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MILAGROS PANUNCILLO, G.R. No. 161305

Petitioner,
Present:

QUISUMBING, Chairperson,
CARPIO,
-versus- CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

CAP PHILIPPINES, INC., Promulgated:

Respondent.
February 9, 2007

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

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review[1] are the Decision dated May 16, 2003[2] and Resolution dated November 17, 2003[3] of the Court of Appeals

in CA-G.R. SP No. 74665 which declared valid the dismissal of Milagros Panuncillo (petitioner) by CAP Philippines, Inc. (respondent).

Petitioner was hired on August 28, 1980 as Office Senior Clerk by respondent. At the time of her questioned separation from respondent

on April 23, 1999, she was receiving a monthly salary of P16,180.60.

In order to secure the education of her son, petitioner procured an educational plan (the plan) from respondent which she had fully paid but

which she later sold to Josefina Pernes (Josefina) for P37,000. Before the actual transfer of the plan could be effected, however, petitioner

pledged it for P50,000 to John Chua who, however, sold it to Benito Bonghanoy. Bonghanoy in turn sold the plan to Gaudioso R. Uy

for P60,000.

Having gotten wind of the transactions subsequent to her purchase of the plan, Josefina, by letter of February 10, 1999,[4] informed
respondent that petitioner had swindled her but that she was willing to settle the case amicably as long as petitioner pay the amount involved

and the interest. She expressed her appreciation if [respondent] could help her in anyway.

Acting on Josefinas letter, the Integrated Internal Audit Operations (IIAO) of respondent required petitioner to explain in writing why the plan

had not been transferred to Josefina and was instead sold to another. Complying, petitioner proffered the following explanation:

Because of extreme need of money, I was constrained to sell my CAP plan of my son to J. Pernes last July, 1996, in the
amount of Thirty Seven Thousand Pesos (P37,000.) The plan was not transferred right away because of lacking
requirement on the part of the buyer (birth certificate). The birth certificate came a month later. While waiting for the birth
certificate, again because of extreme need of money, I was tempted to pawned [sic] the plan, believing I can redeemed
[sic] it later when the birth certificate will come.

Last year, I was already pressured by J. Pernes for the transfer of the plan. But before hand, she already knew the present
situation. I was trying to find means to redeemed [sic] the plan but to no avail. I cannot borrow anymore from my creditors
because of outstanding loans which remains unpaid. As of the present, I am heavily debtladen and I dont know where to
run.

I cant blame the person whom I pawned the plan if he had sold it. I cant redeemed [sic] it anymore. Everybody needs
money and besides, I have given them my papers.
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I admit, I had defrauded Ms. J. Pernes, but I didnt do it intentionally. At first, I believe I can redeem the plan hoping I can
still borrow from somebody.
With my more than 18 years stay with the company, I dont have the intention of ruining my image as well as the
companys. I think I am just a victim of circumstances.[5] (Emphasis and underscoring supplied)

A show-cause memorandum[6] dated February 23, 1999 was thereupon sent to petitioner, giving her 48 hours from receipt thereof to explain

why she should not be disciplinarily dealt with. Petitioner did not comply, however.

The IIAO of respondent thus conducted an investigation on the matter. By Memorandum of April 5, 1999,[7] the IIAO recommended that,

among other things, administrative action should be taken against petitioner for violating Section 8.4 of respondents Code of Discipline

reading:

Committing or dealing any act or conniving with co-employees or anybody to defraud the company or customer/sales
associates.

In the same memorandum, the IIAO reported other matters bearing on petitioners duties as an employee, to wit:

OTHERS:
We also received a copy of demand letter of a certain Evelia Casquejo addressed to Ms. Panuncillo requiring the latter to
pay the amount of P54,870.00 for the supposed transfer of the lapsed plan of Subscriber Corazon Lintag with SFA # 25-
67-40-01-00392. Ms. Panuncillo received the payment of P25,000.00 and P29,870.00 on July 17, 1997 and July 18,
1997 respectively (Exhibits L&M).

Ms. Panuncillo verbally admitted that she was the one who sold the plan to Ms. Casquejo but with the authorization from
Ms. Lintag. However, the transfer was not effected because she had misappropriated a portion of the money until the plan
was terminated. Ms. Casquejo, however, did not file a complaint because Ms. Panuncillo executed a Special Power of
Attorney authorizing the former to receive P68,000 of Ms. Panuncillos retirement pay (Exhibit N).[8] (Emphasis in the
original; underscoring supplied))

On April 7, 1999, another show-cause memorandum was sent to petitioner by Renato M. Daquiz (Daquiz), First Vice President of

respondent, giving her another 48 hours to explain why she should not be disciplinarily dealt with in connection with the complaints of

Josefina and Evelia Casquejo (Evelia). Complying with the directive, petitioner, by letter of April 10, 1999, on top of reiterating her admission of

having defrauded Josefina, admitted having received from Evelia the payment for a lapsed plan, thus:

With regards to [Evelias] case, yes its [sic] true I had received the payment but it was accordingly given to the owner or
Subscriber Ms. C. Lintag. The plan was not transferred because it was already forfeited and we, Ms. Lintag, [Evelia] and I
already made settlement of the case.

I think I have violated Sec. 8.4 of the companys Code of Discipline. I admit it is my wrongdoing. I was only forced to do this
because of extreme needs to pay for my debts. I am open for whatever disciplinary action that will be sanctioned againts
[sic] me. I hope it is not termination from my job.How can I pay for obligations if that will happen to me.

As for [Josefina], I have the greatest desire to pay for my indebtedness but my capability at the moment is nil. (space) I
have been planning to retire early just to pay my obligations. That is why I had written to you last year inquiring tax
exemption when retiring. I have been with the company for almost 19 years already and I never intend [sic] to smear its
name as well as mine. I was only forced by circumstances. Although it hurts to leave CAP, I will be retiring on April 30,
1999.

x x x x[9] (Emphasis and underscoring supplied)

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Respondent thereupon terminated the services of petitioner by Memorandum dated April 20, 1999.[10]

Petitioner sought reconsideration of her dismissal, by letter of April 23, 1999 addressed to Daquiz, imploring as follows:

. . . Please consider my retirement letter I sent to you. I would like to avail [of] the retirement benefit of the company. The
proceeds of my retirement could help me pay some of my obligations as well as the needs of my family. My husband is
jobless and I am the breadwinner of the family. If I will be terminated, I dont know what will happen to us.

Sir, I am enclosing the affidavit of Ms. Evelia Casquejo proving that we have already settled the case.

x x x x[11] (Underscoring supplied)

Pending resolution of petitioners motion for reconsideration, respondent received a letter dated April 28, 1999 [12] from one Gwendolyn N.

Dinoro (Gwendolyn) who informed that she had been paying her quarterly dues through petitioner but found out that none had been remitted to

respondent, on account of which she (Gwendolyn) was being penalized with interest charges.

Acting on petitioners motion for reconsideration, Daquiz, by letter-memorandum of May 5, 1999, denied the same in this wise:

A review of your case was made per your request, and we note that it was not just a single case but multiple cases, that of
Ms. Casquejo, Ms. Pernes, and newly reported Ms. Dinoro. Furthermore, the cases happened way back in July 1996 and
1997, and were just discovered recently. In addition, the misappropriation of money/or act to defraud the company or
customer was deliberate and intentional. There were several payments received over a period of time. While you plead for
your retirement benefit to help you pay some of your obligations, as well as the need of your family (your husband being
jobless and being the breadwinner), these thoughts should have crossed your mind before you committed the violations
rather than now. To allow you to retire with benefits, is to tolerate and encourage others to do the same in the future, as it
will be a precedent that will surely be invoked in similar situations in the future, as it will be a precedent that will surely be
invoked in similar situations in the future. It is also unfair to others who do their jobs faithfully and honestly. If we let you
have your way, it will appear that we let you scot-free and even reward you with retirement someone who deliberately
violated trust and confidence of the company and customers.

Premises considered, the decision to terminate your services for cause stays and the request for reconsideration is denied.

x x x x[13] (Emphasis and underscoring supplied)

Petitioner thus filed a complaint[14] for illegal dismissal, 13th month pay, service incentive leave pay, damages and attorneys fees

against respondent.

The Labor Arbiter, while finding that the dismissal was for a valid cause, found the same too harsh. He thus ordered the reinstatement of

petitioner to a position one rank lower than her previous position, and disposed as follows:

WHEREFORE, the foregoing considered, judgement [sic] is hereby rendered directing the respondent to pay complainants
13th Month pay and Service Incentive Leave Pay for 1999 in proportionate amount computed as follows:

13th Month Pay

January 1, 1999 to April 1, 1999
= 3 months
= P16,180.60/12 mos. x 3 mos. P4,045.14

Service Incentive Leave

= P16,180.60/26 days
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=P622.30 per day x 5 days/12 months. 777.87

TOTAL --------------------------------P4,823.01
Plus P482.30 ten (10%) Attorneys Fees or a total aggregate amount of PESOS: FIVE THOUSAND THREE HUNDRED FIVE &
31/100 (P5,305.31).

Respondent is likewise, directed to reinstate the complainant to a position one rank lower without
backwages.[15] (Underscoring supplied)

On appeal, the National Labor Relations Commission (NLRC), by Decision of October 29, 2001, reversed that of the Labor Arbiter, it finding

that petitioners dismissal was illegal and accordingly ordering her reinstatement to her former position. Thus it disposed:

WHEREFORE, the Decision in the main case dated February 18, 2000 of the Labor Arbiter declaring the dismissal of the
complainant valid, and his Order dated June 26, 2000 declaring the Motion to Declare Respondent-appellant in Contempt
as prematurely filed and ordering the issuance of an alias writ of execution are hereby SET ASIDE, and a new one is
rendered DECLARING the dismissal of the complainant illegal, and ORDERING the respondent, CAP PHILIPPINES,
INCORPORATED, the following:

1. to reinstate the complainant MILAGROS B. PANUNCILLO to her former position without loss of seniority rights and with full
backwages from the date her compensation was withheld from her on April 20, 1999 until her actual reinstatement;

2. to pay to the same complainant P4,045.14 as 13th month pay, and P777.89 as service incentive leave pay;

3. to pay to the same complainant moral damages of FIFTY THOUSAND PESOS (P50,000.00), and exemplary damages of
another FIFTY THOUSAND PESOS (P50,000.00);

4. to pay attorneys fees equivalent to ten percent (10%) of the total award exclusive of moral and exemplary damages.
Further, the complainants Motion to Declare Respondent in Contempt dated May 3, 2000 is denied and rendered moot by
virtue of this Decision.

All other claims are dismissed for lack of merit.[16] (Underscoring supplied)

In so deciding, the NLRC held that the transaction between petitioner and Josefina was private in character and, therefore,

respondent did not suffer any damage, hence, it was error to apply Section 8.4 of respondents Code of Discipline.

Respondent challenged the NLRC Decision before the appellate court via Petition for Certiorari. [17] By Decision of May 16, 2003,[18] the

appellate court reversed the NLRC Decision and held that the dismissal was valid and that respondent complied with the procedural

requirements of due process before petitioners services were terminated.

Hence, the present petition, petitioner faulting the appellate court

x x x IN REVIEWING THE FINDINGS OF FACT OF THE LABOR ARBITER AND THE NATIONAL LABOR RELATIONS COMMISSION
THAT RESPONDENT CAP PHILIPPINES, INC., HAS NOT BEEN DEFRAUDED NOR DAMAGED IN THE TRANSACTION/S ENTERED
INTO BY PETITIONER RELATING TO HER FULLY PAID EDUCATIONAL PLAN.

II

x x x IN HOLDING THAT RESPONDENT CAP PHILIPPINES, INC. IS THE INSURER OF PETITIONERS FULLY PAID EDUCATIONAL
PLAN UNDER THE INSURANCE CODE.

III

x x x IN HOLDING THAT PETITIONER WAS DULY AFFORDED DUE PROCESS BEFORE DISMISSAL[,]
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and maintaining that she

IV

x x x IS ENTITLED TO HER FULL BACKWAGES FROM THE DATE HER COMPENSATION WAS WITHHELD FROM HER ON APRIL
20, 1999 PURSUANT TO THE DECISION OF THE NLRC REINSTATING HER TO HER PREVIOUS POSITION WITH FULL
BACKWAGES AND SETTING ASIDE THE DECISION OF THE LABOR ARBITER REINSTATING HER TO A POSITION NEXT LOWER
IN RANK, UNTIL THE REVERSAL OF THE NLRC DECISION BY THE HONORABLE COURT OF APPEALS. [19] (Emphasis and
underscoring supplied)

The petition is not meritorious.

Whether respondent did not suffer any damage resulting from the transactions entered into by petitioner, particularly that with Josefina, is

immaterial. As Lopez v. National Labor Relations Commission instructs:

That the [employer] suffered no damage resulting from the acts of [the employee] is inconsequential. In Glaxo Wellcome
Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA), we held that deliberate disregard or
disobedience of company rules could not be countenanced, and any justification that the disobedient employee might put
forth would be deemed inconsequential. The lack of resulting damage was unimportant, because the heart of the charge is
the crooked and anarchic attitude of the employee towards his employer. Damage aggravates the charge but its absence
does not mitigate nor negate the employees liability. x x x[20] (Italics in the original; underscoring supplied)

The transaction with Josefina aside, there was this case of misappropriation by petitioner of the amounts given to her by Evelia representing

payment for the lapsed plan of Corazon Lintag. While a settlement of the case between the two may have eventually been forged, that did

not obliterate the misappropriation committed by petitioner against a client of respondent.

Additionally, there was still another complaint lodged before respondent by Gwendolyn against petitioner for failure to remit the cash

payments she had made to her, a complaint she was apprised of but on which she was silent.

In fine, by petitioners repeated violation of Section 8.4 of respondents Code of Discipline, she violated the trust and confidence of

respondent and its customers. To allow her to continue with her employment puts respondent under the risk of being embroiled in

unnecessary lawsuits from customers similarly situated as Josefina, et al. Clearly, respondent exercised its management prerogative when it

dismissed petitioner.

. . . [T]ime and again, this Court has upheld a companys management prerogatives so long as they are exercised in good
faith for the advancement of the employers interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements.

Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever maybe the
justification behind the violations is immaterial at this point, because the fact still remains that an infraction of the
company rules has been committed.

Under the Labor Code, the employer may terminate an employment on the ground of serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or representative in connection with his
work. Infractions of company rules and regulations have been declared to belong to this category and thus are valid
causes for termination of employment by the employer.

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The employer cannot be compelled to continue the employment of a person who was found guilty of maliciously
committing acts which are detrimental to his interests. It will be highly prejudicial to the interests of the employer to
impose on him the charges that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if
the undeserving, if not undesirable, remain in the service. It may encourage him to do even worse and will render a
mockery of the rules of discipline that employees are required to observe. This Court was more emphatic in holding that in
protecting the rights of the laborer, it cannot authorize the oppression or self-destruction of the employer.[21] x x
x (Underscoring supplied)

Petitioner nevertheless argues that she was not afforded due process before her dismissal as she was merely required to answer a

show-cause memorandum dated April 7, 1999 and there was no actual investigation conducted in which she could have been heard.

Before terminating the services of an employee, the law requires two written notices: (1) one to apprise him of the particular acts or

omissions for which his dismissal is sought; and (2) the other to inform him of his employers decision to dismiss him. As to the requirement

of a hearing, the essence of due process lies in an opportunity to be heard, and not always and indispensably in an actual hearing.[22]

When respondent received the letter-complaint of Josefina, petitioner was directed to comment and explain her side thereon. She did

comply, by letter of February 22, 1999 wherein she admitted that she had defrauded Ms. J. Pernes, but [that she] didnt do it intentionally.

Respondent subsequently sent petitioner a show-cause memorandum giving her 48 hours from receipt why she should not be disciplinarily

sanctioned. Despite the 48-hour deadline, nothing was heard from her until April 10, 1999 when she complied with the second show-cause

memorandum dated April 7, 1999.

On April 20, 1999, petitioner was informed of the termination of her services to which she filed a motion for reconsideration.

There can thus be no doubt that petitioner was given ample opportunity to explain her side. Parenthetically, when an employee

admits the acts complained of, as in petitioners case, no formal hearing is even necessary.[23]

Finally, petitioner argues that even if the order of reinstatement of the NLRC was reversed on appeal, it is still obligatory on the part of an

employer to reinstate and pay the wages of a dismissed employee during the period of appeal, citing Roquero v. Philippine

Airlines,[24] thethird paragraph of Article 223[25] of the Labor Code, and the last paragraph of Section 16, [26] Rule V of the then 1990 New

Rules of Procedure of the NLRC.

Petitioner adds that respondent made clever moves to frustrate [her] from enjoying the reinstatement aspect of the decision starting from

that of the Labor Arbiter (although to a next lower rank), [to that] of the NLRC to her previous position without loss of seniority rights until it

was caught up by the decision of the Honorable Court of Appeals reversing the decision of the NLRC and declaring the dismissal of petitioner

as based on valid grounds.

Respondent, on the other hand, maintains that Roquero and the legal provisions cited by petitioner are not applicable as they speak of

reinstatement on order of the Labor Arbiter and not of the NLRC.

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The Labor Arbiter ordered the reinstatement of petitioner to a lower position. The third paragraph of Article 223 of the Labor Code is clear,

however the employee, who is ordered reinstated, must be accepted back to work under the same terms and conditions prevailing prior to

his dismissal or separation.

Petitioners being demoted to a position one rank lower than her original position is certainly not in accordance with the said third

paragraph provision of Article 223. Besides, the provision contemplates a finding that the employee was illegally dismissed or there was no

just cause for her dismissal. As priorly stated, in petitioners case, the Labor Arbiter found that there was just cause for her dismissal, but that

dismissal was too harsh, hence, his order for her reinstatement to a lower position.

