Saint Mary’s University vs.

Court of Appeals

G.R. No. 157788. March 8, 2005.*

SAINT MARY’S UNIVERSITY, represented by its President REV. JESSIE M. HECHANOVA, CICM, petitioner,
vs. COURT OF APPEALS (Former Special Twelfth Division), NATIONAL LABOR RELATIONS COMMISSION
(Second Division) and MARCELO A. DONELO, respondents.

Labor Law; Employment; Private Schools; Teachers; Permanent Status; The following requisites must
concur before a private school teacher acquires permanent status.—Section 93 of the 1992 Manual of
Regulations for Private Schools, provides that full-time teachers who have satisfactorily completed their
probationary period shall be considered regular or permanent. Furthermore, the probationary period
shall not be more than six consecutive regular semesters of satisfactory service for those in the tertiary
level. Thus, the following requisites must concur before a private school teacher acquires permanent
status: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years
of service; and (3) such service must have been satisfactory.

Same; Same; Same; Same; Academic Personnel; Full-Time Status; Section 45 of the Manual of
Regulations for Private Schools provides that full-time academic personnel are those meeting all the
following requirements.—Section 45 of the 1992 Manual of Regulations for Private Schools provides
that full-time academic personnel are those meeting all the following requirements: a. Who possess at
least the minimum academic qualifications prescribed by the Department under this Manual for all
academic personnel; b. Who are paid monthly or hourly, based on the regular teaching loads as
provided for in the policies, rules and standards of the Department and the school; c. Whose total
working day of not more than eight hours a day is devoted to the school; d. Who have no other
remunerative occupation elsewhere requiring regular hours of work that will conflict with the working
hours in the school; and e. Who are not teaching full-time in any other educational institution. All
teaching personnel who do not meet the foregoing qualifications are considered part-time.

Saint Mary’s University vs. Court of Appeals

Same; Same; Same; Same; Termination of Contract; The school could not lawfully terminate a part-timer
before the end of the agreed period without just cause; but once the period, semester, or term ends,
there is no obligation on the part of the school to renew the contract of employment for the next
period, semester, or term.—This is not to say that part-time teachers may not have security of tenure.
The school could not lawfully terminate a part-timer before the end of the agreed period without just
cause. But once the period, semester, or term ends, there is no obligation on the part of the school to
renew the contract of employment for the next period, semester, or term. In this case, the contract of
employment of the respondent was not presented. However, judicial notice may be taken that contracts
of employment of part-time teachers are generally on a per semester or term basis. In the absence of a
specific agreement on the period of the contract of employment, it is presumed to be for a term or
semester. After the end of each term or semester, the school does not have any obligation to give
teaching load to each and every part-time teacher. That petitioner did not give any teaching assignment
to the respondent during a given term or semester, even if factually true, did not amount to an
actionable violation of respondent’s rights. It did not amount to illegal dismissal of the part-time
teacher.

Same; Same; Social Justice; The law, while protecting the rights of the employees, authorizes neither the
oppression nor destruction of the employer.—The law, while protecting the rights of the employees,
authorizes neither the oppression nor destruction of the employer. And when the law tilts the scale of
justice in favor of labor, the scale should never be so tilted if the result would be an injustice to the
employer.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Rogelio P. Corpuz for petitioner.

Rodolfo M. Cornejo and Ernesto S. Salunat for private respondent.

QUISUMBING, J.:

For review on certiorari are the Decision1 dated May 21, 2002 and the Resolution2 dated February 12,
2003 of the Court of Appeals in CA-G.R. SP No. 63240 which dismissed the petition for certiorari of St.
Mary’s University and its motion for reconsideration, respectively.

Respondent Marcelo Donelo started teaching on a contractual basis at St. Mary’s University in 1992. In
1995, he was issued an appointment as an Assistant Professor I. Later on, he was promoted to Assistant
Professor III. He taught until the first semester of school year 1999-2000 when the school discontinued
giving him teaching assignments. For this, respondent filed a complaint for illegal dismissal against the
university.

In its defense, petitioner St. Mary’s University showed that respondent was merely a part-time
instructor and, except for three semesters, carried a load of less than eighteen units. Petitioner argued
that respondent never attained permanent or regular status for he was not a full-time teacher. Further,
petitioner showed that respondent was under investigation by the university for giving grades to
students who did not attend classes. Petitioner alleged that respondent did not respond to inquiries
relative to the investigation. Instead, respondent filed the instant case against the university.
The Labor Arbiter ruled that respondent was lawfully dismissed because he had not attained permanent
or regular status pursuant to the Manual of Regulations for Private Schools. The Labor Arbiter held that
only full-time teachers with regular loads of at least 18 units, who have satisfactorily completed three
consecutive years of service qualify as permanent or regular employees.3

On appeal by respondent, the National Labor Relations Commission (NLRC) reversed the Decision of the
Labor Arbiter and ordered the reinstatement of respondent without loss of seniority rights and
privileges with full backwages from the time his salaries were withheld until actual reinstatement.4 It
held that respondent was a full-time teacher as he did not appear to have other regular remunerative
employment and was paid on a regular monthly basis regardless of the number of teaching hours. As a
full-time teacher and having taught for more than 3 years, respondent qualified as a permanent or
regular employee of the university.

Petitioner sought for reconsideration and pointed out that respondent was also working for the
Provincial Government of Nueva Vizcaya from 1993 to 1996. Nevertheless, the NLRC denied petitioner’s
Motion for Reconsideration. Aggrieved, petitioner elevated the matter to the Court of Appeals, which
affirmed the Decision of the NLRC.

Hence, this petition with a motion for temporary restraining order, alleging that the Court of Appeals
erred in:

. . . FINDING THAT THE RESPONDENT DONELO ATTAINED A PERMANENT STATUS, THE SAID FINDING
BEING CLEARLY CONTRARY TO THE EVIDENCE AT HAND AND DEVOID OF BASIS IN LAW.

. . . HOLDING THAT THE TWIN-NOTICE REQUIREMENT IMPOSED BY LAW BEFORE TERMINATION OF

EMPLOYMENT CAN BE LEGALLY EFFECTED MUST BE COMPLIED WITH BY THE PETITIONER.

. . . AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN ORDERING THE
PETITIONER TO REINSTATE RESPONDENT DONELO TO HIS FOR-MER POSITION WITHOUT LOSS OF
SENIORITY RIGHTS AND PRIVILEGES WITH FULL BACKWAGES FROM THE TIME OF HIS DISMISSAL UNTIL
ACTUALLY REINSTATED.5

Plainly, the ultimate questions before us are:

1. Was respondent a full-time teacher?

2. Had he attained permanent status?

3. Was he illegally dismissed?

Petitioner contends that respondent did not attain permanent status since he did not carry a load of at
least 18 units for three consecutive years; and that only full-time teachers can attain permanent status.
Further, since respondent was not a permanent employee, the twin-notice requirement in the
termination of the latter’s employment did not apply.

Respondent argues that, as early as 1995, he had a permanent appointment as Assistant Professor, and
he was a permanent employee regardless of the provisions of the Manual of Regulations for Private
Schools. He asserts that he should not be faulted for not carrying a load of at least 18 units since the
university unilaterally controls his load assignment in the same manner that the university has the
prerogative to shorten his probationary period. He points out also that the present Manual allows full-
time teachers to hold other remunerative positions as long as these do not conflict with the regular
school day. Since he is a permanent employee, respondent insists that petitioner’s failure to give him
the required notices constitutes illegal dismissal.

Section 93 of the 1992 Manual of Regulations for Private Schools, provides that full-time teachers who
have satisfactorily completed their probationary period shall be considered regular or permanent.6
Furthermore, the probationary period

shall not be more than six consecutive regular semesters of satisfactory service for those in the tertiary
level.7 Thus, the following requisites must concur before a private school teacher acquires permanent
status: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years
of service; and (3) such service must have been satisfactory.8

In the present case, petitioner claims that private respondent lacked the requisite years of service with
the university and also the appropriate quality of his service, i.e., it is less than satisfactory. The basic
question, however, is whether respondent is a full-time teacher.

Section 45 of the 1992 Manual of Regulations for Private Schools provides that full-time academic
personnel are those meeting all the following requirements:

a. Who possess at least the minimum academic qualifications prescribed by the Department under
this Manual for all academic personnel;

b. Who are paid monthly or hourly, based on the regular teaching loads as provided for in the policies,
rules and standards of the Department and the school;

_______________

Full-time teachers who have satisfactorily completed their probationary period shall be considered
regular or permanent.

7 Section 92. Probationary Period.—Subject in all instances to compliance with Department and school
requirements, the probationary period for academic personnel shall not be more than three (3)
consecutive years of satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses are
 c. Whose total working day of not more than eight hours a day is devoted to the school;

d. Who have no other remunerative occupation elsewhere requiring regular hours of work that will
conflict with the working hours in the school; and

e. Who are not teaching full-time in any other educational institution.

All teaching personnel who do not meet the foregoing qualifications are considered part-time.

A perusal of the various orders of the then Department of Education, Culture and Sports prescribing
teaching loads shows that the regular full-time load of a faculty member is in the range of 15 units to 24
units a semester or term, depending on the courses taught. Part-time instructors carry a load of not
more than 12 units.9

The evidence on record reveals that, except for four non-consecutive terms, respondent generally
carried a load of twelve units or less from 1992 to 1999. There is also no evidence that he performed
other functions for the school when not teaching. These give the impression that he was merely a part-
time teacher.10 Although this is not conclusive since there are full-time teachers who are allowed by the
university to take fewer load, in this case, respondent did not show that he belonged to the latter group,
even after the university presented his teaching record. With a teaching load of twelve units or less, he
could not claim he worked for the number of hours daily as prescribed by Section 45 of the Manual.
Furthermore, the records also indubitably show he was employed elsewhere from 1993 to 1996.

Since there is no showing that respondent worked on a full-time basis for at least three years, he could
not have acquired a permanent status.11 A part-time employee does not attain permanent status no
matter how long he has served the school.12 And as a part-timer, his services could be terminated by
the school without being held liable for illegal dismissal. Moreover, the requirement of twin-notice
applicable only to regular or permanent employees could not be invoked by respondent.

Yet, this is not to say that part-time teachers may not have security of tenure. The school could not
lawfully terminate a part-timer before the end of the agreed period without just cause. But once the
period, semester, or term ends, there is no obligation on the part of the school to renew the contract of
employment for the next period, semester, or term.

In this case, the contract of employment of the respondent was not presented. However, judicial notice
may be taken that contracts of employment of part-time teachers are generally on a per semester or
term basis. In the absence of a specific agreement on the period of the contract of employment, it is
presumed to be for a term or semester. After the end of each term or semester, the school does not
have any obligation to give teaching load to each and every part-time teacher. That petitioner did not
give any teaching assignment to the respondent during a given term or semester, even if factually true,
did not amount to an actionable violation of respondent’s rights. It did not amount to illegal dismissal of
the part-time teacher.
The law, while protecting the rights of the employees, authorizes neither the oppression nor destruction
of the employer.13 And when the law tilts the scale of justice in favor of labor, the scale should never be
so tilted if the result would be an injustice to the employer.14

WHEREFORE, the petition is GRANTED. The Decision dated May 21, 2002 and the Resolution dated
February 12, 2003 of the Court of Appeals in CA-G.R. SP No. 63240, which sustained those of the NLRC,
are NULLIFIED and SET ASIDE. The Decision of the Executive Labor Arbiter of the Regional Arbitration
Branch II, Tuguegarao City, Cagayan, is hereby REINSTATED.

SO ORDERED.

Davide, Jr. (C.J., Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.

Petition granted, judgment and resolution nullified and set aside.

Note.—Although the Court gives credence to respondent school’s argument that a private high school
teacher still has work at the end of the school year—to assist in the enrollment—such tasks cannot be
considered a teacher’s main duties, the failure to perform which would be tantamount to dereliction of
duty or abandonment. (Colegio de San Juan de Letran-Calamba vs. Villas, 399 SCRA 550 [2003])

G.R. No. 185058. November 9, 2015.*

JOVITA S. MANALO, petitioner, vs. ATENEO DE NAGA UNIVERSITY, FR. JOEL TABORA and MR. EDWIN
BER-NAL, respondents.

Remedial Law; Civil Procedure; Courts; Hierarchy of Courts; Although the Supreme Court (SC) has
concurrent jurisdiction with the Court of Appeals (CA) as regards petitions for certiorari, such petitions
are filed before the CA (following, of course, the National Labor Relations Commission’s [NLRC’s] denial
of the appropriate Motion for Reconsideration), rather than directly before the SC. This is consistent
with the principle of hierarchy of courts.—As clarified in St. Martin Funeral Home v. National Labor
Relations Commission, 295 SCRA 494 (1998), judicial review of decisions of the National Labor Relations
Commission is permitted. However, this review is through a petition for certiorari (i.e., special civil
action for certiorari) under Rule 65 of the Rules of Court, rather than through an appeal. Moreover,
although this court has concurrent jurisdiction with the Court of Appeals as regards petitions for
certiorari, such petitions are filed before the Court of Appeals (following, of course, the Na-tional Labor
Relations Commission’s denial of the appropriate Motion for Reconsideration), rather than directly
before this court. This is consistent with the principle of hierarchy of courts. It is only from an adverse
ruling of the Court of Appeals that a party may come to this court, which shall then be by way of a
petition for review on certiorari (i.e., appeal by certiorari) under Rule 45 of the Rules of Court.

Same; Certiorari; Petition for Review on Certiorari; A petition for certiorari under Rule 65 is an original
action. It is independent of the action that gave rise to the assailed ruling. In contrast, a petition for
review on certiorari under Rule 45 is a mode of appeal.—A petition for certiorari under Rule 65 is an
original action. It is independent of the action that gave rise to the assailed ruling. In contrast, a petition
for review on certiorari under Rule 45 is a mode of appeal. Thus, it is a continuation of the case subject
of the appeal. It follows then that it cannot go beyond the issues that were properly the subject of the
original action from which it arose.

Labor Law; Termination of Employment; Constructive Dismissal; Constructive dismissal arises “when
continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in
rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to the employee.”—Constructive dismissal arises “when continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in
pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.” In such cases, the impossibility, unreasonableness, or unlikelihood of continued
employment leaves an employee with no other viable recourse but to terminate his or her employment.

Same; Same; Same; Not every inconvenience, disruption, difficulty, or disadvantage that an employee
must endure results in a finding of constructive dismissal.—By definition, constructive dismissal can
happen in any number of ways. At its core, however, is the gratuitous, unjustified, or unwarranted
nature of the employer’s action. As it is a question of whether an employer acted fairly, it is inexorable
that any allegation of constructive dismissal be contrasted with the validity of exercising management
prerogative. Not every inconvenience, disruption, difficulty, or disadvantage that an employee must
endure results in a finding of constructive dismissal. Indeed, basic is the recognition that even as our
laws on labor and social justice impel a “preferential view in favor of labor”: [e]xcept as limited by
special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects
of employment, including hiring, work assignments, working methods, time, place and manner of work,
tools to be used, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, layoff of workers and the discipline, dismissal and recall of work.

Same; Transfer of Employees; Management Prerogative; Jurisprudence has long recognized that
transferring employees, to the extent that it is done fairly and in good faith, is a valid exercise of
management prerogative and will not, in and of itself, sustain a charge of constructive dismissal.—
Jurisprudence has long recognized that transferring employees, to the extent that it is done fairly and in
good faith, is a valid exercise of management prerogative and will not, in and of itself, sustain a charge
of constructive dismissal: [T]he transfer of an employee from one area of operation to another is a
management prerogative and is not constitutive of constructive dismissal, when the transfer is based on
sound business judgment, unattended by demotion in rank or a diminution of pay or bad faith. Thus, in
Philippine Japan Active Carbon Corp. v. NLRC, the Court ruled: “It is the employer’s prerogative, based
on its assessment and perception of its employees’ qualifications, aptitudes, and competence, to move
them around in the various areas of its business operations in order to ascertain where they will
function with maximum benefit to the company. An employee’s right to security of tenure does not give
him such a vested right in his position as would deprive the company of its prerogative to change his
assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor
inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his
salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.”

Professional Regulation; Regulation of a profession is a specific response to the need for certain
standards to be met by the members of that profession[;] [albeit] [t]he need for and nature of such
regulation is dependent on the specific profession and the market conditions in which it operates.—
Persons claiming themselves to be professionals hold themselves out to others and to society itself as
being faithful to benchmarks of quality. Being a professional is, thus, a matter of credibility and
trustworthiness. Accordingly, ethics and values are as inherent to professions as are training and
technical competence. Standards of integrity can never be divorced from standards of workmanship,
technique, and operation. It is precisely with the public interest in mind that professional regulation —
whether by the state or by members of the professions themselves, i.e., self-regulation — is an accepted
norm. In legal parlance and where the state apparatus is employed, professional regulation is a matter
of police power. Regardless, whether through the state apparatus or through self-imposed mechanisms,
all professions continually strive for the ideal of making themselves and their members exemplary and
beyond reproach. “Regulation of a profession is a specific response to the need for certain standards to
be met by the members of that profession[;] [albeit] [t]he need for and nature of such regulation is
dependent on the specific profession and the market conditions in which it operates.”

Same; Relevant as it is, ethical behavior takes on even greater significance in the education and training
of individuals who are prospective members of the profession.—Relevant as it is, ethical behavior takes
on even greater significance in the education and training of individuals who are prospective members
of the profession. Professionals who concurrently take on the role of educators act as gatekeepers to
the esteemed ranks of a profession or as channels of skills and knowledge. Moreover, they manifest by
example the ideals of their profession. Often, it is with these educators that students have their first
authentic and personal encounters with the professionals they seek be counted amongst. Professionals
educate students and open their eyes to what it means to be lawyers, teachers, doctors, nurses, or
engineers, not only by theory, but even by the very examples of their lives.
Same; The totality of the indiscretions imputed to petitioner reflects negatively on the accountancy
profession and indicates anything but professional behavior.—We fail to see how petitioner can avoid
the conclusion that these indiscretions do not reflect her fitness as an educator for the accountancy
profession and her employ-ment with respondent Ateneo de Naga University. These acts run afoul of
the first and most basic of the fundamental ethical principles of the accountancy profession: integrity.
Her having sanctioned unauthorized advances demonstrates a violation of the second fundamental
ethical principle: objectivity. Even assuming that these acts do not evince a premeditated scheme, they
nevertheless manifest that petitioner failed to act diligently, that is, competently and with due care. The
totality of the indiscretions imputed to petitioner reflects negatively on the accountancy profession and
indicates anything but professional behavior.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals Former Special
First Division.

The facts are stated in the opinion of the Court.

Legacion & Escueta-Legacion for petitioner.

The Law Firm of Donato T. Faylona for respondents.

LEONEN, J.:

At the core of the issue of constructive dismissal is the matter of whether an employer’s action is
warranted. Not every inconvenience, disruption, difficulty, or disadvantage that an employee must
endure sustains a finding of constructive dismissal. When professionals and educators violate the ethical
standards of the profession to which they belong and for which they train students, educational
institutions employing them are justified in relieving them of their teaching posts and in taking other
appropriate precautionary or punitive measures.

This resolves a Petition for Review on Certiorari1 praying that the assailed April 30, 2008 Decision2 and
October 7, 2008

Resolution3 of the Court of Appeals Former Special First Division in C.A.-G.R. No. 74899 be reversed and
set aside, and that the December 13, 2000 Decision4 of Labor Arbiter Jesus Orlando M. Quiñones (Labor
Arbiter Quiñones) be reinstated.

Jose Catral Mendoza (now Associate Justice of this court) and Pampio A. Abarintos.

In his December 13, 2000 Decision, Labor Arbiter Quiñones ruled that petitioner Jovita S. Manalo
(Manalo) was constructively dismissed. He ordered that Manalo be reinstated to her former position,
that the applicable increases to her salary and benefits be effected, and that attorney’s fees be paid to
her. However, Labor Arbiter Quiñones denied Manalo’s prayer for moral and exemplary damages.5

Labor Arbiter Quiñones’ Decision was sustained by the National Labor Relations Commission Second
Division in its March 26, 2002 Resolution.6 In its August 30, 2002 Resolution,7 the National Labor
Relations Commission denied the Motion for Reconsideration of respondents Ateneo de Naga
University, Fr. Joel Tabora, S.J. (Fr. Tabora) and Edwin P. Bernal (Bernal).

In its assailed April 30, 2008 Decision, the Court of Appeals reversed and set aside the ruling of Labor
Arbiter Quiñones and of the National Labor Relations Commission and dismissed Manalo’s Complaint.8
In its assailed October 7, 2008 Resolution, the Court of Appeals denied Manalo’s Motion for
Reconsideration.9

Manalo was a regular and permanent full-time faculty member of the Accountancy Department of
Ateneo de Naga University’s College of Commerce. She was employed on June 3, 1993 and was granted
permanent status in 1996. As recounted by Manalo in the Position Paper she filed before the Labor
Arbiter, she taught subjects such as “Auditing Theory, Auditing Practice, Financial Accounting, [and]
Elementary Accounting.”10 In the Reply to respondents’ Position Paper which she, too, filed before the
Labor Arbiter, Manalo similarly acknowledged that in 1994, she taught subjects in Ateneo de Naga
University’s Economics Department (i.e., International Trade and Philippine Economic Development),
albeit insisting that she did not have the required aptitude and competence.11

Manalo was also a part-time Manager of the Ateneo de Naga Multi-Purpose Cooperative (Cooperative)
before it was evicted from holding office inside campus in 1999.12

In her Position Paper, Manalo recounted that during her stint as Cooperative Manager, she came into
conflict with Bernal, Dean of Ateneo de Naga University’s College of Commerce. Bernal supposedly
charged Manalo with various offenses as regards the management of the Cooperative before the
Cooperative’s Board of Directors. The Board of Directors dismissed Manalo on the basis of these
charges. However, on November 30, 1999, Manalo’s dismissal was recalled by the Cooperative’s General
Assembly.13

Manalo further recounted that on December 14, 1999, Bernal wrote to Fr. Tabora, Ateneo de Naga
University President, recommending the termination of her employment on the grounds of serious
business malpractice, palpable dishonesty, and questionable integrity.14

Acting on the charges against Manalo, Fr. Tabora constituted a Grievance Committee. The Grievance
Committee later found Manalo guilty and recommended her dismissal.15 As recounted in the Comment
filed by respondents before this court, Manalo’s offenses were: “fraud in issuance of official receipts,
collection of cash without documented remittance to the cooperative, use of inappropriate forms of
documents cash receipts, 16 instances of bouncing checks issued by the cooperative . . . fraud in the
issuance of an official receipt, unauthorized cash advances[.]”16
Acting on the Grievance Committee’s recommendation as the University President had the “final say on
the matter,”17 Fr. Tabora instead opted to transfer Manalo to teach Economics in the Department of
Social Sciences of Ateneo de Naga University’s College of Arts and Science.18

Alleging that her transfer constituted constructive dismissal, Manalo filed a Complaint19 on April 3,
2000.

