly
held on September 19, 2009, to wit: (1) Resolution removing Engr. Fidel S. Correa
as OIC General Manager of ZAMECO II and appointed Engr. Alvin Farrales as the
Interim OIC General Manager; (2) Resolution withdrawing and cancelling ZAMECO
II's registration with the CDA and recognizing the NEA as the regulatory agency;
(3) Resolution recognizing the present members of the Interim Board of Directors
as legitimate and ratifying their continuance in office until the next regular
election.29 The dispositive portion of the RTC Order
states:ChanRoblesVirtualawlibrary
WHEREFORE, in order to avoid the provocative effect in the catalytic change of
the General Manager and Members of the Board of Directors of Zameco II by the
resolution of the Cooperative Development Authority, the powers of which as
alleged by the defendants' counsel are not clearly defined by law insofar as
appointment and removal of the General Manager and Members of the Board of
Directors are concerned, the Court finds merit in the motion for reconsideration of
the order dated November 19, 2009 and the writ of injunction issued on
November 24, 2009 pursuant to the said order is hereby set aside.
Consequently, and there being no legal and factual basis for the issuance of the
writ of injunction dated November 24, 2009, defendant Engr. Alvin Farrales and
the other defendants are hereby reinstated to their positions as General Manager
and Members of the Interim Board of Directors of Zameco II, respectively, x x x.
x x x. Ineluctably, plaintiff Fidel S. Correa is hereby ordered to vacate his position
as Manager of Zameco II and the other plaintiffs to desist from performing their
duties and functions as designated by the Cooperative Development
Authority.30chanroblesvirtuallawlibrary
On June 16, 2010, this Court issued a Resolution in G.R. No. 176935-36,
thus:ChanRoblesVirtualawlibrary
The Court NOTES the Report dated 25 March 2010 submitted by Associate Justice
Romeo E. Barza of the Court of Appeals, Manila, in compliance with the Decision
dated 13 March 2009 (which remanded these cases to the Court of Appeals for
further proceedings to determine whether the proceedings outlined in Republic
Act No. 9136 (Electric Power Industry Reform Act of 2001 or EPIRA) and its
Implementing Rules for the conversion of an electric cooperative under the
Cooperative Development Authority had been complied with), stating that in the
hearing conducted by the appellate court on October 20, 2009, it was aptly
observed by respondents CASCONA and NEA that counsel for petitioners
categorically admitted that none of the requirements such as conduct of a
referendum and obtainment of a simple majority vote of its members to
determine whether they agree to convert into a stock cooperative or stock
corporation were complied with, and that given the said admissions, the appellate
court cannot but conclude that petitioners failed to prove compliance with the
procedure outline[d] in the EPIRA and its Implementing Rules for the conversion of
an electric cooperative into a stock certificate under the
CDA.31chanroblesvirtuallawlibrary
On September 24, 2010, the RTC of Olongapo City denied the motion of ZAMECO
II to declare the Order of February 15, 2010 immediately executory in view of the
motion for reconsideration filed by petitioners and Correa.32chanrobleslaw
On October 20, 2014, this Court issued a Decision in G.R. Nos. 176935-3633
stating that the NEA's power of supervision applies whether an electric
cooperative remains as a non-stock cooperative or opts to register with the CDA
as a stock cooperative. This Court ruled:ChanRoblesVirtualawlibrary
x x x. This only means that even assuming arguendo that the petitioners validly
registered ZAMECO II with the CDA in 2007, the NEA is not completely ousted of
its supervisory jurisdiction over electric cooperatives under the R.A. No. 10531.
This law may be considered as curative statute that is intended to address the
impact of a restructured electric power industry under the EPIRA on electric
cooperatives, which has not been fully addressed by the Philippine Cooperative
Code of 2008.
The Facts of the Case:
Petitioner Jose M. Gutierrez, Jr. was the Manager of Administrative and Personnel
Department of ZAMECO II and was hired on June 1, 2003. Petitioner Mary Ann
Venzon was the Manager of Member Service Department and had been with
ZAMECO II since January 21, 1996. Petitioner Eddie Gutierrez was a member of
the Operation and Disconnection Team and was hired on April 29, 2002. Petitioner
Monaliza L. Cabal was an accounting staff and started working at ZAMECO II on
August 1, 2001.34chanrobleslaw
In a Memorandum dated September 2, 2009, OIC-General Manager Engr. Alvin
Farrales designated petitioner Gutierrez, Jr. as Officer-in-Charge of the cooperative
during his official travel to Manila on September 3, 2009.35chanrobleslaw
On September, 3, 2009, the CDA authorities arrived in ZAMECO II to assume
management of the cooperative. This was opposed by the existing management
of ZAMECO II.36 The following day, September 4, 2009, Petitioner Gutierrez, Jr.
issued a Memorandum for and in behalf of Farrales directing the employees to
proceed to the main office in compliance with the directive of the CDA appointed
officers. Thus, a meeting was held on the same date at ZAMECO II's office in San
Antonio led by CDA representatives. Petitioners Gutierrez, Jr., Venzon and
Gutierrez participated in the said meeting.37 Also, several meetings were held
which were attended by employees and officers of ZAMECO II who allegedly
defected to the side of CDA appointed officers.38chanrobleslaw
Likewise, on September 4, 2009, petitioners Venzon, Gutierrez and Gutierrez, Jr.
were given separate memoranda by Engr. Farrales directing them to explain why
no disciplinary action should be taken against them for failure to report for work
on the said date and for violating the Company Code of Ethics and Discipline and
the Employees Code of Conduct.39 The charges against them were: (a) attending
unauthorized meetings, gatherings or assembly of employees; (b) abandonment
of work or of assigned duties; (c) misrepresentation or usurpation of functions; (d)
giving unlawful orders that create confusion and disorder; (e) rumor mongering or
gossiping with intent to destroy the reputation of the company or its officers and
employees; and/or (f) any act conduct or behavior not included in the above but
which is prejudicial or detrimental to the company or its employees and/or
contrary to good order or discipline.40chanrobleslaw
Incidentally, petitioner Gutierrez, Jr. had undergone medical treatment from
September 8 to September 28, 2009. He submitted medical certificates but did
not file any application for sick leave.41 He, together with petitioner Gutierrez, did
not submit any explanation with regard to the above charges.
On September 11, 2009, petitioner Venzon answered the above charges. She
explained that effective September 3, 2009 when CDA had assumed jurisdiction
over ZAMECO II, after a serious discernment, she recognized only the officers
appointed by the CDA, who were the ones dismissed by the NEA, and Fidel Correa
as the General Manager. She further averred:ChanRoblesVirtualawlibrary
2. Nevertheless, allow us to state our position on the issues you
raised:ChanRoblesVirtualawlibrary
a. Unauthorized meeting/gathering or assembly of employees at sub-offices. The
meeting was called by the CDA representatives who have the mandate to conduct
information dissemination under the CDA Memorandum dated September 1, 2009
and we had no other choice but to follow a lawful order.
b. Abandonment of work or assigned duties - Since the interim board (which has
no legal authority or power whatsoever) has virtually driven out of ZAMECO II's
office premises the legally-recognized management of the cooperative, we
decided to report for work and undertake our respective duties at their
designated [workplace]. x x x
c. Misrepresentation or usurpation of functions xxx. It is the illegally-constituted
interim board that is usurping the functions of the CDA-recognized Board of
Directors. In addition, you are the one usurping the functions of General Manager
Fidel S. Correa, while the other cooperative staff you designated in our stead are
the ones usurping our own functions as Department Managers.
d. Giving unlawful orders that create confusion and disorder - xxx; It is you and
the interim board that are giving unlawful orders on account of your lack of legal
basis to continue performing such functions, regrettably.
e. Rumor mongering or gossiping with intent to destroy the reputation of the
company or its officers and employees - xxx. Openly discussing the more than
P17M net losses of the cooperative incurred for only the six-month period January
to June 2009 that were registered under the watch of the interim board and
yourself, and talking about the true state of validity of the registration of Zameco
II with CDA are legitimate issues.
f. Any act, conduct or behavior not included in the above but which is prejudicial
or detrimental to the company or its employees and/or contrary to good order or
discipline, etc. Your inclusion of this "offense" among those that we need to
explain merely exposes your lack of knowledge and competence on general
management. x x x42chanroblesvirtuallawlibrary
Petitioner Cabal stopped reporting for work starting September 13, 2009.
On September 18, 2009, Farrales issued a Memorandum to the security personnel
to deny entry to petitioners Gutierrez, Jr, Gutierrez and Venzon and four other
persons including Engr. Correa, and to not allow them to report for
work.43chanrobleslaw
On September 22, 2009, Farrales issued several memoranda: a) for petitioner
Venzon to return the laptop computer and other equipment entrusted to her; b)
for petitioner Gutierrez to answer the charges against him; c) for petitioners
Venzon, Jose Gutierrez, Jr., and Gutierrez placing them under preventive
suspension pending investigation by the Investigation and Appeals Committee
(IAC).44chanrobleslaw
Also, on September 22, 2009, a Memorandum was sent to petitioner Cabal to
explain in writing why no disciplinary action should be taken against her for
violating the Company Code of Ethics and Discipline particularly on the
unauthorized and unexcused absence from work which exceeded six (6)
consecutive days.45 On September 24, 2009, she was directed to appear before
the IAC but she stated that she was banned from entering the premises. She
submitted a Memorandum claiming that she had not abandoned her work, and
that she believed that she had not incurred any unauthorized and unexcused
absences from work exceeding six consecutive days on the basis of what she
believed was "right and legal".46 She was again required to appear, for the last
time, on September 29, 2009 but she replied through a letter that she couldn't do
so because of the existing ban for her from entering the main office of ZAMECO
II.47 On October 1, 2009, she made a written manifestation to Engr. John Regadio
that she did not recognize the authority of the IAC, and that the Interim Board of
Directors was not cloth with any authority, such that, their actions were
illegal.48chanrobleslaw
On October 27, 2009, upon the recommendation of the IAC in a meeting on
October 22, 2009, petitioners were dismissed from employment. The order of
dismissal was served to them on November 20, 2009 but they refused to receive
the same.49chanrobleslaw
On November 23, 2009, petitioners Venzon and Gutierrez jointly filed a complaint
for illegal dismissal, illegal suspension, non-payment of 13th month pay, damages
payment of allowances. On January 5, 2010, petitioners Gutierrez, Jr. and Cabal
jointly filed the same complaint.
During the mandatory conference, a Manifestation and Motion was filed by Correa
stating that petitioners were already reinstated to their respective positions by
him as the CDA-recognized and recently reinstated General Manager of ZAMECO II
commencing on October 20, 2009 with Board Resolution dated November 14,
2009, and that the Interim Board Members and the OIC General Manager were
prohibited from meddling with the operations of ZAMECO II by virtue of the writ of
preliminary injunction issued by the RTC of Olongapo City. Various checks issued
in the names of petitioners dated January 2010 and February 2010, signed by
Dominguez as President and by Correa as General Manager of ZAMECO II, were
presented.
On the other hand, Farrales submitted his Comment stating that the action of the
CDA in assuming jurisdiction over ZAMECO II was a unilateral act on the part of
Vigare; and that, Farrales' appointment as General Manager was still subsisting
and recognized by the Board of Directors of ZAMECO II.50chanrobleslaw
On August 11, 2009, an Order was issued by LA Leandro M. Jose suspending the
resolution of the incident.51chanrobleslaw
On January 21, 2011, the LA issued a Decision declaring petitioners to have been
illegally dismissed from employment. The LA held that though the evidence may,
at first glance, shows compliance with the notice requirement of procedural due
process, the same failed to show that petitioners were indeed guilty of violations
of the cooperative's Code of Ethics and Discipline. According to the LA, the
Investigation Reports and Recommendations were noticeably undated which gave
rise to a suspicion that it was conveniently intercalated to give basis to the
memorandum of dismissal, and that, the supporting documents were not
attached to the said reports.
Thereafter, respondents elevated the case before the NLRC Third Division. On
September 30, 2011, the NLRC ruled that the termination of petitioners from
employment was valid, but in view of their reinstatement, it dismissed the case
for being moot and academic, thus:ChanRoblesVirtualawlibrary
We rule that the said Manifestation and Motion has rendered this case moot and
academic. Notably, when complainants were suspended on September 23, 2009
and dismissed on October 27, 2009 by OIC-General Manager Farrales, he appears
to have the authority to do so. This is because at that point in time, the CDA has
already assumed jurisdiction over ZAMECO II and has recognized the incumbent
Board of Directors headed by Jose S. Dominguez and the management staff under
General Manager Correa. The NEA has (sic) apparently gave way to CDA as shown
by its recall order of Engr. Lopez as Project Supervisor of ZAMECO II effective 1
September 2009 and its letter stating that the reappointment/appointment of the
interim board headed by Gallardo has expired on October 12, 2009. Besides, on
April 28, 2009, the NEA Board of Administrators' Resolution (reappointing as
members of Interim Board of Directors for 180 days or sooner when the regular
Board of Directors of ZAMECO II has been duly elected and qualified) was
annulled and set aside by the Court of Appeals' Special Sixteenth Division in its
Decision dated November 27, 2009 in CA-G.R. SP No. 108553. The records of this
case is bereft of any showing that said Decision was assailed before the Supreme
Court.
x x x. Unless the issue as to which of the Board of Directors and/or management
have authority to control the affairs of ZAMECO II is legally settled with clarity and
finality, we uphold the right of the complainants to remain in their employment
with ZAMECO II and accordingly, receive their salaries and benefits. The grounds
(serious misconduct, breach of trust, willful disobedience, etc.) relied upon by
Engr. Farrales for suspending and dismissing the complainants are essentially
anchored on his and the Interim Board's authority, which authority the
complainants believe they do not possess. And, we have no jurisdiction to rule on
the same.52chanroblesvirtuallawlibrary
Respondent ZAMECO II filed a Motion for Reconsideration. On March 26, 2012, the
NLRC Special Third Division held that there was no valid reinstatement of
petitioners hence the case has not been mooted:ChanRoblesVirtualawlibrary
It is thus clear that as of February 15, 2010, Engr. Alvin Farrales and no longer
Fidel S. Correa was the General Manager of herein respondent-appellant Zameco
II and therefore Fidel S. Correa's Manifestion and Motion filed on February 18,
2010 which sought the dismissal of these consolidated cases since herein
complainants-appellees were allegedly reinstated earlier should not have made
these cases moot and academic since as of February 15, 2010, he already lost his
standing and authority to do anything in connection with these cases.