The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. Thus this Court declared in Colgate

Palmolive Philippines, Inc. v. Ople:

The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in
conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the evidence was
sufficient to warrant the dismissal of the employees the law warrants their dismissal without making any distinction
between a first offender and a habitual delinquent. Under the law, respondent Minister is duly mandated to equally protect
and respect not only the labor or workers side but also the management and/or employers side. The law, in protecting the
rights of the laborer, authorizes neither oppression nor self-destruction of the employer. x x x As stated by Us in the case of
San Miguel Brewery vs. National Labor Union, an employer cannot legally be compelled to continue with the employment of
a person who admittedly was guilty of misfeasance or malfeasance towards his employer, and whose continuance in the
service of the latter is patently inimical to his interest.[27] (Emphasis and underscoring supplied)

The NLRC was thus correct when it ruled that it was erroneous for the Labor Arbiter to order the reinstatement of petitioner, even to

a position one rank lower than that which she formerly held. [28]

Now, on petitioners argument that, following the third paragraph of Article 223 of the Labor Code, the order of the NLRC to reinstate

her and to pay her wages was immediately executory even while the case was on appeal before the higher courts: The third paragraph of

Article 223 of the Labor Code directs that the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the

reinstatement aspect is concerned, shall immediately be executory, even pending appeal.

In Roquero, the Labor Arbiter upheld the dismissal of Roquero, along with another employee, albeit he found both the two and employer

Philippine Airlines (PAL) at fault. The Labor Arbiter thus ordered the payment of separation pay and attorneys fees to the complainant. No

order for reinstatement was issued by the Labor Arbiter, precisely because the dismissal was upheld.

On appeal, the NLRC ruled in favor of Roquero and his co-complainant as it also found PAL guilty of instigation. The NLRC thus

ordered the reinstatement of Roquero and his co-complainant to their former positions, but without backwages.

PAL appealed the NLRC decision via Petition for Review before this Court. Roquero and his co-complainant did not. They instead filed
before the Labor Arbiter a Motion for Execution of the NLRC order for their reinstatement which the Labor Arbiter granted.

Acting on PALs Petition for Review, this Court referred it to the Court of Appeals pursuant to St. Martin Funeral Home v. NLRC.[29]
 Page |8

The appellate court reversed the NLRC decision and ordered the reinstatement of the decision of the Labor Arbiter but only insofar

as it upheld the dismissal of Roquero.

Back to this Court on Roqueros Petition for Review, the following material issues were raised:

xxxx
2. Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunals order be halted by a
petition having been filed in higher courts without any restraining order or preliminary injunction having been
ordered in the meantime?
3. Would the employer who refused to reinstate an employee despite a writ duly issued be held liable to pay the salary of
the subject employee from the time that he was ordered reinstated up to the time that the reversed decision was
handed down?[30]

Resolving these issues, this Court held in Roquero:

Article 223 (3rd paragraph) of the Labor Code as amended by Section 12 of Republic Act No. 6715, and Section 2 of the
NLRC Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, provide that an order of reinstatement by
the Labor Arbiter is immediately executory even pending appeal. The rationale of the law has been explained in Aris (Phil.)
Inc. vs. NLRC:

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating
a dismissed or separated employee, the law itself has laid down a compassionate policy which, once more,
vivifies and enhances the provisions of the 1987 Constitution on labor and the working man.

xxxx
These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman
as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution
also expressly affirms with equal intensity. Labor is an indispensable partner for the nations progress and
stability.

xxxx

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite the
issuance of a writ of execution. Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter to
implement the order of reinstatement. In the case at bar, no restraining order was granted. Thus, it was mandatory on PAL
to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so, PAL must pay Roquero the salary he is
entitled to, as if he was reinstated, from the time of the decision of the NLRC until the finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied only in a
suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat them. Hence, even if the order
of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay
the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if
the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality,
the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually
rendered services during the period.[31] (Italics in the original, emphasis and underscoring supplied)

In the present case, since the NLRC found petitioners dismissal illegal and ordered her reinstatement, following the provision of the

sixth paragraph of Article 223, viz:

 Page |9

The [National Labor Relations] Commission shall decide all cases within twenty (20) calendar days from receipt of the
answer of the appellee. The decision of the Commission shall be final and executory after ten (10) calendar days from
receipt thereof by the parties. (Emphasis and underscoring supplied),

the NLRC decision became final and executory after ten calendar days from receipt of the decision by the parties for reinstatement.

In view, however, of Article 224 of the Labor Code which provides:

ART. 224. Execution of decisions, orders or awards. (a) The Secretary of Labor and Employment or any Regional Director,
the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of any
interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory,
requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards of the Secretary of
Labor and Employment or regional director, the Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In
any case, it shall be the duty of the responsible officer to separately furnish immediately the counsels of record and the
parties with copies of said decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such
responsible officer to appropriate administrative sanctions.

x x x x (Emphasis and underscoring supplied),

there was still a need for the issuance of a writ of execution of the NLRC decision.

Unlike then the order for reinstatement of a Labor Arbiter which is self-executory, that of the NLRC is not. There is still a need for the

issuance of a writ of execution. Thus this Court held in Pioneer Texturizing Corp. v. NLRC:[32]

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall
be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for
reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable,
even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of
a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the
immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance
could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an
inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught
the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article
224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory
nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered
ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates
no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the
purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a
labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic
exercise. On appeal, however, the appellate tribunal concerned may enjoin or suspend the reinstatement order in the
exercise of its sound discretion.[33] (Italics in the original, emphasis and underscoring supplied)

If a Labor Arbiter does not issue a writ of execution of the NLRC order for the reinstatement of an employee even if there is no

restraining order, he could probably be merely observing judicial courtesy, which is advisable if there is a strong probability that the issues

before the higher court would be rendered moot and moribund as a result of the continuation of the proceedings in the lower court.[34] In

such a case, it is as if a temporary restraining order was issued, the effect of which Zamboanga City Water District v. Buhat explains:

The issuance of the temporary restraining order did not nullify the rights of private respondents to their reinstatement and to
collect their wages during the period of the effectivity of the order but merely suspended the implementation thereof pending
the determination of the validity of the NLRC resolutions subject of the petition. Naturally, a finding of this Court that private
respondents were not entitled to reinstatement would mean that they had no right to collect any back wages. On the other
hand, where the Court affirmed the decision of the NLRC and recognized the right of private respondents to reinstatement,
 P a g e | 10

private respondents are entitled to the wages accruing during the effectivity of the temporary restraining order.[35] (Emphasis
and underscoring supplied)

While Zamboanga was decided prior to St. Martin Funeral and, therefore, the NLRC decisions were at the time passed upon by this

Court to the exclusion of the appellate court, it is still applicable.

Since this Court is now affirming the challenged decision of the Court of Appeals finding that petitioner was validly dismissed and

accordingly reversing the NLRC Decision that petitioner was illegally dismissed and should be reinstated, petitioner is not entitled to collect

any backwages from the time the NLRC decision became final and executory up to the time the Court of Appeals reversed said decision.

It does not appear that a writ of execution was issued for the implementation of the NLRC order for reinstatement. Had one been issued,

respondent would have been obliged to reinstate petitioner and pay her salary until the said order of the NLRC for her reinstatement was

reversed by the Court of Appeals, and following Roquero, petitioner would not have been obliged to reimburse respondent for whatever salary

she received in the interim.

IN SUM, while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC becomes final and executory after the

lapse of ten calendar days from receipt thereof by the parties, the adverse party is not precluded from assailing it via Petition for Certiorari

under Rule 65 before the Court of Appeals and then to this Court via a Petition for Review under Rule 45. If during the pendency of the review

no order is issued by the courts enjoining the execution of a decision of the Labor Arbiter or NLRC which is favorable to an employee, the Labor

Arbiter or the NLRC must exercise extreme prudence and observe judicial courtesy when the circumstances so warrant if we are to heed the

injunction of the Court in Philippine Geothermal, Inc v. NLRC:

While it is true that compassion and human consideration should guide the disposition of cases involving termination of
employment since it affects ones source or means of livelihood, it should not be overlooked that the benefits accorded to
labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross
liability to the employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction
of the employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of
the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the
two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini
neganda est (Justice is to be denied to none).[36] (Italics in the original; emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. The assailed Court of Appeals Decision dated May 16, 2003 and Resolution dated November 17,

2003 are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice
 P a g e | 11

MT. CARMEL COLLEGE, G.R. No. 173076

Petitioner, Present:

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and
- versus -
REYES, JJ.

Promulgated:

JOCELYN RESUENA, EDDIE VILLALON, SYLVIA SEDAYON and

ZONSAYDA EMNACE, October 10, 2007

Respondents.
x-------------------------------------------------x

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, petitioner seeks the reversal of the Decision[1] dated 2

June 2006 of the Court of Appeals in CA-G.R. CEB-SP No. 01615 entitled, Mt. Carmel College v. National Labor Relations Commission, Labor

Arbiter Phibun D. Pura, Jocelyn Resuena, et al. Petitioner seeks remedy from this Court for an alleged illegal execution of the

Decision[2] dated 30 October 2001 by the National Labor Relations Commission (NLRC) in NLRC CASE No. V-000176-2000 (RAB CASE Nos.

06-06-10393-98; 06-06-10394-98; 06-06-10395-98; 06-06-10414-98) as affirmed by the Court of Appeals in CA-G.R. SP No. 80639 in a

Decision[3] dated 17 March 2004, insisting it was not in accord with the dispositive portion thereof. Petitioner is not appealing the judgment

itself but the manner of execution of the same.

The following are the factual antecedents of the instant Petition:

 P a g e | 12

Petitioner Mt. Carmel College is a private educational institution. It is administered by the Carmelite Fathers at New Escalante, Negros

Occidental. Respondents were employees of petitioner, namely: Jocelyn Resuena (Accounting Clerk), Eddie Villalon (Elementary Department

Principal); Sylvia Sedayon (Treasurer), and Zonsayda Emnace (Secretary to the Director).

On 21 November 1997, respondents, together with several faculty members, non-academic personnel, and other students, participated in a

protest action against petitioner. Thereafter, petitioners Director, Rev. Fr. Modesto E. Malandac, issued a Memorandum to each of the

respondents. The Memorandum directed respondents to explain in writing why they should not be dismissed for loss of trust and confidence

for joining the protest action against the school administration. Petitioner maintained that respondents were occupying positions of highly

confidential nature. After a hearing conducted by petitioners Fact-Finding Committee and submission of its Report on 25 April 1998,

recommending dismissal or suspension of respondents, petitioner issued written notices of termination to respondents on 7 May

1998.Respondents were terminated by petitioner on 15 May 1998.

Separate complaints were filed by each of the four respondents against petitioner before Regional Arbitration Branch VI of the NLRC

in Bacolod City. Respondents charged petitioner with illegal dismissal and claimed 13th month pay, separation pay, damages and attorneys

fees.The cases were docketed as RAB Cases No. 06-06-10393-98, 06-06-10394-98, 06-06-10395-98, and 06-06-10414-98. All four cases

were consolidated, and Labor Arbiter Ray T. Drilon thereafter issued a Decision[4] dated 25 May 1999 affirming the validity of respondents

termination by petitioner on the ground of loss of trust and confidence. Although the Decision found respondents to have been legally

dismissed, as equitable relief, however, they were awarded separation pay computed at one month pay for every year of service,[5] their

proportionate 13th month pay, and attorneys fees. Their claims for moral and exemplary damages were denied. In issuing the aforesaid

Decision, the Labor Arbiter ruled:

WHEREFORE, premises considered, judgment is hereby rendered ordering [herein petitioner] Mount Carmel College
represented by Fr. Modesto Malandac to pay [herein respondents] Jocelyn Resuena, Zonsayda Emnace, Eddie Villalon and
Sylvia Sedayon, their respective 13th month pay, separation pay and attorneys fee in the total sum of THREE HUNDRED
THIRTY-FOUR THOUSAND EIGHT HUNDRED SEVENTY-FIVE PESOS AND 67/100 (P334,875.47) to be deposited with this
office within ten (10) days from receipt of this decision.

The complaint for moral and exemplary damages is hereby dismissed for lack of legal basis.

All other claims are hereby dismissed for lack of merit.[6]

On 9 September 1999, Labor Arbiter Drilon issued to the parties a Notice of Judgment/Decision of his 25 May 1999 Decision. The notice

indicated that a decision of the Labor Arbiter reinstating a dismissed or separated employee, in so far as the reinstatement aspect is
 P a g e | 13

concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms

and conditions prevailing prior to his dismissal or separation or at the option of the employee (sic) merely reinstated in the payroll.[7]

In the meantime, petitioner appealed to the NLRC Fourth Division in Cebu City, seeking the reversal of the portion of the Labor Arbiters

Decision dated 25 May 1999 awarding separation pay to respondents. The NLRC dismissed the appeal in its Decision dated 30 October

2001.In the same Decision dismissing the appeal, the NLRC reversed and modified the 25 May 1999 Decision of the Labor Arbiter, and

declared the termination of respondents to be illegal. It ordered the reinstatement of respondents, with payment of backwages or payment of

separation pay in lieu thereof. The pertinent portion of the 30 October 2001 NLRC Decision reads:

We rule that complainants were illegally dismissed and must therefore be ordered reinstated with payment of backwages
from the time they were illegally dismissed up to the time of their actual reinstatement.

All other claims are hereby dismissed for lack of merit.

WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack of merit and the appealed decision is
hereby AFFIRMED with modification ordering the [herein petitioner] the payment of the backwages of the [herein
respondents] from May 15, 1998 up to May 25, 1999, further directing the reinstatement of the [respondents] to their
original positions without loss of seniority or in lieu thereof the payment of their separation pay as computed in the
appealed decision.[8]

Petitioner filed a Motion for Reconsideration of the 30 October 2001 Decision of the NLRC. The said Motion was denied in the 19 June

2003 Resolution of the NLRC.

The case was elevated to the Court of Appeals via a Special Civil Action for Certiorari and Prohibition, docketed as CA-G.R. SP No. 80639

where petitioner assailed the aforementioned NLRC Decision dated 30 October 2001 and Resolution dated 19 June 2003, arguing that there

is more than enough basis for loss of trust and confidence as ground for dismissing respondents. It also reiterated compliance with the twin

requirements of notice and hearing. The Court of Appeals denied the petition in a Decision promulgated on 17 March 2004, ruling thus:

Consequently, we find no grave abuse of discretion committed by the NLRC in ruling that [herein respondents] have been
illegally dismissed. Likewise, said [NLRC] correctly held that even if such participation of [respondents] in the protest picket
is rather improper under the circumstances or disappointing to the School Administrator who had rightly expected them to
take the side of the administration or at least stayed neutral on the demand for ouster of Fr. Malandac and Barairo,
dismissal is definitely too harsh where a less punitive action such as reprimand or disciplinary action would have been
sufficient. Considering the long years of faithful service of [respondents] in the School without previous record of
misconduct, as duly noted by the NLRC in its decision, their termination on the basis of alleged loss of confidence by taking
part in an otherwise legitimate and constitutionally-protected right to free speech and peaceful assembly, is certainly illegal
and unjustified.
 P a g e | 14

xxxx

Having been illegally dismissed, [respondents] are entitled to back wages from the time of their termination until
reinstatement, and if reinstatement is no longer possible, the grant of separation pay equivalent to one (1) month for every
year of service. However, in this case since the Labor Arbiter did not order reinstatement, the NLRC correctly excluded the
period of the appeal in the computation of back wages due to [respondents].

Finally, on the prayer for injunctive relief sought by petitioner on the ground that [public respondent] Labor Arbiter exceeded
his jurisdiction in issuing the writ of execution despite the fact that his decision did not order reinstatement and that he is
bereft of authority to implement the decision of the NLRC (Fourth Division).

xxxx

Considering that there is already an entry of judgment on the Decision dated October 30, 2001, and in view of Our
disposition of this petition, we find no more obstacle for the enforcement of the said judgment even pending appeal, in
accordance with Sections 1 and 2, Rule VIII of the NLRC Rules of Procedure, as amended, as well as Sections 2, 4 and 6,
Rule III of the NLRC Manual on Execution of Judgment.

xxxx

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED for
lack of merit. The assailed Decision and Resolution are AFFIRMED. [9]

No Motion for Reconsideration of the afore-quoted Court of Appeals Decision in CA-G.R. SP No. 80639 was filed and it became final and

executory on 14 April 2004.

At about the same time as the foregoing developments in CA-G.R. SP No. 80639, Labor Arbiter Phibun D. Pura issued an Order on 19 May

2003 opining on the self-executory nature of a reinstatement order:

To be sure the Court has not been consistent in its interpretation of Art. 223. The nagging issue has always been whether
the reinstatement order is self-executory. Citing the divergent views of the court beginning with Inciong v. NLRC followed by
the deviation in interpretation in Maranaw Hotel Corporation (Century Park Sheraton Manila) v. NLRC, as reiterated and
adopted in Archilles Manufacturing Corporation v. NLRC and Purificacion Ram v. NLRC, the Court in the 1997 Pioneer case
has laid down the doctrine that henceforth an Order or award for reinstatement is self-executory, meaning that it does not
require a writ of execution, much less a motion for its issuance, as maintained by petitioner. x x x.

Successive writs of execution pertaining to the backwages and accrued salaries of the respondents were issued by Labor Arbiter Pura on

these dates: 9 June 2003,[10] 10 December 2003,[11] and 20 January 2004.[12]

 P a g e | 15

The first writ of execution, issued on 9 June 2003, directed the sheriff to collect from petitioner, the amount of P503,028.05 representing

backwages from 15 May 1998 to 25 May 1999. Based on the Sheriffs Report dated 25 June 2003, reinstatement had not been

effected. There was a Notice of Garnishment issued to the Equitable-PCI Bank Escalante Branch. Labor Arbiter Pura ordered the release of the

garnished amount of P508,168.05 with the said bank for deposit to the Cashier of NLRC Regional Arbitration Branch VI

in Bacolod City. Petitioner moved to quash the Writ of Execution dated 9 June 2003. It was denied.

By 4 December 2003, the NLRC entered in its Book of Entries of Judgment its Decision dated 30 October 2001. The records of the case were

endorsed back to NLRC Regional Arbitration Branch VI for the execution of its final and executory decision, as no restraining order was issued

by the Court of Appeals.

