G.R. No.

119205 April 15, 1998 Lunch break will be between:

SIME DARBY PILIPINAS, INC. petitioner, 12:00 NN 1:00 P.M. (Monday to Friday).
vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME Excluded from the above schedule are the Warehouse and QA
DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP), respondents. employees who are on shifting. Their work and break time schedules will
be maintained as it is now. 1

BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding their paid
lunch break constitutive of unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of
automotive tires, tubes and other rubber products. Sime Darby Salaried
Employees Association (ALU-TUCP), private respondent, is an association of
monthly salaried employees of petitioner at its Marikina factory. Prior to the
present controversy, all company factory workers in Marikina including members
of private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute
paid "on call" lunch break.
Since private respondent felt affected adversely by the change in the work
schedule and discontinuance of the 30-minute paid "on call" lunch break, it
filed on behalf of its members a complaint with the Labor Arbiter for unfair
labor practice, discrimination and evasion of liability pursuant to the
resolution of this Court in Sime Darby International Tire
Co., Inc. v.NLRC. 2 However, the Labor Arbiter dismissed the complaint on
the ground that the change in the work schedule and the elimination of the
30-minute paid lunch break of the factory workers constituted a valid exercise
of management prerogative and that the new work schedule, break time and
one-hour lunch break did not have the effect of diminishing the benefits
granted to factory workers as the working time did not exceed eight (8)
hours.

On 14 August 1992 petitioner issued a memorandum to all factory-based
employees advising all its monthly salaried employees in its Marikina Tire Plant,
except those in the Warehouse and Quality Assurance Department working on
shifts, a change in work schedule effective 14 September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule
of the factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 A.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
The Labor Arbiter further held that the factory workers would be unjustly enriched
if they continued to be paid during their lunch break even if they were no longer
"on call" or required to work during the break. He also ruled that the decision in
the earlier Sime Darby case 3 was not applicable to the instant case because
the former involved discrimination of certain employees who were not paid
for their 30-minute lunch break while the rest of the factory workers were
paid; hence, this Court ordered that the discriminated employees be similarly
paid the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor Relations
Commission (NLRC) which sustained the Labor Arbiter and dismissed the
appeal. 4 However, upon motion for reconsideration by private respondent, the
NLRC, this time with two (2) new commissioners replacing those who earlier
retired, reversed its earlier decision of 20 April 1994 as well as the decision of
the Labor Arbiter. 5 The NLRC considered the decision of this Court in the
Sime Darby case of 1990 as the law of the case wherein petitioner was
ordered to pay "the money value of these covered employees deprived of
lunch and/or working time breaks." The public respondent declared that the
new work schedule deprived the employees of the benefits of a time-honored
company practice of providing its employees a 30-minute paid lunch break
resulting in an unjust diminution of company privileges prohibited by Art. 100
of the Labor Code, as amended. Hence, this petition alleging that public
respondent committed grave abuse of discretion amounting to lack or excess
of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in
the implementation of the change in the work schedule of its employees from
7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch break
from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of
benefits when the 30-minute paid lunch break was eliminated; (c) in failing to
consider that in the earlier Sime Darby case affirming the decision of the
NLRC, petitioner was authorized to discontinue the practice of having a 30-
minute paid lunch break should it decide to do so; and, (d) in ignoring
petitioner's inherent management prerogative of determining and fixing the
work schedule of its employees which is expressly recognized in the
collective bargaining agreement between petitioner and private respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and
motion recommending that the petitioner be granted, alleging that the 14 August
1992 memorandum which contained the new work schedule was not
discriminatory of the union members nor did it constitute unfair labor practice on
the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the
employees rests principally on their employer. In the instant case petitioner, as
the employer, cites as reason for the adjustment the efficient conduct of its
business operations and its improved production. 6 It rationalizes that while the
old work schedule included a 30-minute paid lunch break, the employees
could be called upon to do jobs during that period as they were "on call."
Even if denominated as lunch break, this period could very well be
considered as working time because the factory employees were required to
work if necessary and were paid accordingly for working. With the new work
schedule, the employees are now given a one-hour lunch break without any
interruption from their employer. For a full one-hour undisturbed lunch break,
the employees can freely and effectively use this hour not only for eating but
also for their rest and comfort which are conducive to more efficiency and
better performance in their work. Since the employees are no longer required
to work during this one-hour lunch break, there is no more need for them to
be compensated for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of eight (8) hours
without violating the Labor Code. 7 Besides, the new schedule applies to all
employees in the factory similarly situated whether they are union members
or not. 8
Consequently, it was grave abuse of discretion for public respondent to
equate the earlier Sime Darby case 9 with the facts obtaining in this case.
That ruling in the former case is not applicable here. The issue in that case
involved the matter of granting lunch breaks to certain employees while
depriving the other employees of such breaks. This Court affirmed in that
case the NLRC's finding that such act of management was discriminatory
and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination
of employees but only the issue of whether the change of work schedule, which
management deems necessary to increase production, constitutes unfair labor
practice. As shown by the records, the change effected by management with
regard to working time is made to apply to all factory employees engaged in the
same line of work whether or not they are members of private respondent union.
Hence, it cannot be said that the new scheme adopted by management
prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may
devise means to attain that goal. Even as the law is solicitous of the welfare of
the employees, it must also protect the right of an employer to exercise what are
clearly management prerogatives. 10 Thus, management is free to regulate,
according to its own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, time, place and
manner of work, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay off of workers and
discipline, dismissal and recall of workers. 11 Further, management retains the
prerogative, whenever exigencies of the service so require, to change the
working hours of its employees. So long as such prerogative is exercised in
good faith for the advancement of the employer's interest and not for the
purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold such
exercise.12
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every dispute
will be automatically decided in favor of labor. Management also has rights
which, as such, are entitled to respect and enforcement in the interest of
simple fair play. Although this Court has inclined more often than not toward
the worker and has upheld his cause in his conflicts with the employer, such
favoritism has not blinded the Court to the rule that justice is in every case for
the deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine. 13
WHEREFORE, the Petition is GRANTED. The Resolution of the National
Labor Relations Commission dated 29 November 1994 is SET ASIDE and
the decision of the Labor Arbiter dated 26 November 1993 dismissing the
complaint against petitioner for unfair labor practice is AFFIRMED.
SO ORDERED.
G.R. No. L-15422 November 30, 1962
NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and NATIONAL TEXTILE WORKERS
UNION, respondents.
Government Corporate Counsel Simeon M. Gopengco and Lorenzo R.
Mosqueda for petitioner.
Eulogio R. Lerum for respondent National Textile Workers Union.
Mariano B. Tuason for respondent Court of Industrial Relations.
REGALA, J.:
This is a case for review from the Court of Industrial Relations. The pertinent
facts are the following:
At the National Development Co., a government-owned and controlled
corporation, there were four shifts of work. One shift was from 8 a.m. to 4 p.m.,
while the three other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10 p.m.
and, finally, from 10 p.m. to 6 a.m. In each shift, there was a one-hour mealtime
period, to wit: From (1) 11 a.m. to 12 noon for those working between 6 a.m. and
2 p.m. and from (2) 7 p.m. to 8 p.m. for those working between 2 p.m. and 10
p.m.
The records disclose that although there was a one-hour mealtime, petitioner
nevertheless credited the workers with eight hours of work for each shift and paid
them for the same number of hours. However, since 1953, whenever workers in
one shift were required to continue working until the next shift, petitioner instead
of crediting them with eight hours of overtime work, has been paying them for six
hours only, petitioner that the two hours corresponding to the mealtime periods
should not be included in computing compensation. On the other hand,
respondent National Textile Workers Union whose members are employed at the
NDC, maintained the opposite view and asked the Court of Industrial Relations to
order the payment of additional overtime pay corresponding to the mealtime
periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March
19, 1959, holding that mealtime should be counted in the determination of
overtime work and accordingly ordered petitioner to pay P101,407.96 by way of
overtime compensation. Petitioner filed a motion for reconsideration but the same
was dismissed by the CIR en banc on the ground that petitioner failed to furnish
the union a copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first, that the CIR has
no jurisdiction over claims for overtime compensation and, secondary that the
CIR did not make "a correct appraisal of the facts, in the light of the evidence" in
holding that mealtime periods should be included in overtime work because
workers could not leave their places of work and rest completely during those
hours.
In support of its contention that the CIR lost its jurisdiction over claims for
overtime pay upon the enactment of the Industrial Peace Act (Republic Act No.
875), petitioner cites a number of decisions of this Court. On May 23, 1960,
however, We ruled in Price Stabilization Corp. v. Court of Industrial Relations, et
al., G.R. No. L-13206, that
Analyzing these cases, the underlying principle, it will be noted in all of them,
though not stated in express terms, is that where the employer-employee
relationship is still existing or is sought to be reestablished because of its
wrongful severance, (as where the employee seeks reinstatement) the Court of
Industrial Relations has jurisdiction over all claims arising out of, or in connection
with the employment, such as those related to the Minimum Wage Law and the
Eight-Hour Labor Law. After the termination of their relationship and no
reinstatement is sought, such claims become mere money claims, and come
within the jurisdiction of the regular courts,
We are aware that in 2 cases, some statements implying a different view have
been made, but we now hold and declare the principle set forth in the next
preceding paragraph as the one governing all cases of this nature.
This has been the constant doctrine of this Court since May 23, 1960. 1
A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v.
Manila Railroad Co., et al., G.R. No. L-17905, May 25, 1962, in which We held
that, for such jurisdiction to come into play, the following requisites must be
complied with: (a) there must exist between the parties an employer-employee
relationship or the claimant must seek his reinstatement; and (b) the controversy
must relate to a case certified by the President to the CIR as one involving
national interest, or must arise either under the Eight-Hour Labor Law, or under
the Minimum Wage Law. In default of any of these circumstances, the claim
becomes a mere money claim that comes under the jurisdiction of the regular
courts. Here, petitioner does not deny the existence of an employer-employee
relationship between it and the members of the union. Neither is there any
question that the claim is based on the Eight-Hour Labor Law (Com. Act No. 444,
as amended). We therefore rule in favor of the jurisdiction of the CIR over the
present claim.
The other issue raised in the appeal is whether or not, on the basis of the
evidence, the mealtime breaks should be considered working time under the
following provision of the law;
The legal working day for any person employed by another shall be of not more
than eight hours daily.When the work is not continuous, the time during which the
laborer is not working and can leave his working place and can rest completely
shall not be counted. (Sec. 1, Com. Act No. 444, as amended. Emphasis ours.)
It will be noted that, under the law, the idle time that an employee may spend for
resting and during which he may leave the spot or place of work though not the
premises2 of his employer, is not counted as working time only where the work is
broken or is not continuous.