We therefore reconsider and set aside Our having, thus, dismissed these cases
and proceed to resolve the issue in this case.53chanroblesvirtuallawlibrary
The NLRC Special Third Division54 ruled, however, that there was valid dismissal
of petitioners because, instead of playing neutral, they embroiled themselves in
the ongoing corporate dispute. Hence, it set aside its Decision dated September
30, 2011 and dismissed case the case for lack of merit. The decretal portion of
the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, the Motion for Reconsideration of respondents-appellants is hereby
GRANTED. Our Decision dated September 30, 2011 is hereby reconsidered and
SET ASIDE and a new one entered dismissing the case a quo for lack of merit.
SO ORDERED.55chanroblesvirtuallawlibrary
Aggrieved, petitioners filed a petition for certiorari before the CA. In a Decision
dated July 31, 2014, the CA affirmed the Decision of the NLRC. It held that the
petitioners failed to substantiate their claim, or point to a specific act on the part
of the NLRC that can be construed as amounting to grave abuse of discretion.
Hence, the instant Petition, wherein petitioners make the following assignment of
errors:ChanRoblesVirtualawlibrary
THE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS' PETITION FOR
REVIEW ON CERTIORARI ON THE GROUND THAT THEY FAILED TO SUBSTANTIATE
THEIR CLAIM THAT THE NLRC ACTED ARBITRARILY IN CONCLUDING THAT THEIR
TERMINATION FROM EMPLOYMENT WAS IN ACCORDANCE WITH LAW CONTRARY
TO LAW AND JURISPRUDENCE; [and]
THE COURT OF APPEALS FAILED TO CONSIDER AS AN ACT OF ABUSE OF
DISCRETION THE GRANTING OF PRIVATE RESPONDENTS' MOTION FOR
RECONSIDERATION BY THE NLRC WHEN SUCH MOTION WAS BASED ON THE
MISLEADING AND INCOMPLETE INFORMATION GIVEN BY THE PRIVATE
RESPONDENTS.56
Petitioners argued in their petition that the NLRC acted with grave abuse of
discretion when it treated the Order dated February 15, 2010 of RTC Olongapo
City as final and executory. Petitioners cited the fact that there is a pending
appeal before this Court as to the execution of the said Order in GR No. 199828.
They alleged that without any finality on who has the control of ZAMECO II
because of the pending cases with this Court, they could not be faulted for
following orders of the other faction.
In their Comment,57 respondents alleged that the petition should not be given
due course because it raises questions of fact which is not allowed under Rule 45
of the Rules of Court. They also showed the dismissal of the case before the RTC
Olongapo City upon the initiative of both parties.58 And that, the dismissal of the
case settled the issue of injunction.
Our Ruling
There are two issues that have to be resolved in this case, to wit: a) whether or
not Engr. Farrales of the Interim Board of Directors of ZAMECO II had the authority
to suspend and dismiss petitioners from employment; and, b) whether petitioners
where validly terminated from employment.
To resolve the first issue, We need to determine who between the two factions -
the NEA appointed General Manager Engr. Farrales or the CDA installed General
Manager Engr. Correa - had the authority to manage the affairs of ZAMECO II for
the period from September 4, 2009, when the first memorandum was issued to
petitioners, until October 27, 2009, when petitioners were dismissed from
employment.
We have clarified this in our Decision in CASCONA v. Dominguez,59
thus:ChanRoblesVirtualawlibrary
In the case at bench, the respondents committed several acts which constituted
indirect contempt. The CDA issued the September 1, 2009 Memorandum stating
that it had jurisdiction over ZAMECO II and could reinstate the former members of
the Board of Directors. The CDA officials also issued Resolution No. 262, S-2009
and Special Order 2009-304 to interfere with the management and control of
ZAMECO II. Armed with these issuances, the other respondents even tried to
physically takeover ZAMECO II on October 22,2009. These acts were evidently
against the March 13, 2009 decision of this Court and, thus, constituted indirect
contempt against the Court. These contemptuous acts are criminal in nature
because these obstruct the administration of justice and tend to bring the court
into disrepute or disrespect. x x x.
xxxx
x x x. [T]he March 13, 2009 decision should not be taken in isolation. A perusal of
the said decision shows that there were several pronouncements which must be
respected and obeyed, to wit: first, the CA shall make a factual determination as
to the propriety of ZAMECO II's registration with the CDA; second, the continuing
jurisdiction of the Court, as the case is not yet final and executory; and lastly, that
there is substantial evidence to justify the removal from office of respondents
Dominguez, et al.
Precisely, the Court remanded the case to the CA to determine whether ZAMECO
II was properly registered as a stock cooperative under the CDA. Until the CA
properly had ascertained such fact, the Court could not determine conclusively
that the CDA had supervisory powers over ZAMECO II. The parties were then
expected to maintain status quo and refrain from doing any act that would pre-
empt the final decision of the Court. Hence, the Court continued to exercise its
jurisdiction in G.R. Nos. 176935-36 until a final decision was promulgated. The
respondents, however, unreasonably interfered with the proper procedure
mandated by the Court when they decided for themselves that the CDA had
jurisdiction over ZAMECO II. This constituted a contemptuous act because it
unlawfully interfered with the processes or proceedings of a court.
Worse, the respondent-officials of the CDA, fully aware of the Court's
pronouncement, attempted to reinstate respondents Dominguez, et al. despite
the existence of substantial evidence that warrant the latter's removal from
office. Glaringly, this grave allegation was never refuted by the respondents,
Dominguez, et al. were found unfit to hold office yet the respondents relentlessly
endeavored to return them to the seat of power in ZAMECO II. This blatant
disregard of the March 13, 2009 decision of the Court is an improper conduct that
impedes, obstructs, or degrades the administration of justice.
The respondents justify their acts by stating that in the August 26, 2009 House
Committee Hearing, the NBA acceded to the jurisdiction of the CDA over ZAMECO
II. This contention, however, is completely unsubstantiated. Notably, respondents
Esguerra and Apalisok admitted that the creation of a task force to take over
ZAMECO II would place dire consequences against the CDA. Even CDA Regional
Director Manuel A. Mar doubted that the NEA consented to the authority of the
CDA over ZAMECO II.
Indeed, the October 20, 2014 decision of the Court in G.R. Nos. 176935-36
conclusively settled that it is NEA, and not the CDA, that has jurisdiction and
disciplinary authority over ZAMECO II. The substantial issues of the case have
now been laid to rest. The Court, however, cannot turn a blind eye to the
contemptuous acts of the respondents during the pendency of the case. If the
Court condones these acts of interference and improper conduct, it would set a
dangerous precedent to future litigants in disregarding the interlocutory orders
and processes of the Court.60chanroblesvirtuallawlibrary
Clearly, from the above pronouncement, during the period material to this case,
the Interim Board of Directors of ZAMECO appointed by the NEA had the
jurisdiction and disciplinary authority over ZAMECO II. Thus, Engr. Farrales, as
General Manager, had the authority to suspend and dismiss petitioners.
We go now to the second issue as to whether the petitioners were validly
dismissed from employment. The right to security of tenure states that no
employee shall be dismissed unless there are just or authorized causes and only
after compliance with procedural and substantive due process. Article 279 of the
Labor Code provides for this right, thus:ChanRoblesVirtualawlibrary
Art. 279. Security of tenure. In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause of when
authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.
Hence, a lawful dismissal must meet both substantive and procedural
requirements; in fine, the dismissal must be for a just or authorized cause and
must comply with the rudimentary due process of notice and hearing. Article 282
of the Labor Code provides the just causes for dismissing an employee, to
wit:ChanRoblesVirtualawlibrary
ART. 282. TERMINATION BY EMPLOYER
An employer may terminate an employment for any of the following causes:
chanRoblesvirtualLawlibrary(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in connection
with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative;
(e) Other causes analogous to the foregoing.
Serious misconduct by the employee justifies the employer in terminating his or
her employment.
Misconduct is defined as an improper or wrong conduct. It is a transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies wrongful intent and not mere error in judgment.
To constitute a valid cause for the dismissal within the text and meaning of Article
282 of the Labor Code, the employee s misconduct must be serious i.e., of such
grave and aggravated character and not merely trivial or unimportant.
Additionally, the misconduct must be related to the performance of the
employees duties showing him to be unfit to continue working for the employer.
Further, and equally important and required, the act or conduct must have been
performed with wrongful intent.61chanroblesvirtuallawlibrary
In the case at bar, General Manager Farrales, himself, designated petitioner
Gutierrez, Jr. as Officer-in-Charge of the cooperative during his official travel to
Manila on September 3, 2009. But when the CDA authorities arrived in ZAMECO II
to assume management of the cooperative which was opposed by the existing
management of ZAMECO II, petitioner Gutierrez, Jr. issued a Memorandum,
allegedly signed on behalf of Farrales, directing the employees to proceed to the
main office in compliance with the directive of the CDA appointed officers. Hence,
a meeting was held on the same date at the cooperative's office in San Antonio
led by CDA representatives. Petitioners Gutierrez, Jr., Venzon and Gutierrez
participated in the said meeting.
Petitioners obviously aligned themselves with the former Board of Directors led by
Dominguez in trying to wrest control of the management of ZAMECO II. In
deciding to get involved in the power play, petitioners relinquished their duties as
employees. They defied the instructions and directives of the Interim Board of
Directors as well as that of the General Manager. Instead, they followed the
instructions of the Board of Directors and officers designated by the CDA. They
even filed a civil action against Farrales and the Interim Board of Directors.
Petitioners did not participate in the proceedings before the IAC because they did
not recognize its authority. It was the officers designated by the CDA whom they
recognize. Their acts definitely undermined the existence of the cooperative.
Under these factual premises, We cannot help but consider the petitioners'
misconduct to be of grave and aggravated character so that the cooperative was
justified in imposing the highest penalty available dismissal. In ruling as We do
now, We considered the balancing between petitioners' tenurial rights and
ZAMECO II's interests. Unfortunately for the petitioners, in this balancing under
the circumstances of the case, we have to rule against their tenurial rights in
favor of the employer's management rights.62chanrobleslaw
As correctly held by the NLRC Special Third Division,
thus:ChanRoblesVirtualawlibrary
What is important, as shown by the records, is that complainants-appellees
Venzon, Jose Gutierrez, Jr. and Eddie Gutierrez burned their bridges when they not
only sided with the group of Fidel S. Correa but also fought with them as actual
complainants-appellees in their effort at wrestling control over ZAMECO II and its
interim board headed by Engr. Alvin Farrales.
This is shown by the fact that instead of playing neutral, they, along with Correa,
instituted Civil Case No. 163-0-2009 with the Regional Trial Court of Olongapo City
against Farrales to remove him as the rightful General Manager of Zameco II.
Complainants-appellees embroiled themselves in the ongoing corporate dispute
instead of being neutral.63chanroblesvirtuallawlibrary
Furthermore, Article 296(c) states that loss of trust and confidence in the
employee is a just cause for dismissal. But it will validate an employee's dismissal
only upon compliance with certain requirements, namely: (1) the employee
concerned must be holding a position of trust and confidence; and (2) there must
be an act that would justify the loss of trust and confidence.64chanrobleslaw
Loss of trust and confidence to be a valid cause for dismissal must be work
related such as would show the employee concerned to be unfit to continue
working for the employer and it must be based on a willful breach of trust and
founded on clearly established facts. Such breach is willful if it is done
intentionally, knowingly, and purposely, without justifiable excuse as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently. The loss of trust and confidence must spring from the voluntary or
willful act of the employee, or by reason of some blameworthy act or omission on
the part of the employee.65chanrobleslaw
While loss of trust and confidence should be genuine, it does not require proof
beyond reasonable doubt, it being sufficient that there is some basis to believe
that the employee concerned is responsible for the misconduct and that the
nature of the employees participation therein rendered him unworthy of trust and
confidence demanded by his position.66chanrobleslaw
There are two classes o f positions of trust. First, are the managerial employees
whose primary duty consists of the management of the establishment in which
they are employed or of a department or a subdivision thereof, and to other
officers or members of the managerial staff. The second class consists of the
fiduciary rank-and-file employees, such as cashiers, auditors, property custodians,
or those who, in the normal exercise of their functions, regularly handle significant
amounts of money or property. These employees, though rank-and-file, are
routinely charged with the care and custody of the employer's money or property,
and are thus classified as occupying positions of trust and
confidence.67chanrobleslaw
It is undisputed that at the time of their dismissal, the petitioners Gutierrez, Jr.
and Venson were holding managerial positions and greater fidelity and trust were
expected of them.68 Farrales even designated petitioner Gutierrez, Jr. as Officer-
in-Charge of ZAMECO II during his official travel to Manila. Their positions were
unmistakably imbued with trust and confidence as they were charged with the
delicate task of overseeing the operations of their divisions. As managers, a high
degree of honesty and responsibility, as compared with ordinary rank-and-file
employees, were required and expected of them.