After an exchange of pleadings, respondents filed an Ex-Parte Motion for Issuance of Writ of Execution with the Labor Arbiter considering that
the Entry of Judgment was already issued by the NLRC. On 10 December 2003, the Labor Arbiter granted the Motion and issued the second

Writ of Execution. On motion of respondents, the Labor Arbiter ordered the release to them of the garnished amount of P503,028.05

deposited with the Cashier of NLRC Regional Arbitration Branch VI.

However, the foregoing amount was considered to be only a partial payment of the monetary awards due the respondents and the unpaid

balance thereof continued to grow to P1,307,806.50. Respondents thus filed a motion for partial writ of execution, which the Labor Arbiter

granted by issuing the third Writ of Execution on 20 January 2004.[13] Under the foregoing writs of execution, the aggregate amount

of P1,736.592.08[14] was garnished by Bailiff/Acting Sheriff Romeo D. Pasustento, representing respondents accrued salaries, backwages,

attorneys fees and sheriffs fees computed from the promulgation of the NLRC Decision 30 October 2001.

Respondents filed on 14 July 2004 yet another Motion to Issue a Writ of Execution to collect backwages from 1 January 2004 to 30 June
2004. Petitioner opposed the motion, but the Motion to Issue a Writ of Execution was granted.

On 31 January 2005, Labor Arbiter Pura issued an Order [15] adopting the computation of the Fiscal Examiner of NLRC Regional Arbitration

Branch VI and issuing a writ of execution to enforce the NLRC Decision dated 30 October 2001. The dispositive portion of the said Order

reads:

In light of the foregoing, we have no choice but to adopt the computation of the RAB Fiscal Examiner, hereto attached and
forming part of the record of these cases and conformably thereto, we grant the Motion to Issue Writ of Execution on
backwages for the period stated in this computation, taking into consideration the grant of differentials as there are
benefits which accrued to the [herein respondents] and which they should have enjoyed had they been employed and/or
reinstated, as the case may be, and such other amount as may accrue until actually reinstated or in lieu of reinstatement,
to pay [respondents] separation pay to be computed at one (1) month salary for every year of service in addition to
backwages the formula adopted by the Labor Arbiter in the Decision dated May 25, 1999, page 7, paragraph 1.

Let therefore a Writ of Execution be, as it is hereby issued to enforce judgment in the above entitled cases.[16]
 P a g e | 16

On 8 February 2005, petitioner filed a Motion for Reconsideration of the foregoing Order contending that the judgment of the NLRC mandated

the payment of separation pay as computed in the appealed decision. Respondents likewise filed a Manifestation and Motion to include the

month of November 2004 in the computation. In an Order dated 10 February 2005, the Labor Arbiter denied the petitioners Motion for

Reconsideration. On 22 February 2005, he issued an Alias Writ of Execution[17] for the collection from petitioner of the amount

of P1,131,035.00 representing respondents backwages, separation pay, and attorneys fees. Petitioner filed a Motion to Quash the Alias Writ

of Execution on 17 March 2005.[18]

On 15 April 2005, the Labor Arbiter issued an Order where it found no compelling reason to warrant the grant of the Motion to Quash the Alias

Writ of Execution. The afore-stated Order thus reads:

WHEREFORE, for lack of merit the Motion to Quash the Alias Writ dated March 17, 2005 is denied. [Respondents] Motion
to Include February and March 2005 in the Computation of wages is hereby GRANTED. The entry of appearance of the
collaborating counsel is duly noted.[19]

From the said Order of the Labor Arbiter, petitioner filed with the NLRC an appeal with an application for issuance of a writ of preliminary

injunction on the execution of judgment, docketed as NLRC Case No. V-000377-05. Petitioner assailed the 15 April 2005 Order of the Labor

Arbiter averring that the latter seriously committed errors when he ordered the payment and garnishment of backwages beyond the period 15

May 1998 to 25 May 1999. The NLRC dismissed the petitioners appeal in a Resolution[20] dated 15 August 2005 for lack of

merit. Petitioner filed a Motion for Reconsideration but it was denied by the NLRC in a Resolution dated 30 November 2005, disposed of as

follows:

WHEREFORE, premises considered, the appeal of respondents is hereby DISMISSED for lack of merit. The 15 April
2005 Order of Labor Arbiter Phibun Pura is AFFIRMED.[21]

From the foregoing, petitioner filed with the Court of Appeals a Special Civil Action for Certiorari and Prohibition, docketed as CA-G.R. CEB-SP

No. 01615, praying for the setting aside and nullification of the Resolutions dated 15 August 2005 and 30 November 2005 of the NLRC in

NLRC Case No. V-000377-05. Petitioner contended that the NLRC acted with grave abuse of discretion when it denied its appeal and motion

for reconsideration and in not ruling that there was already satisfaction of judgment. The crux of petitioners case, as succinctly worded by the
Court of Appeals in CA-G.R. CEB-SP No. 01615:

[P]etitioner seeks to annul and set aside the resolutions dated August 15, 2005 and November 30, 2005 of the
respondent NLRC in NLRC Case No. V-000377-05 when the latter refuses to invalidate the various writs of executions and
to refund petitioner of whatever excess there might be on the theory that the execution done by the respondent Labor
 P a g e | 17

Arbiter was illegal and in fact goes beyond what is stated in the decision dated October 30, 2001 of the respondent NLRC
in NLRC Case No. V-000176-2000.[22]

The Court of Appeals eventually dismissed CA-G.R. CEB-SP No. 01615, ruling as follows:

Thus, petitioners avowal that their liability for private respondents backwages is limited from May 15, 1998 up to May 25,
1999 is untenable on these grounds:

First, there is no showing, in the case at bench, that petitioner exercised its option to reinstate private respondents to their
former position or to grant them separation pay. Accordingly, backwages have to be granted to private respondents until
their reinstatement to their former position is effected or upon petitioners payment of separation pay to private
respondents if reinstatement is no longer feasible; and

Second, the decision dated March 17, 2004 of the 17th Division of the Court of Appeals in CA-G.R. SP No. 80639
acquiesced the propriety of the issuance of the writs of execution by the respondent labor arbiter on June 9,
2003, December 10, 2003 and January 30, 2004. On April 14, 2004, the said decision which sanctioned the payment of
backwages even beyond May 25, 1999, became final and executory x x x.

xxxx

In light of the foregoing disquisition, we hereby find public respondent NLRC to have acted accordingly and without grave
abuse of discretion when it issued the questioned Resolutions dated August 15, 2005 and November 30, 2005,
respectively. Grave abuse of discretion means such capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction, or, in other words where the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law. It is not sufficient that a tribunal, in the exercise of power,
abused its discretion; such abuse must be grave.

WHEREFORE, in view of the foregoing, the present petition is hereby DISMISSED and the assailed Resolutions dated August
15, 2005 and November 30, 2005, respectively, issued by the respondent NLRC in NLRC Case No. V-000377-05 are
hereby AFFIRMED.[23]

Hence, petitioner filed the instant Petition for Review on Certiorari, raising the following issues:

I.
 P a g e | 18

THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE LABOR ARBITER AND THE NLRC THAT THE AWARD OF
BACKWAGES GOES BEYOND THE PERIOD FROM 15 MAY 1998 UP TO 25 MAY 1999 ON THE SUPPOSITION THAT
REINSTATEMENT IS SELF-EXECUTORY AND DOES NOT NEED A WRIT OF EXECUTION FOR ITS ENFORCEMENT.

II.

THE HONORABLE COURT OF APPEALS ERRED IN NOT FINIDING THAT THE CONTINUING GRANT AND AWARD OF
BACKWAGES UP TO THE PRESENT IS CONTRARY TO LAW AND JURISPRUDENCE AS LAID DOWN BY THIS HONORABLE
SUPREME COURT.

Petitioner prays that this Court render judgment (a) annulling and setting aside the assailed Decision on 02 June 2006 of the Court of Appeals

in CA-G.R. CEB-SP No. 01615 and all its orders and issuances; (b) ordering that backwages be computed and executed corresponding only to

the period from 15 May 1998 to 25 May 1999; (c) ordering that separation pay be computed based on the computation as originally

submitted by the Labor Arbiter, P344,875.47, which corresponds to the date of respondents employment until 15 May 1998; (d) that no other

award except for backwages for the period 15 May 1998 to 25 May 1999 and separation pay amounting to P344,875.47 shall be paid by

petitioner; and (e) that the respondents be ordered to refund and pay the alleged excess in the amounts garnished by virtue of the Writs of

Execution dated 9 June 2003, 10 December 2003, and 30 January 2004.

In sum, the resolution of this petition hinges on the following issues: (1) whether reinstatement in the instant case is self-executory

and does not need a writ of execution for its enforcement; and (2) whether the continuing award of backwages is proper.

Petitioner insists that what is at issue is the manner of execution of the NLRC Decision dated 30 October 2001 in NLRC CASE No. V-000176-

2000 (RAB CASE Nos. 06-06-10393-98; 06-06-10394-98; 06-06-10395-98; 06-06-10414-98), as affirmed by the Decision dated 17 March

2004 of the Court of Appeals in CA-G.R. No. 80639.

In ruling on the consolidated complaints filed by the four respondents, Labor Arbiter Drilon found that they were not illegally dismissed but

ordered that they be awarded 13th month pay, separation pay and attorneys fees in the amount of P334,875.47. Upon appeal to the NLRC,

the NLRC reversed the findings of the Labor Arbiter ruling that the termination of respondents was illegal and ordering the payment of

backwages of respondents from 15 May 1998 up to 25 May 1999. It further directed the reinstatement of respondents or payment of

separation pay, with backwages. This was affirmed by the Court of Appeals.

While petitioner concedes that the case pertaining to the complaints for illegal dismissal filed by the respondents before the Labor Arbiter had
been resolved with finality by the Court of Appeals in CA-G.R. No. 80639, no other remedy having been taken therefrom, it however assails the

correctness and validity of the execution of the judgment therein. Petitioner avers that the Court of Appeals erred in upholding the Labor

Arbiter and the NLRC that the award of backwages goes beyond the period 15 May 1998 to 25 May 1999 on the supposition that
 P a g e | 19

reinstatement is self-executory and does not need a writ of execution for its enforcement. Petitioner postulates that the Labor Arbiter went

beyond the terms of the NLRC Decision, as affirmed by the Court of Appeals, and erroneously used as bases inapplicable law [24] and

jurisprudence[25] in the execution of the same. Petitioner contends that the Labor Arbiters reliance on Pioneer Texturizing Corp. v. National

Labor Relations Commission[26] is misplaced, for it applied Article 223 of the Labor Code [27] since reinstatement was ordered at the Labor

Arbiters level while in the instant case, reinstatement was ordered upon appeal to the NLRC. Petitioner argues that the relevant statutory and

regulatory provisions herein are Article 224 of the Labor Code,[28] and Rule III of the NLRC Manual for Execution of Judgment, [29] given that

there was no order of reinstatement at the Labor Arbiter level but only at the NLRC level. Petitioner insists that, applying Article 224 of the

Labor Code in the instant case, any reinstatement aspect of the NLRC Decision, as affirmed by the Court of Appeals, should have been done

through the issuance of a Writ of Execution as it is no longer self-executory. It furthermore contends that it was impossible to reinstate

respondents, whether by way of an immediate execution or by way of a self-executory nature, since there was nothing to execute pending

appeal because there was no order for reinstatement.

Petitioner vehemently raises the argument that the award of backwages subject to execution is limited to the period prior to the appeal and

does not include the period during the pendency of the appeal, on the contention that reinstatement during appeal is warranted only when the

Labor Arbiter rules that the dismissed employee should be reinstated. In support of its foregoing argument, petitioner invokes Filflex Industrial

& Manufacturing Corporation v. National Labor Relations Commission[30] where this Court ruled:

In other words, reinstatement during appeal is warranted only when the labor arbiter (LA) himself rules that the dismissed
employee should be reinstated. In the present case, neither the dispositive portion nor the text of the labor arbiters
decision ordered the reinstatement of private respondent. Further, the back wages granted to private respondent were
specifically limited to the period prior to the filing of the appeal with Respondent NLRC. In fact, the LAs decision ordered
her separation from service for the parties mutual advantage and most importantly to physical and health welfare of the
complainant. Hence, it is an error and an abuse of discretion for the NLRC to hold that the award of limited back wages, by
implication, included an order for private respondents reinstatement.

An order for reinstatement must be specifically declared and cannot be presumed; like back wages, it is a separate and
distinct relief given to an illegally dismissed employee. There being no specific order for reinstatement and the order being
for complainants separation, there can be no basis for the award of salaries/back wages during the pendency of appeal.

Petitioners reliance on Filflex is misplaced and inapplicable to the case at bar. Indeed in Filflex, this Court ruled that the award of

backwages is limited to the period prior to the filing of the appeal with the NLRC. This Court had declared in the aforesaid case that

reinstatement during appeal is warranted only when the Labor Arbiter himself rules that the dismissed employee should be reinstated. But this

was precisely because on appeal to the NLRC, it found that there was no illegal dismissal; thus, neither reinstatement nor backwages may be
awarded. In fact, Filfex deleted the award of backwages granted during appeal, reiterating that an award of backwages by the NLRC during the

period of appeal is totally inconsistent with its finding of a valid dismissal. In the instant petition, the NLRC Decision dated 30 October

2001 finding the termination of respondents illegal, had the effect of reversing Labor Arbiter Drilons Decision dated 25 May 1999.
 P a g e | 20

This Court sees no cogent reason as to the relevance of a discussion on whether or not reinstatement is self-executory. However, since

petitioner raised this issue, this Court has opted to discuss it. Verily, Article 223 of the Labor Code is not applicable in the instant case. The

said provision stipulates that the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement

aspect is concerned, shall immediately be executory, even pending appeal.

Petitioner contends that the statutory provision applicable is Article 224 of the Labor Code, as well as Rule III, Section 2(b) of the NLRC

Manual on Execution of Judgment, because the case was decided on appeal. Furthermore, it is a decision which is of a final and executory

nature. The provisions invoked by petitioner reads:

Art. 224. Execution of decisions, orders or awards. -- (a) The Secretary of Labor and Employment or any Regional Director,
the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of any
interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory x
x x.[31]

If the execution be for the reinstatement of any person to any position, office or employment, such writ shall be served by
the sheriff upon the losing party or upon any other person required by law to obey the same, and such party or person may
be punished for contempt if he disobeys such decisions, order for reinstatement. [32]

The records of the case indicate that when Labor Arbiter Drilon issued its 25 May 1999 Decision, there was no order of reinstatement yet

although the dispositive portion of the 31 January 2005 Order issued by Labor Arbiter Pura already provided for reinstatement or payment of

separation pay, to wit:

In light of the foregoing, we have no choice but to adopt the computation of the RAB Fiscal Examiner, hereto attached and
forming part of the record of these cases and conformably thereto, we grant the Motion to Issue Writ of Execution on
backwages for the period stated in this computation, taking into consideration the grant of differentials as there are
benefits which accrued to the complainants and which they should have enjoyed had they been employed and/or
reinstated, as the case may be, and such other amount as may accrue until actually reinstated or in lieu of reinstatement,
to pay complainants separation pay to be computed at one (1) month salary for every year of service in addition to
backwages the formula adopted by the Labor Arbiter in the Decision dated May 25, 1999, page 7, paragraph 1.

Let therefore a Writ of Execution be, as it is hereby issued to enforce judgment in the above entitled cases. [33]

Art. 223 of the Labor Code provides that reinstatement is immediately executory even pending appeal only when the Labor Arbiter himself

ordered the reinstatement. In this case, the original Decision of Labor Arbiter Drilon did not order reinstatement. Reinstatement in this case

was actually ordered by the NLRC, affirmed by the Court of Appeals. The order of Labor Arbiter Pura on 31 January 2005 directing
 P a g e | 21

reinstatement was issued after the Court of Appeals Decision dated 17 March 2004 which affirmed the NLRCs order of reinstatement. Thus,

Art. 223 finds no application in the instant case. Considering that the order for reinstatement was first decided upon appeal to the NLRC and

affirmed with finality by the Court of Appeals in CA-G.R. SP 80369 on 17 March 2004, petitioner rightly invoked Art. 224 of the Labor Code. As

contemplated by Article 224 of the Labor Code, the Secretary of Labor and Employment or any Regional Director, the Commission or any Labor

Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment

within five (5) years from the date it becomes final and executory. Consequently, under Rule III of the NLRC Manual on the Execution of

Judgment, it is provided that if the execution be for the reinstatement of any person to a position, an office or an employment, such writ shall

be served by the sheriff upon the losing party or upon any other person required by law to obey the same, and such party or person may be

punished for contempt if he disobeys such decision or order for reinstatement.[34]

However, as we can glean from the succeeding discussion, the above findings will not affect the award of backwages for the period beyond 25

May 1999.

Anent the second issue, petitioner contends that the 25 May 1999 Decision of Labor Arbiter Drilon did not order the reinstatement of

respondents. Petitioner posits that since there was no finding of illegal dismissal at the Labor Arbiters level, then it follows that there was no

reinstatement aspect, and its liability for backwages is limited to the period from 15 May 1998 up to 25 May 1999, i.e., from dismissal to

promulgation of the Labor Arbiters Decision only, as allegedly determined by the NLRC in its Decision dated 30 October 2001. It argues that

while the said NLRC Decision awarded backwages from 15 May 1998 to 25 May 1999 only, the Writs of Execution issued pursuant thereto

ordered the payment of backwages way beyond the period stated in the Decision [35] it is supposed to execute.

Petitioners argument is absurd. Abbott v. National Labor Relations Commission,[36] as cited by petitioner, declared that there exists a big

difference when what is sought to be reviewed is the manner of execution of a decision and not the decision itself. While it is true that the
decision itself has become final and executory and so can no longer be challenged, there is no question that it must be enforced in

accordance with its terms and conditions. Any deviation therefrom can be the subject of a proper appeal.[37] In the instant case, however, the

manner of execution falls squarely within the terms of the Decision it seeks to implement.

The 30 October 2001 NLRC Decision ruled as follows:

We rule that complainants were illegally dismissed and must therefore be ordered reinstated with payment of backwages
from the time they were illegally dismissed up to the time of their actual reinstatement.

All other claims are hereby dismissed for lack of merit.