On December 13, 2000, Labor Arbiter Quiñones rendered the Decision20 finding that Manalo was
constructively dismissed. He faulted the action taken on Manalo’s case for being anchored on “private
affairs . . . which clearly has [sic] no bearing on the employment relationship between [Ateneo de Naga
University] and [Manalo].”21 He similarly faulted Manalo’s transfer to teach Economics — a subject that
she was supposedly not qualified to teach — as unduly burdensome,inconvenient, and even
embarrassing, and construed it as a badge of constructive dismissal.22

Labor Arbiter Quiñones ordered that Manalo be reinstated to her former position in the Accountancy
Department, that the increases in salaries and benefits effected during the pendency of the case be
applied to Manalo, and that Ateneo de Naga University pay her attorney’s fees. However, noting that
Manalo failed to show that respondents acted out of manifest bad faith, he denied Manalo’s prayer for
moral and exemplary damages.23 The dispositive portion of Labor Arbiter Quiñones’ Decision reads:

WHEREFORE, in view of the foregoing, and finding complainant Jovita S. Manalo to have been
constructively dismissed, judgment is hereby rendered against respondents Ateneo de Naga University,
Fr. Joel Tabora, S.J., and Mr. Edwin P. Bernal, as follows:

a. Respondent Ateneo de Naga University is ordered, upon receipt of this decision, to immediately
reinstate complainant to her former position as faculty member of the Accountancy Department,
College of Commerce, without loss of seniority rights and other privileges, or at the option of
respondent, effect payroll reinstatement;

b. Payment of complainant’s salaries as part of full backwages provided under Article 279 of the Labor
Code, is deemed moot and academic, it being admitted on record that complainant’s salaries have been
regularly deposited with complainant’s ATM account with Equitable PCIBank for the period that
complainant stopped working with respondents,which as of the date of this decision should amount to
Php108,869.40;

c. Additionally, respondent Ateneo de Naga University is ordered to effect and pay complainant’s
additional annual across the board increase equivalent to six percent (6%) of complainant’s monthly
salary, allowances, and other benefits or their monetary equivalent computed from the time her
compensation was withheld from her up to the time of her actual reinstatement or payroll
reinstatement, as the maybe [sic], as part of complainant’s full backwages provided under Article 279 of
the Labor Code;

d. Respondent Ateneo de Naga University is ordered to pay complainant ten percent (10%) of the total
amount awarded representing attorney’s fees.

All other claims and charges are dismissed for lack of merit.

SO ORDERED.24

Manalo and respondents appealed before the National Labor Relations Commission.25

Labor Arbiter Quiñones’ Decision was affirmed in toto by the National Labor Relations Commission
Second Division in its March 26, 2002 Resolution.26 In its August 30, 2002 Resolution,27 the National
Labor Relations Commission denied respondents’ Motion for Reconsideration.

Respondents then filed a Petition for Certiorari before the Court of Appeals.2

On April 30, 2008, the Court of Appeals rendered the assailed Decision.29 It reversed and set aside the
rulings of Labor Arbiter Quiñones and of the National Labor Relations Commission and ordered Manalo’s
Complaint dismissed. The Court of Appeals noted that there was ample factual basis for Manalo’s
transfer, and that such transfer was well within the scope of Ateneo de Naga University’s prerogatives as
an employer and as an educational institution.

In its assailed October 7, 2008 Resolution,30 the Court of Appeals denied Manalo’s Motion for
Reconsideration.

Aggrieved, Manalo filed the present Petition.31 She assails the supposed impropriety of the Court of
Appeals’ ruling that set aside the findings of Labor Arbiter Quiñones and of the National Labor Relations
Commission. She insists that their findings are conclusive and binding on the Court of Appeals and that
alternative findings could not have been the basis for reversing their rulings.32 She insists that she was
constructively dismissed and anchors this conclusion on how it was supposedly improper for the Ateneo
de Naga University to transfer her based on actions imputed to her in her capacity as Cooperative
Manager and not in her capacity as a member of the University’s faculty.33

For resolution are the following issues:

First, whether the Court of Appeals was in error for entertaining alternative findings to those made by
Labor Arbiter Quiñones and the National Labor Relations Commission; and

Second, whether the shift in petitioner Jovita S. Manalo’s teaching load from mainly Accountancy
subjects to Economics subjects constituted constructive dismissal.
Petitioner’s argument that the findings of a Labor Arbiter and of the National Labor Relations
Commission are so binding on the Court of Appeals that they are practically immutable require a
clarification of the procedural parameters of judicial review of decisions of the National Labor Relations
Commission. As this court’s resolution of the present Petition itself proceeds from actions taken by the
Court of Appeals, the same procedural parameters delineate what is permissible in this review.

As clarified in St. Martin Funeral Home v. National Labor Relations Commission,34 judicial review of
decisions of the National Labor Relations Commission is permitted. However, this review is through a
petition for certiorari (i.e., special civil action for certiorari) under Rule 65 of the Rules of Court, rather
than through an appeal. Moreover, although this court has concurrent jurisdiction with the Court of
Appeals as regards petitions for certiorari, such petitions are filed before the Court of Appeals
(following, of course, the National Labor Relations Commission’s denial of the appropriate Motion for
Reconsideration), rather than directly before this court. This is consistent with the principle of hierarchy
of courts. It is only from an adverse ruling of the Court of Appeals that a party may come to this court,
which shall then be by way of a petition for review on certiorari (i.e., appeal by certiorari) under Rule 45
of the Rules of Court.35

In Odango v. National Labor Relations Commission,36 this court explained that a special civil action for
certiorari is an extraordinary remedy that is allowed “only and restrictively in truly exceptional cases.”37
Consistent with this, the remedy of a writ of certiorari may be used only when there is no appeal or any
plain, speedy, and adequate remedy in the ordinary course of law. Nevertheless, this requirement has
been relaxed in cases where what is at stake is public welfare and the advancement of public policy.38

So too, parties who avail themselves of such a remedy are not at liberty to assail an adverse ruling on
grounds of their own choosing. Rather, a petition for certiorari is “confined to issues of jurisdiction or
grave abuse of discretion.”39 Its sole office is “the correction of errors of jurisdiction including the
commission of grave abuse of discretion amounting to lack or excess of jurisdiction.”40

A petition for certiorari under Rule 65 is an original action. It is independent of the action that gave rise
to the assailed ruling. In contrast, a petition for review on certiorari under resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may
file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only
questions of law which must be distinctly set forth.

Rule 45 is a mode of appeal. Thus, it is a continuation of the case subject of the appeal. It follows then
that it cannot go beyond the issues that were properly the subject of the original action from which it
arose.
The nature, parameters, and framework of judicial review of decisions of the National Labor Relations
Commission both by this court and by the Court of Appeals were exhaustively and deftly discussed in
this court’s Decision in Brown Madonna Press v. Casas:41

Mode of review in illegal dismissal cases

The present petition involves mixed questions of fact and law, with the core issue being one of fact. This
issue — from which the other issues arise — relates to the nature of Casas’ termination of employment
relationship with BMPI. Did she voluntarily resign from, or abandon her work at, BMPI, or was she
summarily dismissed by Cabangon?

This question of fact is an issue that we cannot resolved [sic] in a Rule 45 petition, except in the course
of determining whether the [Court of Appeals] correctly ruled in determining that the [National Labor
Relations Commission] did not commit grave abuse of discretion. In other words, the question we ask in
resolving the present case is not whether Casas abandoned her work or was illegally dismissed; instead,
we ask whether the [Court of Appeals] erred in not finding grave abuse of discretion in the [National
Labor Relations Commission’s] decision finding that Casas was dismissed from work.

Should we find that Casas had indeed been summarily dismissed, the next question involves the nature
of her dismissal — did it comply with the procedural and substantial requirements of the law, or was it
an illegal dismissal that should warrant the award to Casas of backwages and separation pay?

Keen awareness of the lens used to review this question is critical, given the jurisdiction of this Court
and the nature of review employed in labor cases appealed to the Court under Rule 45. The Court, save
for exceptional cases, is not a trier of facts; as a general rule, it resolves only questions of law.
Additionally, the [National Labor Relations Commission’s] decision is final and executory, and can be
reviewed by the [Court of Appeals] only when the [National Labor Relations Commission] committed a
grave abuse of discretion amounting to a lack or excess of jurisdiction.

Thus, the [Court of Appeals], in a Rule 65 petition assailing the [National Labor Relations Commission’s]
decision, examines whether the [National Labor Relations Commission] acted in such a “capricious and
whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law.” This is in contrast with appeals reaching the [Court of
Appeals] . . . where it has more leeway in reviewing both questions of fact and of law, and where the
appealed decision may be reversed because of an error in judgment.
Once the [Court of Appeals] decision reaches the Court through a Rule 45 petition, the question
presented before us carries with it the mode of review applied when the case has been appealed before
the [Court of Appeals]. Although we are asked to determine whether the [Court of Appeals] committed
an error in judgment, we necessarily have to consider that the judgment made by the [Court of Appeals]
involves the question of determining grave abuse of discretion. Unlike other petitions for review on
certiorari where we determine errors of law (and in exceptional cases, errors of fact), our appellate
jurisdiction in labor cases involves the determination of whether there had been an error in finding
grave abuse of discretion on the part of the [National Labor Relations Commission].

With these considerations in mind, the onus probandi in assailing a question of fact as determined by
the [National Labor Relations Commission] and upheld by the [Court of Appeals] becomes heavier. Not
only must an exceptional circumstance allowing the Court to review a question of fact exist; it must also
be shown that the [National Labor Relations Commission’s] resolution of the factual issue must have
been tainted with grave abuse of discretion, such that the [Court of Appeals] erred in affirming it.42
(Citations omitted)

From these, it is a clear error for petitioner to insist that the figurative hands of the Court of Appeals
were tied just because the findings of the Labor Arbiter and of the National Labor Relations coincided
with each other. Precisely because it was confronted with a Rule 65 Petition, it was the Court of Appeals’
business to determine whether there had been grave abuse of discretion amounting to lack or excess of
jurisdiction. Had it found that there was none, the proper course of action would have been to dismiss
respondents’ Rule 65 Petition and to sustain the rulings of Labor Arbiter Quiñones and of the National
Labor Relations Commission. In the intervening period, however, when the Court of Appeals was going
about its task of arriving at a resolution, petitioner should not fault the Court of Appeals both for
examining the records and evidence at its disposal and for embarking on its own analysis of whether
Labor Arbiter Quiñones and the National Labor Relations Commission properly performed their duties
and were circumspect in concluding that petitioner was constructively dismissed. A judicious resolution
of the controversy confronting it called for nothing less.

Going about its task, the Court of Appeals concluded that Labor Arbiter Quiñones’ and the National
Labor Relations Commission’s disposition of the case were attended with grave abuse of discretion
amounting to lack or excess of jurisdiction.

We sustain the conclusion of the Court of Appeals.

Labor Arbiter Quiñones and the National Labor Relations Commission concluded that petitioner was
constructively dismissed because the action — that is, her transfer — taken on her designation was
supposedly not warranted by matters that seemed to have been extraneous to her having been a faculty
member teaching Accountancy subjects. Labor Arbiter Quiñones and the National Labor Relations
Commission are grossly mistaken. They divorced petitioner’s manifest breach of the ethical standards
binding accountancy professionals from petitioner’s role as an educator of prospective accounting
professionals. Petitioner’s role as an educator made it imperative for her to impart her profession’s
values and ideals to her students, not least of all by her own example. Because she had failed in this,
respondents were well in a position to seek to prevent one whom they considered to have engaged in
unethical and unprofessional behavior from pursuing her didactic engagement with their students. As
such, Labor Arbiter Quiñones and the National Labor Relations Commission committed such gross errors
as amounting to an evasion of their positive duty to render judgment after only a meticulous
consideration of the circumstances of a case.

II

Constructive dismissal arises “when continued employment is rendered impossible, unreasonable or

unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee.”43 In such cases, the
impossibility, unreasonableness, or unlikelihood of continued employment leaves an employee with no
other viable recourse but to terminate his or her employment.

However, it is not necessary for an employee to actually resign or abandon his or her employment in
order for an em-ployer to be adjudged as having constructively dismissed an employee. In Hyatt Taxi
Services, Inc. v. Catinoy,44 this court frowned upon an overly strict construction of what makes for
constructive dismissal:

[T]he strict adherence by the NLRC to the definition of constructive dismissal is erroneous. Apparently,
the NLRC ruled out constructive dismissal in this case mainly because according to it “constructive
dismissal consists in the act of quitting because continued employment is rendered impossible,
unreasonable or unlikely as in the case of an offer involving demotion in rank and a diminution in pay.”
Based on this definition, the NLRC concluded that since respondent neither resigned nor abandoned his
job and the fact that respondent pursued his reinstatement negate constructive dismissal. What makes
this conclusion tenuous is the fact that constructive dismissal does not always involve forthright
dismissal or diminution in rank, compensation, benefit and privileges. There may be constructive
dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it could foreclose any choice by him except to forego his
continued employment.45

By definition, constructive dismissal can happen in any number of ways. At its core, however, is the
gratuitous, unjustified, or unwarranted nature of the employer’s action. As it is a question of whether an
employer acted fairly, it is inexorable that any allegation of constructive dismissal be contrasted with the
validity of exercising management prerogative.

_______________
Not every inconvenience, disruption, difficulty, or disadvantage that an employee must endure results in
a finding of constructive dismissal. Indeed, basic is the recognition that even as our laws on labor and
social justice impel a “preferential view in favor of labor”:46

[e]xcept as limited by special laws, an employer is free to regulate, according to his own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, time, place
and manner of work, tools to be used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, layoff of workers and the discipline, dismissal and
recall of work.47

Jurisprudence has long recognized that transferring employees, to the extent that it is done fairly and in
good faith, is a valid exercise of management prerogative and will not, in and of itself, sustain a charge
of constructive dismissal:

[T]he transfer of an employee from one area of operation to another is a management prerogative and
is not constitutive of constructive dismissal, when the transfer is based on sound business judgment,
unattended by demotion in rank or a diminution of pay or bad faith. Thus, in Philippine Japan Active
Carbon Corp. v. NLRC, the Court ruled:

“It is the employer’s prerogative, based on its assessment and perception of its employees’
qualifications, aptitudes, and competence, to move them around in the various areas of its business
operations in order to ascertain where they will function with maximum benefit to the company. An
employee’s right to security of tenure does not give him such a vested right in his position as would
deprive the company of its prerogative to change his assignment or transfer him where he will be most
useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not
involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee
may not complain that it amounts to a constructive dismissal.”48

As with all allegations of constructive dismissal, the resolution of this case hinges on whether, given the
circumstances, the employer acted fairly in exercising a prerogative that is indisputably vested in it.
Specifically, with respect to the recognized badges of constructive dismissal, we must look into whether
the employer was motivated not by sound judgment but by bad faith and unduly withheld or diminished
status, benefits, or privileges that otherwise should have been duly accruing to the employee.
Petitioner capitalizes on how the allegations of wrongdoing that prompted the conduct of inquiries and
dismissal proceedings against her pertained to her affiliation with the Ateneo de Naga Multi-Purpose
Cooperative, of which she was a part-time Manager, and not with her employment with respondent
Ateneo de Naga University. Asserting that the Cooperative and the University are distinct entities, she
argues that her supposed offenses are not work-related and cannot be thebases of any prospective
termination or of any other action taken on her employment as a faculty member.49

Respondents aptly note that the offenses petitioner committed show “clear transgressions of the Code
of Ethics of Accountants, which rendered petitioner disqualified to teach Accounting.”50

III

“Every profession is defined by the knowledge, skills, attitude and ethics of those in the profession.”51
In purporting one’s self as a professional, a person does more than merely make a statement as to an
activity that preoccupies him or her — an occupation — which may serve as a means for earning a living,
that is, a livelihood. Rather, he or she proclaims or professes to count himself or herself among a select
class of learned, trained, competent, and proficient individuals adhering to an established and
commonly held set of standards:

‘Profession’ derives from the Latin word ‘profiteor,’ to profess, which can also have the connotation of
making a formal commitment in the sense of taking a monastic oath. This root might suggest that a
professional is someone who claims to possess knowledge of something and has a commitment to a
particular code or set of values, both of which are fairly well-accepted characteristics of professions.52

_______________

Persons claiming themselves to be professionals hold themselves out to others and to society itself as
being faithful to benchmarks of quality. Being a professional is, thus, a matter of credibility and
trustworthiness. Accordingly, ethics and values are as inherent to professions as are training and
technical competence. Standards of integrity can never be divorced from standards of workmanship,
technique, and operation.

It is precisely with the public interest in mind that professional regulation — whether by the state or by
members of the professions themselves, i.e., self-regulation — is an accepted norm. In legal parlance
and where the state apparatus is employed, professional regulation is a matter of police power.
Regardless, whether through the state apparatus or through self-imposed mechanisms, all professions
continually strive for the ideal of making themselves and their members exemplary and beyond
reproach. “Regulation of a profession is a specific response to the need for certain standards to be met
by the members of that profession[;] [albeit] [t]he need for and nature of such regulation is dependent
on the specific profession and the market conditions in which it operates.”53

As with all other professions, the accountancy profession finds its mooring in qualitative and ethical
norms. In a Position Paper prepared in 2007, the International Federation of Accountants expounded on
how integral regulations, as well as technical and ethical standards, are to the accountancy profession:

11. Like other professions, the sustainability of the accountancy profession depends upon the quality of
the services provided by its members and on the profession’s capacity to respond effectively and
efficiently to the demands of the economy and society. Regulation seeks to ensure the right quality and

where appropriate, consistency in the quality of accountancy services.

12. There are a number of reasons why regulation might be necessary to ensure that appropriate quality
is provided in the market for accounting services. These include enforcement of ethical rules and
technical standards and the need to represent non-contracting users of accounting services, such as
investors and creditors. In recent years, for example, ethical failures on the part of some members of
the profession, and the resulting lack of confidence in financial reporting resulted in changes in the
regulation of the profession in many parts of the world.54

The International Federation of Accountants cited “two general cases” that illustrate how the public, left
with no recourse but to repose its trust in accounting professionals, can best be protected by regulatory
measures that ensure compliance with standards of proficiency and integrity:

13. While the specific triggers for regulatory intervention will differ over time, there are two general
cases that provide useful illustrations of why regulation may be an effective means of ensuring quality
and addressing issues in the operation of the market for accounting services. The first general case
arises from the situation where there is a knowledge imbalance between the client who is acquiring
accounting services and the provider of those services, who has professional expertise. The second
general case is where there are significant benefits or costs from the provision of accounting services
that accrue to third parties, not to those acquiring and producing the services.

14. Regulation can address the knowledge imbalance between the provider and purchaser of
professional services by providing assurance to the purchaser that the provider has the necessary
qualifications and will meet the appropriate professional standards in his or her work. In this way, the
purchaser is given assurance that they are receiving services of the right quality.
15. The second generic issue that regulation can address is where parties outside the contracting parties
(the purchaser and provider of services) either receive benefits or incur costs as a result of the
transaction. Regulation can ensure that those benefits and costs to third parties are taken into account
in determining what service is to be produced, and at what quality. Because financial statements have a
much wider use than by the company acquiring an audit, for example, regulation of financial reporting
and audit ensures that investors or potential investors (the third parties) receive the information they
require. Regulation acts to ensure that the benefits to these third parties are “built in,” when a company
contracts for an audit.55

Relevant as it is, ethical behavior takes on even greater significance in the education and training of
individuals who are prospective members of the profession. Professionals who concurrently take on the
role of educators act as gatekeepers to the esteemed ranks of a profession or as channels of skills and
knowledge. Moreover, they manifest by example the ideals of their profession. Often, it is with these
educators that students have their first authentic and personal encounters with the professionals they
seek be counted amongst. Professionals educate students and open their eyes to what it means to be
lawyers, teachers, doctors, nurses, or engineers, not only by theory, but even by the very examples of
their lives.

_______________

Regarding ethics and education in the accountancy profession, the International Federation of
Accountants states:

21. While regulation is important, it is not on its own enough to achieve the objective of assuring quality
and consistency of quality in the provision of professional services. IFAC recognizes that values also are
critical in driving behavior. No regulation can be truly effective unless it is accompanied by ethical
behavior.

22. It is the ethical behavior of the professional accountant that is the ultimate guarantee of good
service and quality. Education in values, especially through example and the appropriate use of
experience and professional judgment, based on a solid educational foundation, and reinforced through
continuing professional education, will be essential to the future of the accountancy profession.56
(Emphasis supplied)
Values and ethics are paramount pedagogical concerns. It is for this reason that training in various fields
is considered a “discipline.” Were it all a matter of operational deftness, mere “how-to” instructionals
would perhaps suffice. This, however, is not the way of genuine education. Educational institutions are
founded on the fundamental notion of how students grow as apprentices following the lived example of
their mentors.

Here in the Philippines, professional regulation by the state finds basis in Article XII, Section 14 of the
1987 Constitution.57 More specifically, the accountancy profession is regulated by Republic Act No.
9298, otherwise known as the Philippine Accountancy Act of 2004.

The centrality of ethics in the practice of accountancy is evident in the Philippine Accountancy Act of
2004. Its declaration of policy states:

Section 2. Declaration of Policy.—The State recognizes the importance of accountants in nation-

building and development. Hence, it shall develop and nurture competent, virtuous, productive and
well-rounded professional accountants whose standard of practice and service shall be excellent,
qualitative, world-class and globally competitive though inviolable, honest, effective, and credible
licensure examinations and though regulatory measures, programs and activities that foster their
professional growth and development. (Emphasis supplied)

Conformably, the Philippine Accountancy Act of 2004 created the Professional Regulatory Board of
Accountancy, thePhilippines shall be limited to Filipino citizens, save in cases prescribed by law.

58 Section 5. The Professional Regulatory Board of Accountancy and its Composition.—The

Professional Regulatory Board of Accountancy, hereinafter referred to as Board, under the supervision
and administrative control of the Professional Regulation Commission, hereinafter referred to as the
Commission, shall be composed of a Chairman and six (6) members to be appointed by the President of
the Philippines from a list of three (3) recommendees for each position and ranked by the Commission
from a list of five (5) nominees for each position submitted by the accredited national professional
organization of certified public accountant. The Board shall elect a vice chairman from among each
members for a term of one (1) year. The chairman shall preside in all meetings of the Boards and in the
event of a vacancy in the office of the chairman, the vice chairman shall assume such duties and
responsibilities until such time as a chairman is appointed.
powers and functions of which include the adoption of measures to ensure ethical practice:

Section 9. Powers and Functions of the Board.—The Board shall exercise the following specific
powers, functions and responsibilities:

....

To prescribe and/or adopt a Code of Ethics for the practice of accountancy;

To monitor the conditions affecting the practice of accountancy and adopt such measures, including
promulgation of accounting and auditing standards, rules and regulations and best practices as may be
deemed proper for the enhancement and maintenance of high professional, ethical, accounting and
auditing standards: That domestic accounting and auditing standards rules and regulations shall include
the international accounting and auditing standards, and generally accepted best practices[.]