It need not be stressed that the nature or extent of the penalty imposed on an
erring employee must be commensurate to the gravity of the offense as weighed
against the degree of responsibility and trust expected of the employee's
position. Petitioners Gutierrez, Jr. and Venson are not just charged with a misdeed,
but with loss of trust and confidence, a cause premised on the fact that
petitioners Gutierrez, Jr. and Venzon hold positions whose functions may only be
performed by someone who enjoys the trust and confidence of the management.
Needless to say, such an employee bears a greater burden of trustworthiness
than ordinary workers, and the betrayal of the trust reposed is the essence of the
loss of trust and confidence which is a ground for the employee's
dismissal.69chanrobleslaw
As to the standards of procedural due process, the same were likewise observed
in effecting the petitioner's dismissal. Petitioners were given written
memorandum to inform them of the charges against them as well as notices of
termination in accordance with Section 2, Rule XIV, Book V of the Omnibus Rules
Implementing the Labor Code.

In protecting the rights of the workers, the law, however, does not authorize the
oppression or self-destruction of the employer. The constitutional commitment to
the policy of social justice cannot be understood to mean that every labor dispute
shall automatically be decided in favor of labor. The constitutional and legal
protection equally recognizes the employer's right and prerogative to manage its
operation according to reasonable standards and norms of fair
play.70chanrobleslaw

Finally, in labor cases, a Rule 45 petition is limited to reviewing whether the CA

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

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

SO ORDERED.chanR
FIRST DIVISION
G.R. No. 219430, November 07, 2016
JINKY S. STA. ISABEL, Petitioner, v. PERLA COMPAIA* DE SEGUROS, INC.,
Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated March
25, 2015 and the Resolution3 dated June 15, 2015 of the Court of Appeals (CA) in
CA-G.R. SP No. 134676, which nullified and set aside the Decision4 dated
December 26, 2013 and the Resolution5 dated February 27, 2014 of the National
Labor Relations Commission (NLRC) in NLRC LAC No. 06-001823-13 and,
accordingly, reinstated the Decision6 dated April 10, 2013 of the Labor Arbiter
(LA) in NLRC NCR Case No. 12-17463-12 finding petitioner Jinky S. Sta. Isabel (Sta.
Isabel) to have been validly dismissed from employment by respondent Perla
Compaia de Seguros, Inc. (Perla).chanroblesvirtuallawlibrary
The Facts
On February 27, 2006, Perla, a corporation engaged in the insurance business
hired Sta. Isabel as a Claims Adjuster with the task of handling and settling claims
of Perla's Quezon City Branch (QC Branch). Later on, Perla discovered that Sta.
Isabel owned a separate insurance agency known as JRS Insurance Agency (JRS).
To avoid conflict of interests, Perla instructed its QC Branch manager to: (a) allow
the licensing of JRS as a licensed agent of the QC Branch at the soonest time
possible; and (b) forward all claims coded under JRS to Perla's Claims Department
at the Head Office for processing, evaluation, and approval.7
Pending the resolution of the JRS issue, Sta. Isabel received a Notice to Explain8
dated October 19, 2012 why no disciplinary action should be taken against her for
her poor services towards the clients of PAIS Insurance Agency (PAIS), to which
she submitted her written explanation.9 On October 29, 2012, Sta. Isabel
attended a meeting with Perla's officers concerning the JRS and PAIS incidents. On
even date, Perla issued a Report on Status of the Hearing for Jinky Sta. Isabel10
wherein it resolved the foregoing incidents by agreeing that: (a) claims under JRS
shall be approved by the Head Office; and (b) claims under PAIS will be
transferred to the Head Office for processing.11
On November 9, 2012, Sta. Isabel received another Notice to Explain12 why no
disciplinary action should be taken against her for her poor services towards the
clients of Ricsons Consultants and Insurance Brokers, Inc. (Ricsons). In view of
Sta. Isabel's failure to submit a written explanation and to appear before the Head
Office to explain herself, Perla issued a Final Written Warning13 dated November
22, 2012 to be more circumspect with her claims servicing, with a stem
admonition that "any repetition of the same offense or any acts analogous to the
foregoing shall be dealt with more severely and shall warrant drastic disciplinary
action including the penalty of Termination in order to protect the interest of the
company."14 On even date, Perla likewise issued a Final Directive to Report to
Head Office15 instructing Sta. Isabel to report to the Head Office and explain her
alleged refusal to receive the afore-cited Final Written Warning.
On November 26, 2012, Perla issued the following to Sta. Isabel: (a) a Notice to
Explain16 why no disciplinary action should be taken against her for failing to
report to the Head Office despite due notice; and (b) a Notice of Termination17
dismissing Sta. Isabel from employment on the ground of insubordination.
Consequently, Sta. Isabel filed the instant complaint18 for: (a) illegal dismissal;
(b) underpayment of wages; (c) non-payment of overtime pay, service incentive
leave pay, accrued leave pay, and 13th to 16th month pay; (d) retirement pay
benefits under the corporation's Provident Fund; (e) actual, moral, and exemplary
damages; and (f) attorney's fees against Perla before the NLRC.19 In relation to
her claim for illegal dismissal, Sta. Isabel prayed for the grant of separation pay
and backwages, maintaining that there is already strained relations between her
and Perla which would render reinstatement impossible.20
In support of her complaint, Sta. Isabel claimed that Perla could no longer use the
PAIS and Ricsons incidents against her, considering that she was already
penalized with multiple warnings to be more circumspect with her claims
servicing. She likewise alleged that after receipt of the Final Directive to Report to
Head Office dated November 22, 2012, she met with Renato Carino (Carino),
Perla's Vice-President for Operations,21 albeit not at the Head Office, but at a
nearby restaurant where Carino himself instructed her to proceed. At the
restaurant, Carino asked Sta. Isabel if she would voluntarily resign over the
Ricsons incident, to which the latter replied that the incident had already been
dealt with. Finally, Sta. Isabel concluded that Perla was bent on easing her out of
work, pointing out that the Notice to Explain and Notice of Termination regarding
her alleged insubordination was dated on the same day.22
In its defense, Perla maintained that it validly terminated Sta. Isabel's
employment on the ground of insubordination. It averred that since Sta. Isabel did
not submit any written explanation regarding the Notice to Explain dated
November 9, 2012 (pertaining to the Ricsons incident), it was constrained to issue
the Final Written Warning dated November 22, 2012, which Sta. Isabel refused to
accept. Carino then called her via telephone to get an explanation and,
thereafter, sent a Final Directive to Report to Head Office. Instead of reporting at
the Head Office, Sta. Isabel requested for an informal meeting with Carino at a
restaurant as she did not want to see the faces of the other officers. Thereat,
Carino asked Sta. Isabel if she was willing to voluntarily retire, and at the same
time, reminded her to report to the Head Office. In view of Sta. Isabel's
recalcitrance in complying with the aforesaid directives, Perla issued a Notice to
Explain dated November 26, 2012 charging Sta. Isabel of insubordination. On
November 27, 2012, Perla received a letter23 from Sta. Isabel saying that she will
only report to the Head Office if Perla's President, Operations Head, Assistant Vice
President, Human Resources Manager, and QC Branch Manager will all be present
for a meeting/conference to clear all issues surrounding her. Thus, on November
28, 2012, Perla terminated Sta. Isabel's employment on the ground of
insubordination. In this regard, Perla explained that due to a typographical error,
it "wrongly" indicated November 26, 2012 as the date of issuance of Sta. Isabel's
Notice of Termination instead of November 28, 2012.24
The LA Ruling
In a Decision25 dated April 10, 2013, the Labor Arbiter (LA) dismissed the
complaint for lack of merit, but nevertheless, ordered Perla to pay Sta. Isabel the
amounts of P8,778.00 and P7,442.30 representing her unpaid salary and service
incentive leave pay, respectively.26
The LA found that since Perla's directives for Sta. Isabel to appear before the
Head Office were in connection with the administrative proceedings against the
latter, her refusal to comply therewith was not tantamount to willful disobedience
or insubordination. At the most, it only amounted to a waiver of her opportunity to
be heard in said proceedings. Nevertheless, the LA found just cause in
terminating Sta Isabel's employment, opining that her disrespectful language in
her letter dated November 27, 2012 not only constitutes serious misconduct, but
also insubordination as it showed her manifest refusal to cooperate with Perla.27
Aggrieved, Sta. Isabel appealed28 to the NLRC.chanroblesvirtuallawlibrary
The NLRC Ruling
In a Decision29 dated December 26, 2013, the NLRC granted Sta. Isabel's appeal
and, accordingly, ordered Perla to pay her separation pay, backwages, benefits
under the Provident Fund, 14th month pay, and attorney's fees equivalent to 10%
of all the monetary awards.30
The NLRC held that Sta. Isabel's refusal to report to the Head Office was not willful
disobedience, considering that the directives were in connection with the
administrative proceedings against her and, as such, her failure to appear was
only tantamount to a waiver of her opportunity to be heard. Hence, she cannot be
dismissed on such cause, which incidentally, was the sole ground for her
termination as stated in the Notice of Termination. In this relation, the NLRC ruled
that the LA could not use Sta. Isabel's November 27, 2012 letter as a ground for
her termination as Perla itself did not invoke the same in the first place. Even
assuming that the letter may be used as evidence against Sta. Isabel, the NLRC
held that a careful perusal thereof would show that it was not discourteous,
accusatory, or inflammatory. At the most, the language in the letter would show
that Sta. Isabel had written it out of confusion and frustration over the matter the
administrative proceedings against her were being handled, and not out of
defiance and arrogance.31 In sum, the NLRC concluded that Sta. Isabel's
dismissal was without just cause, hence, unlawful.32
Upon Perla's motion for reconsideration,33 the NLRC issued a Resolution34 dated
February 27, 2014 affirming its Decision with modification deleting the award of
benefits under the Provident Fund. Dissatisfied, Perla filed a petition for
certiorari35 before the CA.chanroblesvirtuallawlibrary
The CA Ruling
In a Decision36 dated March 25, 2015, the CA nullified and set aside the NLRC
ruling, and reinstated that of the LA.37 Essentially, it held that the NLRC gravely
abused its discretion in failing to appreciate the evidence showing Sta. Isabel's
sheer defiant attitude on the orders of Perla and its officers.38 In this regard, the
CA held that Sta. Isabel's conduct towards Perla's officers by deliberately ignoring
the latter's directives for her to appear before the Head Office, coupled with her
letter dated November 27, 2012, constitutes insubordination or willful
disobedience.39 Thus, the CA concluded that Sta. Isabel's dismissal was valid, it
being a valid exercise of management prerogative in dealing with its affairs,
including the right to dismiss its erring employees.40
Undaunted, Sta. Isabel moved for reconsideration,41 which was, however, denied
in a Resolution42 dated June 15, 2015; hence, this
petition.chanroblesvirtuallawlibrary
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA correctly
ascribed grave abuse of discretion on the part of the NLRC in ruling that Sta.
Isabel's dismissal was illegal.chanroblesvirtuallawlibrary
The Court's Ruling
The petition is meritorious.
To justify the grant of the extraordinary remedy of certiorari, the petitioner must
satisfactorily show that the court or quasi-judicial authority gravely abused the
discretion conferred upon it. Grave abuse of discretion connotes a capricious and
whimsical exercise of judgment, done in a despotic manner by reason of passion
or personal hostility, the character of which being so patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined by or to act at all in contemplation of law.43
In labor disputes, grave abuse of discretion may be ascribed to the NLRC when,
inter alia, its findings and conclusions are not supported by substantial evidence,
or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.44
Guided by the foregoing considerations, the Court finds that the CA committed
reversible error in granting Perla's certiorari petition considering that the NLRC's
finding that Sta. Isabel was illegally dismissed from employment is supported by
substantial evidence.
As may be gleaned from the records, Sta. Isabel received a total of three (3)
Notices to Explain dated October 19, 2012,45 November 9, 2012,46 and
November 26, 2012.47
In the Notice to Explain dated October 19, 2012, Sta. Isabel was charged with
serious misconduct for her poor services towards the clients of PAIS.48 After Sta.
Isabel submitted her written explanation and attended the corresponding
meeting, Perla resolved the matter through a Report on Status of the Hearing for
Jinky Sta. Isabel49 dated October 29, 2012 wherein she was penalized with a
"VERBAL WARNING to improve on the claims servicing of clients in QC Branch."50
Thus, the proceedings with regard to the PAIS incident should be deemed
terminated.