The determination as to whether work is continuous or not is mainly one of fact
which We shall not review as long as the same is supported by evidence. (Sec.
15, Com. Act No. 103, as amended, Philippine Newspaper Guild v. Evening
News, Inc., 86 Phil. 303).
That is why We brushed aside petitioner's contention in one case that workers
who worked under a 6 a.m. to 6 p.m. schedule had enough "free time" and
therefore should not be credited with four hours of overtime and held that the
finding of the CIR "that claimants herein rendered services to the Company from
6:00 a.m. to 6:00 p.m. including Sundays and holidays, . . . implies either that
they were not allowed to leave the spot of their working place, or that they could
not rest completely" (Luzon Stevedoring Co., Inc. v. Luzon Marine Department
Union, et al., G.R. No. L-9265, April 29, 1957).
Indeed, it has been said that no general rule can be laid down is to what
constitutes compensable work, rather the question is one of fact depending upon
particular circumstances, to be determined by the controverted in cases. (31 Am.
Jurisdiction Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner company was continuous
and did not permit employees and laborers to rest completely is not without basis
in evidence and following our earlier rulings, shall not disturb the same. Thus, the
CIR found:
While it may be correct to say that it is well-high impossible for an employee to
work while he is eating, yet under Section 1 of Com. Act No. 444 such a time for
eating can be segregated or deducted from his work, if the same is continuous
and the employee can leave his working place rest completely. The time cards
show that the work was continuous and without interruption. There is also the
evidence adduced by the petitioner that the pertinent employees can freely leave
their working place nor rest completely. There is furthermore the aspect that
during the period covered the computation the work was on a 24-hour basis and
previously stated divided into shifts.
From these facts, the CIR correctly concluded that work in petitioner company
was continuous and therefore the mealtime breaks should be counted as working
time for purposes of overtime compensation.
Petitioner gives an eight-hour credit to its employees who work a single shift say
from 6 a.m. to 2 p.m. Why cannot it credit them sixteen hours should they work in
two shifts?
There is another reason why this appeal should dismissed and that is that there
is no decision by the CIR en bancfrom which petitioner can appeal to this Court.
As already indicated above, the records show that petitioner's motion for
reconsideration of the order of March 19, 1959 was dismissed by the CIR en
banc because of petitioner's failure to serve a copy of the same on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act
No. 103, states:
The movant shall file the motion (for reconsideration), in six copies within five (5)
days from the date on which he receives notice of the order or decision, object of
the motion for reconsideration, the same to be verified under oath with respect to
the correctness of the allegations of fact, and serving a copy thereof personally
or by registered mail, on the adverse party. The latter may file an answer, in six
(6) copies, duly verified under oath. (Emphasis ours.)
In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955),
We sustained the dismissal of a motion for reconsideration filed outside of the
period provided in the rules of the CIR. A motion for reconsideration, a copy of
which has not been served on the adverse party as required by the rules, stands
on the same footing. For "in the very nature of things, a motion for
reconsideration against a ruling or decision by one Judge is in effect an appeal to
the Court of Industrial Relations, en banc," the purpose being "to substitute the
decision or order of a collegiate court for the ruling or decision of any judge." The
provision in Commonwealth Act No. 103 authorizing the presentation of a motion
for reconsideration of a decision or order of the judge to the CIR, en banc and not
direct appeal therefore to this Court, is also in accord with the principal of
exhaustion of administrative remedies before resort can be made to this Court.
(Broce, et al., v. The Court of Industrial Relations, et al., G.R. No. L-12367,
October 29, 1959).
Petitioner's motion for reconsideration having been dismissed for its failure to
serve a copy of the same on the union, there is no decision of the CIR en
banc that petitioner can bring to this Court for review.
WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959
are hereby affirmed and the appeal is dismissed, without pronouncement as to
costs.
Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes,
Dizon and Makalintal concur.
Bengzon, C.J., took no part.
G.R. No. 164772 June 8, 2006
EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI
BANK), petitioner,
vs.
RICARDO SADAC, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition
to the Court En Banc filed by Equitable Banking Corporation (now known as
Equitable-PCI Bank), seeking to reverse the Decision 1 and Resolution2 of the
Court of Appeals, dated 6 April 2004 and 28 July 2004, respectively, as amended
by the Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No. 75013,
which reversed and set aside the Resolutions of the National Labor Relations
Commission (NLRC), dated 28 March 2001 and 24 September 2002 in NLRC-
NCR Case No. 00-11-05252-89.
The Antecedents
As culled from the records, respondent Sadac was appointed Vice President of
the Legal Department of petitioner Bank effective 1 August 1981, and
subsequently General Counsel thereof on 8 December 1981. On 26 June 1989,
nine lawyers of petitioner Banks Legal Department, in a letter-petition to the
Chairman of the Board of Directors, accused respondent Sadac of abusive
conduct, inter alia, and ultimately, petitioned for a change in leadership of the
department. On the ground of lack of confidence in respondent Sadac, under the
rules of client and lawyer relationship, petitioner Bank instructed respondent
Sadac to deliver all materials in his custody in all cases in which the latter was
appearing as its counsel of record. In reaction thereto, respondent Sadac
requested for a full hearing and formal investigation but the same remained
unheeded. On 9 November 1989, respondent Sadac filed a complaint for illegal
dismissal with damages against petitioner Bank and individual members of the
Board of Directors thereof. After learning of the filing of the complaint, petitioner
Bank terminated the services of respondent Sadac. Finally, on 10 August 1989,
respondent Sadac was removed from his office and ordered disentitled to any
compensation and other benefits.4
In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr.,
dismissed the complaint for lack of merit. On appeal, the NLRC in its
Resolution6 of 24 September 1991 reversed the Labor Arbiter and declared
respondent Sadacs dismissal as illegal. The decretal portion thereof reads, thus:
WHEREFORE, in view of all the foregoing considerations, let the Decision of
October 2, 1990 be, as it is hereby, SET ASIDE, and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently ordering
the respondents jointly and severally to reinstate him to his former position as
bank Vice-President and General Counsel without loss of seniority rights and
other privileges, and to pay him full backwages and other benefits from the time
his compensation was withheld to his actual reinstatement, as well as moral
damages of P100,000.00, exemplary damages of P50,000.00, and attorneys
fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents
are ordered likewise jointly and severally to grant separation pay at one (1)
month per year of service in the total sum of P293,650.00 with backwages and
other benefits from November 16, 1989 to September 15, 1991 (cut off date,
subject to adjustment) computed at P1,055,740.48, plus damages of
P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorneys
fees equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.7
Petitioner Bank came to us for the first time via a Special Civil Action for
Certiorari assailing the NLRC Resolution of 24 September 1991 in Equitable
Banking Corporation v. National Labor Relations Commission, docketed as G.R.
No. 102467.8
In our Decision9 of 13 June 1997, we held respondent Sadacs dismissal illegal.
We said that the existence of the employer-employee relationship between
petitioner Bank and respondent Sadac had been duly established bringing the
case within the coverage of the Labor Code, hence, we did not permit petitioner
Bank to rely on Sec. 26, Rule 138 10 of the Rules of Court, claiming that the
association between the parties was one of a client-lawyer relationship, and,
thus, it could terminate at any time the services of respondent Sadac. Moreover,
we did not find that respondent Sadacs dismissal was grounded on any of the
causes stated in Article 282 of the Labor Code. We similarly found that petitioner
Bank disregarded the procedural requirements in terminating respondent
Sadacs employment as so required by Section 2 and Section 5, Rule XIV, Book
V of the Implementing Rules of the Labor Code. We decreed:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with
the following MODIFICATIONS: That private respondent shall be entitled to
backwages from termination of employment until turning sixty (60) years of age
(in 1995) and, thereupon, to retirement benefits in accordance with law; that
private respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are deleted; and that the liability herein
pronounced shall be due from petitioner bank alone, the other petitioners being
absolved from solidary liability. No costs.11
On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became
final and executory.12
Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for
Execution13 thereof. Likewise, petitioner Bank filed a Manifestation and
Motion14 praying that the award in favor of respondent Sadac be computed and
that after payment is made, petitioner Bank be ordered forever released from
liability under said judgment.
Per respondent Sadacs computation, the total amount of the monetary award is
P6,030,456.59, representing his backwages and other benefits, including the
general increases which he should have earned during the period of his illegal
termination. Respondent Sadac theorized that he started with a monthly
compensation of P12,500.00 in August 1981, when he was appointed as Vice
President of petitioner Banks Legal Department and later as its General Counsel
in December 1981. As of November 1989, when he was dismissed illegally, his
monthly compensation amounted to P29,365.00 or more than twice his original
compensation. The difference, he posited, can be attributed to the annual salary
increases which he received equivalent to 15 percent (15%) of his monthly
salary.
Respondent Sadac anchored his claim on Article 279 of the Labor Code of the
Philippines, and cited as authority the cases of East Asiatic Company, Ltd. v.
Court of Industrial Relations,15 St. Louis College of Tuguegarao v. National Labor
Relations Commission,16 and Sigma Personnel Services v. National Labor
Relations Commission.17 According to respondent Sadac, the catena of cases
uniformly holds that it is the obligation of the employer to pay an illegally
dismissed employee the whole amount of the salaries or wages, plus all other
benefits and bonuses and general increases to which he would have been
normally entitled had he not been dismissed; and therefore, salary increases
should be deemed a component in the computation of backwages. Moreover,
respondent Sadac contended that his check-up benefit, clothing allowance, and
cash conversion of vacation leaves must be included in the computation of his
backwages.
Petitioner Bank disputed respondent Sadacs computation. Per its computation,
the amount of monetary award due respondent Sadac is P2,981,442.98 only, to
the exclusion of the latters general salary increases and other claimed benefits
which, it maintained, were unsubstantiated. The jurisprudential precedent relied
upon by petitioner Bank in assailing respondent Sadacs computation is
Evangelista v. National Labor Relations Commission, 18 citing Paramount Vinyl
Products Corp. v. National Labor Relations Commission, 19 holding that an
unqualified award of backwages means that the employee is paid at the wage
rate at the time of his dismissal. Furthermore, petitioner Bank argued before the
Labor Arbiter that the award of salary differentials is not allowed, the established
rule being that upon reinstatement, illegally dismissed employees are to be paid
their backwages without deduction and qualification as to any wage increases or
other benefits that may have been received by their co-workers who were not
dismissed or did not go on strike.
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an
Order20 adopting respondent Sadacs computation. In the main, the Labor Arbiter
relying on Millares v. National Labor Relations Commission 21concluded that
respondent Sadac is entitled to the general increases as a component in the
computation of his backwages. Accordingly, he awarded respondent Sadac the
amount of P6,030,456.59 representing his backwages inclusive of allowances
and other claimed benefits, namely check-up benefit, clothing allowance, and
cash conversion of vacation leave plus 12 percent (12%) interest per annum
equivalent to P1,367,590.89 as of 30 June 1999, or a total of P7,398,047.48.