 P a g e | 22

WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack of merit and the appealed decision is
hereby AFFIRMED with modification ordering the respondents the payment of the backwages of the complainants from May
15, 1998 up to May 25, 1999, further directing the reinstatement of the complainants to their original positions without
loss of seniority or in lieu thereof the payment of their separation pay as computed in the appealed decision. [38]

When the afore-quoted NLRC Decision was appealed to the Court of Appeals in CA-G.R. SP No. 80639, there seemed to be a contradiction

between the body and the fallo of the appellate courts Decision dated 17 March 2004. Petitioner cites the following from the text of the Court

of Appeals Decision:

However, in this case since the Labor Arbiter did not order reinstatement, the NLRC correctly excluded the period of the
appeal in the computation of back wages due to private respondents.[39]

The dispositive portion of the same Decision, however, concludes:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED for
lack of merit. The assailed Decision and Resolution are AFFIRMED. [40]

The general rule is that where there is conflict between the dispositive portion or the fallo and the body of the decision, the fallo controls. This

rule rests on the theory that the fallo is the final order while the opinion in the body is merely a statement ordering nothing.[41] Clearly, the

award of backwages to respondents does not merely cover the period from 15 May 1998 up to 25 May 1999 alone.[42] The findings of the

NLRC, which were affirmed with finality in CA-G.R. SP No. 80639, and subject of execution in the instant petition, pronounced:

We rule that [respondents] were illegally dismissed and must therefore be ordered reinstated with payment of backwages
from the time they were illegally dismissed up to the time of their actual reinstatement.

All other claims are hereby dismissed for lack of merit.

WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack of merit and the appealed decision is
hereby AFFIRMED with modification ordering the [petitioner] payment of the backwages of the [respondents] from May 15,
1998 up to May 25, 1999, further directing the reinstatement of the [respondents] to their original positions without loss of
seniority or in lieu thereof the payment of their separation pay as computed in the appealed decision.[43]
 P a g e | 23

The above ruling of the NLRC in its Decision dated 30 October 2001 had the effect of reversing and modifying the findings of the

Labor Arbiter. Under Article 218(c) of the Labor Code, the Commission is empowered to correct, amend, or waive any error, defect or

irregularity whether in substance or form, in the exercise of its appellate jurisdiction. [44] The dispositive portion of the Labor Arbiters Decision

as worded is clear and needs no further interpretation. The NLRC found respondents to have been illegally dismissed by petitioner, and

ordered reinstatement and payment of backwages. Additionally, it stated that where reinstatement is not possible, separation pay as

computed in the appealed decision should be awarded to respondents. Petitioner interprets the dispositive portion of the NLRC Decision to

mean that it is ordered to pay respondents backwages from 15 May 1998 to 25 May 1999 only. Petitioner seems to have missed that the

aforestated NLRC Decision also directed it to reinstate respondents, or in lieu thereof, pay separation pay. This, petitioner failed to

do. Petitioner did not exercise the option of either reinstatement or paying the separation pay of respondents.

Backwages are to be computed from the time of illegal dismissal until reinstatement or upon petitioners payment of separation pay to
respondents if reinstatement is no longer possible. Article 279 of the Labor Code, as amended, states:

Art. 279. Security of Tenure. x x x

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.

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are separate

and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer,

separation pay is granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if

reinstatement is no longer viable, and backwages.[45]

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages

computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable as an

option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. [46] The payment of

separation pay is in addition to payment of backwages.

Concomitantly, it is evident that respondents backwages should not be limited to the period from 15 May 1998 to 25 May 1999. The

backwages due respondents must be computed from the time they were unjustly dismissed until their actual reinstatement to their former

position or upon petitioners payment of separation pay to them if reinstatement is no longer feasible. Thus, until petitioner actually
 P a g e | 24

implements the reinstatement aspect of the NLRC Decision dated 30 October 2001, as affirmed in the Court of Appeals Decision dated 17

March 2004 in CA-G.R. SP No. 80639, its obligation to respondents, insofar as accrued backwages and other benefits are concerned,

continues to accumulate.

This Court takes this occasion to reiterate that execution is the final stage of litigation, the end of the suit. It can not and should not be

frustrated except for serious reasons demanded by justice and equity. [47] Litigation must end sometime and somewhere. An effective and

efficient administration of justice requires that, once a judgment has become final, the winning party be not, through a mere subterfuge, be

deprived of the fruits of the verdicts. Courts must, therefore, guard against any scheme calculated to bring about that result. Constituted as

they are to put an end to controversies, courts should frown upon any attempt to prolong them. [48]

WHEREFORE, the instant petition is dismissed. The Decision dated 2 June 2006 of the Court of Appeals in CA-G.R. CEB-SP No.

01615 is AFFIRMED. Petitioner is ORDERED to (1) reinstate respondents to their original positions without loss of seniority rights, with

payment of (a) backwages computed from 15 May 1998, the time compensation of respondents was withheld from them when they were

unjustly terminated, up to the time of reinstatement; and (b) accrued 13th month pay for the same period; OR in lieu of reinstatement, (2) pay

respondents (a) separation pay, in the amount equivalent to one (1) month pay for every year of service; and (b) backwages, computed from

15 May 1998, the time compensation of respondents was withheld from them when they were unjustly terminated, up to the time of payment

thereof; and (c) the accrued 13th month pay for the same period. For this purpose, the records of this case are hereby REMANDED to the

Labor Arbiter for proper computation of the subject money claims as discussed above. Costs against petitioner.

SO ORDERED.

MA. ELLAINE D. PANAGA, G.R. No. 164816

Petitioner,
Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
Promulgated:
COURT OF APPEALS,* September 27, 2006
Respondent.
x----------------------------------------------x

DECISION

CARPIO MORALES, J.:

Petitioner, Ma. Ellaine D. Panaga, Senior Personnel Supervisor of Toyota Cubao, Inc., filed a complaint [1] for illegal dismissal against her

employer and its officials Leo Ferreira, Emmanuel Que, Lourdes de Lara and Eliza Lolita Julian.
 P a g e | 25

By Decision[2] of March 31, 2003, the Labor Arbiter rendered judgment against Toyota Cubao, Inc. et al., the dispositive portion of

which decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondents Toyota Cubao, Inc./Leo
Ferreira/Emmanuel Que/ Lourdes De Lara/ Eliza Lolita Julian to:

1) reinstate complainant Ma. Ellaine D. Panaga to her former position without loss of seniority rights;

2) pay complainant the amount of ONE HUNDRED SIXTY ONE THOUSAND EIGHT HUNDRED NINETY SEVEN
PESOS & 91/100 (P161,897.91) representing her backwages, proportionate 13th month pay, unpaid
salary and attorneys fees.

All other claims are DISMISSED for lack of merit.[3]

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiters decision,[4] disposing as follows:

WHEREFORE, the appealed decision dated March 31, 2003 is SET ASIDE. Finding the complainant to be lawfully
dismissed, her complaint for illegal dismissal is hereby dismissed. Respondent Toyota Cubao, Inc. is however ordered to
pay the complainant the following:

(a) P9,597.82, representing the complainants proportionate 13th month pay from 1/1/02-8/7/02; and
(b) P3,663.90, representing her unpaid salary from 8/1/02-8/7/02.

All other claims should be dismissed for lack of merit.

On petition for certiorari, the Court of Appeals, by Resolution [5] of May 12, 2004, dismissed petitioners petition which was found to be fatally

flawed, thus:

. . . [T]he instant petition for certiorari is fatally flawed for not containing an affidavit of proof of service as required in
Section 13 of Rule 13, and for appending only the decisions of the Labor Arbiter and the NLRC, petitioners Motion for
Reconsideration and the NLRC Order

denying the same, without the other pertinent pleadings and part of the records to support the petition pursuant to Section
1 of Rule 65.

x x x x (Emphasis and underscoring supplied)

Petitioners counsel filed a Motion for Reconsideration of the appellate courts resolution. From the counsels statement in the motion that the

two annexes to the petition the Motion for Reconsideration of the NLRC decision and the NLRC order denying the same were detached

unnoticed from the copy of the petition that went to [the] Division while in the process of being transmitted for appropriate disposition, it would

appear that petitioners counsel misunderstood the resolution. That could explain why he again attached to the motion for reconsideration the

said two documents. Additionally, he submitted pages of the Handbook on Personnel Policies and Benefits (1999 Revision) of Toyota Cubao,

Inc.

On the absence of affidavit of proof of service, petitioners counsel pointed out his substantial compliance with the Rules, evident in the fact

that the [o]riginal of the petition bears the rubber acknowledgment stamp of the NLRC, whereas the post office registry receipts issued by the
 P a g e | 26

Quezon City Post Office were stapled there[to] P.O. No. 5643 to the Solicitor General and P.O. No. 5642 to Atty. Maria Cynthia A.V. Sardillo,

counsel for private respondents.

By Resolution[6] of July 16, 2004, the appellate court denied petitioners motion for reconsideration in this wise:

In the Motion for Reconsideration dated May 31, 2004, without the required affidavit of proof of service (Section 1, Rule 13),
is DENIED.(sic) Instead of submitting the other lacking pleadings and other part of the records, the motion insists that the
petition filed is complete with the annexes, contrary to what appears on record. Withal, the dismissal Order of May 12, 2004,
did not say that the petitioners Annexes C

and D are missing. What We said in the dismissal order is that aside from the decisions of the Labor Arbiter and the NLRC,
petitioners Motion for Reconsideration and the order denying the same, the other required pleadings and part of the records
to support the petition to Section 1 of Rule 65(sic). (Emphasis and underscoring, partly in the original and partly supplied)

Hence, the present petition, faulting the appellate court to have acted without or in excess of jurisdiction or with grave abuse of discretion in

dismissing the meritorious petition, and later denying the motion for reconsideration.

Section 1, Rule 65 of the Rules of Court reads:

SECTION 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and
there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law, a person aggrieved thereby may
file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may
require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all
pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the
third paragraph of section 3, Rule 46. (Emphasis and underscoring supplied)

In Quintano v. National Labor Relations Commission,[7] this Court, passing on the requirement to attach relevant and pertinent pleadings and

documents to the petition, held:

. . . The Rules do not specify the precise documents, pleadings or parts of the records that should be appended to the
petition other than the judgment, final order, or resolution being assailed. The Rules only state that such documents,
pleadings or records should be relevant or pertinent to the assailed order, resolution, or judgment or orders; as
such, the initial determination of which pleading, documents or parts of the records are relevant to the assailed order,
resolution or judgment, falls upon the petitioner. The CA will ultimately determine if the supporting documents are sufficient
to even make out a prima facie case. . . [8] (Emphasis and underscoring supplied)

Thus, while the initial determination of what pleadings or relevant or pertinent documents should be attached to the petition lies on petitioner,

the final determination thereof lies on the appellate court.

Still in Quintano, this Court ruled, in finding that the appellate court erred in dismissing the petition for certiorari assailing a decision of

the NLRC on the ground that the therein petitioner appended only the decision and resolution of the NLRC, but failed to append a copy of his

complaint before the labor arbiter, his motion for formal hearing, the decision of the labor arbiter, and his notice appeal, held:

. . . The material allegations filed before the Labor Arbiter were summarized in the assailed resolution of the NLRC; hence
there was no need for petitioner to append a copy of his complaint.
. . . Neither was there any need for the petitioner to append to his petition a copy of his motion for a formal hearing or the
notice of appeal of the Labor Arbiters decision. It must be stressed that no issue pertaining to the said motion, or even the
timeliness of the appeal, was raised in the CA.
 P a g e | 27

. . . There was, likewise, no need for the petitioner to append a copy of the said decision of the Labor Arbiter, considering
that the NLRC delved into and even affirmed, in toto, the said decision. The petitioner was, in effect, assailing the
resolution of the NLRC affirming the decision of the Labor Arbiter in the CA. (Emphasis and underscoring supplied)

x x x x[9]

In the present case, the labor arbiter summarized in its decision the material allegations in the respective pleadings of the parties. The NLRC

decision, on the other hand, fully quoted the report and recommendation on petitioners appeal which

summarized Toyota Cubao, Inc. et al.s memorandum of appeal. Given these, and taking into consideration the contents of the two documents

appended to petitioners petition for certiorari filed before it, the appellate court could determine whether the petition make out a prima

faciecase.

As to the proof of service, with respect to those pleadings served by registered mail, petitioner indeed failed to comply with the

requirements provided by Section 13, Rule 13 of the Rules of Court as she only attached the registry receipts, without an affidavit of the person

mailing.

SEC. 13. Proof of service. Proof of personal service shall consist of a written admission of the party served, or the
official return of the server, or the affidavit of the party serving, containing a full statement of the date, place and manner of
service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of the person mailing of facts showing
compliance with section 7[10] of this Rule. If service is made by registered mail, proof shall be made by such
affidavit and the registry receipt issued by the mailing office. The registry return card shall be filed immediately upon its
receipt by the sender, or in lieu thereof the unclaimed letter together with the certified or sworn copy of the notice given by
the postmaster to the addressee. (Emphasis, italics, and underscoring supplied)

The procedural flaw notwithstanding, especially considering that this is a labor case and the decision of the NLRC differs from that of the Labor

Arbiter, the ends of substantial justice would be better served by relaxing the application of technical rules of procedure. [11]

WHEREFORE, the Resolutions of the Court of Appeals dated May 12, 2004 and July 16, 2004 are SET ASIDE. The case

is REMANDED to the appellate court which is DIRECTED to REINSTATE to its docket

CA-G.R. SP No. 83344, Ma. Ellaine D. Panaga v. National Labor Relations Commission, Toyota Cubao, Inc., and/or Leo Ferreira, Emmanuel

Que, Lourdes de Lara and Eliza Lolita Juan, and take appropriate action thereon.

SO ORDERED

CONCHITA CARPIO MORALES

Associate Justice
 P a g e | 28

SESSION DELIGHTS ICE CREAM AND FAST FOODS, G.R. No. 172149
Petitioner,

Present:
- versus - CARPIO, J., Chairperson,
BRION,
BERSAMIN,*
THE HON. COURT OF APPEALS (Sixth Division), HON. ABAD, and
NATIONAL LABOR RELATIONS COMMISSION (Second PEREZ, JJ.
Division) and ADONIS ARMENIO M. FLORA,
Respondents. Promulgated:

February 8, 2010

x--------------------------------------------------------------------------------------------------------- x
DECISION

BRION, J.:

We rule on the petition for review on certiorari assailing the decision[1] and resolution[2] of the Court of Appeals[3] (CA) in CA-G.R. SP

No. 89326. These CA rulings dismissed the petition for certiorari the petitioner Session Delights Ice Cream and Fast Foods (petitioner) filed to

challenge the resolutions[4] of the Second Division of the National Labor Relations Commission [5] (NLRC) that in turn affirmed the order[6] of

the Labor Arbiter[7] granting a re-computation of the monetary awards in favor of the private respondent Adonis Armenio M. Flora (private

respondent).

The Facts

The private respondent filed against the petitioner a complaint for illegal dismissal, entitled Adonis Armenio M. Flora, Complainant versus

Session Delights Ice Cream & Fast Foods, et. al, Private respondents, docketed as NLRC Case No. RAB-CAR 09-0507-00.

The labor arbiter decided the complaint on February 8, 2001, finding that the petitioner illegally dismissed the private

respondent. The decision awarded the private respondent backwages, separation pay in lieu of reinstatement, indemnity, and attorneys fees,

under a computation that the decision itself outlined in its dispositive portion. The dispositive portion reads:

WHEREFORE, judgment is hereby rendered declaring private respondent guilty of illegal dismissal. Accordingly, private
respondent SESSION DELIGHTS is ordered to pay complainant the following:

a) Backwages:
P170.00 x 154 days P 26,180.00
 P a g e | 29

Proportional 13th month pay

P 26,180/12 2,181.65 28,361.65

b) Separation Pay:
P 170.00 x 314/12 x 1 4,448.35

c) Indemnity of P5,000.00 for failure to observe due process

d) Attorneys fees which is 10% of the total award in the amount of P3,781.00.

SO ORDERED.[8]

On the petitioners appeal, the NLRC affirmed the labor arbiters decision in its resolutions dated May 31, 2002 and September 30,

2002.[9] The dispositive portion of the NLRCs resolution of May 31, 2002 states:
WHEREFORE, premises considered, the decision under review is hereby AFFIRMED, and the appeal, DISMISSED,
for lack of merit.[10]

The petitioner continued to seek relief, this time by filing a petition for certiorari before the CA, which petition was docketed as CA-G.R. SP No.

74653.

On July 4, 2003, the CA dismissed the petition and affirmed with modification the NLRC decision by deleting the awards for a

proportionate 13th month pay and for indemnity.[11] The CA decision became final per Entry of Judgment dated July 29, 2003.[12] The

dispositive portion of this CA decision states:

WHEREFORE, premises considered, the instant petition is hereby DISMISSED. The decision of the National Labor
Relations Commission is AFFIRMED with modification that the award of proportional 13 th month pay as well as the award of
indemnity of P 5,000.00 for failure to observe due process are DELETED.

In January 2004, and in the course of the execution of the above final judgment pursuant to Section 3, Rule VIII[13] of the then NLRC

Rules of Procedure, the Finance Analyst of the Labor Arbiters Office held a pre-execution conference with the contending parties in

attendance. The Finance Analyst submitted an updated computation of the monetary awards due the private respondent in the total amount

of P235,986.00.[14] This updated computation included additional backwages and separation pay due the private respondent computed

from March 1, 2001 to September 17, 2003. The computation also included the proportionate amount of the private respondents 13th month

pay. On March 25, 2004, the labor arbiter approved the updated computation which ran, as follows:

COMPUTATION

Total computation as per NLRC CAR

decision dated February 8, 2001 (sic) 41,591.00

1. Additional backwages: (March 1, 2001-Sept. 17, 2003)

March 1, 2001-April 30, 2002:
P178.00 x 52 days = 9,256.00
May 1, 2001-June 30, 2002:
P185.00 x 365 days = 67,525.00
July 1, 2002- Sept. 17, 2003:
P190.00 x 382 days = 72,580.00 149,361.00
Proportional 13th month pay:
 P a g e | 30

P149,361.00/12 = 12,446.75

161,807.75

2. Additional separation pay:

P190.00 x 314/12 x 3 years = 14,915.00

3. Additional attorneys fee:

P176,722.75 x 10% = 17,672.25 194,395.00

TOTAL 253,986.00

The petitioner objected to the re-computation and appealed the labor arbiters order to the NLRC. The petitioner claimed that the

updated computation was inconsistent with the dispositive portion of the labor arbiters February 8, 2001 decision, as modified by the CA in

CA-G.R. SP No. 74653. The NLRC disagreed with the petitioner and affirmed the labor arbiters decision in a resolution dated October 25,

2004. The NLRC also denied the petitioners motion for reconsideration in its resolution dated January 31, 2005.

The petitioner sought recourse with the CA through a petition for certiorari on the ground that the NLRC acted with grave abuse of

discretion amounting to lack or excess of jurisdiction.