The Code of Ethics for Professional Accountants in the Philippines59 spells out a “conceptual framework
. . . on fundamental ethical principles.”60 First of these is integrity, i.e., being “straightforward and
honest in all professional and busi­ness relationships.”61 Second, objectivity, or “not allow[ing] bias,
conflict of interest or undue influence of others to override professional or business judgments.”62
Third, professional competence and due care in “maintain[ing] professional knowledge and skill at the
level required to ensure that a client or employer receives competent professional service based on
current developments in practice, legislation and techniques.”63 Fourth, confidentiality, or “respect[ing]
the confidentiality of information acquired as a result of professional and business relationships and . . .
not disclos[ing] any such information to third parties without proper and specific authority unless there
is a legal or professional right or duty to disclose.”64 Lastly, professional behavior in one’s
“com­pl[iance] with relevant laws and regulations and . . . avoid[ing] any action that discredits the
profession.”65

IV

Petitioner’s indiscretions were noted to have been “fraud in issuance of official receipts, collection of
cash without documented remittance to the cooperative, use of inappropriate forms of documents cash
receipts, 16 instances of bouncing checks issued by the cooperative . . . fraud in the issuance of an
official receipt, unauthorized cash advances[.]”66 Details regarding these are matters of record and are
spelled out in the Grounds for Dismissal of Mrs. Jovita S. Manalo, which form part of Annex “E” of
petitioner’s own Position Paper before the Labor Arbiter. To reiterate, petitioner capitalizes on all but
how these acts are supposedly not work-related, thereby failing to sustain any action taken on her
employment as a faculty member.
We fail to see how petitioner can avoid the conclusion that these indiscretions do not reflect her fitness
as an educator for the accountancy profession and her employment with respondent Ateneo de Naga
University. These acts run afoul of the first and most basic of the fundamental ethical principles of the
accountancy profession: integrity. Her having sanctioned unauthorized advances demonstrates a
violation of the second fundamental ethical principle: objectivity. Even assuming that these acts do not
evince a premeditated scheme, they nevertheless manifest that petitioner failed to act diligently, that is,
competently and with due care. The totality of the indiscretions imputed to petitioner reflects negatively
on the accountancy profession and indicates anything but professional behavior.

Worse, these acts indicate that petitioner failed to demonstrate to students and to live by her own
example the ideals of the accountancy profession. Even if we were to assume that petitioner remained
an exemplar of technical proficiency, she failed to educate in respect of the values that are integral to
the training that she was supposed to impart to future professional accountants. We again emphasize
that practicing a profession and educating a profession are not only technical or operational matters;
they are as much a matter of ethics.

If at all, petitioner should be grateful to her employer that she was only transferred and her
employment was not completely terminated. At the heart of the issue of constructive dismissal is the
matter of whether the employer’s actions are warranted. Here, we find ample basis not only for the
precautionary measures actually taken on petitioner, but even for other heavier penalties that could
have been imposed on her. It is true that petitioner may have been inconvenienced by the mandated
transfer, but, to reiterate, not every inconvenience, disruption, difficulty, or disadvantage that an
employee must endure sustains a finding of constructive dismissal. With the backdrop of petitioner’s
professional indiscretions, respondent

Ateneo de Naga University, through its President, respondent Fr. Tabora, validly exercised a
management prerogative.

In any case, we fail to appreciate petitioner’s contention that her transfer to the Economics Department
entailed an assignment to something in which she was not competent or qualified. As underscored by
Labor Arbiter Quiñones, “[petitioner] was both a major of accounting and economics, and she was a
magna cum laude to boot.”67 Petitioner similarly admits to having previously taught Economics
subjects, even as she emphasizes that her concentration and the bulk of her teaching load remained to
be Accountancy subjects.

Neither does her lack of a Master’s Degree in Economics automatically render her unqualified. The 1992
Manual of Regulations for Private Schools, which was in effect during the material incidents of this case,
did not absolutely prevent non-holders of master’s degrees from teaching in undergraduate
programs.68 The same is true of the present Manual of Regulation for Private Higher Education.69

Ultimately, there were more than ample reasons for taking precautionary measures against petitioner.
Respondent Ateneo de Naga University could not be said to have acted in an arbitrary, unjustified, or
unwarranted manner in preventing petitioner from teaching Accountancy subjects. Having failed to
prove this crucial element of what amounts to constructivedismissal, petitioner’s Complaint against
respondents was rightly dismissed by the Court of Appeals.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Decision dated April 30, 2008
and Resolution dated October 7, 2008 of the Court of Appeals in C.A.-G.R. No. 74899 are AFFIRMED.

SO ORDERED.

Carpio (Chairperson), Velasco, Jr. ,** Brion and Del Castillo, JJ., concur.

Petition denied, judgment and resolution affirmed.

Notes.—A direct invocation of the Supreme Court’s original jurisdiction to issue extraordinary writs
should be allowed only when there are special and important reasons therefor, clearly and specifically
set out in the petition. (Cruz vs. Gingoyon, 658 SCRA 254 [2011])

While the principle of hierarchy of courts does indeed require that recourses should be made to the
lower courts before they are made to the higher courts, this principle is not an absolute rule and admits
of exceptions under well-defined circumstances. (Republic vs. Caguioa, 691 SCRA 306 [2013])

——o0o——

G.R. No. 215568. August 3, 2015.*

RICHARD N. RIVERA, petitioner, vs. GENESIS TRANSPORT SERVICE, INC. and RIZA A. MOISES,
respondents.

Labor Law; Our laws on labor, foremost of which is the Labor Code, are pieces of social
legislation.—Our laws on labor, foremost of which is the Labor Code, are pieces of social
legislation. They have been adopted pursuant to the constitutional recognition of “labor as a
primary social economic force” and to the constitutional mandates for the state to “protect the
rights of workers and promote their welfare” and for Congress to “give highest priority to the
enactment of measures that protect and enhance the right of all the people to human dignity,
[and] reduce social, economic, and political inequalities.” They are means for effecting social
justice, i.e., the “humanization of laws and the equalization of social and economic forces by
the State so that justice in the rational and objectively secular conception may at least be
approximated.”

Constitutional Law; Article XIII, Section 3 of the 1987 Constitution guarantees the right of
workers to security of tenure.—Article XIII, Section 3 of the 1987 Constitution guarantees the
right of workers to security of tenure. “One’s employment, profession, trade or calling is a
‘property right,’” of which a worker may be deprived only upon compliance with due process
requirements: It is the policy of the state to assure the right of workers to “security of tenure”
(Article XIII, Sec. 3 of the New Constitution, Section 9, Article II of the 1973 Constitution). The
guarantee is an act of social justice. When a person has no property, his job may possibly be his
only possession or means of livelihood. Therefore, he should be protected against any arbitrary
deprivation of his job. Article 280 of the Labor Code has construed security of tenure as
meaning that “the employer shall not terminate the services of an employee except for a just
cause or when authorized by” the code. Dismissal is not justified for being arbitrary where the
workers were denied due process and a clear denial of due process, or constitutional right must
be safeguarded against at all times.

Labor Law; Termination of Employment; Misconduct; Breach of Trust; Misconduct and breach
of trust are just causes for terminating employment only when attended by such gravity as
would leave the employer no other viable recourse but to cut off an employee’s livelihood.—
Misconduct and breach of trust are just causes for terminating employment only when
attended by such gravity as would leave the employer no other viable recourse but to cut off an
employee’s livelihood. The Labor Code recognizes serious misconduct, willful breach of trust or
loss of confidence, and other analogous causes as just causes for termination of employment.

Same; Same; Serious Misconduct; For serious misconduct to justify dismissal, the following
requisites must be present: (a) it must be serious; (b) it must relate to the performance of the
employee’s duties; and (c) it must show that the employee has become unfit to continue
working for the employer.—Serious misconduct as a just cause for termination was discussed in
Yabut v. Manila Electric Co., 663 SCRA 92 (2012): Misconduct is defined as the “transgression of
some established and definite rule of action, a forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment.” For serious misconduct
to justify dismissal, the following requisites must be present: (a) it must be serious; (b) it must
relate to the performance of the employee’s duties; and (c) it must show that the employee has
become unfit to continue working for the employer. (Emphasis supplied, citation omitted) Thus,
it is not enough for an employee to be found to have engaged in improper or wrongful conduct.
To justify termination of employment, misconduct must be so severe as to make it evident that
no other penalty but the termination of the employee’s livelihood is viable.

Same; Same; Breach of Trust; Philippine Plaza Holdings v. Episcope, 692 SCRA 227 (2013),
clarified that two (2) classes of employees are considered to hold positions of trust.—In
Philippine Plaza Holdings v. Episcope, 692 SCRA 227 (2013), we discussed the requisites for valid
dismissal on account of willful breach of trust: Among the just causes for termination is the
employer’s loss of trust and confidence in its employee. Article 296(c) (formerly Article 282[c])
of the Labor Code provides that an employer may terminate the services of an employee for
fraud or willful breach of the trust reposed in him. But in order for the said cause to be properly
invoked, certain requirements must be complied with[,] namely[:] (1) the employee concerned
must be holding a position of trust and confidence and (2) there must be an act that would
justify the loss of trust and confidence. Relating to the first requisite, Philippine Plaza Holdings
clarified that two (2) classes of employees are considered to hold positions of trust: It is
noteworthy to mention that there are two classes of positions of trust: on the one hand, there
are managerial employees whose primary duty consists of the management of the
establishment in which they are employed or of a department or a subdivision thereof, and to
other officers or members of the managerial staff; on the other hand, there are fiduciary rank-
and-file employees, such as cashiers, auditors, property custodians, or those who, in the normal
exercise of their functions, regularly handle significant amounts of money or property. These
employees, though rank-and-file, are routinely charged with the care and custody of the
employer’s money or property, and are thus classified as occupying positions of trust and
confidence. (Emphasis supplied) The position an employee holds is not the sole criterion. More
important than this formalistic requirement is that loss of trust and confidence must be
justified. As with misconduct as basis for terminating employment, breach of trust demands
that a degree of severity attend the employee’s breach of trust.

Same; Same; Same; Bus Conductors; The social justice suppositions underlying labor laws
require that the statutory grounds justifying termination of employment should not be read to
justify the view that bus conductors should, in all cases, be free from any kind of error. Not every
improper act should be taken to justify the termination of employment.—The social justice
suppositions underlying labor laws require that the statutory grounds justifying termination of
employment should not be read to justify the view that bus conductors should, in all cases, be
free from any kind of error. Not every improper act should be taken to justify the termination
of employment. Concededly, bus conductors handle money. To this extent, their work may be
analogous to that of tellers, cashiers, and other similarly situated rank-and-file employees who
occupy positions of trust and confidence. However, even granting that the first requisite for
termination of employment on account of willful breach of trust has been satisfied, we find it
improper to sustain the validity of the termination of petitioner’s employment. We take judicial
notice of bus conductors’ everyday work. Bus conductors receive, exchange,

and keep money paid by passengers by way of transportation fare. They keep track of
payments and make computations down to the last centavo, literally on their feet while a bus is
in transit. Regardless of whether a bus is driving through awkward spaces — through steep
inclines, rugged roads, or sharp turns — or of whether a bus is packed with standing
passengers, the lonesome task of keeping track of the passengers’ payments falls upon a bus
conductor.

Same; Same; Same; Serious Misconduct; Absent any other supporting evidence, the error in a
single ticket issued by petitioner can hardly be used to justify the inference that he has
committed serious misconduct or has acted in a manner that runs afoul of his employer’s
trust.—The records are bereft of evidence showing a pattern of discrepancies chargeable
against petitioner. Seen in the context of his many years of service to his employer and in the
absence of clear proof showing otherwise, the presumption should be that he has performed
his functions faithfully and regularly. It can be assumed that he has issued the correct tickets
and given accurate amounts of change to the hundreds or even thousands of passengers that
he encountered throughout his tenure. It is more reasonable to assume that — except for a
single error costing a loss of only P196.00 — the company would have earned the correct
expected margins per passenger, per trip, and per bus that it allowed to travel. Absent any
other supporting evidence, the error in a single ticket issued by petitioner can hardly be used to
justify the inference that he has committed serious misconduct or has acted in a manner that
runs afoul of his employer’s trust. More so, petitioner cannot be taken to have engaged in a
series of acts evincing a pattern or a design to defraud his employer. Terminating his
employment on these unfounded reasons is manifestly unjust.

Same; Same; Illegal Dismissals; Backwages; As his employment was illegally and unjustly
terminated, petitioner is entitled to full backwages and benefits from the time of his termination
until the finality of the Decision.—As his employment was illegally and unjustly terminated,
petitioner is entitled to full backwages and benefits from the time of his termination until the
finality of this Decision. He is likewise entitled to separation pay in the amount of one (1)
month’s salary for every year of service until the finality of this Decision, with a fraction of a
year of at least six (6) months being counted as one (1) whole year

Same; Same; Same; Attorney’s Fees; As he was compelled to litigate in order to seek relief for
the illegal and unjust termination of his employment, petitioner is likewise entitled to attorney’s
fees in the amount of ten percent (10%) of the total monetary award.—As he was compelled to
litigate in order to seek relief for the illegal and unjust termination of his employment,
petitioner is likewise entitled to attorney’s fees in the amount of 10% of the total monetary
award.

Same; Same; Same; Moral Damages; Moral damages are awarded in termination cases where
the employee’s dismissal was attended by bad faith, malice or fraud, or where it constitutes an
act oppressive to labor, or where it was done in a manner contrary to morals, good customs or
public policy.—“Moral damages are awarded in termination cases where the employee’s
dismissal was attended by bad faith, malice or fraud, or where it constitutes an act oppressive
to labor, or where it was done in a manner contrary to morals, good customs or public policy.”
Also, to provide an “example or correction for the public good,” exemplary damages may be
awarded.

Mercantile Law; Corporations; Separate Legal Personality; Liability of Corporate Officers; A

corporation has a personality separate and distinct from those of the persons composing it.
Thus, as a rule, corporate directors and officers are not liable for the illegal termination of a
corporation’s employees. It is only when they acted in bad faith or with malice that they become
solidarily liable with the corporation.—Respondent Riza A. Moises may not be held personally
liable for the illegal termination of petitioner’s employment. As we explained in Saudi Arabian
Airlines v. Rebesencio, 746 SCRA 140 (2015): A corporation has a personality separate and
distinct from those of the persons composing it. Thus, as a rule, corporate directors and officers
are not liable for the illegal termination of a corporation’s employees. It is only when they acted
in bad faith or with malice that they become solidarily liable with the corporation. In Ever
Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical, this court
clarified that “[b]ad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known
duty through some motive or interest or ill will; it partakes of the nature of fraud.” Petitioner
has not produced proof to show that respondent Riza A. Moises acted in bad faith or with
malice as regards the termination of his employment. Thus, she did not incur any personal
liability.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals, Fifth
Division.

The facts are stated in the opinion of the Court.

Anelyn C. Ciudadano for respondents.

LEONEN, J.:

This resolves a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure praying that the July 8, 2014 Decision1 and the November 20, 2014 Resolution2 of
the Court of Appeals Fifth Division in C.A.-G.R. S.P. No. 130801 be reversed and set aside, and
that new judgment be entered finding petitioner Richard N. Rivera to have been illegally
dismissed and awarding to him his monetary claims.

The assailed July 8, 2014 Decision of the Court of Appeals dismissed the Petition for Certiorari
under Rule 65 of the 1997 Rules of Civil Procedure filed by Richard N. Rivera (Rivera) and
affirmed the February 28, 20133 and April 30, 20134 Resolutions of the National Labor
Relations Commission Second Division. These Resolutions sustained the ruling of Labor Arbiter
Gaudencio P. Demaisip, Jr. who, in his June 26, 2012 Decision,5 dismissed Rivera’s Complaint6
for illegal dismissal.

The assailed November 20, 2014 Resolution of the Court of Appeals denied Rivera’s Motion for
Reconsideration.

Rivera was employed by respondent Genesis Transport Service, Inc. (Genesis) beginning June
2002 as a bus conductor, assigned to the Cubao-Baler, Aurora route. As part of the requisites
for his employment, he was required to post a cash bond of P6,000.00. Respondent Riza A.
Moises is Genesis’ President and General Manager.7

In his Position Paper before the Labor Arbiter, Rivera acknowledged that he was dismissed by
Genesis on account of a discrepancy in the amount he declared on bus ticket receipts. He
alleged that on June 10, 2010, he received a Memorandum8 giving him twenty-four (24) hours
to explain why he should not be sanctioned for reporting and remitting the amount of P198.00
instead of the admittedly correct amount of P394.00 worth of bus ticket receipts. He responded
that it was an honest mistake, which he was unable to correct “because the bus encountered
mechanical problems.”9

The discrepancy between the reported and remitted amount as against the correct amount was
detailed in the “Irregularity Report” prepared by Genesis’ Inspector, Arnel Villaseran
(Villaseran).10

According to Villaseran, on May 25, 2010, he conducted a “man to man” inspection on the
tickets held by the passengers onboard Bus No. 8286 who had transferred from Bus No. 1820 in
San Fernando, Pampanga. (Bus No. 1820 broke down) In the course of his inspection, he
noticed that Ticket No. 723374 VA had a written corrected amount of P394.00. However, the
amount marked by perforations made on the ticket, which was the amount originally indicated
by the bus conductor, was only P198.00. Upon inquiring with the passenger holding the ticket,
Villaseran found out that the passenger paid P500.00 to Rivera, who gave her change in the
amount of P106.00.11

Subsequently, Villaseran conducted verification works with the Ticket Section of Genesis’ Cubao
Main Office. Per his inquiries, the duplicate ticket surrendered by Rivera to Genesis indicated
only the unconnected amount of P198.00. It was also found that Rivera remitted only
P198.00.12

On July 20, 2010, Genesis served on Rivera a written notice13 informing him that a hearing of
his case was set on July 23, 2010. Despite his explanations, Rivera’s services were terminated
through a written notice dated July 30, 2010.14 Contending that this termination was arbitrary
and not based on just causes for terminating employment, he filed the Complaint15 for illegal
dismissal, which is subject of this Petition.16
For their defense, Genesis and Riza A. Moises claimed that Rivera’s misdeclaration of the
amount in the bus ticket receipts and failure to remit the correct amount clearly violated
Genesis’ policies and amounted to serious misconduct, fraud, and willful breach of trust;
thereby justifying his dismissal.17

In a Decision18 dated June 26, 2012, Labor Arbiter Gaudencio P. Demaisip gave credence to
respondents’ appreciation of the gravity of Rivera’s acts of misdeclaring the amount of bus
ticket receipts and failing to remit the correct amount. Thus, he dismissed Rivera’s Complaint.

In a Resolution19 dated February 28, 2013, the National Labor Relations Commission Second
Division affirmed the Decision of Labor Arbiter Demaisip. In a Resolution20 dated April 30,
2013, the National Labor Relations Commission denied Rivera’s Motion for Reconsideration.

Thereafter, Rivera filed a Rule 65 Petition before the Court of Appeals. In the assailed July 8,
2014 Decision,21 the Court of Appeals Fifth Division sustained the rulings of Labor Arbiter
Demaisip and the National Labor Relations Commission. In the assailed November 20, 2014
Resolution,22 the Court of Appeals denied Rivera’s Motion for Reconsideration.

Hence, this Petition was filed.

For resolution is the issue of whether petitioner Richard N. Rivera’s employment was
terminated for just cause by respondent Genesis Transport Service, Inc.

As Riza A. Moises, Genesis’ President and General Manager, has been impleaded, this court
must also rule on her personal liability, should the termination of petitioner’s employment be
found invalid.

Our laws on labor, foremost of which is the Labor Code, are pieces of social legislation. They
have been adopted pursuant to the constitutional recognition of “labor as a primary social
economic force”23 and to the constitutional mandates for the state to “protect the rights of
workers and promote their welfare”24 and for Congress to “give highest priority to the
enactment of measures that protect and enhance the right of all the people to human dignity,
[and] reduce social, economic, and political inequalities.”25

They are means for effecting social justice, i.e., the “humanization of laws and the equalization
of social and economic forces by the State so that justice in the rational and objectively secular
conception may at least be approximated.”26
Article XIII, Section 3 of the 1987 Constitution guarantees the right of workers to security of
tenure. “One’s employment, profession, trade or calling is a ‘property right,’”27 of which a
worker may be deprived only upon compliance with due process requirements:

It is the policy of the state to assure the right of workers to “security of tenure” (Article XIII, Sec.
3 of the New Constitution, Section 9, Article II of the 1973 Constitution). The guarantee is an act
of social justice. When a person has no property, his job may possibly be his only possession or
means of livelihood. Therefore, he should be protected against any arbitrary deprivation of his
job. Article 280 of the Labor Code has construed security of tenure as meaning that “the
employer shall not terminate the services of an employee except for a just cause or when
authorized by” the code. Dismissal is not justified for being arbitrary where the workers were
denied due process and a clear denial of due process, or constitutional right must be
safeguarded against at all times.28 (Citations omitted)

Conformably, liberal construction of Labor Code provisions in favor of workers is stipulated by

Article 4 of the Labor Code:

Art. 4. Construction in favor of labor.—All doubts in the implementation and interpretation of

the provisions of this Code, including its implementing rules and regulations, shall be resolved
in favor of labor.

This case is quintessentially paradigmatic of the need for the law to be applied in order to
ensure social justice. The resolution of this case should be guided by the constitutional
command for courts to take a preferential view in favor of labor in ambitious cases.

This case revolves around an alleged discrepancy between the amounts indicated on a single
ticket. For the paltry sum of P196.00 that petitioner failed to remit in his sole documented
instance of apparent misconduct, petitioner’s employment was terminated. He was deprived of
his means of subsistence.

II

Misconduct and breach of trust are just causes for terminating employment only when
attended by such gravity as would leave the employer no other viable recourse but to cut off an
employee’s livelihood.

The Labor Code recognizes serious misconduct, willful breach of trust or loss of confidence, and
other analogous causes as just causes for termination of employment:
Article 282. Termination by employer.—An employer may terminate an employment for any
of the following just causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

Serious misconduct as a just cause for termination was discussed in Yabut v. Manila Electric
Co.:29

Misconduct is defined as the “transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment.” For serious misconduct to justify dismissal, the following requisites
must be present: (a) it must be serious; (b) it must relate to the performance of the employee’s
duties; and (c) it must show that the employee has become unfit to continue working for the
employer.30 (Emphasis supplied, citation omitted)

Thus, it is not enough for an employee to be found to have engaged in improper or wrongful
conduct. To justify termination of employment, misconduct must be so severe as to make it
evident that no other penalty but the termination of the employee’s livelihood is viable.