However, considering that respondent Sadac had already received the amount of
P1,055,740.48 by virtue of a Writ of Execution 22 earlier issued on 18 January
1999, the Labor Arbiter directed petitioner Bank to pay respondent Sadac the
amount of P6,342,307.00. The Labor Arbiter also granted an award of attorneys
fees equivalent to ten percent (10%) of all monetary awards, and imposed a 12
percent (12%) interest per annum reckoned from the finality of the judgment until
the satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution
be issued commanding the Sheriff, this Branch, to collect from respondent Bank
the amount of Ph6,342,307.00 representing the backwages with 12% interest per
annum due complainant.23
Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor
Arbiter in a Resolution,24promulgated on 28 March 2001. It ratiocinated that the
doctrine on general increases as component in computing backwages in Sigma
Personnel Services and St. Louis was merely obiter dictum. The NLRC found
East Asiatic Co., Ltd. inapplicable on the ground that the original circumstances
therein are not only peculiar to the said case but also completely strange to the
case of respondent Sadac. Further, the NLRC disallowed respondent Sadacs
claim to check-up benefit ratiocinating that there was no clear and substantial
proof that the same was being granted and enjoyed by other employees of
petitioner Bank. The award of attorneys fees was similarly deleted.
The dispositive portion of the Resolution states:
WHEREFORE, the instant appeal is considered meritorious and accordingly, the
computation prepared by respondent Equitable Banking Corporation on the
award of backwages in favor of complainant Ricardo Sadac under the decision
promulgated by the Supreme Court on June 13, 1997 in G.R. No. 102476 in the
aggregate amount of P2,981,442.98 is hereby ordered.25
Respondent Sadacs Motion for Reconsideration thereon was denied by the
NLRC in its Resolution,26promulgated on 24 September 2002.
Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for
Certiorari seeking nullification of the twin resolutions of the NLRC, dated 28
March 2001 and 24 September 2002, as well as praying for the reinstatement of
the 2 August 1999 Order of the Labor Arbiter.
For the resolution of the Court of Appeals were the following issues, viz.:
(1) Whether periodic general increases in basic salary, check-up
benefit, clothing allowance, and cash conversion of vacation leave are
included in the computation of full backwages for illegally dismissed
employees;
(2) Whether respondent is entitled to attorneys fees; and
(3) Whether respondent is entitled to twelve percent (12%) per
annum as interest on all accounts outstanding until full payment thereof.
Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered
a Decision on 6 April 2004, the dispositive portion of which is quoted hereunder:
WHEREFORE, premises considered, the March 28, 2001 and the September 24,
2002 Resolutions of the National Labor Relations Commissions (sic) are
REVERSED and SET ASIDE and the August 2, 1999 Order of the Labor Arbiter
is REVIVED to the effect that private respondent is DIRECTED TO PAY petitioner
the sum of PhP6,342,307.00, representing full back wages (sic) which sum
includes annual general increases in basic salary, check-up benefit, clothing
allowance, cash conversion of vacation leave and other sundry benefits plus 12%
per annum interest on outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.27
The Court of Appeals, citing East Asiatic held that respondent Sadacs general
increases should be added as part of his backwages. According to the appellate
court, respondent Sadacs entitlement to the annual general increases has been
duly proven by substantial evidence that the latter, in fact, enjoyed an annual
increase of more or less 15 percent (15%). Respondent Sadacs check-up
benefit, clothing allowance, and cash conversion of vacation leave were similarly
ordered added in the computation of respondent Sadacs basic wage.
Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It
ruled that our Decision28 of 13 June 1997 did not award attorneys fees in
respondent Sadacs favor as there was nothing in the aforesaid Decision, either
in the dispositive portion or the body thereof that supported the grant of
attorneys fees. Resolving the final issue, the Court of Appeals imposed a 12
percent (12%) interest per annum on the total monetary award to be computed
from 28 July 1997 or the date our judgment in G.R. No. 102467 became final and
executory until fully paid at which time the quantification of the amount may be
deemed to have been reasonably ascertained.
On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration 29 of
the 6 April 2004 Court of Appeals Decision insofar as the appellate court did not
award him attorneys fees. Similarly, petitioner Bank filed a Motion for Partial
Reconsideration thereon. Following an exchange of pleadings between the
parties, the Court of Appeals rendered a Resolution, 30 dated 28 July 2004,
denying petitioner Banks Motion for Partial Reconsideration for lack of merit.
Assignment of Errors
Hence, the instant Petition for Review by petitioner Bank on the following
assignment of errors, to wit:
(a) The Hon. Court of Appeals erred in ruling that general salary
increases should be included in the computation of full backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable
authorities in this case are: (i) East Asiatic, Ltd. v. CIR, 40 SCRA 521
(1971); (ii) St. Louis College of Tuguegarao v. NLRC, 177 SCRA 151
(1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993);
and (iv) Millares v. NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of
the Labor Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525
(1990); (iii) Evangelista v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo
v. NLRC, 255 SCRA 430 (1996).
(c) The Hon. Court of Appeals erred in ruling that respondent is
entitled to check-up benefit, clothing allowance and cash conversion of
vacation leaves notwithstanding that respondent did not present any
evidence to prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is
entitled to be paid legal interest even if the principal amount due him has
not yet been correctly and finally determined.31
Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental
Decision granting respondent Sadacs Partial Motion for Reconsideration and
amending the dispositive portion of the 6 April 2004 Decision in this wise, viz.:
WHEREFORE, premises considered, the March 24 (sic), 2001 and the
September 24, 2002 Resolutions of the National Labor Relations Commission
are hereby REVERSED and SET ASIDE and the August 2, 1999 Order of the
Labor Arbiter is hereby REVIVED to the effect that private respondent is hereby
DIRECTED TO PAY petitioner the sum of P6,342,307.00, representing full
backwages which sum includes annual general increases in basic salary, check-
up benefit, clothing allowance, cash conversion of vacation leave and other
sundry benefits "and attorneys fees equal to TEN PERCENT (10%) of all the
monetary award" plus 12% per annum interest on all outstanding balance from
July 28, 1997 until full payment.
Costs against private respondent.32
On 22 November 2004, petitioner Bank filed a Supplement to Petition for
Review33 contending in the main that the Court of Appeals erred in issuing the
Supplemental Decision by directing petitioner Bank to pay an additional amount
to respondent Sadac representing attorneys fees equal to ten percent (10%) of
all the monetary award.
The Courts Ruling
I.
We are called to write finis to a controversy that comes to us for the second time.
At the core of the instant case are the divergent contentions of the parties on the
manner of computation of backwages.
Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines
does not contemplate the inclusion of salary increases in the definition of "full
backwages." It controverts the reliance by the appellate court on the cases of (i)
East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. While it is in
accord with the pronouncement of the Court of Appeals that Republic Act No.
6715, in amending Article 279, intends to give more benefits to workers,
petitioner Bank submits that the Court of Appeals was in error in relying on East
Asiatic to support its finding that salary increases should be included in the
computation of backwages as nowhere in Article 279, as amended, are salary
increases spoken of. The prevailing rule in the milieu of the East Asiatic doctrine
was to deduct earnings earned elsewhere from the amount of backwages
payable to an illegally dismissed employee.
Petitioner Bank posits that even granting that East Asiatic allowed general salary
increases in the computation of backwages, it was because the inclusion was
purposely to cushion the blow of the deduction of earnings derived elsewhere;
with the amendment of Article 279 and the consequent elimination of the rule on
the deduction of earnings derived elsewhere, the rationale for including salary
increases in the computation of backwages no longer exists. On the references
of salary increases in the aforementioned cases of (i) St. Louis; (ii) Sigma
Personnel; and (iii) Millares, petitioner Bank contends that the same were merely
obiter dicta. In fine, petitioner Bank anchors its claim on the cases of (i)
Paramount Vinyl Products Corp. v. National Labor Relations Commission; 34 (ii)
Evangelista v. National Labor Relations Commission; 35 and (iii) Espejo v. National
Labor Relations Commission,36 which ruled that an unqualified award of
backwages is exclusive of general salary increases and the employee is paid at
the wage rate at the time of the dismissal.
For his part, respondent Sadac submits that the Court of Appeals was correct
when it ruled that his backwages should include the general increases on the
basis of the following cases, to wit: (i) East Asiatic; (ii) St. Louis; (iii) Sigma
Personnel; and (iv) Millares.
Resolving the protracted litigation between the parties necessitates us to revisit
our pronouncements on the interpretation of the term backwages. We said that
backwages in general are granted on grounds of equity for earnings which a
worker or employee has lost due to his illegal dismissal. 37 It is not private
compensation or damages but is awarded in furtherance and effectuation of the
public objective of the Labor Code. Nor is it a redress of a private right but rather
in the nature of a command to the employer to make public reparation for
dismissing an employee either due to the formers unlawful act or bad faith. 38 The
Court, in the landmark case of Bustamante v. National Labor Relations
Commission,39 had the occasion to explicate on the meaning of full backwages as
contemplated by Article 27940 of the Labor Code of the Philippines, as amended
by Section 34 of Rep. Act No. 6715. The Court in Bustamante said, thus:
The Court deems it appropriate, however, to reconsider such earlier ruling on the
computation of backwages as enunciated in said Pines City Educational Center
case, by now holding that conformably with the evident legislative intent as
expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an
illegally dismissed employee, should not, as a general rule, be diminished or
reduced by the earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while
litigating the legality (illegality) of his dismissal, must still earn a living to support
himself and family, while full backwages have to be paid by the employer as part
of the price or penalty he has to pay for illegally dismissing his employee. The
clear legislative intent of the amendment in Rep. Act No. 6715 is to give more
benefits to workers than was previously given them under the Mercury Drug rule
or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to the
legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning
exactly that, i.e., without deducting from backwages the earnings derived
elsewhere by the concerned employee during the period of his illegal dismissal.