In the Notice to Explain dated November 9, 2012, Sta. Isabel was charged with
serious misconduct and gross neglect of duty for her poor services towards the
clients of Ricsons.51 Notwithstanding Sta. Isabel's failure to submit her written
explanation despite due notice, Perla went ahead and resolved the matter
anyway in the Final Written Warning52 dated November 22, 2012 wherein it
penalized her with a "FINAL WARNING to be more circumspect in [her] claims
servicing with agents, brokers, and assureds" with an admonition that "any
repetition of the same offense or any acts analogous to the foregoing shall be
dealt with more severely and shall warrant drastic disciplinary action including
the penalty of Termination in order to protect the interest of the company."53
Hence, Perla's issuance of the Final Written Warning should have likewise
terminated the administrative proceedings relative to the Ricsons incident.
Finally, in the Notice to Explain dated November 26, 2012, Perla charged her of
willful disobedience for her failure to appear before the Head Office despite due
notice.54 In the Notice of Termination55 of even date - although Perla insists that
the date indicated therein was a mere typographical error and that it was actually
made on November 28, 201256 - Sta. Isabel was terminated from work on the
ground o insubordination.57
Since Sta. Isabel was actually dismissed on the ground of insubordination, there is
a need to determine whether or not there is sufficient basis to hold her guilty on
such ground.
Insubordination or willful disobedience, is a just cause for termination of
employment listed under Article 297 (formerly Article 282) of the Labor Code,58
to wit:chanRoblesvirtualLawlibrary
Article 297282. Termination by Employer. - An employer may terminate an
employment for any of the following causes:cralawlawlibrary
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his
work;ChanRoblesVirtualawlibrary
xxxx
Willful disobedience or insubordination, as a just cause for the dismissal of an
employee, necessitates the concurrence of at least two (2) requisites, namely: (a)
the employee's assailed conduct must have been willful, that is, characterized by
a wrongful and perverse attitude; and (b) the order violated must have been
reasonable, lawful, made known to the employee, and must pertain to the duties
which he had been engaged to discharge.59
In this case, a plain reading of the Notice to Explain and Notice of Termination
both dated November 26, 2012 reveals that the charge of insubordination against
Sta. Isabel was grounded on her refusal to report to the Head Office despite due
notice. While Perla's directives for Sta. Isabel to report to the Head Office indeed
appear to be reasonable, lawful, and made known to the latter, it cannot be said
that such directives pertain to her duties as a Claims Adjuster, i.e., handling and
settling claims of Perla's Quezon City Branch, regardless of whether her refusal to
heed them was actually willful or not. The aforesaid directives, whether contained
in the Notice to Explain dated November 9, 2012 or the Final Directive to Report
to Head Office dated November 22, 2012, all pertain to Perla's investigation
regarding the Ricsons incident and, thus, were issued in compliance with the
requisites of procedural due process in administrative cases. Otherwise stated,
such directives to appear before the Head Office were for the purpose of affording
Sta. Isabel an opportunity to be heard regarding the Notice to Explain dated
November 9, 2012.60 As correctly pointed out by the labor tribunals, Sta. Isabel's
failure or refusal to comply with the foregoing directives should only be deemed
as a waiver of her right to procedural due process in connection with the Ricsons
incident, and is not tantamount to willful disobedience or insubordination.
Besides, contrary to Perla's claim that it could not wrap up its investigation on the
Ricsons incident due to Sta. Isabel's continuous disregard of said directives,61 the
Final Written Warning dated November
22, 2012 indubitably shows that Perla had already taken care of the Ricsons
complaint despite Perla's non-cooperation. To recapitulate, the Final Written
Warning stated that Perla: (a) took into consideration Sta. Isabel's refusal to
appear before the Head Office or to submit her written explanation; (b) deemed
such refusal as a waiver of her opportunity to be heard; and (c) resultantly
resolved the matter by penalizing Sta. Isabel with, among others, a "FINAL
WARNING to be more circumspect in [her] claims servicing with agents, brokers[,]
and assureds."62 Clearly, Perla cannot base the charge of insubordination against
Sta. Isabel in her refusal to report to the Head Office in connection with the
Ricsons complaint.
As an additional basis for Sta. Isabel's alleged insubordination, Perla argues that
Sta. Isabel's letter63 dated November 27, 2012 signifies her outright defiance of
management authority, considering that as an employee, she had no right to
impose conditions on management on when and what circumstances she would
explain her side.64
reckoning the computation of Sta. Isabel's separation pay from February 27, 2007
instead of the actual date of the commencement of her employment with Perla, a
modification of the NLRC ruling to reflect this correction is in order.
WHEREFORE, the petition is GRANTED. The Decision dated March 25, 2015 and
the Resolution dated June 15, 2015 of the Court of Appeals in CA-G.R. SP No.
134676 are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated
December 26, 2013 and the Resolution dated February 27, 2014 of the National
Labor Relations Commission in NLRC LAC No. 06-001823-13 are REINSTATED with
MODIFICATION in that the computation of separation pay due to petitioner Jinky S.
Sta. Isabel should be counted from February 26, 2006, the actual date of the
commencement of her employment with respondent Perla Compaia de Seguros,
Inc., instead of February 27, 2007.
SO ORDERED.

The Court finds the argument untenable and simply an afterthought to put some
semblance of legality to Sta. Isabel's dismissal.

A careful examination of the records reveals that Perla already issued Sta. Isabel's
Notice of Termination on November 26, 2012 the same day the Notice to Explain
charging her of insubordination was issued - even before Sta. Isabel wrote them
the letter dated November 27, 2012. Evidently, Perla never took this letter into
consideration in dismissing Sta. Isabel. In an attempt to cover up this mishap,
Perla claimed that the date indicated on the Notice of Termination was only a
typographical error, as it was actually issued on November 28, 2012, even
presenting the private courier receipt65 showing that it was only sent to Sta.
Isabel on the latter date. While such private courier receipt indeed shows the date
when the Notice of Termination was sent, it does not prove that it was made on
the same day. More revealing is the fact that this November 27, 2012 letter
allegedly showing insubordination on the part of Sta. Isabel was not even
mentioned in her Notice of Termination. Verily, Perla's excuse of typographical
error in the date indicated on the Notice of Termination is simply unacceptable for
being a mere self-serving assertion that deserves no weight in law.66 Besides, as
aptly put by the NLRC, a careful perusal of such letter reveals that the wordings
used therein were not discourteous, accusatory, or inflammatory, nor was the
letter written out of defiance and arrogance. Rather, it only exhibits Sta. Isabel's
confusion and frustration over the way the administrative proceedings against her
were being handled. THIRD DIVISION

In sum, the totality of the foregoing circumstances shows that Sta. Isabel was not
guilty of acts constituting insubordination, which would have given Perla a just
cause to terminate her employment. As such, the CA erred in holding that the
NLRC gravely abuse its discretion in ruling that Sta. Isabel's dismissal was illegal;
hence, the NLRC ruling must be reinstated. However, since the NLRC erred in
G.R. Nos. 205685-86 June 22, 2015
EMMANUEL H. BERALDE, HAYDEE B. OCHE, EDGAR E. FERNANDEZ, RONALD M.
DUMADAUG, WENCESLAO L. CAMPORENDONDO, OCTAVE BRENDAN N. MARTINEZ,
AVELINA C. NAVA, ALSADOM P. CIRILO, OSCAR H. GALARAGA, IGNACIO R.
ALMARIO, JR., MISAMBO D. LLEJES, ERNESTO M. MOVILLA, SR., RONALD R.
PANUGALING, NICHOLS M. SULTAN, SR., FRANCISCO M. VELASCO, SAMUEL G.
WENCESLAO, EDMONDO B. ELECCION, SANNY L. ABDUL, JOEL T. AUTIDA,
ANTONIO C. BAG-O, RODOLFO C. BARTIDO, NECTOR B. BASILISCO, GREGORIO Y.
CANAMO, TOMAS M. CANSECO, REYSALVIO M. CARREON, ALEJANDRO A. CELIS,
EMERISA S. BLANCADA, FELIX E. BUGWAT, RENIE N. BURGOS, DESIDERIO C.
CABONITA, RICARDO P. DAG-UMAN, RUBEN B. DAVIDE, FELIPE G. DEMETILA,
EDUARDO B. DIAL, EFREN L. ENCALLADO, GETULIO A. GOHIL, GUMERSINDO C.
HAPE, DOMINGO M. LABTON, ARNOLD B. LIM, LEONARDO G. LOPEZ, SR., ALBINO
M. LECERNAS, JOEL B. LUMERAN, MARTIN C. MAGLINTE, FOL A. MALAYA, ALFREDO
D. MARAVILLAS, MARTINO R. MENDEZ, MAURO B. NAVAREZ, JR., CARLITO R.
NAVARRO, AGUSTIN C. NOTARTE, JR., GONZALO G. OCHE, CARLITO G. OTOM,
WALTER S. PANOY, ALEJANDRO T. PADOJAN, SR., GLESERIA L. PELDEROS, WILSON
C. RODRIGUEZ, ARMAN A. ROSALINDA, ISIDRO M. RUSGAL, ISMAEL M. SANDANG,
SR., WEA MAE B. SALATAN, EDWIN L. SARDIDO, PAULINO T. SEDIMO, CESARIO A.
TANGARO, PABLITO B. TAYURAN, EDUARDO D. TUBURAN, ARMANDO I. VARGAS,
JR., RENATO E. LUMANAS, WILFREDO C. PAUSAL, ALFREDO R. RAMIS, JOSE V.
TUGAP, MANUEL G. WENCESLAO, MARIO D. ALBARAN, EDGAR P. ALSADO, SANTOS
T. AMADO, JR., CHRISBEL A. ANG, BERNARDO C. AYUSTE, JR., RONALD B. BARTIDO,
REYNALDO R. BAURA, SR., ANGELITO A. BIMBO, REYNALDO N. CAPUL, SONNY M.
DAVIDE, REYNALDO A. LANTICSE, SR., MARIO M. LIMPIO, ARGIE A. OTOM, DANILO
V. PABLIO, CARLITO H. PELLERIN, DANILO L. QUIMPAN, MARK ANTHONY M.
SALATAN, DANTE S. SERAFICA, BUENVENTURA J. TAUB, JENRITO S. VIA, ROMULO A.
LANIOHAN, JORGE L. QUIMPAN, ANTONIO C. SALATAN, ARLON C. AYUSTE,
ERNESTO P. MARAVILLAS, DANIEL B. ADONA, and WILFREDO M. ALGONES,
Petitioners,
vs.
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION (GUIHING
PLANTATION OPERATIONS), RICA REGINA L. DA VILA (Chairman), EDWIN T.
FABREGAR, JR. (VP-Banana Production); GERARDO IGNACIO B. ONGKIKO, (Senior
VP-HR), CELSO S. SANCHEZ (Production Manager); and JESSEPEHINE 0. ALEGRE
(Area Administrative Manager), Respondents.
x-----------------------x
PRESCO A. FUENTES and BRIAN TAUB, Petitioners,
vs.
LAPANDAY AGRICULTURAL AND DEVELOPMENT CORPORATION, (GUIHING
PLANTATION OPERATIONS) RICA REGINA L. DAVILA, Chairman; EDWIN T.
FABREGAR, JR., VP-Banana Production; GERARDO IGNACIO B. ONGKIKO, CELSO S.
SANCHEZ, Production Manager, Respondents.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Consolidated Decision1 dated June 29, 2012 and
Consolidated Resolution2 dated November 14, 2012 of the Court of Appeals-
Cagayan de Oro City in CA-G.R. SP No. 035883 and CA-G.R. SP No. 04646.4
The facts, as culled from the records, are as follows:
Lapanday Agricultural and Development Corporation (Lapanday) is engaged in
the business of Banana plantation and exporting of the same to its clientele
abroad. Petitioners are employees in the said corporation.
Between the years 1992-1994, Lapanday retrenched and paid separation pay to
some of its employees in a downsizing effort. Thereafter, Lapanday allegedly re-
hired some of their former employees with a promise that the land they worked
on will be eventually turned-over to them, since the land was covered by the
Comprehensive Agrarian Reform Program (CARP). The employees including
several of the petitioners agreed to be retrenched and re-hired.
Sometime in 1999, Lapanday again retrenched all its employees and offered to
pay separation pay for their years of service. Meanwhile, the land was not turned-
over to them as promised since the Department of Agrarian Reform (DAR) issued
an Order Dated February8, 1999, exempting said land from the coverage of the
CARP.
On March 29, 1999, Lapanday and the employees, including petitioners, signed a
new employment contract. However, upon learning of the DAR's order of
exemption, the employees filed a petition to revoke said order.
On January 4, 2008, Lapanday issued a Notice of Termination to all its employees,
including herein petitioners. In the said notice of termination, it was stated that
the company is instituting a retrenchment program pursuant to Section 5, Article
1 of the Collective Bargaining Agreement (CBA) to prevent losses as a result of
the dramatical increase in production costs and lower productivity. The
termination date for all employees was effective February 4, 2008.