The CA Rulings

The CA partially granted the petition in its decision of December 19, 2005 (now challenged before us) by deleting the awarded

proportionate 13th month pay. The CA ruled:

WHEREFORE, the petition is PARTIALLY GRANTED. The Labor Arbiter is DIRECTED to compute only the following (a) private
respondents backwages from the time his salary was withheld up to July 29, 2003, the finality of the Decision in CA-G.R. SP
No. 74653; (b) private respondents separation pay from July 31, 2000 up to July 29, 2003; and (c) attorneys fees
equivalent to 10% of the total monetary claims from (a) and (b). The total monetary award shall earn legal interest from July
29, 2003 until fully paid. No pronouncement as to cost.

SO ORDERED.[15]

The CA explained in this ruling that employees illegally dismissed are entitled to reinstatement, full backwages, inclusive of allowances and

other benefits or their monetary equivalent, computed from the time actual compensation was withheld from them, up to the time of actual

reinstatement. If reinstatement is no longer feasible, the backwages shall be computed from the time of their illegal dismissal up to the finality

of the decision. The CA reasoned that a re-computation of the monetary awards was necessary to determine the correct amount due the

private respondent from the time his salary was withheld from him until July 29, 2003 (the date of finality of the July 4, 2003 decision in CA-

G.R. SP No. 74653) since the separation pay, which was awarded in lieu of reinstatement, had not been paid by the petitioner. The attorneys

fees likewise have to be re-computed in light of the deletion of the proportionate 13th month pay and indemnity awards.

The petitioner timely filed a motion for reconsideration which the CA denied in its resolution of March 30, 2006, now similarly

assailed before us.

 P a g e | 31

The Issue

The lone issue the petitioner raised is whether a final and executory decision (the labor arbiters decision of February 8, 2001, as affirmed with

modification by the CA decision in CA-G.R. SP No. 74653) may be enforced beyond the terms decreed in its dispositive portion.

In the pleadings submitted to the Court, the petitioner insists on a literal reading and application of the labor arbiters February 8,

2001 decision, as modified by the CA in CA-G.R. SP No. 74653. The petitioner argues that since the modified labor arbiters February 8,

2001decision did not provide in its dispositive portion for a computation of the monetary award up to the finality of the judgment in the case,

the CA should have enforced the decision according to its express and literal terms. In other words, the CA cannot now allow the execution of

the labor arbiters original decision (which the CA affirmed with finality but with modification) beyond the express terms of its dispositive

portion; thus, the amounts that accrued during the pendency of the petitioners recourses with the NLRC and the CA cannot be read into and

implemented as part of the final and executory judgment.

The petitioner, as an alternative argument, argues that even assuming that the body of the CA decision in CA-G.R. SP No. 74653

intended a computation of the monetary award up to the finality of the decision, the dispositive portion remains to be the directive that should

be enforced, as it is the part of the decision that governs, settles, and declares the rights and obligations of the parties.

The private respondent, for his part, counters that the computation of the monetary award until the finality of the CA decision in CA-G.R. SP No.

74653 is in accord with Article 279 of the Labor Code, as amended.

The Courts Ruling

We resolve to dismiss the petition and, accordingly, affirm the CA decision.

We state at the outset that, as a rule, we frown upon any delay in the execution of final and executory decisions, as the immediate

enforcement of the parties rights, confirmed by a final decision, is a major component of the ideal administration of justice. We admit,

however, that circumstances may transpire rendering delay unavoidable. One such occasion is when the execution of the final judgment is not

in accord with what the final judgment decrees in its dispositive portion. Just as the execution of a final judgment is a matter of right for the

winning litigant who should not be denied the fruits of his or her victory, the right of the losing party to give, perform, pay, and deliver only what

has been decreed in the final judgment should also be respected.

 P a g e | 32

That a judgment should be implemented according to the terms of its dispositive portion is a long and well-established

rule.[16] Otherwise stated, it is the dispositive portion that categorically states the rights and obligations of the parties to the dispute as against

each other.[17] Thus, it is the dispositive portion which the entities charged with the execution of a final judgment that must be enforced to

ensure the validity of the execution.[18]

A companion to the above rule on the execution of a final judgment is the principle of its immutability. Save for recognized

exceptions,[19] a final judgment may no longer be altered, amended or modified, even if the alteration, amendment or modification is meant to

correct what is perceived to be an erroneous conclusion of fact or law and regardless of what court, be it the highest Court of the land, renders

it.[20] Any attempt on the part of the responsible entities charged with the execution of a final judgment to insert, change or add matters not

clearly contemplated in the dispositive portion violates the rule on immutability of judgments.

In the present case, with the CAs deletion of the proportionate 13th month pay and indemnity awards in the labor arbiters February 8,

2001 decision, only the awards of backwages, separation pay, and attorneys fees remain. These are the awards subject to execution.

Award of backwages and separation pay

A distinct feature of the judgment under execution is that the February 8, 2001 labor arbiter decision already provided for the

computation of the payable separation pay and backwages due, and did not literally order the computation of the monetary awards up to the

time of the finality of the judgment. The private respondent, too, did not contest the decision through an appeal. The petitioners argument to

confine the awards to what the labor arbiter stated in the dispositive part of his decision is largely based on these established features of the

judgment.

We reject the petitioners view as a narrow and misplaced interpretation of an illegal dismissal decision, particularly of the terms of

the labor arbiters decision.

While the private respondent failed to appeal the February 8, 2001 decision of the labor arbiter, the failure, at the most, had the

effect of making the awards granted to him final so that he could no longer seek any other affirmative relief, or pray for any award additional

to what the labor arbiter had given. Other than these, the illegal dismissal case remained open for adjudication based on the appeal made for

the higher tribunals consideration. In other words, the higher tribunals, on appropriate recourses made, may reverse the judgment and declare

that no illegal dismissal took place, or affirm the illegal dismissal already decreed with or without modifying the monetary consequences

flowing from the dismissal.

 P a g e | 33

As the case developed and is presented to us, the issue before us is not the correctness of the awards, nor the finality of the CAs

judgment, nor the petitioners failure to appeal. The issue before us is the propriety of the computation of the awards made, and, whether this

violated the principle of immutability of final judgments.

In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiters original computation of

the awards made, pegged as of the time the decision was rendered and confirmed with modification by a final CA decision, is legally proper.

The question is posed, given that the petitioner did not immediately pay the awards stated in the original labor arbiters decision; it delayed

payment because it continued with the litigation until final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the original labor arbiter framed his

decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is the finding of the

illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages, attorneys fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows that it was time-

bound as can be seen from the figures used in the computation. This part, being merely a computation of what the first part of the decision

established and declared, can, by its nature, be re-computed. This is the part, too, that the petitioner now posits should no longer be re-

computed because the computation is already in the labor arbiters decision that the CA had affirmed. The public and private respondents, on

the other hand, posit that a re-computation is necessary because the relief in an illegal dismissal decision goes all the way up to

reinstatement if reinstatement is to be made, or up to the finality of the decision, if separation pay is to be given in lieu reinstatement.

That the labor arbiters decision, at the same time that it found that an illegal dismissal had taken place, also made a computation of

the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules of Procedure which requires that a computation be

made.This Section in part states:

[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable, shall embody in
any such decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the labor arbiters decision. As we noted above, this

implication is apparent from the terms of the computation itself, and no question would have arisen had the parties terminated the case and

implemented the decision at that point.

However, the petitioner disagreed with the labor arbiters findings on all counts i.e., on the finding of illegality as well as on all the

consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the labor arbiters decision. By

law,[21]the NLRC decision is final, reviewable only by the CA on jurisdictional grounds.

 P a g e | 34

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule 65 petition

for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13 th month pay and indemnity, lapsed to

finality and was subsequently returned to the labor arbiter of origin for execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor arbiters decision,

the implementing labor arbiter ordered the award re-computed; he apparently read the figures originally ordered to be paid to be the

computation due had the case been terminated and implemented at the labor arbiters level. Thus, the labor arbiter re-computed the award to

include the separation pay and the backwages due up to the finality of the CA decision that fully terminated the case on the merits.

Unfortunately, the labor arbiters approved computation went beyond the finality of the CA decision (July 29, 2003) and included as well the

payment for awards the final CA decision had deleted specifically, the proportionate 13 th month pay and the indemnity awards. Hence, the CA

issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the labor arbiters

original decision in accordance with its basic component parts as we discussed above. To reiterate, the first part contains the finding of

illegality and its monetary consequences; the second part is the computation of the awards or monetary consequences of the illegal dismissal,

computed as of the time of the labor arbiters original decision.

To illustrate these points, had the case involved a pure money claim for a specific sum (e.g. salary for a specific period) or a specific

benefit (e.g. 13th month pay for a specific year) made by a former employee, the labor arbiters computation would admittedly have continuing

currency because the sum is specific and any variation may only be on the interests that may run from the finality of the decision ordering the

payment of the specific sum.

In contrast with a ruling on a specific pure money claim, is a claim that relates to status (as in this case, where the claim is the

legality of the termination of the employment relationship). In this type of cases, the decision or ruling is essentially declaratory of the status

and of the rights, obligations and monetary consequences that flow from the declared status (in this case, the payment of separation pay and

backwages and attorneys fees when illegal dismissal is found). When this type of decision is executed, what is primarily implemented is the

declaratory finding on the status and the rights and obligations of the parties therein; the arising monetary consequences from the declaration

only follow as component of the parties rights and obligations.

In the present case, the CA confirmed that indeed an illegal dismissal had taken place, so that separation pay in lieu of

reinstatement and backwages should be paid. How much that separation pay would be, would ideally be stated in the final CA decision; if not,
 P a g e | 35

the matter is for handling and computation by the labor arbiter of origin as the labor official charged with the implementation of decisions

before the NLRC.[22]

As the CA correctly pointed out, the basis for the computation of separation pay and backwages is Article 279 of the Labor Code, as

amended, which reads:

x x x An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

By jurisprudence derived from this provision, separation pay may be awarded to an illegally dismissed employee in lieu of

reinstatement.[23] Recourse to the payment of separation pay is made when continued employment is no longer possible, in cases where the

dismissed employees position is no longer available, or the continued relationship between the employer and the employee is no longer viable

due to the strained relations between them, or when the dismissed employee opted not to be reinstated, or payment of separation benefits

will be for the best interest of the parties involved.[24]

This reading of Article 279, of course, does not appear to be disputed in the present case as the petitioner admits that separation pay in lieu

of reinstatement shall be paid, computed up to the finality of the judgment finding that illegal dismissal had taken place. What the petitioner

simply disputes is the re-computation of the award when the final CA decision did not order any re-computation while the NLRC decision that

the CA affirmed and the labor arbiter decision the NLRC in turn affirmed, already made a computation that on the basis of immutability of

judgment and the rule on execution of the dispositive portion of the decision should not now be disturbed.

Consistent with what we discussed above, we hold that under the terms of the decision under execution, no essential change is

made by a re-computation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared in that

decision. A re-computation (or an original computation, if no previous computation has been made) is a part of the law specifically, Article 279

of the Labor Code and the established jurisprudence on this provision that is read into the decision. By the nature of an illegal dismissal case,

the reliefs continue to add on until full satisfaction, as expressed under Article 279 of the Labor Code. The re-computation of the

consequences of illegal dismissal upon execution of the decision does not constitute an alteration or amendment of the final decision being

implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this dismissal is affected and this is not

a violation of the principle of immutability of final judgments.

We fully appreciate the petitioners efforts in trying to clarify how the standing jurisprudence on the payment of separation pay in lieu

of reinstatement and the accompanying payment of backwages ought to be read and reconciled. Its attempt, however, is out of place and,

rather than clarify, may only confuse the implementation of Article 279; the core issue in this case is not the payment of separation pay and

backwages but their re-computation in light of an original labor arbiter ruling that already contained a dated computation of the monetary

consequences of illegal dismissal.

 P a g e | 36

That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran

when it continued to seek recourses against the labor arbiters decision. Article 279 provides for the consequences of illegal dismissal in no

uncertain terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is allowed. When that

happens, the finality of the illegal dismissal decision becomes the reckoning point instead of the reinstatement that the law decrees. In

allowing separation pay, the final decision effectively declares that the employment relationship ended so that separation pay and backwages

are to be computed up to that point. The decision also becomes a judgment for money from which another consequence flows the payment of

interest in case of delay. This was what the CA correctly decreed when it provided for the payment of the legal interest of 12% from the finality

of the judgment, in accordance with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.[25]

WHEREFORE, premises considered, we hereby AFFIRM the decision of the Court of Appeals dated December 19, 2005 and its resolution

dated March 30, 2006 in CA-G.R. SP No. 89326.

For greater certainty, the petitioner is ORDERED to PAY the private respondent:

(a) backwages computed from August 28, 2000 (the date the employer illegally dismissed the private respondent) up to July 29,

2003, the date of finality of the decision of the Court of Appeals in CA-G.R. SP No. 74653;

(b) separation pay computed from July 31, 2000 (the private respondents first day of employment) up to July 29, 2003 at the rate of

one month pay per year of service;

(c) ten percent (10%) attorneys fees based on the total amount of the awards under (a) and (b) above; and

(d) legal interest of twelve percent (12%) per annum of the total monetary awards computed from July 29, 2003, until their full

satisfaction.

The labor arbiter is hereby ORDERED to make another re-computation according to the above directives.

Costs against the petitioner.

SO ORDERED.

ARTURO D. BRION
Associate Justice
 P a g e | 37

TIMOTEO H. SARONA, G.R. No. 185280

Petitioner,

Present:

CARPIO, J.,

- versus - Chairperson,

PEREZ,

SERENO,

REYES, and

NATIONAL LABOR RELATIONS BERNABE, JJ. 

COMMISSION, ROYALE SECURITY

AGENCY (FORMERLY SCEPTRE

SECURITY AGENCY) and Promulgated:

CESAR S. TAN,

Respondents. January 18, 2012

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

DECISION

REYES, J.:

This is a petition for review under Rule 45 of the Rules of Court from the May 29, 2008 Decision 1 of the Twentieth Division of the

Court of Appeals (CA) in CA-G.R. SP No. 02127 entitled “Timoteo H. Sarona v. National Labor Relations Commission, Royale Security Agency

(formerly Sceptre Security Agency) and Cesar S. Tan” (Assailed Decision), which affirmed the National Labor Relations Commission’s (NLRC)

November 30, 2005 Decision and January 31, 2006 Resolution, finding the petitioner illegally dismissed but limiting the amount of his

backwages to three (3) monthly salaries. The CA likewise affirmed the NLRC’s finding that the petitioner’s separation pay should be computed
 P a g e | 38

only on the basis of his length of service with respondent Royale Security Agency (Royale). The CA held that absent any showing that Royale is

a mere alter ego of Sceptre Security Agency (Sceptre), Royale cannot be compelled to recognize the petitioner’s tenure with Sceptre. The

dispositive portion of the CA’s Assailed Decision states:

WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED, though piercing of the corporate
veil is hereby denied for lack of merit. Accordingly, the assailed Decision and Resolution of the NLRC respectively dated
November 30, 2005 and January 31, 2006 are hereby AFFIRMED as to the monetary awards.

SO ORDERED. 2

Factual Antecedents

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April 1976, was asked by Karen Therese

Tan (Karen), Sceptre’s Operation Manager, to submit a resignation letter as the same was supposedly required for applying for a position at

Royale. The petitioner was also asked to fill up Royale’s employment application form, which was handed to him by Royale’s General Manager,

respondent Cesar Antonio Tan II (Cesar).3

After several weeks of being in floating status, Royale’s Security Officer, Martin Gono (Martin), assigned the petitioner at Highlight

Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the petitioner was transferred and assigned to Wide Wide

World Express, Inc. (WWWE, Inc.). During his assignment at Highlight Metal, the petitioner used the patches and agency cloths of Sceptre and

it was only

when he was posted at WWWE, Inc. that he started using those of Royale. 4

On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been withdrawn because Royale had

allegedly been replaced by another security agency. The petitioner, however, shortly discovered thereafter that Royale was never replaced as

WWWE, Inc.’s security agency. When he placed a call at WWWE, Inc., he learned that his fellow security guard was not relieved from his post.5
 P a g e | 39

On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit for a short period from September 22,

2003 to September 30, 2003. Subsequently, when the petitioner reported at Royale’s office on October 1, 2003, Martin informed him that he

would no longer be given any assignment per the instructions of Aida Sabalones-Tan (Aida), general manager of Sceptre. This prompted him to

file a complaint for illegal dismissal on October 4, 2003.6

In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the petitioner’s favor and found him illegally

dismissed. For being unsubstantiated, LA Gutierrez denied credence to the respondents’ claim that the termination of the petitioner’s

employment relationship with Royale was on his accord following his alleged employment in another company. That the petitioner was no

longer interested in being an employee of Royale cannot be presumed from his request for a certificate of employment, a claim which, to begin

with, he vehemently denies. Allegation of the petitioner’s abandonment is negated by his filing of a complaint for illegal dismissal three (3)

days after he was informed that he would no longer be given any assignments. LA Gutierrez ruled:

In short, respondent wanted to impress before us that complainant abandoned his employment. We are not however,
convinced.