In other words, the provision calling for "full backwages" to illegally dismissed
employees is clear, plain and free from ambiguity and, therefore, must be applied
without attempted or strained interpretation. Index animi sermo est.41
Verily, jurisprudence has shown that the definition of full backwages has
forcefully evolved. In Mercury Drug Co., Inc. v. Court of Industrial Relations, 42 the
rule was that backwages were granted for a period of three years without
qualification and without deduction, meaning, the award of backwages was not
reduced by earnings actually earned by the dismissed employee during the
interim period of the separation. This came to be known as the Mercury Drug
rule.43 Prior to the Mercury Drug ruling in 1974, the total amount of backwages
was reduced by earnings obtained by the employee elsewhere from the time of
the dismissal to his reinstatement. The Mercury Drug rule was subsequently
modified in Ferrer v. National Labor Relations Commission 44 and Pines City
Educational Center v. National Labor Relations Commission, 45 where we allowed
the recovery of backwages for the duration of the illegal dismissal minus the total
amount of earnings which the employee derived elsewhere from the date of
dismissal up to the date of reinstatement, if any. In Ferrer and in Pines, the three-
year period was deleted, and instead, the dismissed employee was paid
backwages for the entire period that he was without work subject to the
deductions, as mentioned. Finally came our ruling in Bustamante which
superseded Pines City Educational Center and allowed full recovery of
backwages without deduction and without qualification pursuant to the express
provisions of Article 279 of the Labor Code, as amended by Rep. Act No. 6715,
i.e., without any deduction of income the employee may have derived from
employment elsewhere from the date of his dismissal up to his reinstatement,
that is, covering the entirety of the period of the dismissal.
The first issue for our resolution involves another aspect in the computation of full
backwages, mainly, the basis of the computation thereof. Otherwise stated,
whether general salary increases should be included in the base figure to be
used in the computation of backwages.
In so concluding that general salary increases should be made a component in
the computation of backwages, the Court of Appeals ratiocinated, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40
SCRA 521 (1971) that "general increases" should be added as a part of full
backwages, to wit:
In other words, the just and equitable rule regarding the point under discussion is
this: It is the obligation of the employer to pay an illegally dismissed employee or
worker the whole amount of the salaries or wages, plus all other benefits and
bonuses and general increases, to which he would have been normally entitled
had he not been dismissed and had not stopped working, but it is the right, on
the other hand of the employer to deduct from the total of these, the amount
equivalent to the salaries or wages the employee or worker would have earned in
his old employment on the corresponding days he was actually gainfully
employed elsewhere with an equal or higher salary or wage, such that if his
salary or wage in his other employment was less, the employer may deduct only
what has been actually earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis
College of Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma Personnel
Services v. NLRC, 224 SCRA 181 (1993) and Millares v. National Labor
Relations Commission, 305 SCRA 500 (1999).
Private respondent, in opposing the petitioners contention, alleged in his
Memorandum that only the wage rate at the time of the employees illegal
dismissal should be considered private respondent citing the following
decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525
(1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA
430 (1996) which rendered obsolete the ruling in East Asiatic, Ltd. v. Court of
Industrial Relations, 40 SCRA 521 (1971).
We are not convinced.
The Supreme Court had consistently held that payment of full backwages is the
price or penalty that the employer must pay for having illegally dismissed an
employee.
In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v.
NLRC and Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held
that the clear legislative intent in the amendment in Republic Act 6715 was to
give more benefits to workers than was previously given them under the Mercury
Drug rule or the "deductions of earnings elsewhere" rule.
The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent
are inapplicable to the case at bar. The doctrines therein came about as a result
of the old Mercury Drug rule, which was repealed with the passage of Republic
Act 6715 into law. It was in Alex Ferrer v. NLRC 255 SCRA 430 (1993) when the
Supreme Court returned to the doctrine in East Asiatic, which was soon
supplanted by the case of Bustamante v. NLRC and Evergreen Farms, Inc.,
which held that the backwages to be awarded to an illegally dismissed employee,
should not, as a general rule, be diminished or reduced by the earnings derived
from him during the period of his illegal dismissal. Furthermore, the Mercury Drug
rule was never meant to prejudice the workers, but merely to speed the recovery
of their backwages.
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the
intent of the Supreme Court to increase the backwages due an illegally
dismissed employee. In the Mercury Drug case, full backwages was to be
recovered even though a three-year limitation on recovery of full backwages was
imposed in the name of equity. Then in Bustamante, full backwages was
interpreted to mean absolutely no deductions regardless of the duration of the
illegal dismissal. In Bustamante, the Supreme Court no longer regarded equity as
a basis when dealing with illegal dismissal cases because it is not equity at play
in illegal dismissals but rather, it is employers obligation to pay full back wages
(sic). It is an obligation of the employer because it is "the price or penalty the
employer has to pay for illegally dismissing his employee."
The applicable modern definition of full backwages is now found in Millares v.
National Labor Relations Commission 305 SCRA 500 (1999), where although the
issue in Millares concerned separation pay separation pay and backwages
both have employees wage rate at their foundation.
x x x The rationale is not difficult to discern. It is the obligation of the employer to
pay an illegally dismissed employee the whole amount of his salaries plus all
other benefits, bonuses and general increases to which he would have been
normally entitled had he not been dismissed and had not stopped working. The
same holds true in case of retrenched employees. x x x
xxxx
x x x Annual general increases are akin to "allowances" or "other
benefits." 46 (Italics ours.)
We do not agree.
Attention must be called to Article 279 of the Labor Code of the Philippines, as
amended by Section 34 of Rep. Act No. 6715. The law provides as follows:
ART. 279. Security of Tenure. In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. (Emphasis
supplied.)
Article 279 mandates that an employees full backwages shall be inclusive of
allowances and other benefits or their monetary equivalent. Contrary to the ruling
of the Court of Appeals, we do not see that a salary increase can be interpreted
as either an allowance or a benefit. Salary increases are not akin to allowances
or benefits, and cannot be confused with either. The term "allowances" is
sometimes used synonymously with "emoluments," as indirect or contingent
remuneration, which may or may not be earned, but which is sometimes in the
nature of compensation, and sometimes in the nature
reimbursement.47 Allowances and benefits are granted to the employee apart or
separate from, and in addition to the wage or salary. In contrast, salary increases
are amounts which are added to the employees salary as an increment thereto
for varied reasons deemed appropriate by the employer. Salary increases are not
separate grants by themselves but once granted, they are deemed part of the
employees salary. To extend the coverage of an allowance or a benefit to include
salary increases would be to strain both the imagination of the Court and the
language of law. As aptly observed by the NLRC, "to otherwise give the meaning
other than what the law speaks for by itself, will open the floodgates to various
interpretations."48Indeed, if the intent were to include salary increases as basis in
the computation of backwages, the same should have been explicitly stated in
the same manner that the law used clear and unambiguous terms in expressly
providing for the inclusion of allowances and other benefits.
Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic,
therein petitioner East Asiatic Company, Ltd. was found guilty of unfair labor
practices against therein respondent, Soledad A. Dizon, and the Court ordered
her reinstatement with back pay. On the question of the amount of backwages,
the Court granted the dismissed employee the whole amount of the salaries plus
all general increases and bonuses she would have received during the period of
her lay-off with the corresponding right of the employer to deduct from the total
amounts, all the earnings earned by the employee during her lay-off. The
emphasis in East Asiatic is the duty of both the employer and the employee to
disclose the material facts and competent evidence within their peculiar
knowledge relative to the proper determination of backwages, especially as the
earnings derived by the employee elsewhere are deductions to which the
employer are entitled. However, East Asiatic does not find relevance in the
resolution of the issue before us. First, the material date to consider is 21 March
1989, when the law amending Article 279 of the Labor Code, Rep. Act No. 6715,
otherwise known as the Herrera-Veloso Law, took effect. It is obvious that the
backdrop of East Asiatic, decided by this Court on 31 August 1971 was prior to
the current state of the law on the definition of full backwages. Second, it bears
stressing that East Asiatic was decided at a time when even as an illegally
dismissed employee is entitled to the whole amount of the salaries or wages, it
was the recognized right of the employer to deduct from the total of these, the
amount equivalent to the salaries or wages the employee or worker would have
earned in his old employment on the corresponding days that he was actually
gainfully employed elsewhere with an equal or higher salary or wage, such that if
his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned. 49 It is for this reason the Court centered its
discussion on the duty of both parties to be candid and open about facts within
their knowledge to establish the amount of the deductions, and not leave the
burden on the employee alone to establish his claim, as well as on the duty of the
court to compel the parties to cooperate in disclosing such material facts. The
inapplicability of East Asiatic to respondent Sadac was sufficiently elucidated
upon by the NLRC, viz.:
of A full discernment of the pertinent portion of the judgment sought to be executed
in East Asiatic Co., Ltd. would reveal as follows:
"x x x to reinstate Soledad A. Dizon immediately to her former position with
backwages from September 1, 1958 until actually reinstated with all the rights
and privileges acquired and due her, including seniority and such other terms and
conditions of employment AT THE TIME OF HER LAY-OFF"
The basis on which this doctrine was laid out was summed up by the Supreme
Court which ratiocinated in this light. To quote:
"x x x on the other hand, of the employer to deduct from the total of these, the
amount equivalent to these salaries or wages the employee or worker would
have earned in his old employment on the corresponding days that he was
actually gainfully employed elsewhere with an equal or higher salary or wage,
such that if his salary or wage in his other employment was less, the employer
may deduct only what has been actually earned x x x" (Ibid, pp. 547-548).
But the Supreme Court, in the instant case, pronounced a clear but different
judgment from that of East Asiatic Co. decretal portion, in this wise:
"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED
with the following MODIFICATIONS: that private respondent shall be entitled to
backwages from termination of employment until turning sixty (60) years of age
(in 1995) and, thereupon, to retirement benefits in accordance with law; xxx"
Undisputably (sic), it was decreed in plain and unambiguous language that
complainant Sadac "shall be entitled to backwages." No more, no less.
Thus, this decree for Sadac cannot be considered in any way, substantially in
essence, with the award of backwages as pronounced for Ms. Dizon in the case
of East Asiatic Co. Ltd.50
In the same vein, we cannot accept the Court of Appeals reliance on the doctrine
as espoused in Millares. It is evident that Millares concerns itself with the
computation of the salary base used in computing the separation pay of
petitioners therein. The distinction between backwages and separation pay is
elementary. Separation pay is granted where reinstatement is no longer
advisable because of strained relations between the employee and the employer.
Backwages represent compensation that should have been earned but were not
collected because of the unjust dismissal. The bases for computing the two are
different, the first being usually the length of the employees service and the
second the actual period when he was unlawfully prevented from working. 51
The issue that confronted the Court in Millares was whether petitioners housing
and transportation allowances therein which they allegedly received on a monthly
basis during their employment should have been included in the computation of
their separation pay. It is plain to see that the reference to general increases in
Millares citing East Asiatic was a mere obiter. The crux in Millares was our
pronouncement that the receipt of an allowance on a monthly basis does not ipso
facto characterize it as regular and forming part of salary because the nature of
the grant is a factor worth considering. Whether salary increases are deemed
part of the salary base in the computation of backwages was not the issue in
Millares.
Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy.