Several employees signed the notice, in the hopes of getting their separation pay
and other benefits. Petitioners, however, claimed that their separation pay was
not given to them. They further alleged that those who refused to sign the notice
were not allowed to enter the work premises unless they would sign the notice.
Lapanday, on the other hand, claimed that despite its financial predicament,
separation pay was offered to its employees.
Hence, without any recourse, petitioners filed a complaint for illegal dismissal.
Emmanuel Beralde, et al. filed their Complaint on February 5, 2008,5 while
Fuentes and Taub filed their Complaint on October 6, 2008.6
Lapanday claimed that in 2006, it was beset with financial reverses due to very
low productivity, an onslaught of banana diseases, the adverse effects of the
imposition of the aerial spraying ban, the reduction of leased areas due to CARP,
the refusal of the landowners to renew petitioner's lease contracts, increase in
production costs, and the extraordinary fluctuation in foreign exchange. They
averred to have implemented numerous saving measures; however, its financial
condition continued to decline, thus, they opted to implement a retrenchment
program. Lapanday further claimed that it consulted with the employees union
(Samahan Manggagawa ng Lapanday Guihing-SAMALAG), and filed the required
notice with the Department of Labor and Employment (DOLE) before the
implementation of said program.
CA-G.R. SP No. 035887
On August 15, 2008, in NLRC RAB XI-02-00135-08,8 the Labor Arbiter rendered a
Decision9 which reads, thus:
WHEREFORE, foregoing considered, judgment is hereby rendered as follows:
1. Dismissing the complaint for illegal dismissal and unfair labor practice;
2. Declaring that the retrenchment is valid; and
3. Ordering respondent LAPANDAY AGRICULTURAL AND DEVELOPMENT
CORPORATION to pay complainants the sum of EIGHT MILLION TWO HUNDRED
EIGHTY-SIX THOUSAND ONE HUNDRED SEVENTY-FOUR AND 53/100 PESOS
(P8,286,174.53) representing their separation pays.
SO ORDERED.10
Undaunted, before the NLRC, petitioners insisted that they were illegally
dismissed. On September 22, 2009, the NLRC reversed and set aside the
appealed decision.11 The dispositive portion reads, thus:
WHEREFORE, foregoing premises considered, the appealed decision is Reversed
and Set Aside. In lieu thereof, a new judgment is rendered declaring the
complainants, less Presco Fuente and Brian Taub, to have been illegally dismissed
from employment, and thus ordering respondent Lapanday Agricultural
Development Corporation to reinstate the said complainants to their former
positions without loss of seniority rights and other privileges and to pay them full
backwages from the dates they were dismissed until they are actually reinstated
plus attorneys fees equivalent to ten (10%) percent of the aggregate monetary
award due them, subject to computation by the Regional Arbitration Branch of
origin during execution proceedings.
SO ORDERED.12
Lapanday filed a motion for reconsideration, but the NLRC denied the same in a
Resolution13 dated February 12, 2010.
CA-G.R. SP No. 0464614
Meanwhile, in NLRC RAB XI-10-00881-08,15 the Labor Arbiter rendered a
Decision16 dated July 30, 2009, which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered
declaring the dismissal of complainants Presco A. Fuentes and Brina Taub as
illegal:
Accordingly, Lapanday Agricultural Development Corporation (Guihing Plantation
Operation), represented by its authorized officers, is hereby (ordered) to pay
complainants' backwages, to wit:
1. Presco A. Fuentes -P160,632.21
2. Brian M. Taub - P160,632.21
P321,264.42
Respondent is further ordered (to)reinstate complainants to their former positions,
either physically or in the payroll, without loss of seniority rights and other
privileges, and to submit a report of compliance thereon within ten (10) days from
receipt of Decision. This order of reinstatement is immediately executory.
All other claims are denied for insufficiency of evidence.
SO ORDERED.17
Lapanday appealed to the NLRC, however, the NLRC dismissed the same for non-
perfection due to failure of petitioner to post a cash bond or surety bond within
the reglementary period. Petitioner moved for reconsideration but was denied.
Fuentes and Taub filed a petition for certiorari under Rule 65 alleging that the
NLRC gravely abuse its discretion when it denied its appeal. On April 20, 2011,
the Court of Appeals granted the petition and reinstated NLRC RAB XI-10-00881-
08,18 and the proceedings continued before the NLRC.
On July 29, 2011, the NLRC dismissed19 the complaint for lack of merit, affirming
the assailed Decision of the Labor Arbiter which ruled in favor of petitioners'
reinstatement after finding their dismissal to be illegal. It likewise echoed its
Decision dated September 22, 2009 but included Fuentes and Taub as they were
not parties in the earlier case since they filed the complaint several months
thereafter.
The motion for reconsideration was filed, but was denied on October 26, 2011 for
lack of merit.20
Thus, Lapanday filed petitions on certiorari against the appellate court.
In CA-G.R. SP No. 03588,21 Lapanday assailed the NLRC's Resolutions claiming
that it gravely abused its discretion amounting to lack or excess of jurisdiction
when it reversed the decision of the Labor Arbiter.
In CA-G.R. SP No. 04646,Lapanday raised the same issue of whether the NLRC
committed grave abuse of discretion in concluding that the retrenchment
program it had undertaken was a mere ploy to ease out petitioners from their
employment.
In a Resolution22 dated March 13, 2012, upon motion, the appellate court ordered
that CA-G.R. SP No. 04646 be consolidated with CA-G.R. No. SP 03588.
In the disputed Consolidated Decision23 dated June 29, 2012, the Court of
Appeals-Cagayan de Oro City, 23rd Division, granted the petitions for certiorari,
the dispositive portion of which reads:
WHEREFORE, the instant consolidated Petitions are GRANTED.
In CA-G.R. [SP] No. 03588: the National Labor Relations Commission, 8th
Division's (NLRC) Resolution promulgated on September 22, 2009 and February
12, 2010 are SET ASIDE. The Decision of Labor Arbiter Henry F. Te promulgated on
August 15, 2008 is hereby REINSTATED. In CA-G.R. [SP] No. 04646: the National
Labor Relations Commission, 8th Division's (NLRC) Decision promulgated on July
29, 2011 and the Resolution promulgated on October 26, 2011 are SET ASIDE and
a new judgment is entered DISMISSING the instant complaints for lack of merit.
Let this case be remanded to the arbitration branch of origin for the computation
of private respondents' separation pay to be based on each private respondent's
number of years of service.
SO ORDERED.24
Petitioners moved for reconsideration, but was denied in a Resolution25 dated
November 14, 2012.
Hence, petitioners filed the instant appeal questioning the appellate court's
pronouncement of the legality of their dismissal due to retrenchment.
The petition is without merit.
Considering the conflicting findings of the Labor Arbiter and the NLRC, it
behooved upon the Court of Appeals in the exercise of its certiorari jurisdiction to
determine which findings are more in conformity with the evidentiary facts.26
As a rule, a petition for certiorari under Rule 65 is valid only when the question
involved is an error of jurisdiction, or when there is grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the court or tribunals
exercising quasi-judicial functions. Hence, courts exercising certiorari jurisdiction
should refrain from reviewing factual assessments of the respondent court or
agency. However, the Court of Appeals cannot be faulted in reviewing the
correctness of the factual findings, considering that the NLRC and the Labor
Arbiter came up with conflicting findings. Thus, we shall now proceed to review
whether the appellate court's decision was in accord with law and evidentiary
facts.27
Retrenchment is the termination of employment initiated by the employer
through no fault of the employees and without prejudice to the latter, resorted to
by management during periods of business recession; industrial depression; or
seasonal fluctuations, during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program, or the
introduction of new methods or more efficient machinery or automation.
Retrenchment is a valid management prerogative. It is, however, subject to
faithful compliance with the substantive and procedural requirements laid down
bylaw and jurisprudence. In the discharge of these requirements, it is the
employer who bears the onus, being in the nature of affirmative defense.28
The pertinent provision of the Labor Code on the subject of retrenchment is
instructive:
Art. 283. Closure of establishment and reduction of personnel. - The employer
may also terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the provisions of this Title, by serving a written
notice on the worker and the [Department] of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1) month pay
or to at least one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or
at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year.
Therefore, for a valid retrenchment, the following requisites must be complied
with: (a) the retrenchment is necessary to prevent losses and such losses are
proven; (b) written notice to the employees and to the DOLE at least one month
prior to the intended date of retrenchment; and (c) payment of separation pay
equivalent to one-month pay or at least one-half month pay for every year of
service, whichever is higher.
Likewise, jurisprudence laid down the following standards to justify retrenchment
in order to prevent the management from abusing this prerogative. In Ariola v.
Philex Mining Corporation,29 the Court summarized the requirements for
retrenchment, as follows:
Thus, the requirements for retrenchment are: (1) it is undertaken to prevent
losses, which are not merely de minimis, but substantial, serious, actual, and real,
or if only expected, are reasonably imminent as perceived objectively and in good
faith by the employer; (2) the employer serves written notice both to the
employees and the DOLE at least one month prior to the intended date of
retrenchment; and (3) the employer pays the retrenched employees separation
pay equivalent to one month pay or at least 1/2 month pay for every year of
service, whichever is higher. The Court later added the requirements that the
employer must use fair and reasonable criteria in ascertaining who would be
dismissed and x x x retained among the employees and that the retrenchment
must be undertaken in good faith. Except for the written notice to the affected
employees and the DOLE, non-compliance with any of these requirements
renders the retrenchment illegal.30
In the instant case, Lapanday's financial condition before and at the time of
petitioners' retrenchment, justified petitioners retrenchment. The audited
financial report presented in evidence was found to conclusively show that
Lapanday has indeed suffered serious financial losses for the last three years
prior to its retrenchment. We quote the findings of the appellate court, to wit:
Petitioner-company's financial condition before and at the time of the
retrenchment clearly paints a picture of a losing business. An independent auditor
confirmed its claim of financial losses, finding that is suffered a net loss of
Php26,297,297. in 2006 as compared to its net income of Php14,128,589. in
2005. This net loss ballooned to Php72,363,879. in 2007. To be sure, these
financial statements cannot be whimsically assailed as self-serving, as these
documents were prepared and signed by SGV & Co., a firm of reputable
independent external auditors.31 Lapanday instituted a retrenchment program as
a result of the management's decision to limit its operation and streamline
positions and personnel requirements and arrest its increasing financial losses by
downsizing its workforce. Lapanday then was justified in implementing a
retrenchment program since it was undergoing financial reverses, not only for a
single fiscal year, but for several years prior to and even after the program. We
likewise quote the Labor Arbiter's findings: Per audit report of Sycip, Gorres
Velayo & Co (SGV), an independent accounting firm and credible external auditor,
dated April 17, 2007, for 2006 Financial Statement of Lapanday Agriculture and
Development Corporation, it shows that respondent's revenue for sales of
bananas in 2005 was PhP724,200,596.00. In 2006, it dropped to
Php607,186,264.00. A difference or loss of Php117,013,332.00 was incurred by
the respondent company. Also, per audit report dated March 28, 2008 of same
accounting firm x x x for the year 2007, it shows that respondent's revenue for
sales of bananas from Php607,186,264.00 further went down to
PhP539,979,711.00 or a loss of P67,207,753.00.
Recovering from other aspects of respondent's business, summary of respondent
net loss was at PhP26,297,297.00 for 2006 from PhP14,128,589.00 for 2005. The
net loss ballooned to Php72,363,879.00 in 2007.32
We cannot ignore the audited financial reports of independent and reputable
external auditors such as Sycip Gorres Velayo & Co., as no evidence can best
attest to a company's economic status other than its financial statement. We
defined the evidentiary weight accorded to audited financial statements in Asian
Alcohol Corporation v. National Labor Relations Commission,33 thus:
The condition of business losses is normally shown by audited financial
documents like yearly balance sheets and profit and loss statements as well as
annual income tax returns. It is our ruling that financial statements must be
prepared and signed by independent auditors. Unless duly audited, they can be
assailed as self-serving documents. But it is not enough that only the financial
statements for the year during which retrenchment was undertaken, are
presented in evidence. For it may happen that while the company has indeed
been losing, its losses may be on a downward trend, indicating that business is
picking up and retrenchment, being a drastic move, should no longer be resorted
to. Thus, the failure of the employer to show its income or loss for the
immediately preceding year or to prove that it expected no abatement of such
losses in the coming years, may bespeak the weakness of its cause. It is
necessary that the employer also show that its losses increased through a period
of time and that the condition of the company is not likely to improve in the near
future.34
Verily, the fact that the financial statements were audited by independent
auditors settles any doubt on the financial condition of Lapanday.1avvphi1 As
reported by SGV & Co., the financial statements presented fairly, in all material
aspects, the financial position of the respondent as of December 31, 2006 and
2005.35 However, even assuming arguendo that Lapanday was not experiencing
losses, it is still authorized by Article 28336 of the Labor Code to terminate the
employment of any employee due to retrenchment to prevent losses or the
closing provided that the projected losses are not merely de minimis, but
substantial, serious, actual, and real, or if only expected, are reasonably imminent
as perceived objectively and in good faith by the employer.