There is abandonment when there is a clear proof showing that one has no more interest to return to work. In this instant
case, the record has no proof to such effect. In a long line of decisions, the Supreme Court ruled:

“Abandonment of position is a matter of intention expressed in clearly certain and

unequivocal acts, however, an interim employment does not mean abandonment.” (Jardine Davis, Inc.
vs. NLRC, 225 SCRA 757).

“In abandonment, there must be a concurrence of the intention to abandon and some overt
acts from which an employee may be declared as having no more interest to work.” (C. Alcontin & Sons,
Inc. vs. NLRC, 229 SCRA 109).

“It is clear, deliberate and unjustified refusal to severe employment and not mere absence
that is required to constitute abandonment.” x x x” (De Ysasi III vs. NLRC, 231 SCRA 173).

Aside from lack of proof showing that complainant has abandoned his employment, the record would show that
immediate action was taken in order to protest his dismissal from employment. He filed a complaint [for] illegal dismissal
on October 4, 2004 or three (3) days after he was dismissed. This act, as declared by the Supreme Court is inconsistent
with abandonment, as held in the case of Pampanga Sugar Development Co., Inc. vs. NLRC, 272 SCRA 737 where the
Supreme Court ruled:
 P a g e | 40

“The immediate filing of a complaint for [i]llegal [d]ismissal by an employee is inconsistent

with abandonment.”7

The respondents were ordered to pay the petitioner backwages, which LA Gutierrez computed from the day he was dismissed, or on

October 1, 2003, up to the promulgation of his Decision on May 11, 2005. In lieu of reinstatement, the respondents were ordered to pay the

petitioner separation pay equivalent to his one (1) month salary in consideration of his tenure with Royale, which lasted for only one (1) month

and three (3) days. In this

regard, LA Gutierrez refused to pierce Royale’s corporate veil for purposes of factoring the petitioner’s length of service with Sceptre in the

computation of his separation pay. LA Gutierrez ruled that Royale’s corporate personality, which is separate and distinct from that of Sceptre,

a sole proprietorship owned by the late Roso Sabalones (Roso) and later, Aida, cannot be pierced absent clear and convincing evidence that

Sceptre and Royale share the same stockholders and incorporators and that Sceptre has complete control and dominion over the finances

and business affairs of Royale. Specifically:

To support its prayer of piercing the veil of corporate entity of respondent Royale, complainant avers that respondent Royal
(sic) was using the very same office of SCEPTRE in C. Padilla St., Cebu City. In addition, all officers and staff of SCEPTRE are
now the same officers and staff of ROYALE, that all [the] properties of SCEPTRE are now being owned by ROYALE and that
ROYALE is now occupying the property of SCEPTRE. We are not however, persuaded.

It should be pointed out at this juncture that SCEPTRE, is a single proprietorship. Being so, it has no distinct and separate
personality. It is owned by the late Roso T. Sabalones. After the death of the owner, the property is supposed to be divided
by the heirs and any claim against the sole proprietorship is a claim against Roso T. Sabalones. After his death, the claims
should be instituted against the estate of Roso T. Sabalones. In short, the estate of the late Roso T. Sabalones should have
been impleaded as respondent of this case.

Complainant wanted to impress upon us that Sceptre was organized into another entity now called Royale Security Agency.
There is however, no proof to this assertion. Likewise, there is no proof that Roso T. Sabalones, organized his single
proprietorship business into a corporation, Royale Security Agency. On the contrary, the name of Roso T. Sabalones does
not appear in the Articles of Incorporation. The names therein as incorporators are:

Bruno M. Kuizon – [P]150,000.00

Wilfredo K. Tan – 100,000.00

Karen Therese S. Tan – 100,000.00

Cesar Antonio S. Tan – 100,000.00

Gabeth Maria K. Tan – 50,000.00

 P a g e | 41

Complainant claims that two (2) of the incorporators are the granddaughters of Roso T. Sabalones. This fact even
give (sic) us further reason to conclude that respondent Royal (sic) Security Agency is not an alter ego or conduit of
SCEPTRE. It is obvious that respondent Royal (sic) Security Agency is not owned by the owner of “SCEPTRE”.

It may be true that the place where respondent Royale hold (sic) office is the same office formerly used by
“SCEPTRE.” Likewise, it may be true that the same officers and staff now employed by respondent Royale Security Agency
were the same officers and staff employed by “SCEPTRE.” We find, however, that these facts are not sufficient to justify to
require respondent Royale to answer for the liability of Sceptre, which was owned solely by the late Roso T. Sabalones. As
we have stated above, the remedy is to address the claim on the estate of Roso T. Sabalones. 8

The respondents appealed LA Gutierrez’s May 11, 2005 Decision to the NLRC, claiming that the finding of illegal dismissal was

attended with grave abuse of discretion. This appeal was, however, dismissed by the NLRC in its November 30, 2005 Decision, 9 the

dispositive portion of which states:

WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the illegal dismissal of
complainant is hereby AFFIRMED.

However[,] We modify the monetary award by limiting the grant of backwages to only three (3) months in view of
complainant’s very limited service which lasted only for one month and three days.

1. Backwages - [P]15,600.00

2. Separation Pay - 5,200.00

3. 13th Month Pay - 583.34

[P]21,383.34 Attorney’s Fees- 2,138.33

Total [P]23,521.67

The appeal of respondent Royal (sic) Security Agency is hereby DISMISSED for lack of merit.

SO ORDERED.10
 P a g e | 42

The NLRC partially affirmed LA Gutierrez’s May 11, 2005 Decision. It concurred with the latter’s finding that the petitioner was

illegally dismissed and the manner by which his separation pay was computed, but modified the monetary award in the petitioner’s favor by

reducing the amount of his backwages from P95,600.00 to P15,600.00. The NLRC determined the petitioner’s backwages as limited to three

(3) months of his last monthly salary, considering that his employment with Royale was only for a period for one (1) month and three (3) days,

thus:11

On the other hand, while complainant is entitled to backwages, We are aware that his stint with respondent Royal (sic)
lasted only for one (1) month and three (3) days such that it is Our considered view that his backwages should be limited to
only three (3) months.

Backwages:

[P]5,200.00 x 3 months = [P]15,600.0012

The petitioner, on the other hand, did not appeal LA Gutierrez’s May 11, 2005 Decision but opted to raise the validity of LA Gutierrez’s adverse

findings with respect to piercing Royale’s corporate personality and computation of his separation pay in his Reply to the respondents’

Memorandum of Appeal. As the filing of an appeal is the prescribed remedy and no aspect of the decision can be overturned by a mere reply,

the NLRC dismissed the petitioner’s efforts to reverse LA Gutierrez’s disposition of these issues. Effectively, the petitioner had already waived

his right to question LA Gutierrez’s Decision when he failed to file an appeal within the reglementary period. The NLRC held:

On the other hand, in complainant’s Reply to Respondent’s Appeal Memorandum he prayed that the doctrine of piercing
the veil of corporate fiction of respondent be applied so that his services with Sceptre since 1976 [will not] be deleted. If
complainant assails this particular finding in the Labor Arbiter’s Decision, complainant should have filed an appeal and not
seek a relief by merely filing a Reply to Respondent’s Appeal Memorandum.13

Consequently, the petitioner elevated the NLRC’s November 30, 2005 Decision to the CA by way of a Petition for Certiorari under Rule 65 of

the Rules of Court. On the other hand, the respondents filed no appeal from the NLRC’s finding that the petitioner was illegally dismissed.

The CA, in consideration of substantial justice and the jurisprudential dictum that an appealed case is thrown open for the appellate

court’s review, disagreed with the NLRC and proceeded to review the evidence on record to determine if Royale is Sceptre’s alter ego that
 P a g e | 43

would warrant the piercing of its corporate veil.14 According to the CA, errors not assigned on appeal may be reviewed as technicalities should

not serve as bar to the full adjudication of cases. Thus:

In Cuyco v. Cuyco, which We find application in the instant case, the Supreme Court held:

“In their Reply, petitioners alleged that their petition only raised the sole issue of interest on the interest
due, thus, by not filing their own petition for review, respondents waived their privilege to bring matters
for the Court’s review that [does] not deal with the sole issue raised.

Procedurally, the appellate court in deciding the case shall consider only the assigned errors, however, it
is equally settled that the Court is clothed with ample authority to review matters not assigned as errors
in an appeal, if it finds that their consideration is necessary to arrive at a just disposition of the case.”

Therefore, for full adjudication of the case, We have to primarily resolve the issue of whether the doctrine of piercing the
corporate veil be justly applied in order to determine petitioner’s length of service with private respondents.15 (citations
omitted)

Nonetheless, the CA ruled against the petitioner and found the evidence he submitted to support his allegation that Royale and

Sceptre are one and the same juridical entity to be wanting. The CA refused to pierce Royale’s corporate mask as one of the “probative factors

that would justify the application of the doctrine of piercing the corporate veil is stock ownership by one or common ownership of both

corporations” and the petitioner failed to present clear and convincing proof that Royale and Sceptre are commonly owned or controlled. The

relevant portions of the CA’s Decision state:

In the instant case, We find no evidence to show that Royale Security Agency, Inc. (hereinafter “Royale”), a
corporation duly registered with the Securities and Exchange Commission (SEC) and Sceptre Security Agency (hereinafter
“Sceptre”), a single proprietorship, are one and the same entity.

Petitioner, who has been with Sceptre since 1976 and, as ruled by both the Labor Arbiter and the NLRC, was
illegally dismissed by Royale on October 1, 2003, alleged that in order to circumvent labor laws, especially to avoid
payment of money claims and the consideration on the length of service of its employees, Royale was established as an
alter ego or business conduit of Sceptre. To prove his claim, petitioner declared that Royale is conducting business in the
same office of Sceptre, the latter being owned by the late retired Gen. Roso Sabalones, and was managed by the latter’s
daughter, Dr. Aida Sabalones-Tan; that two of Royale’s incorporators are grandchildren [of] the late Gen. Roso Sabalones;
that all the properties of Sceptre are now owned by Royale, and that the officers and staff of both business establishments
are the same; that the heirs of Gen. Sabalones should have applied for dissolution of Sceptre before the SEC before
forming a new corporation.
 P a g e | 44

On the other hand, private respondents declared that Royale was incorporated only on March 10, 2003 as
evidenced by the Certificate of Incorporation issued by the SEC on the same date; that Royale’s incorporators are Bruino M.
Kuizon, Wilfredo Gracia K. Tan, Karen Therese S. Tan, Cesar Antonio S. Tan II and [Gabeth] Maria K. Tan.

Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and the burden
of proof is on the party making the allegation. Further, Section 1 of Rule 131 of the Revised Rules of Court provides:

“SECTION 1. Burden of proof. – Burden of proof is the duty of a party to present evidence on
the facts in issue necessary to establish his claim or defense by the amount of evidence required by
law.”

We believe that petitioner did not discharge the required burden of proof to establish his allegations. As We see it,
petitioner’s claim that Royale is an alter ego or business conduit of Sceptre is without basis because aside from the fact
that there is no common ownership of both Royale and Sceptre, no evidence on record would prove that Sceptre, much
less the late retired Gen. Roso Sabalones or his heirs, has control or complete domination of Royale’s finances and
business transactions. Absence of this first element, coupled by petitioner’s failure to present clear and convincing
evidence to substantiate his allegations, would prevent piercing of the corporate veil. Allegations must be proven by
sufficient evidence. Simply stated, he who alleges a fact has the burden of proving it; mere allegation is not
evidence.16 (citations omitted)

By way of this Petition, the petitioner would like this Court to revisit the computation of his backwages, claiming that the same should be

computed from the time he was illegally dismissed until the finality of this decision. 17 The petitioner would likewise have this Court review and

examine anew the factual allegations and the supporting evidence to determine if the CA erred in its refusal to pierce Royale’s corporate mask

and rule that it is but a mere continuation or successor of Sceptre. According to the petitioner, the erroneous computation of his separation

pay was due to the CA’s failure, as well as the NLRC and LA Gutierrez, to consider evidence conclusively demonstrating that Royale and

Sceptre are one and the same juridical entity. The petitioner claims that since Royale is no more than Sceptre’s alter ego, it should recognize
and credit his length of service with Sceptre.18

The petitioner claimed that Royale and Sceptre are not separate legal persons for purposes of computing the amount of his

separation pay and other benefits under the Labor Code. The piercing of Royale’s corporate personality is justified by several indicators that

Royale was incorporated for the sole purpose of defeating his right to security of tenure and circumvent payment of his benefits to which he is

entitled under the law: (i) Royale was holding office in the same property used by Sceptre as its principal place of business;19 (ii) Sceptre and

Royal have the same officers and employees;20 (iii) on October 14, 1994, Roso, the sole proprietor of Sceptre, sold to Aida, and her husband,

Wilfredo Gracia K. Tan (Wilfredo),21 the property used by Sceptre as its principal place of business;22 (iv) Wilfredo is one of the incorporators of
Royale;23 (v) on May 3, 1999, Roso ceded the license to operate Sceptre issued by the Philippine National Police to Aida;24 (vi) on July 28,

1999, the business name “Sceptre Security & Detective Agency” was registered with the Department of Trade and Industry (DTI) under the

name of Aida;25 (vii) Aida exercised control over the affairs of Sceptre and Royale, as she was, in fact, the one who dismissed the petitioner
 P a g e | 45

from employment;26 (viii) Karen, the daughter of Aida, was Sceptre’s Operation Manager and is one of the incorporators of Royale;27 and (ix)

Cesar Tan II, the son of Aida was one of Sceptre’s officers and is one of the incorporators of Royale. 28

In their Comment, the respondents claim that the petitioner is barred from questioning the manner by which his backwages and

separation pay were computed. Earlier, the petitioner moved for the execution of the NLRC’s November 30, 2005 Decision29 and the

respondents paid him the full amount of the monetary award thereunder shortly after the writ of execution was issued.30 The respondents

likewise maintain that Royale’s separate and distinct corporate personality should be respected considering that the evidence presented by

the petitioner fell short of establishing that Royale is a mere alter ego of Sceptre.

The petitioner does not deny that he has received the full amount of backwages and separation pay as provided under the NLRC’s

November 30, 2005 Decision.31 However, he claims that this does not preclude this Court from modifying a decision that is tainted with grave

abuse of discretion or issued without jurisdiction.32

ISSUES

Considering the conflicting submissions of the parties, a judicious determination of their respective rights and obligations requires

this Court to resolve the following substantive issues:

a. Whether Royale’s corporate fiction should be pierced for the purpose of compelling it to recognize the

petitioner’s length of service with Sceptre and for holding it liable for the benefits that have accrued to him arising from his

employment with Sceptre; and

b. Whether the petitioner’s backwages should be limited to his salary for three (3) months.

OUR RULING
 P a g e | 46

Because his receipt of the proceeds of the award under the NLRC’s November 30,
2005 Decision is qualified and without prejudice to the CA’s resolution of his petition
for certiorari, the petitioner is not barred from exercising his right to elevate the
decision of the CA to this Court.

Before this Court proceeds to decide this Petition on its merits, it is imperative to resolve the respondents’ contention that the full satisfaction

of the award under the NLRC’s November 30, 2005 Decision bars the petitioner from questioning the validity thereof. The respondents submit

that they had paid the petitioner the amount of P21,521.67 as directed by the NLRC and this constitutes a waiver of his right to file an appeal

to this Court.

The respondents fail to convince.

The petitioner’s receipt of the monetary award adjudicated by the NLRC is not absolute, unconditional and unqualified. The

petitioner’s May 3, 2007 Motion for Release contains a reservation, stating in his prayer that: “it is respectfully prayed that the respondents

and/or Great Domestic Insurance Co. be ordered to RELEASE/GIVE the amount of P23,521.67 in favor of the complainant TIMOTEO H.

SARONA without prejudice to the outcome of the petition with the CA.”33

In Leonis Navigation Co., Inc., et al. v. Villamater, et al.,34 this Court ruled that the prevailing party’s receipt of the full amount of the

judgment award pursuant to a writ of execution issued by the labor arbiter does not

close or terminate the case if such receipt is qualified as without prejudice to the outcome of the petition for certiorari pending with the CA.

Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed despite the
pendency of a petition for certiorari, unless it is restrained by the proper court. In the present case, petitioners already paid
Villamater’s widow, Sonia, the amount of P3,649,800.00, representing the total and permanent disability award plus
attorney’s fees, pursuant to the Writ of Execution issued by the Labor Arbiter. Thereafter, an Order was issued declaring the
case as "closed and terminated". However, although there was no motion for reconsideration of this last Order, Sonia was,
nonetheless, estopped from claiming that the controversy had already reached its end with the issuance of the Order
closing and terminating the case. This is because the Acknowledgment Receipt she signed when she received petitioners’
payment was without prejudice to the final outcome of the petition for certiorari pending before the CA.35

The finality of the NLRC’s decision does not preclude the filing of a petition for certiorari under Rule 65 of the Rules of Court. That

the NLRC issues an entry of judgment after the lapse of ten (10) days from the parties’ receipt of its decision36 will only give rise to the
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prevailing party’s right to move for the execution thereof but will not prevent the CA from taking cognizance of a petition for certiorari on

jurisdictional and due process considerations.37 In turn, the decision rendered by the CA on a petition for certiorari may be appealed to this

Court by way of a petition for review on certiorari under Rule 45 of the Rules of Court. Under Section 5, Article VIII of the Constitution, this

Court has the power to “review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may provide, final

judgments and orders of lower courts in x x x all cases in which only an error or question of law is involved.” Consistent with this constitutional

mandate, Rule 45 of the Rules of Court provides the remedy of an appeal by certiorari from decisions, final orders or resolutions of the CA in

any case, i.e., regardless of the nature of the action or proceedings

involved, which would be but a continuation of the appellate process over the original case. 38 Since an appeal to this Court is not an original

and independent action but a continuation of the proceedings before the CA, the filing of a petition for review under Rule 45 cannot be barred

by the finality of the NLRC’s decision in the same way that a petition for certiorari under Rule 65 with the CA cannot.