What was mainly contentious therein was the inclusion of fringe benefits in the
computation of the award of backwages, in particular additional vacation and sick
leaves granted to therein concerned employees, it evidently appearing that the
reference to East Asiatic in a footnote was a mere obiter dictum. Salary increases
are not akin to fringe benefits 52 and neither is it logical to conceive of both as
belonging to the same taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to
the case at bar. The basic issue before the Court therein was whether the
employee, Susan Sumatre, a domestic helper in Abu Dhabi, United Arab
Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was a
mere probationary employee who was, on top of this status, mentally
unsound.53 Even a cursory reading of Sigma Personnel Services citing St. Louis
College of Tuguegarao would readily show that inclusion of salary increases in
the computation of backwages was not at issue. The same was not on all fours
with the instant petition.
What, then, is the basis of computation of backwages? Are annual general
increases in basic salary deemed component in the computation of full
backwages? The weight of authority leans in petitioner Banks favor and against
respondent Sadacs claim for the inclusion of general increases in the
computation of his backwages.
We stressed in Paramount that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal, thus:
The determination of the salary base for the computation of backwages requires
simply an application of judicial precedents defining the term "backwages".
Unfortunately, the Labor Arbiter erred in this regard. An unqualified award of
backwages means that the employee is paid at the wage rate at the time of his
dismissal [Davao Free Worker Front v. Court of Industrial Relations, G.R. No. L-
29356, October 27, 1975, 67 SCRA 418; Capital Garments Corporation v. Ople,
G.R. No. 53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant
& Company v. NLRC, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. And the
Court has declared that the base figure to be used in the computation of
backwages due to the employee should include not just the basic salary, but also
the regular allowances that he had been receiving, such as the emergency living
allowances and the 13th month pay mandated under the law [See Pan-Philippine
Life Insurance Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA
866; Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 166;
Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155 SCRA 124; Insular Life
Assurance Co., Ltd. v. NLRC, supra.]54(Emphasis supplied.)
There is no ambivalence in Paramount, that the base figure to be used in the
computation of backwages is pegged at the wage rate at the time of the
employees dismissal, inclusive of regular allowances that the employee had
been receiving such as the emergency living allowances and the 13th month pay
mandated under the law.
In Evangelista v. National Labor Relations Commission, 55 we addressed the sole
issue of whether the computation of the award of backwages should be based on
current wage level or the wage levels at the time of the dismissal. We resolved
that an unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the
determination of the salary base for the computation of backwages requires
simply an application of judicial precedents defining the term "backwages." An
unqualified award of backwages means that the employee is paid at the wage
rate at the time of his dismissal. Furthermore, the award of salary differentials is
not allowed, the established rule being that upon reinstatement, illegally
dismissed employees are to be paid their backwages without deduction and
qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike. 56
The case of Paramount was relied upon by the Court in the latter case of Espejo
v. National Labor Relations Commission,57 where we reiterated that the
computation of backwages should be based on the basic salary at the time of the
employees dismissal plus the regular allowances that he had been receiving.
Further, the clarification made by the Court in General Baptist Bible College v.
National Labor Relations Commission,58 settles the issue, thus:
We also want to clarify that when there is an award of backwages this actually
refers to backwages without qualifications and deductions. Thus, We held that:
"The term backwages without qualification and deduction means that the
workers are to be paid their backwages fixed as of the time of the dismissal or
strike without deduction for their earnings elsewhere during their layoff and
without qualification of their wages as thus fixed; i.e., unqualified by any wage
increases or other benefits that may have been received by their co-workers who
are not dismissed or did not go on strike. Awards including salary differentials are
not allowed. The salary base properly used should, however, include not only the
basic salary but also the emergency cost of living allowances and also
transportation allowances if the workers are entitled thereto." 59 (Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of the Courts Decision
of 13 June 1997 in G.R. No. 102467, awarding backwages to respondent Sadac,
readily shows that the award of backwages therein is unqualified, ergo, without
qualification of the wage as thus fixed at the time of the dismissal and without
deduction.
A demarcation line between salary increases and backwages was drawn by the
Court in Paguio v. Philippine Long Distance Telephone Co., Inc., 60 where therein
petitioner Paguio, on account of his illegal transfer sought backwages, including
an amount equal to 16 percent (16%) of his monthly salary representing his
salary increases during the period of his demotion, contending that he had been
consistently granted salary increases because of his above average or
outstanding performance. We said:
In several cases, the Court had the opportunity to elucidate on the reason for the
grant of backwages. Backwages are granted on grounds of equity to workers for
earnings lost due to their illegal dismissal from work. They are a reparation for
the illegal dismissal of an employee based on earnings which the employee
would have obtained, either by virtue of a lawful decree or order, as in the case of
a wage increase under a wage order, or by rightful expectation, as in the case of
ones salary or wage. The outstanding feature of backwages is thus the degree of
assuredness to an employee that he would have had them as earnings had he
not been illegally terminated from his employment.
Petitioners claim, however, is based simply on expectancy or his assumption
that, because in the past he had been consistently rated for his outstanding
performance and his salary correspondingly increased, it is probable that he
would similarly have been given high ratings and salary increases but for his
transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in the civil
law, this contention is based merely on speculation. Furthermore, it assumes that
in the other position to which he had been transferred petitioner had not been
given any performance evaluation. As held by the Court of Appeals, however, the
mere fact that petitioner had been previously granted salary increases by reason
of his excellent performance does not necessarily guarantee that he would have
performed in the same manner and, therefore, qualify for the said increase later.
What is more, his claim is tantamount to saying that he had a vested right to
remain as Head of the Garnet Exchange and given salary increases simply
because he had performed well in such position, and thus he should not be
moved to any other position where management would require his services. 61
Applying Paguio to the case at bar, we are not prepared to accept that this
degree of assuredness applies to respondent Sadacs salary increases. There
was no lawful decree or order supporting his claim, such that his salary increases
can be made a component in the computation of backwages. What is evident is
that salary increases are a mere expectancy. They are, by its nature volatile and
are dependent on numerous variables, including the companys fiscal situation
and even the employees future performance on the job, or the employees
continued stay in a position subject to management prerogative to transfer him to
another position where his services are needed. In short, there is no vested right
to salary increases. That respondent Sadac may have received salary increases
in the past only proves fact of receipt but does not establish a degree of
assuredness that is inherent in backwages. From the foregoing, the plain
conclusion is that respondent Sadacs computation of his full backwages which
includes his prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that jurisprudence speaks
only of wage and not salary, and therefore, the rule is inapplicable to him. It is
respondent Sadacs stance that he was not paid at the wage rate nor was he
engaged in some form of manual or physical labor as he was hired as Vice
President of petitioner Bank. He cites Gaa v. Court of Appeals 62 where the Court
distinguished between wage and salary.
The reliance is misplaced. The distinction between salary and wage in Gaa was
for the purpose of Article 1708 of the Civil Code which mandates that, "[t]he
laborers wage shall not be subject to execution or attachment, except for debts
incurred for food, shelter, clothing and medical attendance." In labor law,
however, the distinction appears to be merely semantics. Paramount and
Evangelista may have involved wage earners, but the petitioner in Espejo was a
General Manager with a monthly salary of P9,000.00 plus privileges. That wage
and salary are synonymous has been settled in Songco v. National Labor
Relations Commission.63 We said:
Broadly, the word "salary" means a recompense or consideration made to a
person for his pains or industry in another mans business. Whether it be derived
from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services rendered.
Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p.
44 citing Hopkins vs. Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur.
496). "Salary," the etymology of which is the Latin word "salarium," is often used
interchangeably with "wage", the etymology of which is the Middle English word
"wagen". Both words generally refer to one and the same meaning, that is, a
reward or recompense for services performed. Likewise, "pay" is the synonym of
"wages" and "salary" (Blacks Law Dictionary, 5th Ed). x x x64 (Italics supplied.)
II.
Petitioner Bank ascribes as its second assignment of error the Court of Appeals
ruling that respondent Sadac is entitled to check-up benefit, clothing allowance
and cash conversion of vacation leaves notwithstanding that respondent Sadac
did not present any evidence to prove entitlement to these claims. 65
The determination of respondent Sadacs entitlement to check-up benefit,
clothing allowance, and cash conversion of vacation leaves involves a question
of fact. The well-entrenched rule is that only errors of law not of facts are
reviewable by this Court in a petition for review. 66 The jurisdiction of this Court in
a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, is limited to reviewing only errors of law, not of fact,
unless the factual findings being assailed are not supported by evidence on
record or the impugned judgment is based on a misapprehension of facts. 67 This
Court is also not precluded from delving into and resolving issues of facts,
particularly if the findings of the Labor Arbiter are inconsistent with those of the
NLRC and the Court of Appeals. 68 Such is the case in the instant petition. The
Labor Arbiter and the Court of Appeals are in agreement anent the entitlement of
respondent Sadac to check-up benefit, clothing allowance, and cash conversion
of vacation leaves, but the findings of the NLRC were to the contrary. The Labor
Arbiter sustained respondent Sadacs entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner
Banks acknowledgment in its computation that respondent Sadac is entitled to
certain benefits, namely, rice subsidy, tuition fee allowance, and medicine
allowance, thus, there exists no reason to deprive respondent Sadac of his other
benefits. The Labor Arbiter also reasoned that the petitioner Bank did not adduce
evidence to support its claim that the benefits sought by respondent Sadac are
not granted to its employees and officers. Similarly, the Court of Appeals
ratiocinated that if ordinary employees are entitled to receive these benefits, so it
is with more reason for a Vice President, like herein respondent Sadac to receive
the same.
We find in the records that, per petitioner Banks computation, the benefits to be
received by respondent are monthly rice subsidy, tuition fee allowance per year,
and medicine allowance per year. 69 Contained nowhere is an acknowledgment of
herein claimed benefits, namely, check-up benefit, clothing allowance, and cash
conversion of vacation leaves. We cannot sustain the rationalization that the
acknowledgment by petitioner Bank in its computation of certain benefits granted
to respondent Sadac means that the latter is also entitled to the other benefits as
claimed by him but not acknowledged by petitioner Bank. The rule is, he who
alleges, not he who denies, must prove. Mere allegations by respondent Sadac
does not suffice in the absence of proof supporting the same.
III.
We come to the third assignment of error raised by petitioner Bank in its
Supplement to Petition for Review, assailing the 26 October 2004 Supplemental
Decision of the Court of Appeals which amended the fallo of its 6 April 2004
Decision to include "attorneys fees equal to TEN PERCENT (10%) of all the
monetary award" granted to respondent Sadac. Petitioner Bank posits that
neither the dispositive portion of our 13 June 1997 Decision in G.R. No. 102467
nor the body thereof awards attorneys fees to respondent Sadac. It is postulated
that the body of the 13 June 1997 Decision does not contain any findings of facts
or conclusions of law relating to attorneys fees, thus, this Court did not intend to
grant to respondent Sadac the same, especially in the light of its finding that the
petitioner Bank was not motivated by malice or bad faith and that it did not act in
a wanton, oppressive, or malevolent manner in terminating the services of
respondent Sadac.70
We do not agree.