We also find that Lapanday complied with the requisite notices to the affected
employees and the DOLE to effect a valid retrenchment. As found by the Labor
Arbiter and Court of Appeals:37
Records show that the one (1) written notice requirement was duly filed by the
respondent with the Office of the Department of Labor and Employment on
December 27, 2007 and the Notices of Termination were duly served to its
workers on January 4, 2008 to take effect thirty (30) days from their receipt or on
February4, 2008. By reason of the hard "no retrenchment" stand of herein
complainants, the latter refused to receive the notices of termination, thus, copies
of the Letters of Retrenchment were sent through registered mail on January 8,
2008 to the last known addresses of the complainants. It appears also that
respondent submitted to the Department of Labor and Employment its Reports on
Employee Termination. On the matter of separation pay, it is established that
respondent company is willing to comply with the same.
We likewise cannot sustain petitioners' argument that their dismissal was illegal
on the basis that Lapanday did not actually cease its operation, or that they have
re-hired some of the dismissed employees and even hired new set of employees
to replace the retrenched employees.
The law acknowledges the right of every business entity to reduce its work force if
such measure is made necessary or compelled by economic factors that would
otherwise endanger its stability or existence. In exercising its right to retrench
employees, the firm may choose to close all, or a part of, its business to avoid
further losses or mitigate expenses. In Caffco International Limited v. Office of the
Minister-Ministry of Labor and Employment,38 the Court has aptly observed that
on the ground for the termination of employment. When the termination of
Business enterprises today are faced with the pressures of economic recession,
stiff competition, and labor unrest. Thus, businessmen are always pressured to
adopt certain changes and programs in order to enhance their profits and protect
their investments. Such changes may take various forms. Management may even
choose to close a branch, a department, a plant, or a shop.
In the same manner, when Lapanday continued its business operation and
eventually hired some of its retrenched employees and new employees, it was
merely exercising its right to continue its business. The fact that Lapanday chose
to continue its business does not automatically make the retrenchment illegal. We
reiterate that inretrenchment, the goal is to prevent impending losses or further
business reversals- it therefore does not require that there is an actual closure of
the business. Thus, when the employer satisfactorily proved economic or business
losses with sufficient supporting evidence and have complied with the
requirements mandated under the law to justify retrenchment, as in this case, it
cannot be said that the subsequent acts of the employer to re-hire the retrenched
employees or to hire new employees constitute bad faith. It could have been
different if from the beginning the retrenchment was illegal and the employer
subsequently hired new employees or rehired some of the previously dismissed
employees because that would have constituted bad faith. Consequently, when
Lapanday continued its operation, it was merely exercising its prerogative to
streamline its operations, and to re-hire or hire only those who are qualified to
replace the services rendered by the retrenched employees in order to effect
more economic and efficient methods of production and to forestall business
losses. The rehiring or reemployment of retrenched employees does not
necessarily negate the presence or imminence of losses which prompted
Lapanday to retrench.39
In spite of overwhelming support granted by the social justice provisions of our
Constitution in favor of labor, the fundamental law itself guarantees, even during
the process of tilting the scales of social justice towards workers and employees,
"the right of enterprises to reasonable returns of investment and to expansion
and growth." To hold otherwise would not only be oppressive and inhuman, but
also counter-productive and ultimately subversive of the nation's thrust towards a
resurgence in our economy which would ultimately benefit the majority of our
people. Where appropriate and where conditions are in accord with law and
jurisprudence, the Court has authorized valid reductions in the work force to
forestall business losses, the hemorrhaging of capital, or even to recognize an
obvious reduction in the volume of business which has rendered certain
employees redundant.40
AWARD OF SEPARATION PAY
The payment of separation pay would be due when a dismissal is on account of
an authorized cause as in this case, and the amount of separation pay depends
employment is due to retrenchment to prevent losses, or to closure or cessation
of operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay is only an equivalent of "one (1) month
pay or at least one-half (1/2) month pay for every year of service, whichever is
higher." In the above instances, a fraction of at least six (6) months is considered
as one (1) whole year.41
Consequently, petitioners are not entitled to backwages as it is well settled that
backwages may be granted only when there is a finding of illegal dismissal.42
Nevertheless, petitioners are entitled to separation pay as provided under the
law, equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher,43 and those other benefits that
petitioners may been titled thereto under the retrenchment program.
WHEREFORE, premises considered, the instant Petition is DENIED. The Court of
Appeals Consolidated Decision dated June 29, 2012 and its Resolution dated
November 14, 2012 in CA-G.R. SP No. 03588 are hereby AFFIRMED.
Let the records of the case be remanded to the Labor Arbiter for proper
computation of the award in accordance with this decision.
SO ORDERED.
FIRST DIVISION
G.R. No. 213729, September 02, 2015
PHILIPPINE AIRLINES, INC., Petitioner, v. ALEXANDER P. BICHARA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated January
24, 2014 and the Resolution3 dated July 30, 2014 rendered by the Court of
Appeals (CA) in CA-G.R. SP. No. 118777, which reversed and set aside the
Decision4 dated November 23, 2010 and the Resolution5 dated January 21, 2011
of the National Labor Relations Commission (NLRC) in NLRC NCR 00-04-03414-94
(CA No. 013528-97) (AE-03-09), and thereby, ordered petitioner Philippine
Airlines, Inc. (PAL) to pay respondent Alexander P. Bichara (Bichara) salary
differentials, backwages, and retirement benefits.
The Facts
On October 28, 1968, PAL hired Bichara as a flight attendant. Sometime in 1971,
PAL implemented a retrenchment program. By April of that year, Bichara
voluntarily resigned. On May 15, 1975, he was rehired.6
In August 1993, Bichara was included in PAL's Purser Upgrading Program in which
he graduated on December 13, 1993. As flight purser, he was required to take
five (5) check rides for his performance evaluation and earn at least an 85%
rating for each ride. However, Bichara failed in the two (2) check rides with
ratings of 83.46% and 80.63%. Consequently, on March 21, 1994, Bichara was
demoted to the position of flight steward.7
On March 22, 1994, Bichara appealed his demotion to PAL, but no action was
taken; hence, he filed a complaint for illegal demotion against PAL8 before the
NLRC-Regional Arbitration Branch, docketed as NLRC NCR 04-03414-94 (illegal
demotion case). Eventually, or on June 16, 1997, Labor Arbiter Ricardo C. Nora
(LA Nora) issued a Decision9 (June 16, 1997 Decision) declaring Bichara's
demotion as illegal, and accordingly, ordered PAL to reinstate Bichara to his
position as flight purser.10 PAL filed an appeal before the NLRC and later before
the CA, both of which, however, upheld LA Nora's finding. PAL no longer appealed
to the Court, thus, it rendered the June 16, 1997 Decision final and executory on
February 5, 2004.11
During the pendency of the illegal demotion case12 before the CA, however, or on
July 15, 1998, PAL implemented another retrenchment program that resulted in
the termination of Bichara's employment.13 This prompted him, along with more
than 1,400 other retrenched flight attendants, represented by the Flight
Attendants and Stewards Association of the Philippines (FASAP), to file on June 22,
1998, a separate complaint for unfair labor practice, illegal retrenchment with
claims for reinstatement and payment of salaries, allowances, backwages, and
damages14 against PAL, docketed as NLRC-NCR Case No. 06-05100-9815 (illegal
retrenchment case)16 This case was appealed all the way to this Court, docketed
as G.R. No. 178083 entitled "Flight Attendants and Stewards Assn. of the Phils, v.
PAL, Patria T. Chiong, and CA" (FASAP case), which remains pending as of this
time.17
On July 9, 2005, Bichara reached the 60 year-old compulsory retirement age
under the PAL-FASAP Collective Bargaining Agreement (CBA).18
On January 31, 2008, Bichara filed a motion for execution of LA Nora's June 16,
1997 Decision,19 which PAL opposed20 by arguing that the "complaint for illegal
demotion x x x was overtaken by supervening events, i.e., the retrenchment of
[Bichara] in 1998 and his having reached [the] compulsory retirement age in
2005."21
The LA Ruling
In an Order22 dated February 4, 2009 (February 4, 2009 Order), Labor Arbiter
Antonio R. Macam (LA Macam) granted Bichara's motion for execution, thus,
directing the issuance of a writ of execution against PAL and/or a certain Jose
Garcia to jointly and severally pay Bichara: (a) separation pay in lieu of
reinstatement equivalent to one (1) month's pay for every year of service
counting from October 28, 1968 up to the present, excluding the period from April
1, 1971 until May 15, 1975, or a period of 35 years; and (b) attorney's fees in the
amount of P20,000.00.23
LA Macam declared that, notwithstanding the pendency before this Court of the
illegal retrenchment case, i.e., FASAP case, Bichara's termination was invalid,
given that: (a) PAL did not use a fair and reasonable criteria in effecting the
retrenchment; (b) PAL disregarded the labor arbiters' rulings in the illegal
demotion and illegal retrenchment cases which were both immediately executory;
and (c) retrenchment was made during the pendency of the illegal demotion case
without the permission of the court where the case was pending.24 For these
reasons, Bichara was entitled to reinstatement to his position as flight purser.
However, since Bichara may no longer be reinstated in view of his compulsory
retirement in accordance with the CBA, LA Macam, instead, ordered PAL to pay
Bichara separation pay with the salary base of a flight purser.25cralawred
Aggrieved, PAL appealed to the NLRC.
The NLRC Ruling
In a Decision26 dated November 23, 2010, the NLRC reversed and set aside LA
Macam's February 4, 2009 Order and denied the motion for execution for being
moot and academic, considering Bichara's compulsory retirement in 2005,27
without prejudice to the latter's entitlement to backwages and retirement benefits
of a flight steward pursuant to this Court's final decision in the FASAP case.28
At the outset, the NLRC ruled that Bichara's reinstatement could have taken
effect, if at all, only on January 31, 2008 when he sought the execution of the said
relief.29 In this light, his reinstatement and corresponding backwages prior to said
date must therefore be based on the salary rate and other benefits attached to
the position of flight steward to which he was demoted/reverted.30 (However, it
declared that reinstatement is no longer possible as the same was rendered moot
and academic when he compulsorily retired in 2005.31 On the other hand, the
NLRC concluded that the matter of payment of monetary benefits is not for it to
order since it is a relief pertaining to the pending FASAP case; as such, Bichara
should pursue payment of backwages when the decision in the FASAP case is due
for execution. In this relation, the NLRC remarked that LA Macam exceeded his
authority in awarding separation pay in lieu of reinstatement, since such relief is
not contemplated in the decision sought to be executed, i.e., the June 16, 1997
Decision.32
Both parties moved for reconsideration, which were, however, denied in a
Resolution33 dated January 21, 2011. Dissatisfied, Bichara elevated the case to
the CA through a petition for review on certiorari.
The CA Ruling
In a Decision34 dated January 24, 2014, the CA reversed and set aside the NLRC's
ruling. It did not find LA Macam to have exceeded his authority in ordering the
payment of separation pay in lieu of reinstatement since, in a long line of cases,
this Court has consistently held that when reinstatement is not possible due to
over age, payment of separation pay is in place.35 The CA, however, observed
that since Bichara was one of the retrenched employees involved in the FASAP
case, this Court's Decision dated October 2, 2009, wherein it ruled that the
retrenchment was illegal and thereby stated that "[f]light attendants who have
reached their compulsory retirement age of retirement shall receive backwages
up to the date of their retirement only,"36 should be made to apply. Thus, instead
of separation pay, Bichara is entitled to backwages from the time of his
retrenchment up to the time he reached the compulsory retirement age of 60. In
addition, since the June 16, 1997 Decision, rendered in the illegal demotion case,
had already become final and executory, he is entitled to salary differentials of a
flight purser from a flight attendant from March 21, 1994, i.e., the date of his
demotion, up to the time of his retrenchment in July 1998.37 He is also entitled to
retirement benefits in accordance with the existing CBA at the time of his
retirement.38
PAL moved for reconsideration39 which was denied in a Resolution40 dated July
30, 2014; hence, this petition.
The Issue Before the Court
The essential issue to be resolved is whether or not the CA erred in reversing the
NLRC's Decision and thereby awarding Bichara the aforementioned monetary
awards.
The Court's Ruling
The petition is partly meritorious.
A judgment should be implemented according to the terms of its dispositive
portion is a long and well-established rule.41 As such, where the writ of execution
is not in harmony with and exceeds the judgment which gives it life, the writ has
pro tanto no validity.42
A companion to this rule is the principle of immutability of final judgments, which
states that a final judgment may no longer be altered, amended or modified, even
if the alteration, amendment or modification is meant to correct what is perceived
to be an erroneous conclusion of fact or law and regardless of what court renders
it. Any attempt to insert, change or add matters not clearly contemplated in the
dispositive portion violates the rule on immutability of judgments.43 But like any
other rule, this principle has exceptions, namely: (1) the correction of clerical
errors; (2) the so-called nunc pro tunc entries which cause no prejudice to any
party; (3) void judgments; and (4) whenever circumstances transpire after the
finality of the decision rendering its execution unjust and inequitable.44
In this case, the final judgment sought to be executed is LA Nora's June 16, 1997
Decision, which was confined to the directive that PAL reinstate Bichara as a flight
purser in view of his illegal demotion to the position of flight attendant:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered declaring the
illegality of complainant's [Bichara] demotion/reversion to Flight Steward and
ordering the respondents [PAL] to reinstate the complainant to his position as
Flight Purser within ten (10) days from receipt of this Decision.