In Philippine Plaza Holdings v. Episcope,31 we discussed the requisites for valid dismissal on
account of willful breach of trust:

Among the just causes for termination is the employer’s loss of trust and confidence in its
employee. Article 296(c) (formerly Article 282[c]) of the Labor Code provides that an employer
may terminate the services of an employee for fraud or willful breach of the trust reposed in
him. But in order for the said cause to be properly invoked, certain requirements must be
complied with[,] namely[:] (1) the employee concerned must be holding a position of trust and
confidence and (2) there must be an act that would justify the loss of trust and confidence.32
Relating to the first requisite, Philippine Plaza Holdings clarified that two (2) classes of
employees are considered to hold positions of trust:

It is noteworthy to mention that there are two classes of positions of trust: on the one hand,
there are managerial employees whose primary duty consists of the management of the
establishment in which they are employed or of a department or a subdivision thereof, and to
other officers or members of the managerial staff; on the other hand, there are fiduciary rank-
and-file employees, such as cashiers, auditors, property custodians, or those who, in the normal
exercise of their functions, regularly handle significant amounts of money or property. These
employees, though rank-and-file, are routinely charged with the care and custody of the
employer’s money or property, and are thus classified as occupying positions of trust and
confidence.33 (Emphasis supplied)

The position an employee holds is not the sole criterion. More important than this formalistic
requirement is that loss of trust and confidence must be justified. As with misconduct as basis
for terminating employment, breach of trust demands that a degree of severity attend the
employee’s breach of trust. In China City Restaurant Corporation v. National Labor Relations
Commission,34 this court emphasized the need for caution:

For loss of trust and confidence to be a valid ground for the dismissal of employees, it must be
substantial and not arbitrary, whimsical, capricious or concocted.

Irregularities or malpractices should not be allowed to escape the scrutiny of this Court.
Solicitude for the protection of the rights of the working class [is] of prime importance.
Although this is not [al license to disregard the rights of management, still the Court must be
wary of the ploys of management to get rid of employees it considers as undesirable.35
(Emphasis supplied)

III

The social justice suppositions underlying labor laws require that the statutory grounds
justifying termination of employment should not be read to justify the view that bus conductors
should, in all cases, be free from any kind of error. Not every improper act should be taken to
justify the termination of employment.

Concededly, bus conductors handle money. To this extent, their work may be analogous to that
of tellers, cashiers, and other similarly situated rank-and-file employees who occupy positions
of trust and confidence. However, even granting that the first requisite for termination of
employment on account of willful breach of trust has been satisfied, we find it improper to
sustain the validity of the termination of petitioner’s employment.
We take judicial notice of bus conductors’ everyday work. Bus conductors receive, exchange,
and keep money paid by passengers by way of transportation fare. They keep track of
payments and make computations down to the last centavo, literally on their feet while a bus is
in transit. Regardless of whether a bus is driving through awkward spaces — through steep
inclines, rugged roads, or sharp turns — or of whether a bus is packed with standing
passengers, the lonesome task of keeping track of the passengers’ payments falls upon a bus
conductor.

Thus, while they do handle money, their circumstances are not at all the same as those of
regular cashiers. They have to think quickly, literally on their feet. Regular cashiers, on the other
hand, have the time and comfort to deliberately and carefully examine the transactions of their
employer.

However, handling passengers’ fare payments is not their sole function. Bus conductors assist
drivers as they maneuver buses through tight spaces while they are in transit, depart, or park.
They often act as dispatchers in bus stops and other such places, assist passengers as they
embark and alight, and sometimes even help passengers load and unload goods and cargo.
They manage the available space in a bus and ensure that no space is wasted as the bus
accommodates more passengers. Along with drivers, bus conductors commit to memory the
destination of each passenger so that they can anticipate their stops.

There are several ways to manifest the severity that suffices to qualify petitioner’s alleged
misconduct or breach of trust as so grave that terminating his employment is warranted. It may
be through the nature of the act itself: spanning an entire spectrum between, on one end, an
overlooked error, made entirely in good faith; and, on another end, outright larceny. It may be
through the sheer amount mishandled. It may be through frequency of acts. It may be through
other attendant circumstances, such as attempts to destroy or conceal records and other
evidence, or evidence of a motive to undermine the business of an employer.

We fail to appreciate any of these in this case.

To reiterate, what is involved is a paltry amount of P196.00. All that has been proven is the
existence of a discrepancy. No proof has been adduced of ill motive or even of gross negligence.
From all indications, petitioner stood charged with a lone, isolated instance of apparent
wrongdoing.

The records are bereft of evidence showing a pattern of discrepancies chargeable against
petitioner. Seen in the context of his many years of service to his employer and in the absence
of clear proof showing otherwise, the presumption should be that he has performed his
functions faithfully and regularly. It can be assumed that he has issued the correct tickets and
given accurate amounts of change to the hundreds or even thousands of passengers that he
encountered throughout his tenure. It is more reasonable to assume that — except for a single
error costing a loss of only P196.00 — the company would have earned the correct expected
margins per passenger, per trip, and per bus that it allowed to travel.
Absent any other supporting evidence, the error in a single ticket issued by petitioner can
hardly be used to justify the inference that he has committed serious misconduct or has acted
in a manner that runs afoul of his employer’s trust. More so, petitioner cannot be taken to have
engaged in a series of acts evincing a pattern or a design to defraud his employer. Terminating
his employment on these unfounded reasons is manifestly unjust.

To infer from a single error that petitioner committed serious misconduct or besmirched his
employer’s trust is grave abuse of discretion. It is an inference that is arbitrary and capricious. It
is contrary to the high regard for labor and social justice enshrined in our Constitution and our
labor laws.

The Court of Appeals committed an error of law correctible by a petition for review under Rule
45. It erred when it held that the National Labor Relations did not commit grave abuse of
discretion when the latter did not engage in the requisite scrutiny to review the inference and
its bases.

IV

As his employment was illegally and unjustly terminated, petitioner is entitled to full backwages
and benefits from the time of his termination until the finality of this Decision. He is likewise
entitled to separation pay in the amount of one (1) month’s salary for every year of service until
the finality of this Decision, with a fraction of a year of at least six (6) months being counted as
one (1) whole year.

As he was compelled to litigate in order to seek relief for the illegal and unjust termination of
his employment, petitioner is likewise entitled to attorney’s fees in the amount of 10% of the
total monetary award.36

“Moral damages are awarded in termination cases where the employee’s dismissal was
attended by bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or
where it was done in a manner contrary to morals, good customs or public policy.”37 Also, to
provide an “example or correction for the public good,”38 exemplary damages may be
awarded.

However, we find no need to award these damages in favor of petitioner. While the
termination of his employment was invalid, we nevertheless do not find respondent Genesis to
have acted with such a degree of malice as to act out of a design to oppress petitioner. It
remains that a discrepancy and shortage chargeable to petitioner was uncovered, although this
discrepancy and shortage does not justify a penalty as grave as termination of employment.
 V

Respondent Riza A. Moises may not be held personally liable for the illegal termination of
petitioner’s employment.

As we explained in Saudi Arabian Airlines v. Rebesencio:39

A corporation has a personality separate and distinct from those of the persons composing it.
Thus, as a rule, corporate directors and officers are not liable for the illegal termination of a
corporation’s employees. It is only when they acted in bad faith or with malice that they
become solidarily liable with the corporation.

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical, this
court clarified that “[b]ad faith does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a
known duty through some motive or interest or ill will; it partakes of the nature of fraud.”40

Petitioner has not produced proof to show that respondent Riza A. Moises acted in bad faith or
with malice as regards the termination of his employment. Thus, she did not incur any personal
liability.

WHEREFORE, the Petition for Review on Certiorari is PARTIALLY GRANTED. The assailed
Decision dated July 8, 2014 and the assailed Resolution dated November 20, 2014 of the Court
of Appeals Fifth Division in C.A.-G.R. S.P. No. 130801, which dismissed the Petition for Certiorari
filed by petitioner Richard N. Rivera and affirmed the February 28, 2013 and April 30, 2013
Resolutions of the National Labor Relations Commission Second Division, as well as the June 26,
2012 Decision of Labor Arbiter Gaudencio P. Demaisip, Jr., are REVERSED and SET ASIDE.
Accordingly, respondent Genesis Transport Service, Inc. is ordered to pay petitioner:

(1) Full backwages and other benefits computed from July 30, 2010, when petitioner’s
employment was illegally terminated, until the finality of this Decision;

(2) Separation pay computed from June 2002, when petitioner commenced employment, until
the finality of this Decision, at the rate of one (1) month’s salary for every year of service, with a
fraction of a year of at least six (6) months being counted as one (1) whole year; and (3)
Attorney’s fees equivalent to ten percent (10%) of the total award.
The case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts
due to petitioner, which respondents should pay without delay.

The case is DISMISSED with respect to respondent Riza A. Moises.

SO ORDERED.

Carpio (Chairperson), Brion, Del Castillo and Mendoza, JJ., concur.

Petition partially granted, judgment and resolution reversed and set aside.

Notes.—Loss of trust and confidence to be a valid cause for dismissal must be work-related
such as would show the employee concerned to be unfit to continue working for the employer
and it must be based on a willful breach of trust and founded on clearly established facts. (Bluer
Than Blue Joint Ventures Company vs. Esteban, 720 SCRA 765 [2014])

A corporation, upon coming into existence, is invested by law with a personality separate and
distinct from those of the persons composing it as well as from any other legal entity to which it
may be related. (Commissioner of Customs vs. Oilink International Corporation, 728 SCRA 469
[2014])

——o0o——

434 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

G.R. No. 148132. January 28, 2008.*

SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent.

G.R. No. 151079. January 28, 2008.*

SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent.

G.R. No. 151372. January 28, 2008.*

REGINA M. ASTORGA, petitioner, vs. SMART COMMUNICATIONS, INC. and ANN MARGARET
V. SANTIAGO, respondents.
Actions; Provisional Remedies; Replevin; Words and Phrases; Replevin is an action whereby the
owner or person entitled to repossession of goods or chattels may recover those goods or
chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods
or chattels; The term may refer either to the action itself, for the recovery of personality, or to
the provisional remedy traditionally associated with it, by which possession of the property may
be obtained by the plaintiff and retained during the pendency of the action.—Replevin is an
action whereby the owner or person entitled to repossession of goods or chattels may recover
those goods or chattels from one who has wrongfully distrained or taken, or who wrongfully
detains such goods or chattels. It is designed to permit one having right to possession to
recover property in specie from one who has wrongfully taken or detained the property. The
term may refer either to the action itself, for the recovery of personalty, or to the provisional
remedy traditionally associated with it, by which possession of the property may be obtained
by the plaintiff and retained during the pendency of the action.

Same; Same; Same; Jurisdictions; Labor Law; An employer’s demand for payment of the market
value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute;
A

_______________

VOL. 542, JANUARY 28, 2008 435

Smart Communications, Inc. vs. Astorga

dispute which involves the relationship of debtor and creditor rather than employee-employer
relations falls within the jurisdiction of the regular courts.—Contrary to the CA’s ratiocination,
the RTC rightfully assumed jurisdiction over the suit and acted well within its discretion in
denying Astorga’s motion to dismiss. SMART’s demand for payment of the market value of the
car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves
the relationship of debtor and creditor rather than employeeemployer relations. As such, the
dispute falls within the jurisdiction of the regular courts.

Labor Law; Termination of Employment; Redundancy; Management Prerogatives; Words and

Phrases; Redundancy in an employer’s personnel force necessarily or even ordinarily refers to
duplication of work; A position is redundant where it is superfluous, and superfluity of a position
or positions may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise; The characterization of an
employee’s services as superfluous or no longer necessary and, therefore, properly terminable, is
an exercise of business judgment on the part of the employer. The wisdom and soundness of
such characterization or decision is not subject to discretionary review provided, of course, that
a violation of law or arbitrary or malicious action is not shown.—Astorga was terminated due to
redundancy, which is one of the authorized causes for the dismissal of an employee. The nature
of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire
File Co., Inc. v. National Labor Relations Commission, 193 SCRA 665 (1991), viz.: x x x
redundancy in an employer’s personnel force necessarily or even ordinarily refers to
duplication of work. That no other person was holding the same position that private
respondent held prior to termination of his services does not show that his position had not
become redundant. Indeed, in any well organized business enterprise, it would be surprising to
find duplication of work and two (2) or more people doing the work of one person. We believe
that redundancy, for purposes of the Labor Code, exists where the services of an employee are
in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. The characterization of an employee’s services
as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of
business judgment on the part of the employer. The wisdom and soundness of such
characterization or decision is not subject to discretionary review provided, of course, that a
violation of law or arbitrary or malicious action is not shown.

Same; Same; Same; Due Process; The validity of termination can exist independently of the
procedural infirmity of the dismissal.—SMART’s assertion that Astorga cannot complain of lack
of notice because the organizational realignment was made known to all the employees as
early as February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization
cannot replace the formal and written notice required by the law. In the written notice, the
employees are informed of the specific date of the termination, at least a month prior to the
effectivity of such termination, to give them sufficient time to find other suitable employment
or to make whatever arrangements are needed to cushion the impact of termination. In this
case, notwithstanding Astorga’s knowledge of the reorganization, she remained uncertain
about the status of her employment until SMART gave her formal notice of termination. But
such notice was received by Astorga barely two (2) weeks before the effective date of
termination, a period very much shorter than that required by law. Be that as it may, this
procedural infirmity would not render the termination of Astorga’s employment illegal. The
validity of termination can exist independently of the procedural infirmity of the dismissal. In
DAP Corporation v. CA, 477 SCRA 792 (2005), we found the dismissal of the employees therein
valid and for authorized cause even if the employer failed to comply with the notice
requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but held the
employer liable for noncompliance with the procedural requirements.

PETITIONS for review on certiorari of the decisions and resolutions of the Court of Appeals.

The facts are stated in the opinion of the Court.

Picazo, Buyco, Tan, Fider & Santos for Smart Communications, Inc. and Ann Margaret V.
Santiago.
NACHURA, J.:

For the resolution of the Court are three consolidated petitions for review on certiorari under
Rule 45 of the Rules of Court. G.R. No. 148132 assails the February 28, 2000 Decision 1 and the
May 7, 2001 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos.
151079 and 151372 question the June 11, 2001 Decision3 and the December 18, 2001
Resolution4 in CA-G.R. SP. No. 57065.

Regina M. Astorga (Astorga) was employed by respondent Smart Communications,

Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales
Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary of
P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely, annual
performance incentive equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount of P455,000.00. 5

In February 1998, SMART launched an organizational realignment to achieve more efficient

operations. This was made known to the employees on February 27, 1998.6 Part of the
reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into
a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia,
Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART
abolished the CSMG/FSD, Astorga’s division.

To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would
be recommended by SMART. SMART then conducted a performance evaluation of CSMG
personnel and those who garnered the highest ratings were favorably recommended to SNMI.
Astorga landed last in the performance evaluation, thus, she was not recommended by SMART.
SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but
she refused the offer because the position carried lower salary rank and rate.

Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3,
1998, SMART issued a memorandum advising Astorga of the termination of her employment on
ground of redundancy, effective April 3, 1998. Astorga received it on March 16, 1998. 7

The termination of her employment prompted Astorga to file a Complaint 8 for illegal dismissal,
non-payment of salaries and other benefits with prayer for moral and exemplary damages
against SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing CSMG
and, consequently, terminating her employment was illegal for it violated her right to security
of tenure. She also posited that it was illegal for an employer, like SMART, to contract out
services which will displace the employees, especially if the contractor is an in-house agency.9

SMART responded that there was valid termination. It argued that Astorga was dismissed by
reason of redundancy, which is an authorized cause for termination of employment, and the
dismissal was effected in accordance with the requirements of the Labor Code. The redundancy
of Astorga’s position was the result of the abolition of CSMG and the creation of a specialized
and more technically equipped SNMI, which is a valid and legitimate exercise of management
prerogative.10

In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the
current market value of the Honda Civic Sedan which was given to her under the company’s car
plan program, or to surrender the same to the company for proper disposition.11 Astorga,
however, failed and refused to do either, thus prompting SMART to file a suit for replevin with
the Regional Trial Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil
Case No. 981936 and was raffled to Branch 57.12

Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state
a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the regular
courts have no jurisdiction over the complaint because the subject thereof pertains to a benefit
arising from an employment contract; hence, jurisdiction over the same is vested in the labor
tribunal and not in regular courts.13

Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter rendered
a Decision14 dated August 20, 1998, declaring Astorga’s dismissal from employment illegal.
While recognizing SMART’s right to abolish any of its departments, the Labor Arbiter held that
such right should be exercised in good faith and for causes beyond its control. The Arbiter
found the abolition of CSMG done neither in good faith nor for causes beyond the control of
SMART, but a ploy to terminate Astorga’s employment. The Arbiter also ruled that contracting
out the functions performed by Astorga to an in-house agency like SNMI was illegal, citing
Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.

Accordingly, the Labor Arbiter ordered:

“WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal

and unjust. [SMART and Santiago] are hereby ordered to:

1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without

loss of seniority rights and other privileges, with full backwages, inclusive of allowances and
other benefits from the time of [her] dismissal to the date of reinstatement, which computed as
of this date, are as follows:

(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
UNPAID SALARIES (February 15, 1998-
April 3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE = P 8,000.00
 (P2,000.00 x 4)
FUEL ALLOWANCE (300 liters/mo. x
= P 14,457.83
4 mos. at P12.04/liter)
TOTAL = P211,415.52

xxxx

3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary
damages in the amount of P300,000.00. x x x

4. Jointly and severally pay 10% of the amount due as attorney’s fees.

SO ORDERED.”15

VOL. 542, JANUARY 28, 2008 441

Smart Communications, Inc. vs. Astorga

Subsequently, on March 29, 1999, the RTC issued an Order16 denying Astorga’s motion to
dismiss the replevin case. In so ruling, the RTC ratiocinated that:

“Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.

As correctly pointed out, this case is to enforce a right of possession over a company car
assigned to the defendant under a car plan privilege arrangement. The car is registered in the
name of the plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules
of Civil Procedure, which is undoubtedly within the jurisdiction of the Regional Trial Court.

In the Complaint, plaintiff claims to be the owner of the company car and despite demand,
defendant refused to return said car. This is clearly sufficient statement of plaintiff’s cause of
action.

Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist
because the judgment in the labor dispute will not constitute res judicata to bar the filing of this
case.

WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.

SO ORDERED.”17

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999. 18
Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28,
2000 Decision,19 reversed the RTC ruling. Granting the petition and, consequently, dismissing
the replevin case, the CA held that the case is intertwined with Astorga’s complaint for illegal
dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMART’s
motion for reconsideration having been denied,20 it elevated the case to this Court, now
docketed as G.R. No. 148132.

Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal
dismissal case to the National Labor Relations Commission (NLRC). In its September 27, 1999
Decision,21 the NLRC sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC
declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services
for SMART a valid organizational action. It overruled the Labor Arbiter’s ruling that SNMI is an
in-house agency, holding that it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of increasing efficiency are
allowed under the law. The NLRC further found erroneous the Labor Arbiter’s disquisition that
redundancy to be valid must be impelled by economic reasons, and upheld the redundancy
measures undertaken by SMART.

The NLRC disposed, thus:

“WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is
further ordered to immediately return the company vehicle assigned to her. [Smart and
Santiago] are hereby ordered to pay the final wages of [Astorga] after [she] had submitted the
required supporting papers therefor.

SO ORDERED.”22

Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999. 23

Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision24
affirming with modification the resolutions of the NLRC. In gist, the CA agreed with

the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG was
a legitimate exercise of management prerogative. It rejected Astorga’s posturing that her non-
absorption into SNMI was tainted with bad faith. However, the CA found that SMART failed to
comply with the mandatory one-month notice prior to the intended termination. Accordingly,
the CA imposed a penalty equivalent to Astorga’s one-month salary for this non-compliance.
The CA also set aside the NLRC’s order for the return of the company vehicle holding that this
issue is not essentially a labor concern, but is civil in nature, and thus, within the competence of
the regular court to decide. It added that the matter had not been fully ventilated before the
NLRC, but in the regular court.

Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the
Decision. On December 18, 2001, the CA resolved the motions, viz.:
“WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is
hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06 November 1998.
[Smart’s] motion for reconsideration is outrightly DENIED.

SO ORDERED.”25

Astorga and SMART came to us with their respective petitions for review assailing the CA ruling,
docketed as G.R. Nos. 151079 and 151372. On February 27, 2002, this Court ordered the
consolidation of these petitions with G.R. No. 148132.26

In her Memorandum, Astorga argues:

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S DISMISSAL

DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION

_______________

Smart Communications, Inc. vs. Astorga

OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO

GENUINE GROUND FOR HER DISMISSAL.

II

SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS

REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING
THE PENDENCY OF THE APPEAL.

III

THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO
JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS
PART OF HER EMPLOYEE (sic) BENEFIT.27

On the other hand, Smart in its Memoranda raises the following issues:

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A

WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE
HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE
REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.

II

WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND
EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE
TERMINATION.

_______________

Smart Communications, Inc. vs. Astorga

III

WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION
FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE
WAS ABSOLUTELY NO NOTICE AT ALL.28

IV

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A

WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE
HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT HAVE
JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN
COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE
SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT
SIMPLY THE RECOVERY OF A COMPANY CAR.

VI

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA
CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE.29

The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of
Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132.

Smart Communications, Inc. vs. Astorga

Replevin is an action whereby the owner or person entitled to repossession of goods or chattels
may recover those goods or chattels from one who has wrongfully distrained or taken, or who
wrongfully detains such goods or chattels. It is designed to permit one having right to
possession to recover property in specie from one who has wrongfully taken or detained the
property.30 The term may refer either to the action itself, for the recovery of personalty, or to
the provisional remedy traditionally associated with it, by which possession of the property may
be obtained by the plaintiff and retained during the pendency of the action.31

That the action commenced by SMART against Astorga in the RTC of Makati City was one for
replevin hardly admits of doubt.

In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA
made the following disquisition, viz.:

“[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the
employment package. We doubt that [SMART] would extend [to Astorga] the same car plan
privilege were it not for her employment as district sales manager of the company.
Furthermore, there is no civil contract for a loan between [Astorga] and [Smart]. Consequently,
We find that the car plan privilege is a benefit arising out of employer-employee relationship.
Thus, the claim for such falls squarely within the original and exclusive jurisdiction of the labor
arbiters and the NLRC.”32

We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction
over the suit and acted well within its discretion in denying Astorga’s motion to dismiss.
SMART’s demand for payment of the market value of the car or, in the alternative, the
surrender of the car, is not a labor, but a civil, dispute. It involves the relationship of debtor and
creditor rather than employee-employer relations.33 As such, the dispute falls within the
jurisdiction of the regular courts.