At the outset it must be emphasized that when a final judgment becomes
executory, it thereby becomes immutable and unalterable. The judgment may no
longer be modified in any respect, even if the modification is meant to correct
what is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the Court rendering it or by
the highest Court of the land. The only recognized exceptions are the correction
of clerical errors or the making of so-called nunc pro tunc entries which cause no
prejudice to any party, and, of course, where the judgment is void. 71 The Courts
13 June 1997 Decision in G.R. No. 102467 became final and executory on 28
July 1997. This renders moot whatever argument petitioner Bank raised against
the grant of attorneys fees to respondent Sadac. Of even greater import is the
settled rule that it is the dispositive part of the judgment that actually settles and
declares the rights and obligations of the parties, finally, definitively, and
authoritatively, notwithstanding the existence of inconsistent statements in the
body that may tend to confuse.72
Proceeding therefrom, we make a determination of whether the Court in
Equitable Banking Corporation v. National Labor Relations Commission, 73 G.R.
No. 102467, dated 13 June 1997, awarded attorneys fees to respondent Sadac.
In recapitulation, the dispositive portion of the aforesaid Decision is hereunder
quoted:
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with
the following MODIFICATIONS: That private respondent shall be entitled to
backwages from termination of employment until turning sixty (60) years of age
(in 1995) and, thereupon, to retirement benefits in accordance with law; that
private respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are deleted; and that the liability herein
pronounced shall be due from petitioner bank alone, the other petitioners being
absolved from solidary liability. No costs.74
The dispositive portion of the 24 September 1991 Decision of the NLRC awards
respondent Sadac attorneys fees equivalent to ten percent (10%) of the
monetary award, viz:
WHEREFORE, in view of all the foregoing considerations, let the Decision of
October 2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED
declaring the dismissal of the complainant as illegal, and consequently ordering
the respondents jointly and severally to reinstate him to his former position as
bank Vice-President and General Counsel without loss of seniority rights and
other privileges, and to pay him full backwages and other benefits from the time
his compensation was withheld to his actual reinstatement, as well as moral
damages of P100,000.00, exemplary damages of P50,000.00, and attorneys
fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents
are ordered likewise jointly and severally to grant separation pay at one (1)
month per year of service in the total sum of P293,650.00 with backwages and
other benefits from November 16, 1989 to September 15, 1991 (cut off date,
subject to adjustment) computed at P1,055,740.48, plus damages of
P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorneys
fees equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.75 (Italics Ours.)
As can be gleaned from the foregoing, the Courts Decision of 13 June 1997
AFFIRMED with MODIFICATION the NLRC Decision of 24 September 1991,
which modification did not touch upon the award of attorneys fees as granted,
hence, the award stands. Juxtaposing the decretal portions of the NLRC
Decision of 24 September 1991 with that of the Courts Decision of 13 June
1997, we find that what was deleted by the Court was "the award of moral and
exemplary damages," but not the award of "attorneys fees equivalent to Ten
Percent (10%) of the monetary award." The issue on the grant of attorneys fees
to respondent Sadac has been adequately and definitively threshed out and
settled with finality when petitioner Bank came to us for the first time on a Petition
for Certiorari in Equitable Banking Corporation v. National Labor Relations
Commission, docketed as G.R. No. 102467. The Court had spoken in its
Decision of 13 June 1997 in the said case which attained finality on 28 July 1997.
It is now immutable.
IV.
We proceed with the penultimate issue on the entitlement of respondent Sadac
to twelve percent (12%) interest per annum on the outstanding balance as of 28
July 1997, the date when our Decision in G.R. No. 102467 became final and
executory.
In Eastern Shipping Lines, Inc. v. Court of Appeals, 76 the Court, speaking through
the Honorable Justice Jose C. Vitug, laid down the following rules of thumb:
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title
XVIII on "Damages" of the Civil Code govern in determining the measure
of recoverable damages.
II. With regard particularly to an award of interest in the concept
of actual or compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in
the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall
be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim
 is made judicially or extrajudicially (Article 1169, Civil Code) but
when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2 above,
shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to
a forbearance of credit.77
It is obvious that the legal interest of twelve percent (12%) per annum shall be
imposed from the time judgment becomes final and executory, until full
satisfaction thereof. Therefore, petitioner Bank is liable to pay interest from 28
July 1997, the finality of our Decision in G.R. No. 102467. 78 The Court of Appeals
was not in error in imposing the same notwithstanding that the parties were at
variance in the computation of respondent Sadacs backwages. What is
significant is that the Decision of 13 June 1997 which awarded backwages to
respondent Sadac became final and executory on 28 July 1997.
V.
Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily
be denied as established in our foregoing discussion. We are not herein
modifying or reversing a doctrine or principle laid down by the Court en banc or in
a division. The instant case is not one that should be heard by the Court en
banc.79 1avvphil.net
Fallo
WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the
computation of the backwages, respondent Sadacs claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of vacation
leaves are excluded. The petition is PARTIALLY DENIED insofar as we
AFFIRMED the grant of attorneys fees equal to ten percent (10%) of all the
monetary award and the imposition of twelve percent (12%) interest per annum
on the outstanding balance as of 28 July 1997. Hence, the Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 75013, dated 6 April 2004
and 28 July 2004, respectively, and the Supplemental Decision dated 26 October
2004 are MODIFIED in the following manner, to wit:
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:
(1) BACKWAGES in accordance with Our Decision dated 13
June 1997 in G.R. No. 102467 with a clarification that the award of
backwages EXCLUDES respondent Sadacs claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of
vacation leaves;
(2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the
total sum of all monetary award; and
(3) INTEREST of TWELVE PERCENT (12%) per annum is
hereby imposed on the total sum of all monetary award from 28 July
1997, the date of finality of Our Decision in G.R. No. 102467 until full
payment of the said monetary award.
The Motion to Refer the Petition to the Court En Banc is DENIED.
No costs.
SO ORDERED
G.R. No. 160073 October 24, 2005
ABUNDIO BARAYOGA and BISUDECO-PHILSUCOR CORFARM WORKERS
UNION (PACIWU CHAP-TPC),Petitioners,
vs.
ASSET PRIVATIZATION TRUST,* Respondent.
DECISION
PANGANIBAN, J.:
esponsibility for the liabilities of a mortgagor towards its employees cannot be
transferred via an auction sale to a purchaser who is also the mortgagee-creditor
of the foreclosed assets and chattels. Clearly, the mortgagee-creditor has no
employer- __________________
* The Privatization and Management Office has succeeded APT. Comment, p. 1;
rollo, p. 480.
employee relations with the mortgagors workers. The mortgage constitutes a lien
on the determinate properties of the employer-debtor, because it is a specially
preferred credit to which the workers monetary claims is deemed subordinate.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing
the January 30, 2003 Decision 2and the August 27, 2003 Resolution 3 of the Court
of Appeals (CA), in CA-GR SP No. 58813. The disposition orfallo of the
questioned Decision reads as follows:
"IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED and the
assailed NLRC Decision dated February 18, 2000 is hereby RECALLED and
SET ASIDE insofar as herein petitioner APT is concerned. No cost." 4
The reversed Decision5 of the National Labor Relations Commission (NLRC)
disposed as follows:
"WHEREFORE, premises considered, the decision appealed from is AFFIRMED
with modifications as follows:
1. Complainants are awarded their monetary claims for underpayment of
salaries and payment of allowances per their computation on pp. 97-99 and 142-
144 of the records;
2. Complainants are declared to have been illegally dismissed and should be
paid their backwages from 01 May 1991 to 30 October 1992." 6
The challenged August 27, 2003 Resolution denied petitioners Motion for
Reconsideration.
The Facts
The CA summarized the antecedents in this portion of its Decision, which we
quote:
"Bisudeco-Philsucor Corfarm Workers Union is composed of workers of
Bicolandia Sugar Development Corporation (BISUDECO), a sugar plantation mill
located in Himaao, Pili, Camarines Sur.
"On December 8, 1986, [Respondent] Asset Privatization Trust (APT), a public
trust was created under Proclamation No. 50, as amended, mandated to take title
to and possession of, conserve, provisionally manage and dispose of non-
performing assets of the Philippine government identified for privatization or
disposition.
"Pursuant to Section 23 of Proclamation No. 50, former President Corazon
Aquino issued Administrative Order No. 14 identifying certain assets of
government institutions that were to be transferred to the National Government.
Among the assets transferred was the financial claim of the Philippine National
Bank against BISUDECO in the form of a secured loan. Consequently, by virtue
of a Trust Agreement executed between the National Government and APT on
February 27, 1987, APT was constituted as trustee over BISUDECOs account
with the PNB.
"Sometime later, on August 28, 1988, BISUDECO contracted the services of
Philippine Sugar Corporation (Philsucor) to take over the management of the
sugar plantation and milling operations until August 31, 1992.
"Meanwhile, because of the continued failure of BISUDECO to pay its
outstanding loan with PNB, its mortgaged properties were foreclosed and
subsequently sold in a public auction to APT, as the sole bidder. On April 2, 1991,
APT was issued a Sheriffs Certificate of Sale.
"On July 23, 1991, the union filed a complaint for unfair labor practice, illegal
dismissal, illegal deduction and underpayment of wages and other labor standard
benefits plus damages.
"In the meantime, on July 15, 1992, APTs Board of Trustees issued a resolution
accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the sugar
plantation and mill. Again, on September 23, 1992, the board passed another
resolution authorizing the payment of separation benefits to BISUDECOs
employees in the event of the companys privatization. Then, on October 30,
1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took
over its sugar milling operations under the trade name Peafrancia Sugar Mill
(Pensumil).
"On December 17, 1992, the union filed a similar complaint, later to be
consolidated with its earlier complaint and docketed as RAB V Case No. 07-
00184-91.
"On March 2, 1993, it filed an amended complaint, impleading as additional party
respondents APT and Pensumil.
"In their Position Paper, the union alleged that when Philsucor initially took over
the operations of the company, it retained BISUDECOs existing personnel under
the same terms and conditions of employment. Nonetheless, at the start of the
season sometime in May 1991, Philsucor started recalling workers back to work,
to the exception of the union members. Management told them that they will be
re-hired only if they resign from the union. Just the same, thereafter, the
company started to employ the services of outsiders under the pakyaw system.
"BISUDECO, Pensumil and APT all interposed the defense of lack of employer-
employee relationship.
xxxxxxxxx
"After due proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano
disposed as follows:
WHEREFORE, premises considered, respondent APT is hereby ordered to pay
herein complainants of the mandated employment benefits provided for under
Section 27 of Proclamation No. 50 which benefits had been earlier extended to
other employees similarly situated.