The claim for damages is dismissed for lack of merit.
SO ORDERED.45
Evidently, LA Macam went beyond the terms of the June 16, 1997 Decision when
he, in his February 4, 2009 Order, directed the issuance of a writ of execution
ordering the payment of separation pay in lieu of reinstatement:
WHEREFORE, finding merit in the complainant's [Bichara] Motion for Execution,
the same is hereby GRANTED. Let a Writ of Execution be issued ordering the
respondents Philippine Airlines, Inc. and/or Jose Garcia, in lieu of reinstating the
complainant to the position of Flight Purser, to jointly and severally PAY to the
complainant his separation pay equivalent to one (1) month's pay for every year
of service counting from October 28, 1968 up to the present, excluding the period
from April 1, 1971 until May 15, 1975, or a period of thirty-five (35) years and to
pay the complainant the sum of Twenty Thousand Pesos (P20,000.00) for and as
attorney's fees.
SO ORDERED.46
Unlike the cases47 cited by the CA, which all involved illegal dismissal cases, it
would not be proper to accord such relief in this case since, in those cases, the
awards of separation pay in lieu of reinstatement were all hinged on the validity
of the employee's dismissal. Here, the validity of Bichara's termination is the
subject matter of a separate case, i.e., the FASAP case, which is still pending
before this Court, and is also beyond the ambit of the illegal demotion
proceedings. Hence, LA Macam exceeded his authority when he ruled on this
issue and directed PAL to pay Bichara separation pay in lieu of reinstatement.
PAL's supervening retrenchment of its employees, which included Bichara, in July
1998, and his compulsory retirement in July 2005, however, prevent the
enforcement of the reinstatement of Bichara to the position of flight purser under
the June 16, 1997 Decision. Nonetheless, since this Decision had already settled
the illegality of Bichara's demotion with finality, this Court finds that Bichara
should, instead, be awarded the salary differential of a flight purser from a flight
steward from the time of his illegal demotion on March 21, 1994 up until the time
he was retrenched in July 1998. Notably, unlike LA Macam's award of separation
pay in lieu of reinstatement, the award of salary differential is not dependent on
the validity of his termination, as it is, in fact, intrinsically linked to the illegality of
Bichara's demotion. Hence, with this direct relation, there should be no obstacle
in rendering this award.
Further, it should be pointed out that the principle of immutability of judgments,
from which the above-stated rule on writ of executions proceed, allow courts, as
an exception, to recognize circumstances that transpire after the finality of the
decision which would render its execution unjust and inequitable and act
accordingly. Thus, in view of the supervening events above-mentioned, this Court
deems the award of salary differential to be the just and equitable award under
the circumstances herein prevailing. Jurisprudence holds that courts may modify
or alter the judgment to harmonize the same with justice and the facts when after
judgment has been rendered and the latter has become final, facts and
circumstances transpire which render its execution impossible or unjust,48 as in
this case.
As a last point, it deserves mentioning that since Bichara's illegal demotion has
been finally decreed, he should be entitled to (a) backwages, at the salary rate of
a flight purser, from the time of retrenchment in July 1998 up until his compulsory
retirement in July 2005; (b) retirement benefits of a flight purser in accordance
with the existing CBA at the time of Bichara's retirement; and (c) attorney's fees,
moral, and exemplary damages, if any, but only if this Court, in the FASAP case,
finally rules that the subject retrenchment is invalid. Otherwise, he should only be
entitled to the above-stated salary differential, as well as the corresponding
separation pay required under the relevant CBA, or Article 29749 (formerly Article
283) of the Labor Code if no such CBA provision exists. The awards of backwages,
and retirement benefits, including attorney's fees, moral, and exemplary
damages, if any, cannot, however, be executed in these proceedings since they
are incidents which pertain to the illegal retrenchment case, hence, executable
only when the FASAP case is finally concluded.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated January 24,
2014 and the Resolution dated July 30, 2014 of Court of Appeals in CA-G.R. SP. No.
118777 are hereby REVERSED and SET ASIDE. A new one is entered ORDERING
petitioner Philippine Airlines, Inc. to pay respondent Alexander P. Bichara the
salary differential of a flight purser from a flight attendant from the time of his
illegal demotion on March 21, 1994 up until the time he was retrenched on July
15, 1998.
SO ORDERED.chanr
SECOND DIVISION
G.R. No. 214961, September 16, 2015
BANCO DE ORO UNIBANK, INC., Petitioner, v. GUILLERMO C. SAGAYSAY,
Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the
March 31, 2014 Decision1 and the October 8, 2014 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 126586, which reversed and set aside the
February 29, 2012 Decision3 and the June 25, 2012 Resolution4 of the National
Labor Relations Commission (NLRC) and reinstated the July 19, 2011 Decision5 of
the Labor Arbiter (LA) in NLRC Case No. RAB II 02-0067-11.
The Facts
On May 16, 2006, respondent Guillermo Sagaysay (Sagaysay) was hired by
petitioner Banco De Oro Unibank, Inc., (BDO) as Senior Accounting Assistant 5 in
its San Jose, Nueva Ecija, branch as a result of a merger with United Overseas
Bank (UOB), with BDO as the surviving bank. Sagaysay was previously employed
in UOB from 2004 to 2006 or for two (2) years. Prior thereto, he worked for
Metropolitan Bank and Trust Co. (Metrobank) from 1976 to 2004 for a period of
twenty-eight (28) years.
In a letter,6 dated January 8, 2010, BDO informed Sagaysay that, pursuant to the
retirement policy of the bank which mandated its retirement age to be sixty (60),
he would be formally retired effective September 1, 2010, a few days after his
60th birthday. The normal or compulsory retirement age of the bank was based
on its retirement plan7 which was implemented on July 1, 1994, Section 1, Article
V of which reads:chanRoblesvirtualLawlibrary
Section 1. Normal Retirement
The Normal Retirement Date of each member shall be the first day of the month
coincident with or next following his sixtieth (60th) birthday. The Member's
Normal Retirement Benefit shall be a sum determined in accordance with the
Retirement Benefit Schedule stated in Section 4 of this Article as of his retirement
date.8ChanRoblesVirtualawlibrary
In an e-mail,9 dated July 27, 2010, Sagaysay wrote that, although the time had
come that the BDO Retirement Program would be implemented to those reaching
the age of sixty (60), he requested that his services be extended because he had
an outstanding loan and his children were still in college. He assured BDO that he
was healthy and could still perform his duties in the branch. BDO denied
Sagaysay's request.
In another e-mail,10 dated August 19, 2010, Sagaysay appealed to BDO to extend
his service for 8.5 months or up to May 16, 2011 so that he could render at least
five (5) years of employment which would entitle him to 50% of his basic pay for
every year of service upon his retirement. BDO denied Sagaysay's appeal and
retired him on September 1, 2010. As of his last day of work, he was earning a
monthly salary of P28,048.00.
Sagaysay then signed Release, Waiver and Quitclaim11 (quitclaim), dated
October 22, 2010, for and in consideration of P98,376.14. The quitclaim stated,
among others, that in consideration of the foregoing payment, Sagaysay released
and discharged the bank, its affiliates and its subsidiaries from any action, suit,
claim or demand in connection with his employment.
On January 10, 2011, Sagaysay filed a complaint12 for illegal dismissal with
prayer for reinstatement and payment of backwages, moral damages, exemplary
damages, and attorney's fee against BDO before the Labor Arbiter (LA). He
claimed that despite his appeal, BDO compulsory retired him on September 1,
2010. As a result, he and his family suffered damages in the amount of
P2,225,403.00 which he would have received if he was made to retire at the age
of sixty-five (65).
For its part, BDO countered that after the bank denied Sagaysay's request for
extension of services, he was paid the amount of P98,376.14 representing the full
and final settlement of his compensation, allowances, benefits and other
emoluments. BDO stressed that he was not dismissed but was retired from the
service.
The LA Ruling
In a decision, dated July 19, 2011, the LA ruled that Sagaysay was illegally
dismissed because he was forced to avail of an optional retirement at the age of
sixty (60) which was contrary to the provisions of Article 287 of the Labor Code.13
The LA opined that he was terminated on the basis of a provision in a retirement
plan to which he did not freely assent. BDO took advantage of his predicament
and made him sign a quitclaim in exchange for a small consideration. The
decretal portion of the LA decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring that
complainant GUILLERMO C. SAGAYSAY was illegally dismissed from work. Hence,
respondent BDO UNIBANK, INC. is ordered to REINSTATE complainant to his
former position as Senior Accounting Assistant 5 without loss of seniority rights
and privileges and to pay him backwages in the sum of P280,480.00 as of July 7,
2011, plus ten percent (10%) thereof as attorney's fees or a total of P308,528.00.
The reinstatement aspect is immediately executory, even pending appeal.
Respondent is hereby ordered to show proof that it complied with the
reinstatement of complainant within ten (10) calendar days from receipt hereof.
Respondents [are] also ordered to pay complainant P50,000.00 each as moral and
exemplary damages.
SO ORDERED.14ChanRoblesVirtualawlibrary
Aggrieved, BDO appealed to the NLRC arguing chiefly that Sagaysay freely
assented to its retirement plan.
The NLRC Ruling
On February 29, 2012, the NLRC reversed and set aside the ruling of the LA. The
NLRC explained that BDO's retirement plan, which mandated a normal or
compulsory retirement date at the age of sixty (60), was effective as early as June
1, 1994. The plan was renamed Banco de Oro Multiemployer Retirement Plan on
July 1, 2004, but the compulsory retirement age of sixty (60) was preserved.
When Sagaysay was employed on May 16, 2006, the retirement plan was already
in full force and effect. Thus, the NLRC concluded that when he accepted his
employment with BDO, he assented to the provisions of the retirement plan.
The NLRC found it difficult to believe that Sagaysay started his employment with
BDO without familiarizing himself with the bank's retirement policy considering
that he had previously retired from two (2) other banks. Further, the NLRC stated
that a more concrete proof of his acceptance of BDO's retirement plan was his
execution of a quitclaim where he declared that he had no cause of action against
the bank and its agents. The dispositive portion of the NLRC decision
states:chanRoblesvirtualLawlibrary
WHEREFORE, the appeal is GRANTED. The Decision of Labor Arbiter Ma. Lourdes
R. Baricaua dated July 19, 2011 is REVERSED and SET ASIDE and a new one
entered DISMISSING the complaint.
SO ORDERED.15ChanRoblesVirtualawlibrary
Sagaysay filed a motion for reconsideration, but it was denied by the NLRC in its
Resolution, dated June 25, 2012.
Undaunted, Sagaysay filed a petition for certiorari16 before the CA contending
that it was neither stated in his employment contract nor stipulated in the
collective bargaining agreement (CBA) between BDO and its employees that the
compulsory retirement age was sixty (60) years old.
The CA Ruling
On March 31, 2014, the CA rendered the assailed decision which reversed the
NLRC ruling. The appellate court explained that while the cases of Pantranco
North Express, Inc., v. NLRC17 and Philippine Airlines v. Airline Pilots Association
of the Philippines18 affirmed that the employer may provide an earlier retirement
age, the retirement plans therein were the result of negotiations and agreement
between employer and employee. The CA continued that, in this case, the
retirement plan was not a result of a mutual agreement of employer and
employee. This was affirmed by the BDO Memorandum,19 dated June 1, 2009,
stating that the retirement plan was to be implemented in the merged bank.
Citing Cercado v. UNIPROM Inc.20 (Cercado), the CA ruled that a retirement plan
with no voluntary acquiescence on the part of the employee was ineffective.
The CA stated that Sagaysay was forced to participate in the retirement plan.
Equally, the quitclaim he executed was not given credence because his
subsequent filing of a complaint for illegal dismissal manifested that he had no
intention to relinquish his employment. Nonetheless, the CA deleted the awards
of moral and exemplary damages for lack of basis. The appellate court disposed
the case in this wise:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2012 and
the Resolution dated June 25, 2012 of the National Labor Relations Commission
are REVERSED and SET ASIDE. The July 19, 2011 Decision of the Labor Arbiter is
REINSTATED, with MODIFICATION that the awards of moral and exemplary
damages are DELETED for lack of basis.
SO ORDERED.21ChanRoblesVirtualawlibrary
BDO moved for reconsideration, but the motion was denied by the CA in the
assailed resolution, dated October 8, 2014.
Hence, this petition.
The issues presented can be summarized as follows:chanRoblesvirtualLawlibrary
I
WHETHER THE RETIREMENT PLAN IS VALID AND EFFECTIVE AND, CONSEQUENTLY,
THE MANDATORY RETIREMENT AGE OF 60 YEARS OLD IS ALSO BINDING.
II
WHETHER THE EXECUTION OF A RELEASE, WAIVER AND QUITCLAIM BY
RESPONDENT IS VALID.ChanRoblesVirtualawlibrary
BDO principally argues that the retirement plan has been valid and effective since
June 1, 1994; that having been in place for such a long period, the retirement plan
is deemed to have been written into Sagaysay's employment contract, executed
on May 16, 2006; that he even asked for an extension to become eligible to avail
of the benefits under the same retirement plan; and that the 2005-2010 CBA
stated, "[t]he Bank shall continue to grant retirement pay," showing that the CBA
likewise recognized the existing retirement plan.