In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the replevin
suit, explained:

“Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The
primary relief sought therein is the return of the property in specie wrongfully detained by
another person. It is an ordinary statutory proceeding to adjudicate rights to the title or
possession of personal property. The question of whether or not a party has the right of
possession over the property involved and if so, whether or not the adverse party has
wrongfully taken and detained said property as to require its return to plaintiff, is outside the
pale of competence of a labor tribunal and beyond the field of specialization of Labor Arbiters.

xxxx

The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective
issues raised in each forum can be resolved independently on the other. In fact in 18 November
1986, the NLRC in the case before it had issued an Injunctive Writ enjoining the petitioners
from blocking the free ingress and egress to the Vessel and ordering the petitioners to
disembark and vacate. That aspect of the controversy is properly settled under the Labor Code.
So also with petitioners’ right to picket. But the determination of the question of who has the
better right to take possession of the Vessel and whether petitioners can deprive the Charterer,
as the legal possessor of the Vessel, of that right to possess in addressed to the competence of
Civil Courts.

In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction
as laid down by pertinent laws.”

_______________

The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered
the dismissal of the replevin case for lack of jurisdiction.

Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.

Astorga was terminated due to redundancy, which is one of the authorized causes for the
dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is
explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations Commission,35
viz.:

“x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to

duplication of work. That no other person was holding the same position that private
respondent held prior to termination of his services does not show that his position had not
become redundant. Indeed, in any well organized business enterprise, it would be surprising to
find duplication of work and two (2) or more people doing the work of one person. We believe
that redundancy, for purposes of the Labor Code, exists where the services of an employee are
in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise.”

The characterization of an employee’s services as superfluous or no longer necessary and,

therefore, properly terminable, is an exercise of business judgment on the part of the
employer. The wisdom and soundness of such characterization or decision is not subject to
discretionary review provided, of course, that a violation of law or arbitrary or malicious action
is not shown.36

Astorga claims that the termination of her employment was illegal and tainted with bad faith.
She asserts that the reorganization was done in order to get rid of her. But except for her
barefaced allegation, no convincing evidence was offered to prove it. This Court finds it
extremely difficult to believe that SMART would enter into a joint venture agreement with NTT,
form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular
employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a
supervisory position in the Customer Care Department, but she refused the offer because the
position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it
would not have offered her a position in any department in the enterprise.

Astorga also states that the justification advanced by SMART is not true because there was no
compelling economic reason for redundancy. But contrary to her claim, an employer is not
precluded from adopting a new policy conducive to a more economical and effective
management even if it is not experiencing economic reverses. Neither does the law require that
the employer should suffer financial losses before he can terminate the services of the
employee on the ground of redundancy. 37

We agree with the CA that the organizational realignment introduced by SMART, which
culminated in the abolition of CSMG/FSD and termination of Astorga’s employment was an
honest effort to make SMART’s sales and marketing departments more efficient and
competitive. As the CA had taken pains to elucidate:

“x x x a careful and assiduous review of the records will yield no other conclusion than that the
reorganization undertaken by SMART is for no purpose other than its declared objective—as a
labor and cost savings device. Indeed, this Court finds no fault in SMART’s decision to outsource
the corporate sales market to SNMI in order to attain greater productivity. [Astorga] belonged
to the Sales Marketing Group under the Fixed Services Division (CSMG/ FSD), a distinct sales
force of SMART in charge of selling SMART’s telecommunications services to the corporate
market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to newly-
created SNMI Multimedia Incorporated, a joint venture company of SMART and NTT of Japan,
for the reason that CSMG/FSD does not have the necessary technical expertise required for the
value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a
more competent and specialized organization to perform the work required for corporate
accounts. It is also relieved SMART of all administrative costs—management, time and money-
needed in maintaining the CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant criteria
and is therefore a legitimate exercise of management prerogative.”

Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined
towards the worker and upheld his cause in most of his conflicts with his employer. This
favored treatment is consonant with the social justice policy of the Constitution. But while
tilting the scales of justice in favor of workers, the fundamental law also guarantees the right of
the employer to reasonable returns for his investment.38 In this light, we must acknowledge the
prerogative of the employer to adopt such measures as will promote greater efficiency, reduce
overhead costs and enhance prospects of economic gains, albeit always within the framework
of existing laws. Accordingly, we sustain the reorganization and redundancy program
undertaken by SMART.

However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month
notice prior to termination. The record is clear that Astorga received the notice of termination
only on March 16, 199839 or less than a month prior to its effectivity on April 3, 1998. Likewise,
the Department of Labor and Employment was notified of the redundancy program only on
March 6, 1998.40

Article 283 of the Labor Code clearly provides:

“Art. 283. Closure of establishment and reduction of personnel.—The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof x x x.”

SMART’s assertion that Astorga cannot complain of lack of notice because the organizational
realignment was made known to all the employees as early as February 1998 fails to persuade.
Astorga’s actual knowledge of the reorganization cannot replace the formal and written notice
required by the law. In the written notice, the employees are informed of the specific date of
the termination, at least a month prior to the effectivity of such termination, to give them
sufficient time to find other suitable employment or to make whatever arrangements are
needed to cushion the impact of termination. In this case, notwithstanding Astorga’s
knowledge of the reorganization, she remained uncertain about the status of her employment
until SMART gave her formal notice of termination. But such notice was received by Astorga
barely two (2) weeks before the effective date of termination, a period very much shorter than
that required by law.

Be that as it may, this procedural infirmity would not render the termination of Astorga’s
employment illegal. The validity of termination can exist independently of the proce-

dural infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the
employees therein valid and for authorized cause even if the employer failed to comply with
the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal,
but held the employer liable for non-compliance with the procedural requirements.

The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at the
same time, awarding indemnity for violation of Astorga’s statutory rights.

However, we find the need to modify, by increasing, the indemnity awarded by the CA to
Astorga, as a sanction on SMART for non-compliance with the one-month mandatory notice
requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.:
“[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should be tempered
because the dismissal process was, in effect, initiated by an act imputable to the employee, and
(2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to
comply with the notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employer’s exercise of his management prerogative.”

We deem it proper to increase the amount of the penalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay
equivalent to at least one (1) month salary or to at least one (1) month’s pay for every year of
service, whichever is higher. The records show that Astorga’s length of service is less than a
year. She is, therefore, also entitled to separation pay equivalent to one (1) month pay.

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

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

WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28,
2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831
are SET ASIDE. The Regional Trial Court of Makati City, Branch 57 is DIRECTED to proceed with
the trial of Civil Case No. 98-1936 and render its Decision with reasonable dispatch.

On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and
151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in CA-
G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is declared validly dismissed.
However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its noncompliance with
procedural due process, her separation pay equivalent to one (1) month pay, and her salary
from February 15, 1998 until the effective date of her termination on April 3, 1998. The award
of backwages is DELETED for lack of basis.

SO ORDERED.
 Ynares-Santiago (Chairperson), Austria-Martinez, Corona** and Reyes, JJ., concur.

Petition granted in G.R. No. 148132, judgment and resolution dated February 28, 2000 set aside.

Notes.—Replevin may refer either to the action itself, i.e., to regain the possession of personal
chattels being wrongfully detained from the plaintiff by another, or to the provisional remedy
that would allow the plaintiff to retain the thing during the pendency of the action and hold it
pendente lite. (BA Finance Corporation vs. Court of Appeals, 258 SCRA 102 [1996])

Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise—a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise. (DOLE Philippines, Inc. vs. National Labor Relations Commission, 365 SCRA 124
[2001]

_______________

VOL. 286, FEBRUARY 12, 1998 245

Filflex Industrial & Manufacturing Corp. vs. NLRC

G.R. No. 115395. February 12, 1998.*

FILFLEX INDUSTRIAL & MANUFACTURING CORPORATION and/or CELIA BUENCONSEJO,

petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, NATIONAL FEDERATION OF
LABOR UNIONS (NAFLU) AND SALUD GALING, respondents.

Labor Law; Dismissals; Appeals; Reinstatement during appeal, warranted only when the labor
arbiter himself rules that the dismissed employee should be reinstated.—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 arbiter’s 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 LA’s decision
ordered her separation from service for the parties’ “mutual advantage and most importantly
to the physical and health welfare of 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 respondent’s reinstatement.

Same; Same; Same; 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.—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 complainant’s
separation, there can be no basis for the award of salaries/back wages during the pendency of
appeal.

Same; Same; Same; Before reinstatement or back wages may be granted, there must be unjust
or illegal dismissal from work.—In addition to the foregoing discussion, there is an equally
cogent reason to sustain the petition. Before reinstatement or back wages may be granted,
there must be unjust or illegal dismissal from work. The labor arbiter ruled that private
respondent’s “absences and tardiness by itself are sufficient ground for the complainant’s
dismissal were it not for reason of sickness which we believe is excusable.” On appeal, however,
the NLRC categorically declared that private respondent’s dismissal was wholly justified
because her performance was characterized by inefficiency, infractions and absenteeism.

Same; Same; Same; Since the dismissal of private respondent was deemed valid, she cannot be
entitled to reinstatement and back wages.—Since the dismissal of private respondent was
deemed valid, she cannot be entitled to reinstatement and back wages. An award of back
wages by the NLRC during the period of appeal is totally inconsistent with its finding of a valid
dismissal.

Same; Same; Same; A party who has not appealed cannot obtain from the appellate court any
affirmative relief other than the ones granted in the appealed decision.—Additionally, private
respondent cannot now be granted separation pay or any other affirmative relief previously
awarded to her by the labor arbiter but reversed by the NLRC. Since she did not appeal from
the NLRC’s Resolution, she is presumed to be satisfied with the adjudication therein. This is in
accord with the doctrine that a party who has not appealed cannot obtain from the appellate
court any affirmative relief other than the ones granted in the appealed decision.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Siguion Reyna, Montecillo & Ongsiako for petitioners.

Cadiz, Quilas, Romero and Associates for private respondent.

PANGANIBAN, J.:

Is an employee entitled to back wages during the pendency of her appeal before the NLRC,
even if the assailed labor arbiter’s decision did not order her reinstatement? May the NLRC
decree back wages where the employee’s dismissal was legal?
The Case

The Court answers these questions in the negative in granting this petition for certiorari under
Rule 65 of the Rules of Court assailing the October 29, 1993 Resolution 1 of the National Labor
Relations Commission2 (NLRC) which disposed as follows:3

“WHEREFORE, the assailed Decision is hereby set aside and a new one is entered dismissing the
complaint for lack of merit.

However, respondents [petitioners herein] are ordered to pay complainant [private respondent
herein] her salaries from the date of the filing of the instant appeal on April 10, 1992 up to the
date of the promulgation of this Resolution, pursuant to Art. 223 of the Labor Code, as
amended.”

Petitioners also challenge the NLRC’s Resolution dated February 7, 1994 which denied their
subsequent motion for reconsideration, for lack of merit.

The labor arbiter’s decision, which the NLRC set aside, in NLRC NCR Case No. 00-02-01060-91
dated March 10, 1992 disposed as follows:4

“WHEREFORE, based on the foregoing considerations, judgment is hereby rendered declaring

the dismissal of complainant improper and unjust. Accordingly, respondent is hereby ordered
to pay the complainant limited backwages and other benefits for six (6) months in the amount
of P18,252.00.

Considering however the physical condition of the complainant that was the real cause of her
absences and tardiness, it would be to their mutual advantage and most importantly to the
physical and health welfare of complainant that she is separated from the service with
separation benefits equivalent to 1/2 month basic salary for every year of service, a fraction of
six (6) months equivalent to one year in the amount of P22,815.00.

The charge of unfair labor practice is hereby denied for lack of legal basis.

Individual respondent Celia Buenconsejo is hereby absolved of any liability for she acted only in
her official capacity.

Other claims are denied for lack of merit.”

The Facts

Labor Arbiter Daniel C. Cueto recited the facts of this case as follows:5

“Complainant is a sewer who started working with respondent in November 1975. She was
dismissed for abandonment on February 11, 1991. At the time of her dismissal, she was
receiving a salary of P117.00 per day of work. She claimed that while it is true that she was
absent from November 30, 1990 up to December 11, 1990, her dismissal on ground of
abandonment is not in consonance with law considering that her absences was [sic]
attributable to chronic ashmatic [sic] bronchitis which she contacted since early 1990 yet. She
presented as evidence the medical certificate dated March 4, 1991 attesting for [sic] her
medical treatment covering the period January 1990 to May 28, 1990. She claims that her
failure to report for work for 11 days was due to sickness wherein respondents were notified by
her through the telephone. Complainant argued that she did not abandon her job and that is
evidenced by her immediate filing of instant complaint on February 8, 1991. Her 16 years of
service, according to complainant, should have been considered by respondents before she was
dismissed. She prays for reinstatement plus backwages and also for damages.

Respondents contended otherwise. It is their position that complainant was hired on February
5, 1978 and that since the early period of her employment, she committed various violations of
company rules and regulations ranging from habitual tardiness to frequent absences. Said
misdemeanor registered the highest number of tardiness in the second quarter of 1984
numbering 45 times from times in the first quarter of 1984 whereas in terms of monthly
tardiness, complainant incurred 21 times in March and June, both in 1990 the said tardiness
covered by corresponding memoranda marked as Annexes ‘A’ to ‘L’ for respondents, that
despite the several warnings given, complainant persisted in her tardiness and frequent
absences. By way of evidence, respondent submitted the memorandum (Annex ‘O’) giving
complainant the stern warning for frequent absenteeism incurred in 1988 numbering 49
absences that affects her performance where the same became worse when she absented for
ten (10) days in August 1989, which was the subject of another memorandum warning that
management shall be constrained to take the necessary drastic action against her due to loss of
productive manhours caused by complainant’s excessive absences. Finally, due to
complainant’s absences from November 30, 1990 to December 11, 1990 the respondent issued
another letter dated December 11, 1990 to complainant (Annex ‘R’ respondent position paper)
requiring her to explain in writing within 72 hours ‘why you should not be considered dismissed
for having abandoned your job considering that you have been earlier served warning memos
for the similar violations.’ Respondents stated that despite the said order, it was only on
December 19, 1990 that complainant went to the office of respondent to explain. Respondents
were forced to terminate complainant’s employment due to her failure to report for work and
explain her absence for the straight 20 days without any leave or permission for which reason
they considered her continued absence as an abandonment of work.”

Declaring “the dismissal of complainant improper and unjust,” the labor arbiter awarded her
“limited backwages and other benefits” plus separation pay equivalent to one half month for
every year of service. The labor arbiter did not order her reinstatement, holding that her
separation from employment would be to the parties’ “mutual benefit and most importantly to
the physical and health welfare of complainant.”
Respondent NLRC’s Ruling

On appeal, Respondent NLRC ruled that the dismissal of private respondent was justified. It
held, however, that Article 223 of the Labor Code required the reinstatement of pri-

vate respondent during the pendency of her appeal. Thus, it awarded back wages for the said
period when the appeal was pending before it, reasoning as follows:6

“Verily, respondents-appellants could no longer be faulted when they decided to terminate the
services of complainant for her failure to improve her attendance despite repeated warnings.

However, pursuant to Art. 223 of the Labor Code, as amended, which provides for mandatory
reinstatement whether actual or on payroll, pending appeal, respondent should pay
complainant her salaries from the time the appeal was filed on April 10, 1992 up to the date of
the promulgation of this Resolution.”

Dissatisfied, petitioners lodged this recourse before this Court. In the Resolution7 dated June
29, 1994, this Court issued a temporary restraining order thus:8

“NOW, THEREFORE, you (respondents), your officers, agents, representatives, and/or persons
acting upon your orders or in your place or stead, are hereby ENJOINED from enforcing or
executing the resolutions of public respondent National Labor Relations Commission dated
October 29, 1993 and February 8, 1994, and in any manner or purpose continuing with the
proceedings of the case in NLRC NCR Case No. 00-02-01060-91 entitled ‘National Federation of
Labor Unions (NAFLU) and Salud Galing vs. Filflex Industrial and Manufacturing Corporation
and/or Celia Buenconsejo’ of the Department of Labor and Employment.”9

The Issue

Petitioners raise a single issue:10

“x x x. Petitioners submit that the only issue is whether the public respondent NLRC committed
grave abuse of discretion, amounting to lack of jurisdiction, in awarding private respondent
Galing her salaries from the date of the filing of the appeal on April 10, 1992 up to the date of
the promulgation of its Resolution on October 29, 1993, given the undisputed fact of her
persistent, repeated, prolonged and contumacious violations of company rules and
regulations.”

The Court’s Ruling

The petition is meritorious.

Sole Issue: Back wages During Pendency of Appeal

Petitioners argue that the “second paragraph of the dispositive portion of the Decision 11 has no
basis in fact or in law.” They assert that “the decision of Labor Arbiter Cueto did not call for the
reinstatement of [C]omplainant Galing [private respondent herein], [thus] it follows that there
is no basis now for this Honorable Commission to grant her backwages during the period of
appeal. Clearly, Article 223 finds no application to the instant case.” 12 They also contend that
the assailed Resolution “became inconsistent with itself. For while it declared the dismissal of
the complainant legal, it ruled nevertheless that [C]omplainant Galing should have been
reinstated during the period of appeal.”13

Agreeing with the petition, the solicitor general clarifies that Article 223 of the Labor Code is
inapplicable to the instant case because Labor Arbiter Cueto “did not order the reinstatement
of private respondent.” Likewise, the government lawyer agrees that the NLRC Resolution was
inherently inconsistent for holding that the dismissal of Complainant Galing was justified and, at
the same time, ruling that she should have been reinstated during the pendency of the
appeal.14

On the other hand, the legal department of the NLRC15 maintains that “reinstatement (pending
appeal) whether actual or in payroll is mandatory under Art. 223 of the Code.”16

Private respondent adds that under paragraph one, second sentence of the Labor Arbiter’s
decision, “there [was] a call for reinstatement of the complainant because of the backwages
granted to her.”17

We agree with the petitioners and the solicitor general.

No Order of Reinstatement

The relevant law is Article 22318 of the Labor Code, which reads:

“ART. 223. Appeal.—Decisions, awards, or orders of the Labor Arbiter are final and executory
unless appealed to the Commission by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the
following grounds:

xxx xxx xxx

In any event, 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. 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 employer,
merely reinstated in the payroll. The posting of a bond by the employer shall not stay the
execution for reinstatement provided herein.
xxx xxx x x x” (Italics supplied.)

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 arbiter’s 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 LA’s
decision ordered her separation from service for the parties’ “mutual advantage and most
importantly to the physical and health welfare of 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 respondent’s 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. 19 There being
no specific order for reinstatement and the order being for complainant’s separation, there can
be no basis for the award of salaries/back wages during the pendency of appeal.

NLRC Found Dismissal Justified

In addition to the foregoing discussion, there is an equally cogent reason to sustain the petition.
Before reinstatement or back wages may be granted, there must be unjust or illegal dismissal
from work.20 The labor arbiter ruled that private respondent’s “absences and tardiness by itself
are sufficient ground for the complainant’s dismissal were it not for reason

of sickness which we believe is excusable.”21 On appeal, however, the NLRC categorically

declared that private respondent’s dismissal was wholly justified because her performance was
characterized by inefficiency, infractions and absenteeism.22 Indeed, the records substantiate
the following findings of the NLRC:

“It was sufficiently established that complainant’s absences from November 11, 1990 until
December 18, 1990 are unauthorized. She never informed the respondent of her whereabouts
which naturally worked to the prejudice to her work. Complainant’s assertion that she called-up
the respondent by telephone, informing them of state of illness is a bare allegation,
unsupported by convincing evidence. This [sic] unauthorized absences left no alternative to the
respondent but to seek her explanation on the matter (Rollo, p. 48). Complainant, however did
not bother to explain within a reasonable period of time and she only showed-up in the
respondent’s office on December 19, 1990.

xxx xxx xxx

In this particular, complainant’s attitude toward her work is characterized by infractions and
inefficiency. It is undisputed that besides her unauthorized absences from November 11, 1990
to December 18, 1990, she previously incurred various offenses. She was frequently late in
reporting for work during the following period:
First Quarter of 1984 - 37 times
Second Quarter of 1984 - 45 times
First Quarter of 1985 - 18 times
January 1987 - 8 times
February 1987 - 8 times
March 1987 - 13 times
April 1987 - 6 times
May 1987 - 13 times
June 1987 - 19 times
July 1987 - 11 times
August 1987 - 7 times
October 1987 - 13 times
November 1987 - 17 times

December 1987 - 19 times

January 1988 - 13 times
February 1988 - 15 times
March 1988 - 9 times
April 1988 - 3 times
May 1988 - 10 times
January 1990 - 11 times
March 1990 - 21 times
April 1990 - 16 times
May 1990 - 19 times
June 1990 - 21 times

Evidence likewise disclosed that complainant was absent for 10 days during the month of
August 1989 and incurred absences without leave on October 6 and 7, 1989, (Rollo, pp. 46 to
47). The foregoing infractions show the unsatisfactory work performance of complainant. In the
case of Mendoza vs. NLRC, 196 SCRA 606, the Supreme Court held that ‘the totality of the
infractions that petitioner had committed justifies the penalty of dismissal.’ Furthermore,
complainant was duly informed of the company rules on absences to the fact that a 7th
absence within a calendar year constitute habitual unexcused absence. (Rollo, p. 44). Instead
however of improving her attendance, complainant continuously ignored the warnings given
her by the respondent. This finds support in the findings of the Labor Arbiter when [sic] ruled
that:

‘x x x All that we can see from the parties pleadings is the fact that complainant have (sic) been
incurring tardiness and absences and that despite numerous warnings sent to her in fact
numbering 16 all in all from 1989 to 1990, she still persist in incurring absences and tardiness.
She had not shown enough improvement on her attendance the last of which was her absences
incurred from November 30, 1990 to December 19, 1990 without any justification presented
relative to the said absences except the reliance to the certification of her attending physician
which was dated March 4, 1991 that she was under treatment of the said doctor from ‘chronic
ashtmatic [sic] bronchitis,’ covering the period January 19, 1990 to May 28, 1990. While it may
be true that complainant was suffering from the alleged sickness, her absences incurred during
the period November 30, 1990 up to the time when she reported to explain on December 19,
1990 was not supported by competent proof to rely on.’

Since the dismissal of private respondent was deemed valid, she cannot be entitled to
reinstatement and back wages.23 An award of back wages by the NLRC during the period of
appeal is totally inconsistent with its finding of a valid dismissal.

Additionally, private respondent cannot now be granted separation pay or any other
affirmative relief previously awarded to her by the labor arbiter but reversed by the NLRC. Since
she did not appeal from the NLRC’s Resolution, she is presumed to be satisfied with the
adjudication therein. This is in accord with the doctrine that a party who has not appealed
cannot obtain from the appellate court any affirmative relief other than the ones granted in the
appealed decision.24

WHEREFORE, the petition is hereby GRANTED. The award of back wages in the assailed NLRC
Resolution dated October 29, 1993 is DELETED. The temporary restraining order issued on June
29, 1994 is MADE PERMANENT. No costs.

SO ORDERED.

Davide, Jr. (Chairman), Bellosillo, Vitug and Quisumbing, JJ., concur.

Petition granted.

——o0o——
 G.R. No. 169549. September 3, 2008.*

JOHN HANCOCK LIFE INSURANCE CORPORATION and/or MICHAEL PLAXTON, petitioners, vs.
JOANNA CANTRE DAVIS, respondent.