Furthermore, if the NLRC’s decision or resolution was reversed and set aside for being issued with grave abuse of discretion by way of a

petition for certiorari to the CA or to this Court by way of an appeal from the decision of the CA, it is considered void ab initio and, thus, had

never become final and executory.39

A Rule 45 Petition should be confined to questions of law. Nevertheless, this Court

has the power to resolve a question of fact, such as whether a corporation is a mere
alter ego of another entity or whether the corporate fiction was invoked for fraudulent
or malevolent ends, if the findings in assailed decision is not supported by the
evidence on record or based on a misapprehension of facts.

The question of whether one corporation is merely an alter ego of another is purely one of fact. So is the question of whether a

corporation is a paper company, a sham or subterfuge or whether the petitioner adduced the requisite quantum of evidence warranting the

piercing of the veil of the respondent’s corporate personality.40

As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45 of the Rules of Court must

exclusively raise questions of law. Moreover, if factual findings of the NLRC and the LA have been affirmed by the CA, this Court accords them

the respect and finality they deserve. It is well-settled and oft-repeated that findings of fact of administrative agencies and quasi-judicial

bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but

finality when affirmed by the CA. 41

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Nevertheless, this Court will not hesitate to deviate from what are clearly procedural guidelines and disturb and strike down the

findings of the CA and those of the labor tribunals if there is a showing that they are unsupported by the evidence on record or there was a

patent misappreciation of facts. Indeed, that the impugned decision of the CA is consistent with the findings of the labor tribunals does not per

se conclusively demonstrate the correctness thereof. By way of exception to the general rule, this Court will scrutinize the facts if only to rectify

the prejudice and injustice resulting from an incorrect assessment of the evidence presented.

A resolution of an issue that has supposedly become final and executory as the
petitioner only raised it in his reply to the respondents’ appeal may be revisited by
the appellate court if such is necessary for a just disposition of the case.

As above-stated, the NLRC refused to disturb LA Gutierrez’s denial of the petitioner’s plea to pierce Royale’s corporate veil as the petitioner

did not appeal any portion of LA Gutierrez’s May 11, 2005 Decision.

In this respect, the NLRC cannot be accused of grave abuse of discretion. Under Section 4(c), Rule VI of the NLRC Rules,42 the NLRC shall limit

itself to reviewing and deciding only the issues that were elevated on appeal. The NLRC, while not totally bound by technical rules of

procedure, is not licensed to disregard and violate the implementing rules it implemented. 43

Nonetheless, technicalities should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the

parties. Technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the working
man.44 This Court may choose not to encumber itself with technicalities and limitations consequent to procedural rules if such will only serve

as a hindrance to its duty to decide cases judiciously and in a manner that would put an end with finality to all existing conflicts between the

parties.

Royale is a continuation or successor of Sceptre.

A corporation is an artificial being created by operation of law. It possesses the right of succession and such powers, attributes, and properties

expressly authorized by law or incident to its existence. It has a personality separate and distinct from the persons composing it, as well as

from any other legal entity to which it may be related. This is basic.45
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Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced when the corporation is

just an alter ego of a person or of another corporation. For reasons of public policy and in the interest of justice, the corporate veil will

justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against third persons. 46

Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court should be mindful of the

milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an extent that injustice, fraud, or crime was

committed against another, in disregard of rights. The wrongdoing must be clearly and convincingly established; it cannot be presumed.

Otherwise, an injustice that was never unintended may result from an erroneous application. 47

Whether the separate personality of the corporation should be pierced hinges on obtaining facts appropriately pleaded or proved.

However, any piercing of the corporate veil has to be done with caution, albeit the Court will not hesitate to disregard the corporate veil when it

is misused or when necessary in the interest of justice. After all, the concept of corporate entity was not meant to promote unfair objectives.48

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the

corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a

wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business

conduit of a person, or where the

corporation is so organized and controlled and its affairs are so conducted as

to make it merely an instrumentality, agency, conduit or adjunct of another corporation. 49

In this regard, this Court finds cogent reason to reverse the CA’s findings. Evidence abound showing that Royale is a mere

continuation or successor of Sceptre and fraudulent objectives are behind Royale’s incorporation and the petitioner’s subsequent

employment therein. These are plainly suggested by events that the respondents do not dispute and which the CA, the NLRC and LA Gutierrez

accept as fully substantiated but misappreciated as insufficient to warrant the use of the equitable weapon of piercing.

As correctly pointed out by the petitioner, it was Aida who exercised control and supervision over the affairs of both Sceptre and

Royale. Contrary to the submissions of the respondents that Roso had been the only one in sole control of Sceptre’s finances and business

affairs, Aida took over as early as 1999 when Roso assigned his license to operate Sceptre on May 3, 1999. 50 As further proof of Aida’s
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acquisition of the rights as Sceptre’s sole proprietor, she caused the registration of the business name “Sceptre Security & Detective Agency”

under her name with the DTI a few months after Roso abdicated his rights to Sceptre in her favor.51 As far as Royale is concerned, the

respondents do not deny that she has a hand in its management and operation and possesses control and supervision of its employees,

including the petitioner. As the petitioner correctly pointed out, that Aida was the one who decided to stop giving any assignments to the

petitioner and summarily dismiss him is an eloquent testament of the power she wields insofar as Royale’s affairs are concerned. The

presence of actual common control coupled with the misuse of the corporate form to perpetrate oppressive or manipulative conduct or evade

performance of legal obligations is patent; Royale cannot hide behind its corporate fiction.

Aida’s control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction. There must be a showing that a

fraudulent intent or illegal purpose is behind the exercise of such control to warrant the piercing of the corporate veil.52 However, the manner

by which the petitioner was made to resign from Sceptre and how he became an employee of Royale suggest the perverted use of the legal

fiction of the separate corporate personality. It is undisputed that the petitioner tendered his resignation and that he applied at Royale at the

instance of Karen and Cesar and on the impression they created that these were necessary for his continued employment. They orchestrated

the petitioner’s resignation from Sceptre and subsequent employment at Royale, taking advantage of their ascendancy over the petitioner and

the latter’s lack of knowledge of his rights and the consequences of his actions. Furthermore, that the petitioner was made to resign from

Sceptre and apply with Royale only to be unceremoniously terminated shortly thereafter leads to the ineluctable conclusion that there was

intent to violate the petitioner’s rights as an employee, particularly his right to security of tenure. The respondents’ scheme reeks of bad faith

and fraud and compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling Royale to credit and recognize

the petitioner’s length of service with Sceptre. The respondents cannot use the legal fiction of a separate corporate personality for ends

subversive of the policy and purpose behind its creation 53 or which could not have been intended by law to which it owed its being. 54

For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole proprietorship. As ruled in Prince Transport, Inc., et al. v.

Garcia, et al.,55 it is the act of hiding behind the separate and distinct personalities of juridical entities to perpetuate fraud, commit illegal acts,
evade one’s obligations that the equitable piercing doctrine was formulated to address and prevent:

A settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises are owned,
conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that these two entities are distinct and treat them as identical or as one and the same. In
the present case, it may be true that Lubas is a single proprietorship and not a corporation. However, petitioners’ attempt
to isolate themselves from and hide behind the supposed separate and distinct personality of Lubas so as to evade their
liabilities is precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy. 56
 P a g e | 51

Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994, Aida and Wilfredo became the owners of

the property used by Sceptre as its principal place of business by virtue of a Deed of Absolute Sale they executed with Roso.57 Royale, shortly

after its incorporation, started to hold office in the same property. These, the respondents failed to dispute.

The respondents do not likewise deny that Royale and Sceptre share the same officers and employees. Karen assumed the dual role

of Sceptre’s Operation Manager and incorporator of Royale. With respect to the petitioner, even if he has already resigned from Sceptre and

has been employed by Royale, he was still using the patches and agency cloths of Sceptre during his assignment at Highlight Metal.

Royale also claimed a right to the cash bond which the petitioner posted when he was still with Sceptre. If Sceptre and Royale are

indeed separate entities, Sceptre should have released the petitioner’s cash bond when he resigned and Royale would have required the

petitioner to post a new cash bond in its favor.

Taking the foregoing in conjunction with Aida’s control over Sceptre’s and Royale’s business affairs, it is patent that Royale was a

mere subterfuge for Aida. Since a sole proprietorship does not have a separate and distinct personality from that of the owner of the

enterprise, the latter is personally liable. This is what she sought to avoid but cannot prosper.

Effectively, the petitioner cannot be deemed to have changed employers as Royale and Sceptre are one and the same. His

separation pay should, thus, be computed from the date he was hired by Sceptre in April 1976 until the finality of this decision. Based on this

Court’s ruling in Masagana Concrete Products, et al. v. NLRC, et al.,58 the intervening period between the day an employee was illegally

dismissed and the day the decision finding him illegally dismissed becomes final and executory shall be considered in the computation of his

separation pay as a period of “imputed” or “putative” service:

Separation pay, equivalent to one month's salary for every year of service, is awarded as an alternative to
reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of employment
up to the time of termination, including the imputed service for which the employee is entitled to backwages, with the
salary rate prevailing at the end of the period of putative service being the basis for computation.59

It is well-settled, even axiomatic, that if reinstatement is not possible, the period

covered in the computation of backwages is from the time the employee was
unlawfully terminated until the finality of the decision finding illegal dismissal.
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With respect to the petitioner’s backwages, this Court cannot subscribe to the view that it should be limited to an amount equivalent to three

(3) months of his salary. Backwages is a remedy affording the employee a way to recover what he has lost by reason of the unlawful

dismissal.60 In awarding backwages, the primordial consideration is the income that should have accrued to the employee from the time that

he was dismissed up to his reinstatement61 and the length of service prior to his dismissal is definitely inconsequential.

As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62 clarified in no uncertain terms that if reinstatement is no longer

possible, backwages should be computed from the time the employee was terminated until the finality of the decision, finding the dismissal
unlawful.

Therefore, in accordance with R.A. No. 6715, petitioners are entitled on their full backwages, inclusive of allowances and
other benefits or their monetary equivalent, from the time their actual compensation was withheld on them up to the time
of their actual reinstatement.

As to reinstatement of petitioners, this Court has already ruled that reinstatement is no longer feasible, because the
company would be adjustly prejudiced by the continued employment of petitioners who at present are overage, a
separation pay equal to one-month salary granted to them in the Labor Arbiter's decision was in order and, therefore,
affirmed on the Court's decision of 15 March 1996. Furthermore, since reinstatement on this case is no longer feasible,
the amount of backwages shall be computed from the time of their illegal termination on 25 June 1990 up to the time of
finality of this decision.63 (emphasis supplied)

A further clarification was made in Javellana, Jr. v. Belen:64

Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:

Art. 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.

Clearly, the law intends the award of backwages and similar benefits to accumulate past the date of the Labor Arbiter's
decision until the dismissed employee is actually reinstated. But if, as in this case, reinstatement is no longer possible, this
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Court has consistently ruled that backwages shall be computed from the time of illegal dismissal until the date the decision
becomes final.65 (citation omitted)

In case separation pay is awarded and reinstatement is no longer feasible, backwages shall be computed from the time of illegal dismissal up

to the finality of the decision should separation pay not be paid in the meantime. It is the employee’s actual receipt of the full amount of his

separation pay that will effectively terminate the employment of an illegally dismissed employee. 66 Otherwise, the employer-employee

relationship subsists and the illegally dismissed employee is entitled to backwages, taking into account the increases and other benefits,

including the 13th month pay, that were received by his co-employees who are not dismissed.67 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. 68

In fine, this Court holds Royale liable to pay the petitioner backwages to be computed from his dismissal on October 1, 2003 until the

finality of this decision. Nonetheless, the amount received by the petitioner from the respondents in satisfaction of the November 30, 2005

Decision shall be deducted accordingly.

Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the petitioner’s dismissal, which was tainted

by bad faith and fraud, are in order. Moral damages may be recovered where the dismissal of the employee was tainted by bad faith or fraud,

or where it constituted an act oppressive to labor, and done in a manner contrary to morals, good customs or public policy while exemplary

damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner.69

WHEREFORE, premises considered, the Petition is hereby GRANTED. We REVERSE and SET ASIDE the CA’s May 29, 2008 Decision in

C.A.-G.R. SP No. 02127 and order the respondents to pay the petitioner the following minus the amount of (P23,521.67) paid to the petitioner

in satisfaction of the NLRC’s November 30, 2005 Decision in NLRC Case No. V-000355-05:

a) full backwages and other benefits computed from October 1, 2003 (the date Royale illegally dismissed the petitioner) until the

finality of this decision;

b) separation pay computed from April 1976 until the finality of this decision at the rate of one month pay per year of service;
 P a g e | 54

c) ten percent (10%) attorney’s fees based on the total amount of the awards under (a) and (b) above;

d) moral damages of Twenty-Five Thousand Pesos (P25,000.00); and

5. exemplary damages of Twenty-Five Thousand Pesos (P25,000.00).

This case is REMANDED to the labor arbiter for computation of the separation pay, backwages, and other monetary awards due the petitioner.

SO ORDERED.

BIENVENIDO L. REYES

Associate Justice

G.R. No.170904 November 13, 2013

BANI RURAL BANK INC. ENOC THEATER I AND II and/or RAFAEL DE GUZMAN, Petitioners,
vs.
TERESA DE GUZMAN, EDGAR C. TAN and TERESA G. TAN, Respondents.

DECISION

BRION, J.:

We pass upon the petition for review on certiorari1 under Rule 45 of the Rules of Court filed by petitioners Bani Rural Bank, Inc., ENOC Theater
I and II, and Rafael de Guzman. They assail the decision 2 dated September 1, 2005 and the resolution3 dated December 14, 2005 of the
Court of Appeals CA) in CA-G.R. SP No. 70085. The assailed CA rulings, in turn, affirmed the computation of the backwages due respondents
Teresa de Guzman and Edgar C. Tan4made by the National Labor Relations Commission (NLRC).

The Facts

The respondents were employees of Bani Rural Bank, Inc. and ENOC Theatre I and II who filed a complaint for illegal dismissal against the
petitioners. The complaint was initially dismissed by Labor Arbiter Roque B. de Guzman on March 15, 1994. On appeal, the National Labor
Relations Commission (NLRC) reversed Labor Arbiter De Guzman's findings, and ruled that the respondents had been illegally dismissed. In a
resolution5 dated March 17, 1995 the NLRC ordered the petitioners to:

... [R]einstate the two complainants to their former positions, without loss o seniority rights and other benefits and privileges, with backwages
from the time o their dismissal (constructive) until their actual reinstatement, less earnings elsewhere. 6
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The parties did not file any motion for reconsideration or appeal. The March 17, 1995 resolution of the NLRC became final and executory and
the computation of the awards was remanded to the labor arbiter for execution purposes.

The first computation of he monetary award under the March ,17 1995 resolution of the NLRC

The computation of the respondents' backwages, under the terms of the March 17 1995 NLRC resolution was remanded to Labor Arbiter
Rolando D. Gambito. First, Labor Arbiter Gambito deducted the earnings derived by the respondents either from Bani Rural Bank, Inc. or ENOC
Theatre I and II. Second, Labor Arbiter Gambito fixed the period of backwages from the respondents' illegal dismissal until August 25 1995 or
the date when the respondents allegedly manifested that they no longer wanted to be reinstated.7

The respondents appealed Labor Arbiter Gambito's computation with the NLRC. In a

Decision8 dated July 31, 1998, the NLRC modified the terms of the March 17, 1995 resolution insofar as it clarified the phrase less earnings
elsewhere. The NLRC additionally awarded the payment of separation pay, in lieu of reinstatement, under the following terms:

The decision of this Commission is hereby MODIFIED to the extent that: (1) the phrase earnings elsewhere in its dispositive portion shall
exclude the complainants' salaries from the Rural Bank of Mangantarem; and (2) in lieu of reinstatement, the respondents are hereby ordered
to pay the complainants separation pay equivalent to one month salary for every year of service computed from the start of their employment
up to the date of the finality of the decision.9

The NLRC justified the award of separation pay on account of the strained relations between the parties. In doing so, the NLRC ruled:

Insofar as the second issue is concerned, it should be noted: (1) that in his report dated November 8, 1995, the NLRC Sheriff stated that on
October 5, 1995, he went to the Sub-Arbitration Branch to serve the writ of execution upon the complainants; that they did not appear, but
instead, sent a representative named Samuel de la Cruz who informed him that they were interested, not on being reinstated, but only in the
monetary award; (2) that in a letter dated October 9, 1995, the complainants authorized one Samuel de la Cruz to get a copy of the writ of
execution; and (3) that during the pre-execution conference, the respondents' counsel manifested that the respondents were requiring the
complainants to report for work on Monday and, in turn, the complainants' counsel manifested that the complainants were asking to be
reinstated. The proceedings already protracted as it is-would be delayed further if this case were to be remanded to the Labor Arbiter for a
hearing to ascertain the correctness of the above-mentioned sheriff's report. Besides, if both parties were really interested in the complainants
being reinstated, as their counsels stated during the pre-execution conference, the said reinstatement should already have been effected.
Since neither party has actually done anything to implement the complainants' reinstatement, it would appear that the relations between them
have been strained to such an extent as to make the resumption of the employer-employee relationship unpalatable to both of them. Under
the circumstances, separation pay may be awarded in lieu of reinstatement. 10

The respondents filed a motion for reconsideration on whether the award of backwages was still included in the judgment. The NLRC
dismissed the motion for having been filed out of time.

On January 29, 1999, the July 31, 1998 decision of the NLRC lapsed to finality and became executory.

The second computation of the monetary awards under the July 31, 998 decision of the NLRC

The recomputation of the monetary awards of the respondents' backwages and separation pay, according to the decision dated July 31, 1998
and the modified terms of the March 17, 1995 resolution of the NLRC, was referred to Labor Arbiter Gambito. In the course of the
recomputation, the petitioners filed before Labor Arbiter Gambito a Motion to Quash Writ of

Execution and Suspend Further Execution they reiterated their position that the respondents backwages should be computed only up to
August 25, 1995, citing the alleged manifestation made by the respondents, through Samuel de la Cruz, as their basis.

In an order11 dated July 12, 2000, Labor Arbiter Gambito computed the respondents backwages only up to August 25, 1995.