SO ORDERED.
"Both the union and APT elevated the labor arbiters decision before NLRC." 7
The NLRC affirmed APTs liability for petitioners money claims. While no
employer-employee relationship existed between members of the petitioner
union and APT, at the time of the employees illegal dismissal, the assets of
BISUDECO had been transferred to the national government through APT.
Moreover, the NLRC held that APT should have treated petitioners claim as a
lien on the assets of BISUDECO. The Commission opined that APT should have
done so, considering its awareness of the pending complaint of petitioners at the
time BISUDECO sold its assets to BAPCI, and APT started paying separation
pay to the workers.
Finding their computation to be in order, the NLRC awarded to petitioners their
money claims for underpayment, labor-standard benefits, and ECOLA. It also
awarded them their back wages, computed at the prevailing minimum wage, for
the period May 1, 1991 (the date of their illegal dismissal) until October 30, 1992
(the sale of BISUDECO assets to the BAPCI). On the other hand, the NLRC
ruled that petitioners were not entitled to separation pay because of the huge
business losses incurred by BISUDECO, which had resulted in its bankruptcy.
Respondent sought relief from the CA via a Petition for Certiorari under Rule 65
of the Rules of Court.
Ruling of the Court of Appeals
The CA ruled that APT should not be held liable for petitioners claims for unfair
labor practice, illegal dismissal, illegal deduction and underpayment of wages, as
well as other labor-standard benefits plus damages. As found by the NLRC, APT
was not the employer of petitioners, but was impleaded only for possessing
BISUDECOs mortgaged properties as trustee and, later, as the highest bidder in
the foreclosure sale of those assets.
Citing Batong Buhay Gold Mines v. Dela Serna,8 the CA concluded that
petitioners claims could not be enforced against APT as mortgagee of the
foreclosed properties of BISUDECO.
Hence, this Petition.9
Issues
In their Memorandum, petitioners raise the following issues for our consideration:
"I. Whether or not the Court of Appeals erred in ruling that Respondent Asset
Privatization Trust (APT) should not be held liable for the petitioner unions claim
for unfair labor practice, illegal dismissal, illegal deduction and underpayment of
wages and other labor standard benefits plus damages.
"II. Whether or not the claims of herein petitioners cannot be enforced against
APT/PNB as mortgagee of the foreclosed properties of BISUDECO.
"III. Whether or not the entitlement of petitioners upon their claims against
Respondent APT is recognized under the law." 10
In brief, the main issue raised is whether Respondent APT is liable for petitioners
monetary claims.
The Courts Ruling
The Petition has no merit.
Main Issue:
Whether APT Is Liable for the Claims of
Petitioners Against Their Former Employer
It should be stressed at the outset that, pursuant to Administrative Order No. 14,
Series of 1987,11 PNBs assets, loans and receivables from its borrowers were
transferred to APT as trustee of the national government. Among the liabilities
transferred to APT was PNBs financial claim against BISUDECO, not the latters
assets and chattel. Contrary to petitioners assertions, BISUDECO remained the
owner of the mortgaged properties in August 1988, when the Philippine Sugar
Corporation (Philsucor) undertook the operation and management of the sugar
plantation until August 31, 1992, under a so-called Contract of Lease between
the two corporations. At the time, APT was merely a secured creditor of
BISUDECO.12
It was only in April 1991 that APT foreclosed the assets and chattels of
BISUDECO because of the latters continued failure to pay outstanding loan
obligations to PNB/APT. The properties were sold at public auction to APT, the
highest bidder, as indicated in the Sheriffs Certificate of Sale issued on April 2,
1991. It was only in September 1992 (after the expiration of the
lease/management Contract with Philsucor in August 1992), however, when APT
took over BISUDECO assets, preparatory to the latters privatization.
In the present case, petitioner-unions members who were not recalled to work by
Philsucor in May 1991 seek to hold APT liable for their monetary claims and
allegedly illegal dismissal. Significantly, prior to the actual sale of BISUDECO
assets to BAPCI on October 30, 1992, the APT board of trustees had approved a
Resolution on September 23, 1992. The Resolution authorized the payment of
separation benefits to the employees of the corporation in the event of its
privatization. Not included in the Resolution, though, were petitioner-unions
members who had not been recalled to work in May 1991.
The question now before the Court is whether APT is liable to pay petitioners
monetary claims, including back wages from May 1, 1991, to October 30, 1992
(the date of the sale of BISUDECO assets to BAPCI).
We rule in the negative. The duties and liabilities of BISUDECO, including its
monetary liabilities to its employees, were not all automatically assumed by APT
as purchaser of the foreclosed properties at the auction sale. Any assumption of
liability must be specifically and categorically agreed upon. In Sundowner
Development Corp. v. Drilon,13 the Court ruled that, unless expressly assumed,
labor contracts like collective bargaining agreements are not enforceable against
the transferee of an enterprise. Labor contracts are in personam and thus binding
only between the parties.
No succession of employment rights and obligations can be said to have taken
place between the two. Between the employees of BISUDECO and APT, there is
no privity of contract that would make the latter a substitute employer that should
be burdened with the obligations of the corporation. To rule otherwise would
result in unduly imposing upon APT an unwarranted assumption of accounts not
contemplated in Proclamation No. 50 or in the Deed of Transfer between the
national government and PNB.
Furthermore, under the principle of absorption, a bona fide buyer or transferee of
all, or substantially all, the properties of the seller or transferor is not obliged to
absorb the latters employees.14 The most that the purchasing company may do,
for reasons of public policy and social justice, is to give preference of
reemployment to the selling companys qualified separated employees, who in its
judgment are necessary to the continued operation of the business
establishment.15
In any event, the national government (in whose trust APT previously held the
mortgage credits of BISUDECO) is not the employer of petitioner-unions
members, who had been dismissed sometime in May 1991, even before APT
took over the assets of the corporation. Hence, under existing law and
jurisprudence, there is no reason to expect any kind of bailout by the national
government.16 Even the NLRC found that no employer-employee relationship
existed between APT and petitioners. Thus, the Commission gravely abused its
discretion in nevertheless holding that APT, as the transferee of the assets of
BISUDECO, was liable to petitioners.
Petitioners also contend that in Central Azucarera del Danao v. Court of
Appeals,17 this Court supposedly ruled that the "sale of a business of a going
concern does not ipso facto terminate the employer-employee relations insofar
as the successor-employer is concerned, and that change of ownership or
management of an establishment or company is not one of the just causes
provided by law for termination of employment[.]" 18
A careful reading of the Courts Decision in that case plainly shows that it does
not contain the words quoted by counsel for petitioners. At this juncture, we
admonish their counsel19 of his bounden duty as an officer of the Court to refrain
from misquoting or misrepresenting the text of its decisions. 20 Ever present is the
danger that, if not faithfully and exactly quoted, they may lose their proper and
correct meaning, to the detriment of other courts, lawyers and the public who
may thereby be misled.21
In that case, contrary to the assertions of petitioners, the Court held as follows:
"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 sell or 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. x x x.
"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 transferor to continue employing 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." 22 (Citations omitted.)
In other words, the liabilities of the previous owner to its employees are not
enforceable against the buyer or transferee, unless (1) the latter unequivocally
assumes them; or (2) the sale or transfer was made in bad faith. Thus, APT
cannot be held responsible for the monetary claims of petitioners who had been
dismissed even before it actually took over BISUDECOs assets.
Moreover, it should be remembered that APT merely became a transferee of
BISUDECOs assets for purposes of conservation because of its lien on those
assets -- a lien it assumed as assignee of the loan secured by the corporation
from PNB. Subsequently, APT, as the highest bidder in the auction sale, acquired
ownership of the foreclosed properties.
Relevant to this transfer of assets is Article 110 of the Labor Code, as amended
by Republic Act No. 6715, which reads:
"Article 110. Workers preference in case of bankruptcy. In the event of
bankruptcy or liquidation of the employers business, his workers shall enjoy first
preference as regards their unpaid wages and other monetary claims shall be
paid in full before the claims of the Government and other creditors may be
paid."23
This Court has ruled in a long line of cases 24 that under Articles 2241 and 2242 of
the Civil Code, a mortgage credit is a special preferred credit that enjoys
preference with respect to a specific/determinate property of the debtor. On the
other hand, the workers preference under Article 110 of the Labor Code is an
ordinary preferred credit. While this provision raises the workers money claim to
first priority in the order of preference established under Article 2244 of the Civil
Code, the claim has no preference over special preferred credits.
to creditors claims; and preserved in harmony is the legal scheme of
classification, concurrence and preference of credits in the Civil Code, the
Insolvency Law, and the Labor Code.
The Court hastens to add that the present Petition was brought against APT
alone. In holding that the latter, which has never really been an employer of
petitioners, is not liable for their claims, this Court is not reversing or ruling upon
their entitlement to back wages and other unpaid benefits from their previous
employer.
On the basis of the foregoing clarification, the Court finds no reversible error in
the questioned CA Decision, which set aside the February 8, 2000 Decision of
the NLRC. As a mere transferee of the mortgage credit and later as the
purchaser in a public auction of BISUDECOs foreclosed properties, APT cannot
be held liable for petitioners claims against BISUDECO: illegal dismissal, unpaid
back wages and other monetary benefits.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision and
Resolution AFFIRMED. Costs against petitioners.
SO ORDERED

Thus, the right of employees to be paid benefits due them from the properties of
their employer cannot have any preference over the latters mortgage credit. In
other words, being a mortgage credit, APTs lien on BISUDECOs mortgaged G.R. No. L-11876 May 29, 1959
assets is a special preferred lien that must be satisfied first before the claims of
the workers. MERALCO WORKERS UNION, petitioner,

Development Bank of the Philippines v. NLRC 25 explained the rationale of this vs.
ruling as follows: MANILA ELECTRIC, respondent.

"x x x. A preference applies only to claims which do not attach to specific

properties. A lien creates a charge on a particular property. The right of first
preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is
but a preference of credit in their favor, a preference in application. It is a method G.R. No. 145561 June 15, 2005
adopted to determine and specify the order in which credits should be paid in the
final distribution of the proceeds of the insolvents assets. It is a right to a first
preference in the discharge of the funds of the judgment debtor. x x x" HONDA PHILS., INC., petitioner,
vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.