Labor Law; Termination of Employment; Misconduct; For misconduct to be serious and

therefore a valid ground for dismissal, it must be: 1) of grave and aggravated character and not
merely trivial or unimportant and 2) connected with the work of the employee.—Article 282 of
the Labor Code provides: Article 282. Termination by Employer.—An employer may terminate
an employment for any of the following causes: (a) Serious misconduct or willful disobedience
by the employee of the lawful orders of his employer or his representatives in connection with
his work; x x x x x x x x x (e) Other causes analogous to the foregoing. Misconduct involves
“the transgression of some established and definite rule of action, forbidden act, a dereliction
of duty, willful in character, and implies wrongful intent and not mere error in judgment.” For
misconduct to be serious and therefore a valid ground for dismissal, it must be: 1. of grave and
aggravated character and not merely trivial or unimportant and 2. connected with the work of
the employee.

Same; Same; For an employee to be validly dismissed for a cause analogous to those
enumerated in Article 282, the cause must involve a voluntary and/or willful act or omission of
the employee.—In this case, petitioner dismissed respondent based on the NBI’s finding that
the latter stole and used Yuseco’s credit cards. But since the theft was not committed against
petitioner itself but against one of its employees, respondent’s misconduct was not work-
related and therefore, she could not be dismissed for serious misconduct. Nonetheless, Article
282(e) of the Labor Code talks of other analogous causes or those which are susceptible of
comparison to another in general or in specific detail. For an employee to be validly dismissed
for a cause analogous to those enumerated in Article 282, the cause must involve a voluntary
and/or willful act or omission of the employee.

Same; Same; Theft; Theft committed by an employee against a person other than his employer,
if proven by substantial evidence, is a cause analogous to serious misconduct.—A cause
analogous to serious misconduct is a voluntary and/or willful act or omission attesting to an
employee’s moral depravity. Theft committed by an employee against a person other than his
employer, if proven by substantial evidence, is a cause analogous to serious misconduct.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Ponce Enrile, Reyes and Manalastas for petitioners.

R.P. Nograles Law Office for respondent.

CORONA, J.:

Respondent Joanna Cantre Davis was agency administration officer of petitioner John Hancock
Life Insurance Corporation.1

On October 18, 2000, Patricia Yuseco, petitioner’s corporate affairs manager, discovered that
her wallet was missing. She immediately reported the loss of her credit cards to AIG and BPI
Express. To her surprise, she was informed that “Patricia Yuseco” had just made substantial
purchases using her credit cards in various stores in the City of Manila. She was also told that a
proposed transaction in Abenson’s-Robinsons Place was disapproved because “she” gave the
wrong information upon verification.

Because loss of personal property among its employees had become rampant in its office,
petitioner sought the assistance of the National Bureau of Investigation (NBI). The NBI, in the
course of its investigation, obtained a security video from Abenson’s showing the person who
used Yuseco’s credit cards. Yuseco and other witnesses positively identified the person in the
video as respondent.

Consequently, the NBI and Yuseco filed a complaint for qualified theft against respondent in the
office of the Manila city prosecutor. But because the affidavits presented by the NBI (identifying
respondent as the culprit) were not properly verified, the city prosecutor dismissed the
complaint due to insufficiency of evidence.

Meanwhile, petitioner placed respondent under preventive suspension and instructed her to
cooperate with its ongoing investigation. Instead of doing so, however, respondent filed a
complaint for illegal dismissal2 alleging that petitioner terminated her employment without
cause.

The labor arbiter, in a decision dated May 21, 2002,3 found that respondent committed serious
misconduct (she was the principal suspect for qualified theft committed inside petitioner’s
office during work hours). There was a valid cause for her dismissal. Thus, the complaint was
dismissed for lack of merit.

Respondent appealed4 the labor arbiter’s decision to the National Labor Relations Commission
(NLRC) which affirmed the assailed decision on July 31, 2003.5 Respondent moved for
reconsideration but it was denied in a resolution dated October 30, 2003.6

Aggrieved, respondent filed a petition for certiorari7 in the Court of Appeals (CA) claiming that
the NLRC committed grave abuse of discretion in affirming the decision of the labor arbiter. She
claimed there was no valid cause for her termination because the city prosecutor of Manila “did
not find probable cause for qualified theft against her.” The dismissal of the complaint proved
that the charges against her were based on suspicion.

The CA, in its July 4, 2005 decision,8 found that the labor arbiter and NLRC merely adopted the
findings of the NBI regarding respondent’s culpability. Because the affidavits of the witnesses
were not verified, they did not constitute substantial evidence. The labor arbiter and NLRC
should have assessed evidence independently as “unsubstantiated suspicions, accusations and
conclusions of employers (did) not provide legal justification for dismissing an employee.” Thus,
the CA granted the petition.

Petitioner moved for reconsideration but it was denied.9 Hence, this petition.

The issue in this case is whether or not petitioner substantially proved the presence of valid
cause for respondent’s termination.

Petitioner essentially argues that the ground for an employee’s dismissal need only be proven
by substantial evidence. Thus, the dropping of charges against an employee (specially on a
technicality such as lack of proper verification) or his subsequent acquittal does not preclude an
employer from dismissing him due to serious misconduct.

We grant the petition.

Article 282 of the Labor Code provides:

“Article 282. Termination by Employer.—An employer may terminate an employment for any
of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or his representatives in connection with his work;

xxx xxx xxx

(e) Other causes analogous to the foregoing.

Misconduct involves “the transgression of some established and definite rule of action,
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment.”10 For misconduct to be serious and therefore a valid ground for
dismissal, it must be:

“1. of grave and aggravated character and not merely trivial or unimportant and

2. connected with the work of the employee.”11

In this case, petitioner dismissed respondent based on the NBI’s finding that the latter stole and
used Yuseco’s credit cards. But since the theft was not committed against petitioner itself but
against one of its employees,12 respondent’s misconduct was not work-related and therefore,
she could not be dismissed for serious misconduct.

Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which
are susceptible of comparison to another in general or in specific detail.13 For an employee to
be validly dismissed for a cause analogous to those enumerated in Article 282, the cause must
involve a voluntary and/or willful act or omission of the employee.14

A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting
to an employee’s moral depravity.15 Theft committed by an employee against a person other
than his employer, if proven by substantial evidence, is a cause analogous to serious
misconduct.16

Did petitioner substantially prove the existence of valid cause for respondent’s separation? Yes.
The labor arbiter and the NLRC relied not only on the affidavits of the NBI’s witnesses but also
on that of respondent. They likewise considered petitioner’s own investigative findings. Clearly,
they did not merely adopt the findings of the NBI but independently assessed evidence
presented by the parties. Their conclusion (that there was valid cause for respondent’s
separation from employment) was therefore supported by substantial evidence.

All things considered, petitioner validly dismissed respondent for cause analogous to serious
misconduct.

WHEREFORE, the petition is hereby GRANTED. The July 4, 2005 decision and September 1, 2005
resolution of the Court of Appeals in CA-G.R. SP No. 81515 are REVERSED and SET ASIDE.

The July 31, 2003 decision and October 30, 2003 resolution of the National Labor Relations
Commission in NLRC CA No. 032865-02 affirming the May 21, 2002 decision of the labor arbiter
are REINSTATED.

SO ORDERED.

Puno (C.J., Chairperson), Carpio, Azcuna and Leonardo-De Castro, JJ., concur.

Petition granted, judgment and resolution reversed and set aside.

Notes.—Under Article 282 of the Labor Code, the misconduct, to be a just cause for
termination, must be of such grave

_______________
 VOL. 545, FEBRUARY 14, 2008 351
Alabang Country Club, Inc. vs. National Labor Relations Commission

G.R. No. 170287. February 14, 2008.*

ALABANG COUNTRY CLUB, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
ALABANG COUNTRY CLUB INDEPENDENT EMPLOYEES UNION, CHRISTOPHER PIZARRO,
MICHAEL BRAZA, and NOLASCO CASTUERAS, respondents.

Labor Law; Termination of Employment; Dismissals; Grounds.—Under the Labor Code, an

employee may be validly terminated on the following grounds: (1) just causes under Art. 282;
(2) authorized causes under Art. 283; (3) termination due to disease under Art. 284; and (4)
termination by the employee or resignation under Art. 285.

Same; Same; Union Security Clause; Words and Phrases; “Union Shop,” and “Maintenance of
Membership Shop,” Explained; Termination of employment by virtue of a union security clause
embodied in a Collective Bargaining Agreement (CBA) is recognized and accepted in our
jurisdiction—this practice strengthens the union and prevents disunity in the bargaining unit
within the duration of the Collective Bargaining Agreement (CBA).—Another cause for
termination is dismissal from employment due to the enforcement of the union security clause
in the CBA. Here, Art. II of the CBA on Union security contains the provisions on the Union shop
and maintenance of membership shop. There is union shop when all new regular employees
are required to join the union within a certain period as a condition for their continued
employment. There is maintenance of membership shop when employees who are union
members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted
or transferred out of the bargaining unit or the agreement is terminated. Termination of
employment by virtue of a union security clause embodied in a CBA is recognized and accepted
in our jurisdiction. This practice strengthens the union and prevents disunity in the bargaining
unit within the duration of the CBA. By preventing member disaffiliation with the threat of
expulsion from the union and the consequent termination of employment, the authorized
bargaining representative gains more numbers and strengthens its position as against other
unions which may want to claim majority representation.

Same; Same; Same; Termination of Employment Pursuant to Union Security Clause;

Requisites.—In terminating the employment of an employee by enforcing the union security
clause, the employer needs only to determine and prove that: (1) the union security clause is
applicable; (2) the union is requesting for the enforcement of the union security provision in the
CBA; and (3) there is sufficient evidence to support the union’s decision to expel the employee
from the union. These requisites constitute just cause for terminating an employee based on
the CBA’s union security provision.

Same; Same; Same; Same; There is substantial compliance with due process where the
employees were notified that their dismissal was being requested by the Unions, their
explanations heard, and dismissed only after the employer had reviewed and considered the
documents submitted by the Union vis-à-vis the written explanations submitted by said
employees.—The CA and the three respondents err in relying on Malayang Samahan, as its
ruling has no application to this case. In Malayang Samahan, the union members were expelled
from the union and were immediately dismissed from the company without any semblance of
due process. Both the union and the company did not conduct administrative hearings to give
the employees a chance to explain themselves. In the present case, the Club has substantially
complied with due process. The three respondents were notified that their dismissal was being
requested by the Union, and their explanations were heard. Then, the Club, through its
President, conferred with said respondents during the last week of October 2001. The three
respondents were dismissed only after the Club reviewed and considered the documents
submitted by the Union vis-à-vis the written explanations submitted by said respondents.
Under these circumstances, we find that the Club had afforded the three respondents a
reasonable opportunity to be heard and defend themselves.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

VELASCO, JR., J.:

Petitioner Alabang Country Club, Inc. (Club) is a domestic non-profit corporation with principal
office at Country Club Drive, Ayala Alabang, Muntinlupa City. Respondent Alabang Country Club
Independent Employees Union (Union) is the exclusive bargaining agent of the Club’s rank-and-
file employees. In April 1996, respondents Christopher Pizarro, Michael Braza, and Nolasco
Castueras were elected Union President, Vice-President, and Treasurer, respectively.

On June 21, 1999, the Club and the Union entered into a Collective Bargaining Agreement
(CBA), which provided for a Union shop and maintenance of membership shop.

The pertinent parts of the CBA included in Article II on Union Security read, as follows:
ARTICLE II
UNION SECURITY

SECTION 1. CONDITION OF EMPLOYMENT.—All regular rank-and-file employees, who are

members or subsequently become members of the UNION shall maintain their membership in
good standing as a condition for their continued employment by the CLUB during the lifetime of
this Agreement or any extension thereof.

SECTION 2. [COMPULSORY] UNION MEMBERSHIP FOR NEW REGULAR RANK-AND-FILE

EMPLOYEES

1. a) New regular rank-and-file employees of the Club shall join the UNION within five (5) days
from the date of their appointment as regular employees as a condition for their continued
employment during the lifetime of this Agreement, otherwise, their failure to do so shall be a
ground for dismissal from the CLUB upon demand by the UNION.

1. b) The Club agrees to furnish the UNION the names of all new probationary and regular
employees covered by this Agreement not later than three (3) days from the date of regular
appointment showing the positions and dates of hiring.

xxxx

SECTION 4. TERMINATION UPON UNION DEMAND.—Upon written demand of the UNION and
after observing due process, the Club shall dismiss a regular rank-and-file employee on any of
the following grounds:

1. (a) Failure to join the UNION within five (5) days from the time of regularization;
2. (b) Resignation from the UNION, except within the period allowed by law;
3. (c) Conviction of a crime involving moral turpitude;
4. (d) Non-payment of UNION dues, fees, and assessments;
5. (e) Joining another UNION except within the period allowed by law;
6. (f) Malversation of union funds;
7. (g) Actively campaigning to discourage membership in the UNION; and
8. (h) Inflicting harm or injury to any member or officer of the UNION.

It is understood that the UNION shall hold the CLUB free and harmless [sic] from any liability or
damage whatsoever which may be imposed upon it by any competent judicial or quasi-judicial
authority as a result of such dismissal and the UNION shall reimburse the CLUB for any and all
liability or damage it may be adjudged.”1 (Emphasis supplied.)

Subsequently, in July 2001, an election was held and a new set of officers was elected. Soon
thereafter, the new officers conducted an audit of the Union funds. They discovered some
irregularly recorded entries, unaccounted expenses and disbursements, and uncollected loans
from the Union funds. The
Union notified respondents Pizarro, Braza, and Castueras of the audit results and asked them to
explain the discrepancies in writing.2

Thereafter, on October 6, 2001, in a meeting called by the Union, respondents Pizarro, Braza,
and Castueras explained their side. Braza denied any wrongdoing and instead asked that the
investigation be addressed to Castueras, who was the Union Treasurer at that time. With
regard to his unpaid loans, Braza claimed he had been paying through monthly salary
deductions and said the Union could continue to deduct from his salary until full payment of his
loans, provided he would be reimbursed should the result of the initial audit be proven wrong
by a licensed auditor. With regard to the Union expenses which were without receipts, Braza
explained that these were legitimate expenses for which receipts were not issued, e.g.
transportation fares, food purchases from small eateries, and food and transportation
allowances given to Union members with pending complaints with the Department of Labor
and Employment, the National Labor Relations Commission (NLRC), and the fiscal’s office. He
explained that though there were no receipts for these expenses, these were supported by
vouchers and itemized as expenses. Regarding his unpaid and unliquidated cash advances
amounting to almost PhP 20,000, Braza explained that these were not actual cash advances but
payments to a certain Ricardo Ricafrente who had loaned PhP 200,000 to the Union.3

Pizarro, for his part, blamed Castueras for his unpaid and uncollected loan and cash advances.
He claimed his salaries were regularly deducted to pay his loan and he did not know why these
remained unpaid in the records. Nonetheless, he likewise agreed to continuous salary
deductions until all his accountabilities were paid.4

Castueras also denied any wrongdoing and claimed that the irregular entries in the records
were unintentional and were due to inadvertence because of his voluminous work load. He
offered that his unpaid personal loan of PhP 27,500 also be deducted from his salary until the
loans were fully paid. Without admitting any fault on his part, Castueras suggested that his
salary be deducted until the unaccounted difference between the loans and the amount
collected amounting to a total of PhP 22,000 is paid.5

Despite their explanations, respondents Pizarro, Braza, and Castueras were expelled from the
Union, and, on October 16, 2001, were furnished individual letters of expulsion for
malversation of Union funds.6 Attached to the letters were copies of the Panawagan ng mga
Opisyales ng Unyon signed by 37 out of 63 Union members and officers, and a Board of
Directors’ Resolution7 expelling them from the Union.

In a letter dated October 18, 2001, the Union, invoking the Security Clause of the CBA,
demanded that the Club dismiss respondents Pizarro, Braza, and Castueras in view of their
expulsion from the Union.8 The Club required the three respondents to show cause in writing
within 48 hours from notice why they should not be dismissed. Pizarro and Castueras submitted
their respective written explanations on October 20, 2001, while Braza submitted his
explanation the following day.
During the last week of October 2001, the Club’s general manager called respondents Pizarro,
Braza, and Castueras for an informal conference inquiring about the charges against them. Said
respondents gave their explanation and asserted that the Union funds allegedly malversed by
them were even over the total amount collected during their tenure as Union officers—PhP
120,000 for Braza, PhP 57,000 for Castueras, and PhP 10,840 for Pizarro, as against the total
collection from April 1996 to December 2001 of only PhP 102,000. They claimed the charges are
baseless. The general manager announced he would conduct a formal investigation.

Nonetheless, after weighing the verbal and written explanations of the three respondents, the
Club concluded that said respondents failed to refute the validity of their expulsion from the
Union. Thus, it was constrained to terminate the employment of said respondents. On
December 26, 2001, said respondents received their notices of termination from the Club. 9

Respondents Pizarro, Braza, and Castueras challenged their dismissal from the Club in an illegal
dismissal complaint docketed as NLRC-NCR Case No. 30-01-00130-02 filed with the NLRC,
National Capital Region Arbitration Branch. In his January 27, 2003 Decision,10 the Labor Arbiter
ruled in favor of the Club, and found that there was justifiable cause in terminating said
respondents. He dismissed the complaint for lack of merit.

On February 21, 2003, respondents Pizarro, Braza, and Castueras filed an Appeal docketed as
NLRC NCR CA No. 034601-03 with the NLRC.

On February 26, 2004, the NLRC rendered a Decision11 granting the appeal, the fallo of which
reads:

“WHEREFORE, finding merit in the Appeal, judgment is hereby rendered declaring the dismissal
of the complainants illegal. x x x Alabang Country Club, Inc. and Alabang Country Club
Independent Union are hereby ordered to reinstate complainants Christopher Pizarro, Nolasco
Castueras and Michael Braza to their former positions without loss of seniority rights and other
privileges withfull backwages from the time they were dismissed up to their actual
reinstatement.

SO ORDERED.”

The NLRC ruled that there was no justifiable cause for the termination of respondents Pizarro,
Braza, and Castueras. The commissioners relied heavily on Section 2, Rule XVIII of the Rules
Implementing Book V of the Labor Code. Sec. 2 provides:

“SEC. 2. Actions arising from Article 241 of the Code.—Any action arising from the
administration or accounting of union funds shall be filed and disposed of as an intra-union
dispute in accordance with Rule XIV of this Book.

In case of violation, the Regional or Bureau Director shall order the responsible officer to render
an accounting of funds before the general membership and may, where circumstances warrant,
mete the appropriate penalty to the erring officer/s, including suspension or expulsion from the
union.”12

According to the NLRC, said respondents’ expulsion from the Union was illegal since the DOLE
had not yet made any definitive ruling on their liability regarding the administration of the
Union’s funds.

The Club then filed a motion for reconsideration which the NLRC denied in its June 20, 2004
Resolution.13

Aggrieved by the Decision and Resolution of the NLRC, the Club filed a Petition for Certiorari
which was docketed as CAG.R. SP No. 86171 with the Court of Appeals (CA).

The CA Upheld the NLRC Ruling that the Three Respondents were Deprived Due
Process

On July 5, 2005, the appellate court rendered a Decision,14 denying the petition and upholding
the Decision of the NLRC. The CA’s Decision focused mainly on the Club’s perceived failure to
afford due process to the three respondents. It found that said respondents were not given the
opportunity to be heard in a separate hearing as required by Sec. 2(b), Rule XXIII, Book V of the
Omnibus Rules Implementing the Labor Code, as follows:

“SEC. 2. Standards of due process; requirements of notice.—In all cases of termination of

employment, the following standards of due process shall be substantially observed:

For termination of employment based on just causes as defined in Article 282 of the Code:

xxxx

(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him.”

The CA also said the dismissal of the three respondents was contrary to the doctrine laid down
in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos (Malayang Samahan),
where this Court ruled that even on the assumption that the union had valid grounds to expel
the local union officers, due process requires that the union officers be accorded a separate
hearing by the employer company.15

In a Resolution16 dated October 20, 2005, the CA denied the Club’s motion for reconsideration.

The Club now comes before this Court with these issues for our resolution, summarized as
follows:
 1. “1. Whether there was just cause to dismiss private respondents, and whether they were
afforded due process in accordance with the standards provided for by the Labor Code and its
Implementing Rules.
2. 2. Whether or not the CA erred in not finding that the NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it ruled that respondents Pizarro,
Braza, and Castueras were illegally expelled from the Union.
3. 3. Whether the case of Agabon vs. NLRC 17 should be applied to this case.
4. 4. Whether that in the absence of bad faith and malice on the part of the Club, the Union is
solely liable for the termination from employment of said respondents.”

The main issue is whether the three respondents were illegally dismissed and whether they
were afforded due process.

The Club avers that the dismissal of the three respondents was in accordance with the Union
security provisions in their CBA. The Club also claims that the three respondents were afforded
due process, since the Club conducted an investigation separate and independent from that
conducted by the Union.

Respondents Pizarro, Braza, and Castueras, on the other hand, contend that the Club failed to
conduct a separate hearing as prescribed by Sec. 2(b), Rule XXIII, Book V of the implementing
rules of the Code.

First, we resolve the legality of the three respondents’ dismissal from the Club.

Valid Grounds for Termination

Under the Labor Code, an employee may be validly terminated on the following grounds: (1)
just causes under Art. 282; (2) authorized causes under Art. 283; (3) termination due to disease
under Art. 284; and (4) termination by the employee or resignation under Art. 285.

Another cause for termination is dismissal from employment due to the enforcement of the
union security clause in the CBA. Here, Art. II of the CBA on Union security contains the
provisions on the Union shop and maintenance of membership shop. There is union shop when
all new regular employees are required to join the union within a certain period as a condition
for their continued employment. There is maintenance of membership shop when employees
who are union members as of the effective date of the agreement, or who thereafter become
members, must maintain union membership as a condition for continued employment until
they are promoted or transferred out of the bargaining unit or the agreement is terminated. 18
Termination of employment by virtue of a union security clause embodied in a CBA is
recognized and accepted in our jurisdiction.19 This practice strengthens the union and prevents
disunity in the bargaining unit within the duration of the CBA. By preventing member
disaffiliation with the threat of expulsion from the union and the consequent termination of
employment, the authorized bargaining representative gains more numbers and strengthens its
position as against other unions which may want to claim majority representation.
In terminating the employment of an employee by enforcing the union security clause, the
employer needs only to determine and prove that: (1) the union security clause is applicable;
(2) the union is requesting for the enforcement of the union security provision in the CBA; and
(3) there is sufficient evidence to support the union’s decision to expel the employee from the
union. These requisites constitute just cause for terminating an employee based on the CBA’s
union security provision.