BDO also contends that the CA erred in citing Cercado because in that case, the
retirement plan was executed only after the employment of petitioner therein.
Moreover, Sagaysay, as a veteran banker, fully knew the effects of the release,
waiver and quitclaim when he signed it.
In his Comment,22 Sagaysay countered that he was retired by BDO against his
will; that there was no provision in any CBA that employees who reached sixty
(60) years of age could be compulsorily retired; that there was no agreement
either between Sagaysay and BDO that he would be retired upon reaching sixty
(60); and that the quitclaim was invalid because BDO took undue advantage of
his situation and dire financial problems to obtain his signature therein.
In its Reply,23 BDO reiterated that the retirement plan was not forced upon
Sagaysay; and that at the time he was employed by BDO in 2006, he had every
opportunity to refuse employment if he disagreed with the retirement policy of
the bank.chanrobleslaw
The Court's Ruling
The Court finds the petition meritorious.
The petition essentially centers on whether the June 1, 1994 retirement plan is
valid and effective against Sagaysay. To resolve this issue, a review of the
relevant laws and jurisprudence regarding the compulsory retirement age is
warranted.
Laws and jurisprudence on early age of retirement
Retirement is the result of a bilateral act of the parties, a voluntary agreement
between the employer and the employee whereby the latter, after reaching a
certain age, agrees to sever his or her employment with the former.24 Article 287
of the Labor Code is the primary provision which governs the age of retirement
and states:chanRoblesvirtualLawlibrary
Art. 287. Retirement. xxx
In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age
of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
[Emphasis Supplied]
Doubtless, under this provision, the retirement age is primarily determined by the
existing agreement or employment contract. Only in the absence of such an
agreement shall the retirement age be fixed by law, which provides for a
compulsory retirement age at 65 years, while the minimum age for optional
retirement is set at 60 years.25cralawred
Retirement plans allowing employers to retire employees who have not yet
reached the compulsory retirement age of 65 years are not per se repugnant to
the constitutional guaranty of security of tenure. By its express language, the
Labor Code permits employers and employees to fix the applicable retirement
age at 60 years or below, provided that the employees' retirement benefits under
any CBA and other agreements shall not be less than those provided therein.26
Jurisprudence is replete with cases discussing the employer's prerogative to lower
the compulsory retirement age subject to the consent of its employees. In
Pantranco North Express, Inc. v. NLRC,27 the Court upheld the retirement of the
private respondent therein pursuant to a CBA allowing the employer to
compulsorily retire employees upon completing 25 years of service to the
company. Interpreting Article 287, the Court held that the Labor Code permits
employers and employees to fix the applicable retirement age lower than 60
years of age. The Court also stressed that "[p]roviding in a CBA for compulsory
retirement of employees after twenty-five (25) years of service is legal and
enforceable so long as the parties agree to be governed by such CBA."28
In Progressive Development Corporation v. NLRC,29 the retirement plan, which
allowed the employer to retire employees who had rendered more than 20 years
of service, was declared valid and enforceable even though it was not embodied
in a CBA. In that case, the Court concluded that the employees, who were hired
before the execution of the employer's retirement plan on April 1, 1980, were
bound by it because the retirement plan was expressly made known and
accepted by them.
In contrast, the case of Jaculbe v. Silliman University30 did not allow the
application of a lower retirement age. The petitioner in the said case was
employed sometime in 1958 while the retirement plan, which automatically
retired its members upon reaching the age of 65 or after 35 years of
uninterrupted service to the university, came into being in 1970. The said
retirement plan was not applied to the petitioner because there was no
agreement to which the latter assented.
Similarly, the case of Cercado, which was heavily relied on by the CA, involved a
non-contributory retirement plan which provided that any employee with twenty
(20) years of service, regardless of age, may be retired at his option or at the
option of the company. The said plan was adopted on April 1, 1980 while the
petitioner therein was employed earlier on December 15, 1978. When respondent
UNIPROM retired the petitioner pursuant to its retirement plan, the latter objected
stating that she did not consent to it. The Court ruled in favor of the petitioner
because there was no voluntary acquiescence to UNIPROM's early retirement age
option on her part. It elucidated that:
Acceptance by the employees of an early retirement age option must be explicit,
voluntary, free, and uncompelled. While an employer may unilaterally retire an
employee earlier than the legally permissible ages under the Labor Code, this
prerogative must be exercised pursuant to a mutually instituted early retirement
plan. In other words, only the implementation and execution of the option may be
unilateral, but not the adoption and institution of the retirement plan containing
such option. For the option to be valid, the retirement plan containing it must be
voluntarily assented to by the employees or at least by a majority of them
through a bargaining representative.31
On the other hand, in Obusan v. Philippine National Bank32 (Obusan), the
petitioner therein, who was hired by PNB in 1979, was deemed covered by its
retirement plan adopted on December 22, 2000. It mandated that the employee
should retire when he attained the age of sixty (60), regardless of his length of
service, or when he had rendered thirty (30) years of service, regardless of age,
whichever of the said conditions came first. Considering that on February 21,
2001, PNB had informed all of its officers and employees about the said
retirement plan, the said plan was then registered with the B1R and was later
recognized by the Philnabank Employees Association in its CBA. Despite the
proper dissemination of information, no one questioned the retirement plan.
Hence, the Court deemed it valid and effective as due notice of the employer's
decision to retire an employee was adequately provided.
A scrutiny of the above-discussed cases reveals that the retirement plan was
adopted after the employees were hired by their employer. This is in stark
contrast with the case at bench wherein the adoption of the retirement plan came
before the hiring of Sagaysay. Thus, the present petition portrays a unique
predicament on whether a retirement plan adopted before the employment of an
employee is deemed binding on the latter.
Sagaysay was sufficiently informed of the retirement plan
After a judicious study of records, the Court is convinced that Sagaysay was
undeniably informed and had consented to the retirement plan of BDO before his
compulsory retirement on September 1, 2010 based on the following:
First, the retirement plan was established as early as July 1, 1994. The purpose of
the plan was to create a BDO employee's retirement trust fund which would
provide for retirement and other benefits for all employees of the bank. It was
also intended to support the funding of the benefits indicated in the CBA.33 The
retirement plan provided several retirement options such as normal retirement,
early retirement, late retirement, and disability retirement. Normal or compulsory
retirement was mandated at the first day of the month following the employee's
sixtieth (60th) birthday, while early or optional retirement age was pegged at the
age of fifty (50) with at least 10 years of credited service. It also discussed the
different benefits that an employee could be entitled to upon retirement,
resignation or separation.
It was renamed on June 1, 2004, but its provision on the normal retirement age
was retained. Twelve (12) years after the adoption of the retirement plan,
Sagaysay was employed by the bank. From its inception until his hiring, no
employee had earnestly questioned the retirement plan. By then, it was
unquestionably an established policy within the BDO, applied to each and every
worker of the bank.
Second, by accepting the employment offer of BDO, Sagaysay was deemed to
have assented to all existing rules, regulations and policy of the bank, including
the retirement plan. Likewise, he consented to the CBA34 between BDO and the
National Union of Bank Employees Banco De Oro Chapter. Section 2 of Article XVII
of the CBA provides that "[t]he Bank shall continue to grant retirement/gratuity
pay xxx." Notably, both the retirement plan and the CBA recognize that the bank
has a continued and existing practice of granting the retirement pay to its
employees.
Third, on June 1, 2009, BDO issued a memorandum35 regarding the
implementation of its retirement program, reiterating that the normal retirement
date was the first day of the month following the employee's sixtieth (60th)
birthday. Similar to the case of Obusan, the memorandum was addressed to all
employees and officers. By that time, Sagaysay was already an employee and he
did not deny being informed of such memorandum.
For four years, from the time he was employed until his retirement, and having
actual knowledge of the BDO retirement plan, Sagaysay had every opportunity to
question the same, if indeed he knew it would not be beneficial to him. Yet, he did
not express his dissent. As observed in Obusan, "[t]his deafening silence
eloquently speaks of [his] lack of disagreement with its provisions."36
Lastly, perhaps the most telling detail indicative of Sagaysay's assent to the
retirement plan was his e-mails to the bank, dated July 27, 2010 and August 19,
2010. In these communications, albeit having been informed of his upcoming
retirement, Sagaysay never opposed the company's compulsory age of
retirement. In fact, he recognized that "the time has come that BDO Retirement
Program will be implemented to those reaching the age of sixty (60)."37
Glaringly, he even requested that his services be extended, at least until May 16,
2011, so that he could render five (5) years of service.38 Sagaysay's request
reflects the late retirement option where an employee may be allowed by the
bank to continue to work on a yearly extension basis beyond his normal
retirement date.39 The late retirement option is embodied in the same retirement
plan, of which, ironically, he claimed to be unaware. With such inconsistent
stance, the Court can only conclude that Sagaysay was indeed notified and had
accepted the provisions of the retirement plan. It was only when his request for
late retirement was denied that he suddenly became oblivious to the said plan.
The case of Cercado is not applicable
The case of Cercado is not applicable in the present case as it has a different
factual milieu. First, in Cercado, the petitioner was employed on December 15,
1978, which was almost two (2) years before the adoption of the employer's
retirement plan on April 1, 1980. The Court explained that, logically, her
employment contract did not include the retirement plan, much less the early
retirement age option contained therein.
In the case at bench, Sagaysay was employed on May 16, 2006, which was
almost twelve (12) years after the adoption of retirement plan on July 1, 1994.
Accordingly, from the moment that Sagaysay accepted his employment, he was
deemed to have consented to all existing company rules and regulations,
including the policy on the early age retirement.
Second, in Cercado, the retirement plan was implemented when the petitioner
therein was already employed. The Court held that because of the automatic
application of the retirement plan to the current employees without their
voluntary conformity, "[p]etitioner was forced to participate in the plan, and the
only way she could have rejected the same was to resign or lose her job."
Necessarily, it undermined the petitioner's security of tenure.
The ruling in Cercado cannot be applied to this case as Sagaysay was not yet
employed when the retirement plan was adopted. When he was offered
employment by the bank in 2006, the established retirement plan was not forced
upon him. Sagaysay had the free will whether to undertake the employment and
accept the bank's corresponding policies or look for a job elsewhere. Corollarily,
no security of tenure had yet attached at that specific moment.
In other words, the evil sought to be prevented in Cercardo does not exist in the
present case as Sagaysay was given the opportunity to accept or reject the lower
retirement age policy.
Third, the petitioner in Cercado refused the early retirement package in the
amount of P171,982.90 from her employer. From the very beginning, she was
adamant that she did not consent to the retirement plan of her employer.
The opposite cam be observed in the present case. It has been uncontroverted
that Sagaysay earlier acknowledged the retirement program of BDO and even
requested for an extension of service. Moreover, he signed a quitclaim for and in
consideration of P98,376.14 which discharged the bank, its affiliates and its
subsidiaries from any action, suit, claim or demand in connection with his
employment.
Generally, a quitclaim is frowned upon. As an exception, a quitclaim, with clear
and unambiguous contents and executed for a valid consideration received in full
by the employee who signed the same, cannot be later invalidated because its
signatory claims that he was pressured into signing it on account of his dire
financial need. When it is shown that the person executing the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration
for the quitclaim was credible and reasonable, the transaction must be recognized
as a valid and binding undertaking.40
Here, the Court is of the view that the quitclaim was validly executed. For the
consideration of the quitclaim, Sagaysay received the amount of P98,376.14. As
admitted by him, the amount was based on a liquidation data sheet which
showed the computation of benefits and emoluments of a rank and file
employee.41 Understandably, the amount given would not reflect the retirement
benefits he demanded because he did not qualify under the retirement plan of
BDO for he had not completed five (5) years of service upon his compulsory
retirement. Thus, the consideration provided in the quitclaim was justified and
reasonable.
Further, it has been duly proven that Sagaysay was a seasoned banker, spending
thirty-four (34) years of his career in different banking establishments. He was
learned in his profession and even experienced separation from his previous
employments. Consequently, it cannot be said that he was naive in dealing with
his employer and that he failed to exercise his free and voluntary will when faced
with the documents relating to his retirement. Not an iota of evidence showed
that BDO exerted undue influence against him to acquire his consent. In fine,
absent any doubt to the contrary, his quitclaim must stand.
Extension of service
Finally, on Sagaysay's request to extend his length of service despite the
compulsory retirement age of sixty (60) which was denied by BDO and eventually
sparked the present controversy, the Court holds that BDO had the management
prerogative to deny the extension of service. It is important to state that upon the
compulsory retirement of an employee or official in the public or private service
his employment is deemed terminated. The matter of extension of service of such
employee or official is addressed to the sound discretion of the employer. It is a
privilege only the employer can grant.42
Although the Court has, more often than not, been inclined towards the plight of
the workers and has upheld their cause in their conflicts with the employers, such
inclination has not blinded it to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and applicable law
and doctrine.43
WHEREFORE, the petition is GRANTED. The March 31, 2014 Decision and the
October 8, 2014 Resolution of the Court of Appeals in CA-G.R. SP No. 126586 are
REVERSED and SET ASIDE, and the February 29, 2012 Decision and the June 25,
2012 Resolution of the National Labor Relations Commission in NLRC LAC No. 08-
002069-11 are REINSTATED.
SO ORDERED.ch