The NLRC’s Ruling

The respondents appealed the July 12, 2000 order of Labor Arbiter Gambito to the NLRC, which reversed Labor Arbiter Gambito s order. In its
decision12 dated September 28, 2001, the NLRC ruled that the computation of the respondents backwages should be until January 29 1999
which was the date when the July 31, 1998 decision attained finality:

WHEREFORE, the Order of Labor Arbiter Rolando D. Gambito dated July 12, 2000 is SET ASIDE. In lieu thereof, judgment is hereby rendered by
ordering respondents to p y complainants backwages up to January 29, 1999 as above discussed.13
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The NLRC emphasized that the issue relating to the computation of the respondents backwages had been settled in its July 31, 1998
decision. In a resolution dated January 23, 2002, the NLRC denied the motion for reconsideration filed by the petitioners.

The petitioners disagreed with the NLRC s ruling and filed a petition for certiorari with the CA, raising the following issues:

(A) THE COMMISSION ACTED WITHOUT JURISDICTION AND WITH GRAVE . ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT REVERSED AND SET ASIDE THE ORDER OF LABOR ARBITER ROLANDO D. GAMBITO DATED JULY 12, 2000
AND ORDERED THE COMPUTATION OF PRIVATE RESPONDENTS BACKWAGES TO COVER THE PERIOD AFTER AUGUST 25, 1995, OR
UNTIL JANUARY 29, 1999, THE DATE OF FINALITY OF THE SECOND RESOLUTION OF THE COMMISSION.

(B) THE COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION FOR DENYING
PETITIONERS MOTION FOR RECONSIDERA TION.14

The CA Rulings

The CA found the petition to be without merit. It held that certiorari was not the proper remedy since no error of jurisdiction was raised or no
grave abuse of discretion was committed by the NLRC. The CA stated that:

The extraordinary remedy of certiorari is proper if the tribunal, board or officer exercising judicial or quasi-judicial functions acted without or in
grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in law.
When a court, tribunal or officer has jurisdiction over the person and the subject matter of dispute, the decision on all other questions arising
in the case is an exercise of that jurisdiction. Consequently, all errors committed in the exercise of said jurisdiction are merely errors of
judgment. Under prevailing procedural rules and jurisprudence, errors of judgment are not proper subjects of a special civil action for
certiorari.15

Thus, the CA echoed the NLRC’s conclusions:

As explained in the assailed Decision, what is controlling for purposes of the backwages is the NLRC s Resolution dated 17 March 1995 which
decreed that private respondents are entitled to backwages from the time of their dismissal (constructive) until their actual reinstatement; and
considering that the award of reinstatement was set aside by the NLRC in its final and executory Decision dated 3 July 1998 which ordered
the payment of separation pay in lieu of reinstatement to be computed up to the finality on 29 January 1999 of said Decision dated 3 July
1998, then the computation of the backwages should also end on said date, which is 29 January 1999. 16

Citing the case of Chronicle Securities Corp. v. NLRC,17 the CA held that backwages are granted to an employee or worker who had been
illegally dismissed from employment. If reinstatement is no longer possible, the backwages shall be computed from the time of the illegal
termination up to the finality of the decision.

The Present Petition

The petitioners argue that the following reversible errors were committed by the CA, namely:

(1) In ruling that no grave abuse of discretion was committed by the NLRC when it issued the September 28, 2001 decision, the
January 23, 2002 resolution and the July 31, 1998 decision, which modified the final and executory resolution dated March 17,
1995 of the NLRC computing the backwages only until the reinstatement of the respondents;

(2) When it manifestly overlooked or misappreciated relevant facts, i.e. Labor Arbiter Gambito s computation did conform to the
NLRC s March 17, 1995 resolution considering the manifestation of Samuel that the respondents no longer wanted to be reinstated,
in response to the order of execution dated August 25, 1995; and

(3) When it declared that only errors o judgment, and not jurisdiction, were committed by the NLRC.

In their Comment,18 the respondents contend that the computation of the backwages until January 29, 1999 was consistent with the tenor of
the decision dated July 31, 1998 and the modified March 17, 1995 resolution of the NLRC.

After the petitioners filed their Reply,19 the Court resolved to give due course to the petition; in compliance with our directive, the parties
submitted their respective memoranda repeating the arguments in the pleadings earlier filed. 20

The Issue
 P a g e | 57

As presented, the issue boils down to whether the respondents’ backwages had been correctly computed under the decision dated September
28, 2001 of the NLRC, as confirmed by the CA, in light of the circumstance that there were two final NLRC decisions affecting the computation
of the backwages.

The Court s Ruling

We find the petition unmeritorious.

Preliminary considerations

In Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division), 21 we held that a decision in an illegal dismissal case
consists essentially of two components:

The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is the finding of the illegality
of the dismissal and the awards of separation pay in lieu of reinstatement, backwages.

The second part is the computation of the awards made. 22

The first part of the decision stems from the March 17, 1995 NLRC resolution finding an illegal dismissal and defining the legal consequences
of this dismissal. The second part involves the computation of the monetary award of backwages and the respondents' reinstatement. Under
the terms of the March 17, 1995 resolution, the respondents' backwages were to be computed from the time of the illegal dismissal up to
their reinstatement.

In the first computation of the backwages, Labor Arbiter Gambito confronted the following circumstances and the Sheriffs Report dated
November 8, 1995:23 first, how to interpret the phrase less earnings elsewhere as stated in the dispositive portion of the March 17, 1995
resolution of the NLRC; second, the effect of the alleged manifestation (dated October 9, 1995) of Samuel that the respondents were only
interested in the monetary award, not in their reinstatement; and third, the effect of the respondents' counsel's statement during the pre-
execution proceedings that the respondents simply wanted to be reinstated.

The records indicate that the respondents denied Samuel's statement and asked for reinstatement through their counsel. Nevertheless, Labor
Arbiter Gambito relied on Samuel's statement and fixed the computation date of the respondents' backwages to be up to and until August 25,
1995 or the date the order of execution was issued for the NLRC's March 17, 1995 decision. As stated in his July 12, 2000 order, 24 Labor
Arbiter Gambito found it fair and just that in the execution of the NLRC's decision, the computation of the respondents' backwages should
"stop at that time when it was put on record by them [respondents] that they had no desire to return to work." 25

The NLRC disregarded Labor Arbiter Gambito's first computation. In the dispositive portion of its July 31, 1998 decision, the NLRC modified
the final March 17, 1995 resolution. The first part of this decision -the original ruling of illegal dismissal -was left untouched while the second
part of the decision -the monetary award and its computation -was altered to conform with the strained relations between the parties that
became manifest during the execution phase of the March 17, 1995 resolution.

The effect of the modification of the March 17, 1995 resolution of the NLRC was two-fold: £, the reinstatement aspect of the March 1 7, 1995
resolution was expressly substituted by an order of payment of separation pay; and two the July 31, 1998 decision of the NLRC now provided
for two monetary awards (backwages and separation pay). The July 31, 1998 decision of the NLRC became final since neither parties
appealed.

Immutability of Judgment

That there is already a final and executory March 17, 1995 resolution finding that respondents have been illegally dismissed, and awarding
backwages and reinstatement, is not disputed. That there, too, is the existence of another final and executory July 31, 1998 decision
modifying the reinstatement aspect of the March 17, 1995 resolution, by awarding separation pay, is likewise beyond dispute.

As a rule, "a final judgment may no longer be altered, amended or modified, even if the alteration, amendment or modification is meant to
correct what is perceived to be an erroneous conclusion of fact or law and regardless of what court, be it the highest Court of the land,
rendered it. Any attempt on the part of the x x x entities charged with the execution of a final judgment to insert, change or add matters not
clearly contemplated in the dispositive portion violates the rule on immutability of judgments." 26 An exception to this rule is the existence of
supervening events27which refer to facts transpiring after judgment has become final and executory or to new circumstances that developed
after the judgment acquired finality, including matters that the parties were not aware of prior to or during the trial as they were not yet in
existence at that time.28

Under the circumstances of this case, the existence of the strained relations between the petitioners and the respondents was a supervening
event that justified the NLRC s modification of its final March 17, 1995 resolution. The NLRC, in its July 31, 1998 decision, based its
conclusion that strained relations existed on the conduct of the parties during the first execution proceedings before Labor Arbiter Gambito.
 P a g e | 58

The NLRC considered the delay in the respondents reinstatement and the parties conflicting claims on whether the respondents wanted to be
reinstated.29The NLRC also observed that during the intervening period from the first computation (which was done in 1995) to the appeal
and resolution of the correctness of the first computation (subject of the NLRC s July 31, 1998 decision), neither party actually did anything to
implement the respondents reinstatement. The NLRC considered these, actions as indicative of the strained relations between the parties so
that neither of them actually wanted to implement the reinstatement decree in the March 17, 1995 resolution. The NLRC concluded that the
award of reinstatement was no longer possible; thus, it awarded separation pay, in lieu of reinstatement. Unless exceptional reasons are
presented, these above findings and conclusion can no longer be disturbed after they lapsed to finality.

Appeal of labor case under Rule 45

A review of the CA s decision in a labor case, brought to the Court via Rule 45 of the Rules of Court, is limited to a review of errors of law
imputed to the CA. In Montoya v. Transmed Manila Corporation,30 we laid down the basic approach in reviews of Rule 45 decisions of the CA in
labor cases, as follows:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for jurisdictional error that we
undertake under Rule 65. Furthermore, Rule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling for
legal correctness, we have to view the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; we have
to examine the CA decision from the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it. This is the approach
that should be basic in a Rule 45 review of a CA ruling in a labor case. In question form, the question to ask is: Did the C correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case?

This manner of review was reiterated in Holy Child Catholic School v Hon. Patricia Sta. Tomas, etc., et al.,31 where the Court limited its review
under Rule 45 of the CA s decision in a labor case to the determination of whether the CA correctly resolved the presence or absence of grave
abuse of discretion in the decision of the Secretary of Labor, and not on the basis of whether the latter's decision on the merits of the case
was strictly correct.

Grave abuse of discretion, amounting to lack or excess of jurisdiction, has been defined as the capricious and whimsical exercise of judgment
amounting to or equivalent to lack of jurisdiction.32 There is grave abuse of discretion when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law."33

With this standard in mind, we find no reversible error committed by the CA when it found no grave abuse of discretion in the NLRC's ruling.
We find the computation of backwages and separation pay in the September 28, 2001 decision of the NLRC consistent with the provisions of
law and jurisprudence. The computation conforms to the terms of the March 17, 1995 resolution (on illegal dismissal and payment of
backwages) and the July 31, 1998 decision (on the computation of the backwages and the payment of separation pay).

Article 279 of the Labor Code, as amended,34 provides backwages and reinstatement as basic awards and consequences of illegal dismissal:

Article 279. Security of Tenure. -x x x An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

"By jurisprudence derived from this provision, separation pay may [also] be awarded to an illegally dismissed employee in lieu of
reinstatement."35 Section 4(b), Rule I of the Rules Implementing Book VI of the Labor Code provides the following instances when the award of
separation pay, in lieu of reinstatement to an illegally dismissed employee, is proper: (a) when reinstatement is no longer possible, in cases
where the dismissed employee s position is no longer available; (b) the continued relationship between the employer and the employee is no
longer viable due to the strained relations between them; and (c) when the dismissed employee opted not to be reinstated, or the payment of
se aration benefits would be for the best interest of the parties involved. 36 In these instances, separation pay is the alternative remedy to
reinstatement in addition to the award of backwages.37 The payment of separation pay and reinstatement are exclusive remedies. The
payment of separation pay replaces the legal consequences of reinstatement to an employee who was illegally dismissed. 38

For clarity, the bases for computing separation pay and backwages are different. Our ruling in Macasero v. Southern Industrial Gases
Philippines39 provides us with the manner these awards should be computed:

[U]nder Article 279 of the Labor Code and as held in a catena of cases, an employee who is dismissed without just cause and without due
process is entitled to backwages and reinstatement or payment of separation pay in lieu thereof:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are separate and
distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer,
separation pay is granted. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
 P a g e | 59

The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable as an
option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative. The payment of
separation pay is in addition to payment of backwages.40

The computation of separation pay is based on the length of the employee s service; and the computation of backwages is based on the
actual period when the employee was unlawfully prevented from working. 41

The basis of computation of backwages

The computation of backwages depends on the final awards adjudged as a consequence of illegal dismissal, in that:

First, when reinstatement is ordered, the general concept under Article 279 of the Labor Code, as amended, computes the backwages from
the time of dismissal until the employee’s reinstatement. The computation of backwages (and similar benefits considered part of the
backwages) can even continue beyond the decision of the labor arbiter or NLRC and ends only when the employee is actually reinstated.42

Second, when separation pay is ordered in lieu of reinstatement (in the event that this aspect of the case is disputed) or reinstatement is
waived by the employee (in the event that the payment of separation pay, in lieu, is not disputed), backwages is computed from the time of
dismissal until the finality of the decision ordering separation pay.

Third, when separation pay is ordered after the finality of the decision ordering the reinstatement by reason of a supervening event that makes
the award of reinstatement no longer possible (as in the case), backwages is computed from the time of dismissal until the finality of the
decision ordering separation pay.

The above computation of backwages, when separation pay is ordered, has been the Court s consistent ruling. In Session Delights Ice Cream
and Fast Foods v. Court Appeals Sixth Division, we explained that the finality of the decision becomes the reckoning point because in allowing
separation pay, the final decision effectively declares that the employment relationship ended so that separation pay and backwages are to be
computed up to that point.43

We may also view the proper computation of backwages (whether based on reinstatement or an order of separation pay) in terms of the life of
the employment relationship itself.1âwphi1

When reinstatement is ordered, the employment relationship continues. Once the illegally dismissed employee is reinstated, any
compensation and benefits thereafter received stem from the employee s continued employment. In this instance, backwages are computed
only up until the reinstatement of the employee since after the reinstatement, the employee begins to receive compensation from his resumed
employment.

When there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or subsequently ordered in light
of a supervening event making the award of reinstatement no longer possible), the employment relationship is terminated only upon the
finality of the decision ordering the separation pay. The finality of the decision cuts-off the employment relationship and represents the final
settlement of the rights and obligations of the parties against each other. Hence, backwages no longer accumulate upon the finality of the
decision ordering the payment of separation pay since the employee is no longer entitled to any compensation from the employer by reason of
the severance of his employment.

The computation of the respondents backwages

As the records show, the contending parties did not dispute the NLRC s order of separation pay that replaced the award of reinstatement on
the ground of the supervening event arising from the newly-discovered strained relations between the parties. The parties allowed the NLRC s
July 31, 1998 decision to lapse into finality and recognized, by their active participation in the second computation of the awards, the validity
and binding effect on them of the terms of the July 31, 1998 decision.

Under these circumstances, while there was no express modification on the period for computing backwages stated in the dispositive portion
of the July 31, 1998 decision of the NLRC, it is nevertheless clear that the award of reinstatement under the March 17, 1995 resolution (to
which the respondents backwages was initially supposed to have been computed) was substituted by an award of separation pay. As earlier
stated, the awards of reinstatement and separation pay are exclusive remedies; the change of awards (from reinstatement to separation pay)
under the NLRC s July 31, 1998 not only modified the awards granted, but also changed the manner the respondents backwages is to be
computed. The respondents’ backwages can no longer be computed up to the point of reinstatement as there is no longer any award of
reinstatement to speak of.

We also emphasize that the payment of backwages and separation pay cannot be computed from the time the respondents allegedly
expressed their wish to be paid separation pay. In the first place, the records show that the alleged manifestation by the respondents, through
Samuel, was actually a mere expression of interest.44 More importantly, the alleged manifestation was disregarded in the NLRC's July 31,
 P a g e | 60

1998 decision where the NLRC declared that the award of separation pay was due to the supervening event arising from the strained relations
(not a waiver of reinstatement) that justified the modification of the NLRC's final March 17, 1995 resolution on the award of reinstatement.
Simply put, insofar as the computation of the respondents' backwages, we are guided by the award, modified to separation pay, under the
NLRC's July 31, 1998 decision.

Thus, the computation of the respondents' backwages must be from the time of the illegal dismissal from employment until the finality of the
decision ordering the payment of separation pay. It is only when the NLRC rendered its July 31, 1998 decision ordering the payment of
separation pay (which both parties no longer questioned and which thereafter became final) that the issue of the respondents' employment
with the petitioners was decided with finality, effectively terminating it. The respondents' backwages, therefore, must be computed from the
time of their illegal dismissal until January 29, 1999, the date of finality of the NLRC's July 31, 1998 Decision. As a final point, the CA s ruling
must be modified to include legal interest commencing from the finality of the NLRC's July 31, 1998 decision. The CA failed to consider that
the NLRC's July 31, 1998 decision, once final, becomes a judgment for money from which another consequence flows -the payment of interest
in case of delay.45 Under the circumstances, the payment of legal interest of six percent (6) upon the finality of the judgment is proper. It is not
barred by the principle of immutability of judgment as it is compensatory interest arising from the final judgment. 46

WHEREFORE, premises considered, we DENY the petition and thus effectively AFFIRM with MODIFICATION the decision dated September 1
2005 and the resolution dated December 14, 2005 of the Court of Appeals in CA-G.R. SP No. 70085. The petitioners Bani Rural Bank, Inc.,
Enoc Theatre I and II and/or Rafael de Guzman, are ORDERED to PAY respondents Teresa de Guzman, Edgar C. Tan and Teresa G. Tan the
following:

(a) Backwages computed from the date the petitioners illegally dismissed the respondents up to January 29, 1999, the date of the
finality of the decision dated July 31, 1998 of the National Labor Relations Commission in NLRC CN. SUB-RAB-01-07- 7-0136-93 CA
No. L-001403 and NLRC CN. SUB-RAB-01-07-7-0137-93 CA No. L-001405;

(b) Separation pay computed from respondents' first day of employment up to January 29, 1999 at the rate of one (1) month pay per
year of service; and

(c) Legal interest of six percent (6) per annum of the total monetary awards computed from January 29, 1999 until their full
satisfaction.

The labor arbiter is hereby ORDERED to make another recomputation according to the above directives.

SO ORDERED.

ARTURO D. BRION
Associate Justice