The language of Art. II of the CBA that the Union members must maintain their membership in
good standing as a condition sine qua non for their continued employment with the Club is
unequivocal. It is also clear that upon demand by the Union and after due process, the Club
shall terminate the employment of a regular rank-and-file employee who may be found liable
for a number of offenses, one of which is malversation of Union funds.20

Below is the letter sent to respondents Pizarro, Braza, and Castueras, informing them of their
termination:

“On October 18, 2001, the Club received a letter from the Board of Directors of the Alabang
Country Club Independent Employees’ Union (“Union”) demanding your dismissal from service
by reason of your alleged commission of act of dishonesty, specifically malversation of union
funds. In support thereof, the Club was furnished copies of the following documents:

1. 1. A letter under the subject “Result of Audit” dated September 14, 2001 (receipt of which was
duly acknowledged from your end), which required you to explain in writing the charges against
you (copy attached);
2. 2. The Union’s Board of Directors’ Resolution dated October 2, 2001, which explained that the
Union afforded you an opportunity to explain your side to the charges;

1. 3. Minutes of the meeting of the Union’s Board of Directors wherein an administrative

investigation of the case was conducted last October 6, 2001; and
2. 4. The Union’s Board of Directors’ Resolution dated October 15, 2001 which resolved your
expulsion from the Union for acts of dishonesty and malversation of union funds, which was
duly approved by the general membership.

After a careful evaluation of the evidence on hand vis-à-vis a thorough assessment of your
defenses presented in your letterexplanation dated October 6, 2001 of which you also
expressed that you waived your right to be present during the administrative investigation
conducted by the Union’s Board of Directors on October 6, 2001, Management has reached the
conclusion that there are overwhelming reasons to consider that you have violated Section 4(f)
of the CBA, particularly on the grounds of malversation of union funds. The Club has
determined that you were sufficiently afforded due process under the circumstances.

Inasmuch as the Club is duty-bound to comply with its obligation under Section 4(f) of the CBA,
it is unfortunate that Management is left with no other recourse but to consider your
termination from service effective upon your receipt thereof. We wish to thank you for your
services during your employment with the Company. It would be more prudent that we just
move on independently if only to maintain industrial peace in the workplace.

Be guided accordingly.”21

Gleaned from the above, the three respondents were expelled from and by the Union after due
investigation for acts of dishonesty and malversation of Union funds. In accordance with the
CBA, the Union properly requested the Club, through the October 18, 2001 letter22 signed by
Mario Orense, the Union President, and addressed to Cynthia Figueroa, the Club’s HRD
Manager, to enforce the Union security provision in their CBA and terminate said respondents.
Then, in compliance with the Union’s request, the Club reviewed the documents submitted by
the Union, requested said respondents to submit written explanations, and thereafter afforded
them reasonable opportunity to present their side. After it had determined that there was
sufficient evidence that said respondents malversed Union funds, the Club dismissed them from
their employment conformably with Sec. 4(f) of the CBA.

Considering the foregoing circumstances, we are constrained to rule that there is sufficient
cause for the three respondents’ termination from employment.

Were respondents Pizarro, Braza, and Castueras accorded due process before their
employments were terminated?

We rule that the Club substantially complied with the due process requirements before it
dismissed the three respondents.

The three respondents aver that the Club violated their rights to due process as enunciated in
Malayang Samahan,23 when it failed to conduct an independent and separate hearing before
they were dismissed from service.

The CA, in dismissing the Club’s petition and affirming the Decision of the NLRC, also relied on
the same case. We explained in Malayang Samahan:

“x x x Although this Court has ruled that union security clauses embodied in the collective
bargaining agreement may be validly enforced and that dismissals pursuant thereto may
likewise be valid, this does not erode the fundamental requirements of due process. The reason
behind the enforcement of union security clauses which is the sanctity and inviolability of
contracts cannot override one’s right to due process.”24

In the above case, we pronounced that while the company, under a maintenance of
membership provision of the CBA, is bound to dismiss any employee expelled by the union for
disloyalty upon its written request, this undertaking should not be done hastily and summarily.
The company acts in bad faith in dismissing a worker without giving him the benefit of a
hearing.25 We cautioned in the same case that the power to dismiss is a normal prerogative of
the employer; however, this power has a limitation. The employer is bound to exercise caution
in terminating the services of the employees especially so when it is made upon the request of
a labor union pursuant to the CBA. Dismissals must not be arbitrary and capricious. Due process
must be observed in dismissing employees because the dismissal affects not only their positions
but also their means of livelihood. Employers should respect and protect the rights of their
employees, which include the right to labor.26

The CA and the three respondents err in relying on Malayang Samahan, as its ruling has no
application to this case. In Malayang Samahan, the union members were expelled from the
union and were immediately dismissed from the company without any semblance of due
process. Both the union and the company did not conduct administrative hearings to give the
employees a chance to explain themselves. In the present case, the Club has substantially
complied with due process. The three respondents were notified that their dismissal was being
requested by the Union, and their explanations were heard. Then, the Club, through its
President, conferred with said respondents during the last week of October 2001. The three
respondents were dismissed only after the Club reviewed and considered the documents
submitted by the Union vis-à-vis the written explanations submitted by said respondents.
Under these circumstances, we find that the Club had afforded the three respondents a
reasonable opportunity to be heard and defend themselves.

On the applicability of Agabon, the Club points out that the CA ruled that the three respondents
were illegally dismissed primarily because they were not afforded due process. We are not
unaware of the doctrine enunciated in Agabon that when there is just cause for the dismissal of
an employee, the lack of statutory due process should not nullify the dismissal, or render it
illegal or ineffectual, and the employer should indemnify the employee for the violation of his
statutory rights.27 However, we find that we could not apply Agabon to this case as we have
found that the three respondents were validly dismissed and were actually afforded due
process.

Finally, the issue that since there was no bad faith on the part of the Club, the Union is solely
liable for the termination from employment of the three respondents, has been mooted by our
finding that their dismissal is valid.

WHEREFORE, premises considered, the Decision dated July 5, 2005 of the CA and the Decision
dated February 26, 2004 of the NLRC are hereby REVERSED and SET ASIDE. The Decision dated
January 27, 2003 of the Labor Arbiter in NLRC-NCR Case No. 30-01-00130-02 is hereby
REINSTATED.

No costs.

SO ORDERED.

Quisumbing (Chairperson), Carpio-Morales, Azcuna** and Tinga, JJ., concur.

Judgment and resolution reversed and set aside, that of Labor Arbiter reinstated.
G.R. No. 158620. October 11, 2006.*

DEL MONTE PHILIPPINES, INC. and WARFREDO C. BALANDRA, petitioners, vs. MARIANO
SALDIVAR, NENA TIMBAL, VIRGINIO VICERA, ALFREDO AMONCIO and NAZARIO S. COLASTE,
respondents.

Labor Law; Termination; Collective Bargaining Agreements; Stipulations in the Collective

Bargaining Agreement (CBA) authorizing the dismissal of employees are of equal import as the
statutory provisions on dismissal under the Labor Code, since a CBA is the law between the
company and the union and compliance therewith is mandated by the express policy to give
protection to labor.—It bears elaboration that Timbal’s dismissal is not predicated on any of the
just or authorized causes for dismissal under Book Six, Title I of the Labor Code, but on the
union security clause in the CBA between Del Monte and ALU. Stipulations in the CBA
authorizing the dismissal of employees are of equal import as the statutory provisions on
dismissal under the Labor Code, since “[a] CBA is the law between the company and the union
and compliance therewith is mandated by the express policy to give protection to labor.” The
CBA, which covers all regular hourly paid employees at the pineapple plantation in Bukidnon,
stipulates that all present and subsequent employees shall be required to become a member of
ALU as a condition of continued employment.

Same; Same; Same; Closed-Shop; Definition of Closed-Shop; A Collective Bargaining Agreement

(CBA) provision for a closed-shop is a valid form of union security and it is not a restriction on
the right or freedom of association guaranteed by the Constitution.—The CBA obviously adopts
a closed-shop policy which mandates, as a condition of employment, membership in the
exclusive bargaining agent. A “closed-shop” may be defined as an enterprise in which, by
agreement between the employer and his employees or their representatives, no person may
be employed in any or certain agreed departments of the enterprise unless he or she is,
becomes, and, for the duration of the agreement, remains a member in good standing of a
union entirely comprised of or of which the employees in interest are a part. A CBA provision
for a closed-shop is a valid form of union security and it is not a restriction on the right or
freedom of association guaranteed by the Constitution.

Same; Same; Same; Same; The law has allowed stipulations for “union shop” and “closed-shop”
as means of encouraging workers to join and support the union of their choice in the protection
of their rights and interests vis-á-vis the employer.—The enforcement of a closed-shop or union
security provision in the CBA as a ground for termination finds no extension within any of the
provisions under Title I, Book Six of the Labor Code. Yet jurisprudence has consistently
recognized, thus: “It is State policy to promote unionism to enable workers to negotiate with
management on an even playing field and with more persuasiveness than if they were to
individually and separately bargain with the employer. For this reason, the law has allowed
stipulations for ‘union shop’ and ‘closed shop’ as means of encouraging workers to join and
support the union of their choice in the protection of their rights and interests vis-á-vis the
employer.”
Same; Same; Same; In the matter of determining whether cause exists for termination, whether
under Book Six, Title I of the Labor Code or under a valid Collective Bargaining Agreement (CBA),
substantial due process must be observed as a means of ensuring that security of tenure is not
infringed.—Agabon v. NLRC, 442 SCRA 573 (2004), did qualify that constitutional due process or
security of tenure did not shield from dismissal an employee found guilty of a just cause for
termination even if the employer failed to render the statutory notice and hearing requirement.
At the same time, it should be understood that in the matter of determining whether cause
exists for termination, whether under Book Six, Title I of the Labor Code or under a valid CBA,
substantive due process must be observed as a means of ensuring that security of tenure is not
infringed.

Same; Same; Same; As applied to the dismissals grounded on violations of the Collective
Bargaining Agreement (CBA), observance of substantial due process is indispensable in
establishing the presence of the cause or causes for dismissal as provided for in the CBA.—Even
if the dismissal of an employee is conditioned not on the grounds for termination under the
Labor Code, but pursuant to the provisions of a CBA, it still is necessary to observe substantive
due process in order to validate the dismissal. As applied to the Labor Code, adherence to
substantive due process is a requisite for a valid determination that just or authorized causes
existed to justify the dismissal. As applied to the dismissals grounded on violations of the CBA,
observance of substantial due process is indispensable in establishing the presence of the cause
or causes for dismissal as provided for in the CBA.

Same; Same; Same; In order that the dismissal of an employee may be validated by the Court, it
is necessary that the grounds for dismissal are justified by substantial evidence as duly
appreciated by an impartial trier of facts.—The Disloyalty Board may have appreciated
Piquero’s testimony in its own finding that Timbal was guilty, yet the said board cannot be
considered as a wholly neutral or dispassionate tribunal since it was constituted by the very
organization that stood as the offended party in the disloyalty charge. Without impugning the
integrity of ALU and the mechanisms it has employed for the internal discipline of its members,
we nonetheless hold that in order that the dismissal of an employee may be validated by this
Court, it is necessary that the grounds for dismissal are justified by substantial evidence as duly
appreciated by an impartial trier of facts. The existence of Piquero’s testimony was appreciated
only by the Disloyalty Board, but not by any of the impartial tribunals which heard Timbal’s
case. The appreciation of such testimony by the Disloyalty Board without any similar
affirmation or concurrence by the NLRC-RAB, the NLRC, or the Court of Appeals, cannot satisfy
the substantive due process requirement as a means of upholding Timbal’s dismissal.

Same; Same; Same; Benefits; Where reinstatement is adjudged, the award of backwages and
other benefits continues beyond the date of the labor arbiter’s decision ordering reinstatement
and extends up to the time said order of reinstatement is actually carried out.—Del Monte cites
a jurisprudential rule that an employer who acted in good faith in dismissing employees on the
basis of a closed-shop provision may not be penalized even if the dismissal were illegal. Such a
doctrine is admittedly supported by the early case of National Labor Union v. Zip Venetian
Blind, 2 SCRA 509 (1961), and the later decision in 1989 of Soriano v. Atienza, 171 SCRA 284
(1989), wherein the Court affirmed the disallowance of backwages or “financial assistance” in
dismissals under the aforementioned circumstance. However, the Court now recognizes that
this doctrine is inconsistent with Article 279 of the Labor Code, as amended by Republic Act No.
6715, which took effect just five (5) days after Soriano was promulgated. It is now provided in
the Labor Code that

“[a]n 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, where
reinstatement is adjudged, the award of backwages and other benefits continues beyond the
date of the labor arbiter’s decision ordering reinstatement and extends up to the time said
order of reinstatement is actually carried out.

Same; Voluntary Arbitrators; Jurisdictions; The Voluntary Arbitrator or Panel of Voluntary

Arbitrators will have original and exclusive jurisdiction over money claims “arising from the
interpretation or implementation of the Collective Bargaining Agreement and those arising from
the interpretation or enforcement of company policies” under Article 261.—In reconciling the
grants of jurisdiction vested under Articles 261 and 217 of the Labor Code, the Court has
pronounced that “the original and exclusive jurisdiction of the Labor Arbiter under Article
217(c) for money claims is limited only to those arising from statutes or contracts other than a
Collective Bargaining Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators will
have original and exclusive jurisdiction over money claims ‘arising from the interpretation or
implementation of the Collective Bargaining Agreement and, those arising from the
interpretation or enforcement of company personnel policies’, under Article 261.” Our
conclusion that the Labor Arbiter in the instant case could not properly pass judgment on the
cross-claim is further strengthened by the fact that Del Monte and ALU expressly recognized
the jurisdiction of Voluntary Arbitrators in the CBA.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Marco T. Parpan for Del Monte Philippines, Inc.

Pelaez & Sabio Law Office for Mariano Saldivar, Virginio Vicera, Alfredo Amoncio and Nazario
Colaste.

Leandricia M. Monsanto for Nena Timbal.

TINGA, J.:
The main issue for resolution herein is whether there was sufficient cause for the dismissal of a
rank-and-file employee effectuated through the enforcement of a closed-shop provision in the
Collective Bargaining Agreement (CBA) between the employer and the union.

The operative facts are uncomplicated.

The Associated Labor Union (ALU) is the exclusive bargaining agent of plantation workers of
petitioner Del Monte Philippines, Inc. (Del Monte) in Bukidnon. Respondent Nena Timbal
(Timbal), as a rank-and-file employee of Del Monte plantation in Bukidnon, is also a member of
ALU. Del Monte and ALU entered into a Collective Bargaining Agreement (CBA) with an
effective term of five (5) years from 1 September 1988 to 31 August 1993.1

Timbal, along with four other employees (collectively, co-employees), were charged by ALU for
disloyalty to the union, particularly for encouraging defections to a rival union, the National
Federation of Labor (NFL). The charge was contained in a Complaint dated 25 March 1993,
which specifically alleged, in relation to Timbal: “That on July 13, 1991 and the period prior or
after thereto, said Nena Timbal personally recruited other bona fide members of the ALU to
attend NFL seminars and has actually attended these seminars together with the other ALU
members.”2 The matter was referred to a body within the ALU organization, ominously named
“Disloyalty Board.”

The charge against Timbal was supported by an affidavit executed on 23 March 1993 by
Gemma Artajo (Artajo), also an employee of Del Monte. Artajo alleged that she was personally
informed by Timbal on 13 July 1991 that a seminar was to be conducted by the NFL on the
following day. When Artajo demurred from attending, Timbal assured her that she would be
given honorarium in the amount of P500.00 if she were to attend the NFL meeting and bring
new recruits. Artajo admitted having attended the NFL meeting together with her own recruits,
including Paz Piquero (Piquero). Artajo stated that after the meeting she was given P500.00 by
Timbal.3

Timbal filed an Answer before the Disloyalty Board, denying the allegations in the complaint
and the averments in Artajo’s Affidavit. She further alleged that her husband, Modesto Timbal,
had filed a complaint against Artajo for collection of a sum of money on 17 March 1993, or just
six (6) days before Artajo executed her affidavit. She noted that the allegations against her were
purportedly committed nearly two (2) years earlier, and that Artajo’s act was motivated by hate
and revenge owing to the filing of the aforementioned civil action.4

Nevertheless, the ALU Disloyalty Board concluded that Timbal was guilty of acts or conduct
inimical to the interests of ALU, through a Resolution dated 7 May 1993.5 It found that the acts
imputed to Timbal were partisan activities, prohibited since the “freedom period” had not yet
commenced as of that time. Thus, the Disloyalty Board recommended the expulsion of Timbal
from membership in ALU, and likewise her dismissal from Del Monte in accordance with the
Union Security Clause in the existing CBA between ALU and Del Monte. The Disloyalty Board
also reached the same conclusions as to the co-employees, expressed in separate resolutions
also recommending their expulsion from ALU.6

On 21 May 1993, the Regional Vice President of ALU adopted the recommendations of the
Disloyalty Board and expelled Timbal7 and her co-employees from ALU.8 The ALU National
President affirmed the expulsion.9 On 17 June 1993, Del Monte terminated Timbal and her co-
employees effective 19 June 1993, noting that the termination was “upon demand of [ALU]
pursuant to Sections 4 and 5 of Article III of the current Collective Bargaining Agreement.” 10

Timbal and her co-employees filed separate complaints against Del Monte and/or its Personnel
Manager Warfredo C. Balandra and ALU with the Regional Arbitration Branch (RAB) of the
National Labor Relations Commission (NLRC) for illegal dismissal, unfair labor practice and
damages.11 The complaints were consolidated and heard before Labor Arbiter Irving Pedilla.
The Labor Arbiter affirmed that all five (5) were illegally dismissed and ordered Del Monte to
reinstate complainants, including Timbal, to their former positions and to pay their full
backwages and other allowances, though the other claims and charges were dismissed for want
of basis.12

Only Del Monte interposed an appeal with the NLRC.13 The NLRC reversed the Labor Arbiter and
ruled that all the complainants were validly dismissed.14 On review, the Court of Appeals ruled
that only Timbal was illegally dismissed.15 At the same time, the appellate court found that Del
Monte had failed to observe procedural due process in dismissing the co-employees, and thus
ordered the company to pay P30,000.00 to each of the co-employees as penalties. The co-
employees sought to file a Petition for Review16 with this Court assailing the ruling of the Court
of Appeals affirming their dismissal, but the petition was denied because it was not timely
filed.17

On the other hand, Del Monte, through the instant petition, assails the Court of Appeals
decision insofar as it ruled that Timbal was illegally dismissed. Notably, Del Monte does not
assail in this petition the award of P30,000.00 to each of the co-employees, and the ruling of
the Court of Appeals in that regard should now be considered final.

The reason offered by the Court of Appeals in exculpating Timbal revolves around the
problematic relationship between her and Artajo, the complaining witness against her. As
explained by the appellate court:

“However, the NLRC should have considered in a different light the situation of petitioner Nena
Timbal. Timbal asserted before the NLRC, and reiterates in this petition, that the statements of
Gemma Artajo, ALU’s sole witness against her, should not be given weight because Artajo had
an ax[e] to grind at the time when she made the adverse statements against her. Respondents
never disputed the claim of Timbal that in the two (2) collection suits initiated by Timbal and
her husband, Artajo testified for the defendant in the first case and she was even the defendant
in the second case which was won by Timbal. We find it hard to believe that Timbal would so
willingly render herself vulnerable to expulsion from the Union by revealing to an estranged
colleague her desire to shift loyalty. The strained relationship between Timbal and Artajo
renders doubtful the charge against the former that she attempted to recruit Artajo to

join a rival union. Inasmuch as the respondents failed to justify the termination of Timbal’s
employment, We hold that her reinstatement to her former position in accordance with the
September 27, 1996 decision of the Labor Arbiter is appropriate.”18

The Labor Arbiter, in his favorable ruling to the dismissed employees, had noted that
“complainant Timbal[‘s] x x x accuser has an axe to grind against her for an unpaid debt so that
her testimony cannot be given credit.”19 The NLRC, in reversing the Labor Arbiter, did not see it
fit to mention the circumstances of the apparent feud between Timbal and Artajo, except in the
course of narrating Timbal’s allegations.

However, in the present petition, Del Monte utilizes a new line of argument in justifying
Timbal’s dismissal. While it does not refute the contemporaneous ill-will between Timbal and
Artajo, it nonetheless alleges that there was a second witness, Paz Piquero, who testified
against Timbal before the Disloyalty Board.20 Piquero had allegedly corroborated Artajo’s
allegations and positively identified Timbal as among those present during the seminar of the
NFL conducted on 14 July 1992 and as having given her transportation money after the seminar
was finished. Del Monte asserts that Piquero was a disinterested witness against Timbal. 21

Del Monte also submits two (2) other grounds for review. It argues that the decision of the
Labor Arbiter, which awarded Timbal full backwages and other allowances, was inconsistent
with jurisprudence which held that an employer who acted in good faith in dismissing
employees on the basis of a closed-shop provision is not liable to pay full backwages.22 Finally,

Del Monte asserts that it had, from the incipience of these proceedings consistently prayed that
in the event that it were found with finality that the dismissal of Timbal and the others is illegal,
ALU should be made liable to Del Monte pursuant to the CBA. The Court of Appeals is faulted
for failing to rule upon such claim.

For her part, Timbal observes that Piquero’s name was mentioned for the first time in Del
Monte’s Motion for Partial Reconsideration of the decision of the Court of Appeals. 23 She claims
that both Piquero and Artajo were not in good terms with her after she had won a civil suit for
the collection of a sum of money against their immediate superior, one Virgie Condeza. 24

The legality of Timbal’s dismissal is obviously the key issue in this case. We are particularly
called upon to determine whether at this late stage, the Court may still give credence to the
purported testimony of Piquero and justify Timbal’s dismissal based on such testimony.

It bears elaboration that Timbal’s dismissal is not predicated on any of the just or authorized
causes for dismissal under Book Six, Title I of the Labor Code,25 but on the union security clause
in the CBA between Del Monte and ALU. Stipulations in the CBA authorizing the dismissal of
employees are of equal import as the statutory provisions on dismissal under the Labor Code,
since “[a] CBA is the law between the company and the union and compliance therewith is
mandated by the express policy to give protection to labor.”26 The CBA, which covers all regular
hourly paid employ-

ees at the pineapple plantation in Bukidnon,27 stipulates that all present and subsequent
employees shall be required to become a member of ALU as a condition of continued
employment. Sections 4 and 5, Article II of the CBA further state:

ARTICLE II

Section 4. Loss of membership in the UNION shall not be a ground for dismissal by the
Company except where loss of membership is due to:

1. 1. Voluntary resignation from [ALU] earlier than the expiry date of this [CBA];
2. 2. Non-payment of duly approved and ratified union dues and fees; and
3. 3. Disloyalty to [ALU] in accordance with its Constitution and By-Laws as duly registered
with the Department of Labor and Employment.