Furthermore, workers claims for unpaid wages and monetary benefits cannot be
paid outside of a bankruptcy or judicial liquidation proceedings against the
employer.26 It is settled that the application of Article 110 of the Labor Code is DECISION
contingent upon the institution of those proceedings, during which all creditors
are convened, their claims ascertained and inventoried, and their preferences YNARES-SANTIAGO, J.:
determined.27 Assured thereby is an orderly determination of the preference given
This petition for review under Rule 45 seeks the reversal of the Court of Appeals
decision1 dated September 14, 20002 and its resolution3 dated October 18, 2000,
in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2,
2000 rendered by the Voluntary Arbitrator who ruled that petitioner Honda
Philippines, Inc.s (Honda) pro-rated payment of the 13th and 14th month pay
and financial assistance to its employees was invalid.
As found by the Court of Appeals, the case stems from the Collective Bargaining
Agreement (CBA) forged between petitioner Honda and respondent union
Samahan ng Malayang Manggagawa sa Honda (respondent union) which
contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the implementation [of] the
13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on the same basis as
computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of granting, in its
discretion, financial assistance to covered employees in December of each year,
of not less than 100% of basic pay.
This CBA is effective until year 2000. In the latter part of 1998, the parties started
re-negotiations for the fourth and fifth years of their CBA. When the talks
between the parties bogged down, respondent union filed a Notice of Strike on
the ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout.
On March 31, 1999, then Department of Labor and Employment (DOLE)
Secretary Laguesma assumed jurisdiction over the labor dispute and ordered the
parties to cease and desist from committing acts that would aggravate the
situation. Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a second Notice of Strike on
the ground of unfair labor practice alleging that Honda illegally contracted out
work to the detriment of the workers. Respondent union went on strike and
picketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE
Acting Secretary Felicisimo Joson, Jr. assumed jurisdiction over the case and
certified the same to the National Labor Relations Commission (NLRC) for
compulsory arbitration. The striking employees were ordered to return to work
and the management accepted them back under the same terms prior to the
strike staged.
On November 22, 1999, the management of Honda issued a
memorandum4 announcing its new computation of the 13th and 14th month pay
to be granted to all its employees whereby the thirty-one (31)-day long strike
shall be considered unworked days for purposes of computing said benefits. As
per the companys new formula, the amount equivalent to 1/12 of the employees
basic salary shall be deducted from these bonuses, with a commitment however
that in the event that the strike is declared legal, Honda shall pay the amount
deducted.
Respondent union opposed the pro-rated computation of the bonuses in a letter
dated November 25, 1999. Honda sought the opinion of the Bureau of Working
Conditions (BWC) on the issue. In a letter dated January 4, 2000, 5 the BWC
agreed with the pro-rata payment of the 13th month pay as proposed by Honda.
The matter was brought before the Grievance Machinery in accordance with the
parties existing CBA but when the issue remained unresolved, it was submitted
for voluntary arbitration. In his decision 6 dated May 2, 2000, Voluntary Arbitrator
Herminigildo C. Javen invalidated Hondas computation, to wit:
WHEREFORE, in view of all foregoing premises being duly considered and
evaluated, it is hereby ruled that the Companys implementation of pro-rated 13th
Month pay, 14th Month pay and Financial Assistance [is] invalid. The Company is
thus ordered to compute each provision in full month basic pay and pay the
amounts in question within ten (10) days after this Decision shall have become
final and executory.
The three (3) days Suspension of the twenty one (21) employees is hereby
affirmed.
SO ORDERED.7
Hondas Motion for Partial Reconsideration was denied in a resolution dated May
22, 2000. Thus, a petition was filed with the Court of Appeals, however, the
petition was dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of whether the pro-rated
computation of the 13th month pay and the other bonuses in question is valid
and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated contract between a
legitimate labor organization and the employer concerning wages, hours of work
and all other terms and conditions of employment in a bargaining unit. 8 As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms
and conditions as they may deem convenient provided these are not contrary to
law, morals, good customs, public order or public policy. 9 Thus, where the CBA is
clear and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law. 10
In some instances, however, the provisions of a CBA may become contentious,
as in this case. Honda wanted to implement a pro-rated computation of the
benefits based on the "no work, no pay" rule. According to the company, the
phrase "present practice" as mentioned in the CBA refers to the manner and
requisites with respect to the payment of the bonuses, i.e., 50% to be given in
May and the other 50% in December of each year. Respondent union, however,
insists that the CBA provisions relating to the implementation of the 13th month
pay necessarily relate to the computation of the same.
We agree with the findings of the arbitrator that the assailed CBA provisions are
far from being unequivocal. A cursory reading of the provisions will show that
they did not state categorically whether the computation of the 13th month pay,
14th month pay and the financial assistance would be based on one full months
basic salary of the employees, or pro-rated based on the compensation actually
received. The arbitrator thus properly resolved the ambiguity in favor of labor as
mandated by Article 1702 of the Civil Code. 11 The Court of Appeals affirmed the
arbitrators finding and added that the computation of the 13th month pay should
be based on the length of service and not on the actual wage earned by the
worker.
We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings
of labor officials, who are deemed to have acquired expertise in matters within
their respective jurisdiction, are generally accorded not only respect but even
finality, and bind us when supported by substantial evidence. It is not our function
to assess and evaluate the evidence all over again, particularly where the
findings of both the arbiter and the Court of Appeals coincide. 12
Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which
required all employers to pay their employees a 13 th month pay, was issued to
protect the level of real wages from the ravages of worldwide inflation. It was
enacted on December 16, 1975 after it was noted that there had been no
increase in the minimum wage since 1970 and the Christmas season was an
opportune time for society to show its concern for the plight of the working
masses so that they may properly celebrate Christmas and New Year. 13
Under the Revised Guidelines on the Implementation of the 13 th month pay
issued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No.
851 was removed. It further provided that the minimum 13 th month pay required
by law shall not be less than one-twelfth (1/12) of the total basic salary earned by
an employee within a calendar year. The guidelines pertinently provides:
The "basic salary" of an employee for the purpose of computing the 13 th month
pay shall include allremunerations or earnings paid by his employer for
services rendered but does not include allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary, such
as the cash equivalent of unused vacation and sick leave credits, overtime
premium, night differential and holiday pay, and cost-of-living
allowances.14 (Emphasis supplied)
For employees receiving regular wage, we have interpreted "basic salary" to
mean, not the amount actually received by an employee, but 1/12 of their
standard monthly wage multiplied by their length of service within a given
calendar year. Thus, we exclude from the computation of "basic salary" payments
for sick, vacation and maternity leaves, night differentials, regular holiday pay
and premiums for work done on rest days and special holidays. 15 In Hagonoy
Rural Bank v. NLRC,16 St. Michael Academy v. NLRC,17 Consolidated Food
Corporation v. NLRC,18 and similar cases, the 13th month pay due an employee
was computed based on the employees basic monthly wage multiplied by the
number of months worked in a calendar year prior to separation from
employment.
The revised guidelines also provided for a pro-ration of this benefit only in cases
of resignation or separation from work. As the rules state, under these
circumstances, an employee is entitled to a pay in proportion to the length of time
he worked during the year, reckoned from the time he started working during the
calendar year.19 The Court of Appeals thus held that:
Considering the foregoing, the computation of the 13th month pay should be
based on the length of service and not on the actual wage earned by the worker.
In the present case, there being no gap in the service of the workers during the
calendar year in question, the computation of the 13th month pay should not be
pro-rated but should be given in full.20 (Emphasis supplied)
More importantly, it has not been refuted that Honda has not implemented any
pro-rating of the 13th month pay before the instant case. Honda did not adduce
evidence to show that the 13th month, 14th month and financial assistance benefits
were previously subject to deductions or pro-rating or that these were dependent
upon the companys financial standing. As held by the Voluntary Arbitrator:
The Company (Honda) explicitly accepted that it was the strike held that
prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a] state
of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and 215M
lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the
strike, a full month basic pay computation was the "present practice" intended
to be maintained in the CBA.21
The memorandum dated November 22, 1999 which Honda issued shows that it
was the first time a pro-rating scheme was to be implemented in the company. It
was a convenient coincidence for the company that the work stoppage held by
the employees lasted for thirty-one (31) days or exactly one month. This enabled
them to devise a formula using 11/12 of the total annual salary as base amount
for computation instead of the entire amount for a 12-month period.
That a full month payment of the 13th month pay is the established practice at
Honda is further bolstered by the affidavits executed by Feliteo Bautista and
Edgardo Cruzada. Both attested that when they were absent from work due to
motorcycle accidents, and after they have exhausted all their leave credits and
were no longer receiving their monthly salary from Honda, they still received the
full amount of their 13th month, 14th month and financial assistance pay.22
The case of Davao Fruits Corporation v. Associated Labor Unions, et
al.23 presented an example of a voluntary act of the employer that has ripened
into a company practice. In that case, the employer, from 1975 to 1981, freely
and continuously included in the computation of the 13 th month pay those items
that were expressly excluded by the law. We have held that this act, which was
favorable to the employees though not conforming to law, has ripened into a
practice and therefore can no longer be withdrawn, reduced, diminished,
discontinued or eliminated. Furthermore, in Sevilla Trading Company v.
Semana,24 we stated:
With regard to the length of time the company practice should have been
exercised to constitute voluntary employer practice which cannot be unilaterally
withdrawn by the employer, we hold that jurisprudence has not laid down any rule
requiring a specific minimum number of years. In the above quoted case
of Davao Fruits Corporation vs. Associated Labor Unions, the company practice
lasted for six (6) years. In another case, Davao Integrated Port Stevedoring
Services vs. Abarquez, the employer, for three (3) years and nine (9) months,
approved the commutation to cash of the unenjoyed portion of the sick leave with
pay benefits of its intermittent workers. While in Tiangco vs. Leogardo, Jr. the
employer carried on the practice of giving a fixed monthly emergency allowance
from November 1976 to February 1980, or three (3) years and four (4)
months. In all these cases, this Court held that the grant of these benefits
has ripened into company practice or policy which cannot be peremptorily
withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of
including non-basic benefits such as paid leaves for unused sick leave and
vacation leave in the computation of their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes voluntary employer practice which
cannot be unilaterally withdrawn by the employer without violating Art. 100
of the Labor Code.25 (Emphasis supplied)
Lastly, the foregoing interpretation of law and jurisprudence is more in keeping
with the underlying principle for the grant of this benefit. It is primarily given to
alleviate the plight of workers and to help them cope with the exorbitant
increases in the cost of living. To allow the pro-ration of the 13 th month pay in this
case is to undermine the wisdom behind the law and the mandate that the
workingmans welfare should be the primordial and paramount
consideration.26 What is more, the factual milieu of this case is such that to rule
otherwise inevitably results to dissuasion, if not a deterrent, for workers from the
free exercise of their constitutional rights to self-organization and to strike in
accordance with law.27
WHEREFORE, the instant petition is DENIED. The decision and the resolution of
the Court of Appeals dated September 14, 2000 and October 18, 2000,
respectively, in CA-G.R. SP No. 59052, affirming the decision rendered by the
Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto.
SO ORDERED