Section 5. Upon request of [ALU], [Del Monte] shall dismiss from its service in accordance with
law, any member of the bargaining unit who loses his membership in [ALU] pursuant to the
provisions of the preceding section. [ALU] assumes full responsibility for any such termination
and hereby agrees to hold [Del Monte] free from any liability by judgment of a competent
authority for claims arising out of dismissals made upon demand of [ALU], and [the] latter shall
reimburse the former of such sums as it shall have paid therefor. Such reimbursement shall be
deducted from union dues and agency fees until duly paid.28

The CBA obviously adopts a closed-shop policy which mandates, as a condition of employment,
membership in the exclusive bargaining agent. A “closed-shop” may be defined as an enterprise
in which, by agreement between the employer and his employees or their representatives, no
person may be employed in any or certain agreed departments of the enterprise unless he or
she is, becomes, and, for the duration of the agreement, remains a member in good standing of
a union entirely comprised of or of which the employees in interest are a part. 29 A CBA
provision for a closed-shop is a valid form of union security and it is not a restriction on the
right or freedom of association guaranteed by the Constitution.30

Timbal’s expulsion from ALU was premised on the ground of disloyalty to the union, which
under Section 4(3), Article II of the CBA, also stands as a ground for her dismissal from Del
Monte. Indeed, Section 5, Article II of the CBA enjoins Del Monte to dismiss from employment
those employees expelled from ALU for disloyalty, albeit with the qualification “in accordance
with law.”
Article 279 of the Labor Code ordains that “in cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when authorized by [Title I,
Book Six of the Labor Code].” Admittedly, the enforcement of a closed-shop or union security
provision in the CBA as a ground for termination finds no extension within any of the provisions
under Title I, Book Six of the Labor Code. Yet jurisprudence has consistently recognized, thus:
“It is State policy to promote unionism to enable workers to negotiate with management on an
even playing field and with more persuasiveness than if they were to individually and
separately bargain with the employer. For this reason, the law has allowed stipulations for
‘union shop’ and ‘closed shop’ as means of encouraging workers to join and support the union
of their choice in the protection of their rights and interests vis-á-vis the employer.”31

It might be suggested that since Timbal was expelled from ALU on the ground of disloyalty, Del
Monte had no choice but to implement the CBA provisions and cause her dismissal. Similarly, it
might be posited that any tribunal reviewing such dismissal is precluded from looking beyond
the provisions of the CBA in ascertaining whether such dismissal was valid. Yet deciding the
problem from such a closed perspective would virtually guarantee unmitigated discretion on
the part of the union in terminating the employment status of an individual employee. What
the Constitution does recognize is that all workers, whether union members or not, are
“entitled to security of tenure.”32 The guarantee of security of tenure itself is implemented
through legislation, which lays down the proper standards in determining whether such right
was violated.33

Agabon v. NLRC34 did qualify that constitutional due process or security of tenure did not shield
from dismissal an employee found guilty of a just cause for termination even if the employer
failed to render the statutory notice and hearing requirement. At the same time, it should be
understood that in the matter of determining whether cause exists for termination, whether
under Book Six, Title I of the Labor Code or under a valid CBA, substantive due process must be
observed as a means of ensuring that security of tenure is not infringed.

Agabon observed that due process under the Labor Code comprised of two aspects:
“substantive, i.e., the valid and authorized causes of employment termination under the Labor
Code; and procedural, i.e., the manner of dismissal.”35 No serious dispute arose in Agabon over
the observance of substantive due process in that case, or with the conclusion that the
petitioners therein were guilty of abandonment of work, one of the just causes for dismissal
under the Labor Code. The controversy in Agabon centered on whether the failure to observe
procedural due process, through the non-observance of the two-notice rule, should lead to the
invalidation of the dismissals. The Court ruled, over the dissents of some Justices, that the
failure by the employer to observe procedural due process did not invalidate the dismissals for
just cause of the petitioners therein. However, Agabon did not do away with the requirement
of substantive due process, which is essentially the existence of just cause provided by law for a
valid dismissal. Thus, Agabon cannot be invoked to validate a dismissal wherein substantive due
process, or the proper determination of just cause, was not observed.
Even if the dismissal of an employee is conditioned not on the grounds for termination under
the Labor Code, but pursuant to the provisions of a CBA, it still is necessary to observe
substantive due process in order to validate the dismissal. As applied to the Labor Code,
adherence to substantive due process is a requisite for a valid determination that just or
authorized causes existed to justify the dismissal.36 As applied to the dismissals grounded on
violations of the CBA, observance of substantial due process is indispensable in establishing the
presence of the cause or causes for dismissal as provided for in the CBA.

Substantive due process, as it applies to all forms of dis-missals, encompasses the proper
presentation and appreciation of evidence to establish that cause under law exists for the
dismissal of an employee. This holds true even if the dismissal is predicated on particular causes
for dismissal established not by the Labor Code, but by the CBA. Further, in order that any CBA-
mandated dismissal may receive the warrant of the courts and labor tribunals, the causes for
dismissal as provided for in the CBA must satisfy to the eviden-tiary threshold of the NLRC and
the courts.

It is necessary to emphasize these principles since the immutable truth under our constitutional
and labor laws is that no employee can be dismissed without cause. Agabon may have
tempered the procedural due process requirements if just cause for dismissal existed, but in no
way did it eliminate the existence of a legally prescribed cause as a requisite for any dismissal.
The fact that a CBA may provide for additional grounds for dismissal other than those
established under the Labor Code does not detract from the necessity to duly establish the
existence of such grounds before the dismissal may be validated. And even if the employer or,
in this case, the collective bargaining agent, is satisfied that cause has been established to
warrant the dismissal, such satisfaction will be of no consequence if, upon legal challenge, they
are unable to establish before the NLRC or the courts the presence of such causes.

In the matter at bar, the Labor Arbiter—the proximate trier of facts—and the Court of Appeals
both duly appreciated that the testimony of Artajo against Timbal could not be given credence,
especially in proving Timbal’s disloyalty to ALU. This is due to the prior animosity between the
two engendered by the pending civil complaint filed by Timbal’s husband against Artajo.
Considering that the civil complaint was filed just six (6) days prior to the execution of Artajo’s
affidavit against Timbal, it would be plainly injudicious to presume that Artajo possessed an
unbiased state of mind as she executed that affidavit. Such circumstance was considered by the
Labor Arbiter, and especially the Court of Appeals, as they rendered a favorable ruling to
Timbal. The NLRC may have decided against Artajo, but in doing so, it failed to provide any basis
as to why Artajo’s testimony should be believed, instead of disbelieved. No credible disputation
was offered by the NLRC to the claim that Artajo was biased against Timbal; hence, we should
adjudge the findings of the Labor Arbiter and the Court of Appeals as more cogent on that
point.

Before this Court, Del Monte does not even present any serious argument that Artajo’s
testimony against Timbal was free from prejudice. Instead, it posits that Piquero’s alleged
testimony against Timbal before the Disloyalty Board should be given credence, and that taken
with Artajo’s testimony, should sufficiently establish the ground of disloyalty for which Timbal
should be dismissed.

The Court sees the danger to jurisprudence and the rights of workers in acceding to Del
Monte’s position. The dismissal for cause of employees must be justified by substantial
evidence, as appreciated by an impartial trier of facts. None of the trier of facts below—the
Labor Arbiter, the NLRC and the Court of Appeals—saw fit to accord credence to Piquero’s
testimony, even assuming that such testimony was properly contained in the record. Even the
NLRC decision, which was adverse to Timbal, made no reference at all to Piquero’s alleged
testimony.

Del Monte is able to point to only one instance wherein Piquero’s name and testimony appears
on the record. It appears that among the several attachments to the position paper submitted
by the ALU before the NLRC-RAB was a copy of the raw stenographic notes transcribed,
apparently on 17 April 1993, during a hearing before the Disloyalty Board. The transcription is
not wholly legible, but there appears to be references therein to the name “Paz Piquero,” and
her apparent testimony before the Disloyalty Board. We are unable to reproduce with accuracy,
based on the handwritten stenographic notes, the contents of this seeming testimony of
Piquero, although Del Monte claims before this Court that Piquero had corroborated Artajo’s
claims during such testimony, “positively identified [Timbal’s] presence in the NFL seminar on
14 July 1992,” and “confirmed that Timbal gave Artajo P500.00 for recruiting participants in the
NFL seminar.”37

There are evident problems on our part, at this late stage, in appreciating these raw
stenographic notes adverting to the purported testimony of Piquero, especially as a means of
definitively concluding that Timbal was guilty of disloyalty. Certainly, these notes cannot be
appreciated as entries in the official record, which are presumed prima facie evidence of the
facts therein stated,38 as such records can only be made by a public officer of the Philippines or
by a person in the performance of a duty specially enjoined by law. These transcripts were not
taken during a hearing conducted by any public office in the Philippines, but they were
committed in the course of an internal disciplinary mechanism devised by a privately organized
labor union. Unless the authenticity of these notes is duly proven before, and appreciated by
the

triers of fact, we cannot accord them any presumptive or conclusive value.

Moreover, despite the fact that the apparent record of Piquero’s testimony was appended to
ALU’s position paper, the position paper itself does not make any reference to such testimony,
or even to Piquero’s name for that matter. The position paper observes that “[t]his testimony
of [Artajo] was directly corroborated by her actual attendance on July 14, 1992 at the agreed
[venue],” but no mention is made that such testimony was also “directly corroborated” by
Piquero. Then again, it was only Artajo, and not Piquero, who executed an affidavit recounting
the allegations against Timbal.
Indeed, we are inclined to agree with Timbal’s observation in her Comment on the present
petition that from the time the complaint was filed with the NLRC-RAB, Piquero’s name and
testimony were invoked for the first time only in Del Monte’s motion for reconsideration before
the Court of Appeals. Other than the handwritten reference made in the raw stenographic
notes attached to ALU’s position paper before the NLRC-RAB, Piquero’s name or testimony was
not mentioned either by ALU or Del Monte before any of the pleadings filed before the NLRC-
RAB, the NLRC, and even with those submitted to the Court of Appeals prior to that court’s
decision.

In order for the Court to be able to appreciate Piquero’s testimony as basis for finding Timbal
guilty of disloyalty, it is necessary that the fact of such testimony must have been duly
established before the NLRC-RAB, the NLRC, or at the very least, even before the Court of
Appeals. It is only after the fact of such testimony has been established that the triers of fact
can come to any conclusion as to the veracity of the allegations in the testimony.

It should be mentioned that the Disloyalty Board, in its Resolution finding Timbal guilty of
disloyalty, did mention that Artajo’s testimony “was corroborated by Paz Piquero who
positively identified and testified that Nena Timbal was engaged in recruitment of ALU
members at [Del Monte] to attend NFL seminars.”39

The Disloyalty Board may have appreciated Piquero’s testimony in its own finding that Timbal
was guilty, yet the said board cannot be considered as a wholly neutral or dispassionate
tribunal since it was constituted by the very organization that stood as the offended party in
the disloyalty charge. Without impugning the integrity of ALU and the mechanisms it has
employed for the internal discipline of its members, we nonetheless hold that in order that the
dismissal of an employee may be validated by this Court, it is necessary that the grounds for
dismissal are justified by substantial evidence as duly appreciated by an impartial trier of
facts.40 The existence of Piquero’s testimony was appreciated only by the Disloyalty Board, but
not by any of the impartial tribunals which heard Timbal’s case. The appreciation of such
testimony by the Disloyalty Board without any similar affirmation or concurrence by the NLRC-
RAB, the NLRC, or the Court of Appeals, cannot satisfy the substantive due process requirement
as a means of upholding Timbal’s dismissal.

All told, we see no error on the part of the Court of Appeals when it held that Timbal was
illegally dismissed.

We now turn to the second issue raised, whether the Labor Arbiter correctly awarded full
backwages to Timbal.

Del Monte cites a jurisprudential rule that an employer who acted in good faith in dismissing
employees on the basis of a closed- shop provision may not be penalized even if the dismissal
were illegal. Such a doctrine is admittedly supported by the early case of National Labor Union
v. Zip Venetian Blind41 and the later decision in 1989 of Soriano v. Atienza,42 wherein the Court
affirmed the disallowance of backwages or “financial assistance” in dismissals under the
aforementioned circumstance.

However, the Court now recognizes that this doctrine is inconsistent with Article 279 of the
Labor Code, as amended by Republic Act No. 6715, which took effect just five (5) days after
Soriano was promulgated. It is now provided in the Labor Code that “[a]n 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, where reinstatement is adjudged, the award
of backwages and other benefits continues beyond the date of the labor arbiter’s decision
ordering reinstatement and extends up to the time said order of reinstatement is actually
carried out.43

Rep. Act No. 6715 effectively mitigated previous jurisprudence which had limited the extent to
which illegally dismissed employees could claim for backwages. We explained in Ferrer v. “With
the passage of Republic Act No. 6715 which took effect on March 21, 1989, Article 279 of the
Labor Code was amended to read as follows:

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.

and as implemented by Section 3, Rule 8 of the 1990 New Rules of Procedure of the National
Labor Relations Commission, it would seem that the Mercury Drug Rule (Mercury Drug Co., Inc.
vs. Court of Industrial Relations, 56 SCRA 694 [1974]) which limited the award of back wages of
illegally dismissed workers to three (3) years “without deduction or qualification” to obviate the
need for further proceedings in the course of execution, is no longer applicable.

A legally dismissed employee may now be paid his back wages, allowances, and other benefits
for the entire period he was out of work subject to the rule enunciated before the Mercury
Drug Rule, which is that the employer may, however, deduct any amount which the employee
may have earned during the period of his illegal termination (East Asiatic Company, Ltd. vs.
Court of Industrial Relations, 40 SCRA 521 [1971]). Computation of full back wages and
presentation of proof as to income earned elsewhere by the illegally dismissed employee after
his termination and before actual reinstatement should be ventilated in the execution
proceedings before the Labor Arbiter concordant with Section 3, Rule 8 of the 1990 New Rules
of Procedure of the National Labor Relations Commission.

Inasmuch as we have ascertained in the text of this discourse that the OFC whimsically
dismissed petitioners without proper hearing and has thus opened OFC to a charge of unfair
labor practice, it ineluctably follows that petitioners can receive their back wages computed
from the moment their compensation was withheld after their dismissal in 1989 up to the date
of actual reinstatement. In such a scenario, the award of back wages can extend beyond the 3-
year period fixed by the Mercury Drug Rule depending, of course, on when the employer will
reinstate the employees.

It may appear that Article 279 of the Labor Code, as amended by Republic Act No. 6715, has
made the employer bear a heavier burden than that pronounced in the Mercury Drug Rule, but
perhaps Republic Act No. 6715 was enacted precisely for the employer to realize that the
employee must be immediately restored to his former position, and to impress the idea that
immediate reinstatement is tantamount to a cost-saving measure in terms of overhead expense
plus incremental productivity to the company which lies in the hands of the employer.”45

The Labor Arbiter’s ruling, which entitled Timbal to claim full backwages and other allowances,
“without qualifications and diminutions, computed from the time [she was] illegally dismisse[d]
up to the time [she] will be actually reinstated,” conforms to Article 279 of the Labor Code.
Hence, the Court of Appeals was correct in affirming the Labor Arbiter insofar as Timbal was
concerned.

Finally, we address the claim that the Court of Appeals erred when it did not rule on Del
Monte’s claim for reimbursement against ALU. We do observe that Section 5 of the CBA
stipulated that “[ALU] assumes full responsibility of any such termination [of any member of
the bargaining unit who loses his membership in ALU] and hereby agrees to hold [Del Monte]
free from any liability by judgment of a competent authority for claims arising out of dismissals
made upon demand of [ALU], and latter shall reimburse the former of such sums as it shall have
paid therefore.”46

This stipulation does present a cause of action in Del Monte’s favor should it be held financially
liable for the dismissal of an employee by reason of expulsion from ALU. Nothing in this
decision should preclude the operation of this provision in the CBA. At the same time, we are
unable to agree with Del Monte that the Court of Appeals, or this Court, can implement this
provision of the CBA and accordingly directly condemn ALU to answer for the financial
remuneration due Timbal.

Before the Labor Arbiter, Del Monte had presented its cross-claim against ALU for
reimbursement should it be made liable for illegal dismissal or unfair labor practice, pursuant to
the CBA. The Labor Arbiter had actually passed upon this claim for reimbursement, stating that
“[as] for the cross-claims of respondent DMPI and Tabusuares against the respondent ALU-
TUCP, this Branch cannot validly entertain the same in the absence of employer-employee
relationship between the former and the latter.”47 We have examined Article 217 of the Labor
Code,48 which sets forth the original jurisdiction of the Labor Arbiters. Article 217(c) states:

“Cases arising from the interpretation or implementation of collective bargaining agreements

and those arising from the interpretation or enforcement of company personnel policies shall
be disposed of by the Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements.” [Emphasis supplied.]

In contrast, Article 261 of the Labor Code indubitably vests on the Voluntary Arbitrator or panel
of Voluntary Arbitrators the “original and exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement.”49 Among those areas of conflict traditionally within the jurisdiction of
Voluntary Arbitrators are contract-interpretation and contract-implementation,50 the questions
precisely involved in Del Monte’s claim seeking enforcement of the CBA provision mandating
restitution by ALU should the company be held financially liable for dismissals pursuant to the
union security clause.

In reconciling the grants of jurisdiction vested under Articles 261 and 217 of the Labor Code, the
Court has pronounced that “the original and exclusive jurisdiction of the Labor Arbiter under
Article 217(c) for money claims is limited only to those arising from statutes or contracts other
than a Collective Bargaining Agreement. The Voluntary Arbitrator or

1. (b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.
2. (c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company
personnel policies shall be disposed by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said agreements.”

Panel of Voluntary Arbitrators will have original and exclusive jurisdiction over money claims
‘arising from the interpretation or implementation of the Collective Bargaining Agreement and,
those arising from the interpretation or enforcement of company personnel policies’, under
Article 261.”51

Our conclusion that the Labor Arbiter in the instant case could not properly pass judgment on
the cross-claim is further strengthened by the fact that Del Monte and ALU expressly
recognized the jurisdiction of Voluntary Arbitrators in the CBA. Section 2, Article XXXI of the
CBA provides:

Section 2. In the event a dispute arises concerning the application of, or interpretation of this
Agreement which cannot be settled pursuant to the [grievance procedure set forth in the]
preceding Section, the dispute shall be submitted to an arbitrator agreed to by [Del Monte] and
[ALU].

Should the parties fail to agree on the arbitrator, the same shall be drawn by lottery from a list
of arbitrators furnished by the Bureau of Labor Relations of the Department of Labor and
Employment.

xxxx
Thus, as the law indubitably precludes the Labor Arbiter from enforcing money claims arising
from the implementation of the CBA, the CBA herein complementarily recognizes that it is the
Voluntary Arbitrators which have jurisdiction to hear the claim. The Labor Arbiter correctly
refused to exercise jurisdiction over Del Monte’s cross-claim, and the Court of Appeals would
have no basis had it acted differently. At the same time, even as we affirm the award of
backwages against Del Monte, our ruling should not operate to prejudice in any way whatever
causes of action Del Monte may have against ALU, in accordance with the CBA.

G.R. No. 166208. June 29, 2007.*

KING OF KINGS TRANSPORT, INC., CLAIRE DELA FUENTE, and MELISSA LIM, petitioners, vs.
SANTIAGO O. MAMAC, respondent.

Labor Law; Due Process; Due Process under the Labor Code involves two aspects: first,
substantive—the valid and authorized causes of termination of employment under the Labor
Code, and second, procedural—the manner of dismissal.—Due process under the Labor Code
involves two aspects: first, substantive—the valid and authorized causes of termination of
employment under the Labor Code; and second, procedural—the manner of dismissal. In the
present case, the CA affirmed the findings of the labor arbiter and the NLRC that the
termination of employment of respondent was based on a “just cause.” This ruling is not at
issue in this case. The question to be determined is whether the procedural requirements were
complied with.

Same; Same; In order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will
serve as basis for the charge against the employees—a general description of the charge will
not suffice.—The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees are given
the opportunity to submit their written explanation within a reasonable period. “Reasonable
opportunity” under the Omnibus Rules means every kind of assistance that management must
accord to the employees to enable them to prepare adequately for their defense. This should
be construed as a period of at least five (5) calendar days from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.

Same; Same; A verbal appraisal of the charges against an employee does not comply with the
first notice requirement.—In the instant case, KKTI admits that it had failed to provide
respondent with a “charge sheet.” However, it maintains that it had substantially complied with
the rules, claiming that “respondent would not have issued a written explanation had he not
been informed of the charges against him.” We are not convinced. First, respondent was not
issued a written notice charging him of committing an infraction. The law is clear on the matter.
A verbal appraisal of the charges against an employee does not comply with the first notice
requirement. In Pepsi Cola Bottling Co. v. NLRC, 210 SCRA 277 (1992), the Court held that
consultations or conferences are not a substitute for the actual observance of notice and
hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano, 408 SCRA 478 (2003), the Court,
sanctioning the employer for disregarding the due process requirements, held that the
employee’s written explanation did not excuse the fact that there was a complete absence of
the first notice.

Same; Same; The doctrine in Serrano v. NLRC, 323 SCRA 445 (2000) had already been
abandoned in Agabon v. NLRC, 442 SCRA 573 (2004), by ruling that if the dismissal is done
without due process, the employer should indemnify the employee with nominal damages.—
After a finding that petitioners failed to comply with the due process requirements, the CA
awarded full backwages in favor of respondent in accordance with the doctrine in Serrano v.
NLRC, 323 SCRA 445 (2000). However, the doctrine in Serrano had already been abandoned in
Agabon v. NLRC, 442 SCRA 573 (2004), by ruling that if the dismissal is done without due
process, the employer should indemnify the employee with nominal damages. Thus, for non-
compliance with the due process requirements in the termination of respondent’s
employment, petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand
pesos (PhP30,000) as damages.

Same; 13th-Month Pay; A bus conductor paid on commission only is not entitled to 13th-month
benefit.—It was erroneous for the CA to apply the case of Philippine Agricultural Commercial
and Industrial Workers Union. Notably in the said case, it was established that the drivers and
conductors praying for 13th-month pay were not paid purely on commission. Instead, they
were receiving a commission in addition to a fixed or guaranteed wage or salary. Thus, the
Court held that bus drivers and conductors who are paid a fixed or guaranteed minimum wage
in case their commission be less than the statutory minimum, and commissions only in case
where they are over and above the statutory minimum, are entitled to a 13th-month pay
equivalent to one-twelfth of their total earnings during the calendar year. On the other hand, in
his Complaint, respondent admitted that he was paid on commission only. Moreover, this fact
is supported by his pay slips which indicated the varying amount of commissions he was
receiving each trip. Thus, he was excluded from receiving the 13th-month pay benefit.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Batino Law Offices for petitioners.

Pro-Labor Legal Assistance Center for respondents.

VELASCO, JR., J.:

Is a verbal appraisal of the charges against the employee a breach of the procedural due
process? This is the main issue to be resolved in this plea for review under Rule 45 of the
September 16, 2004 Decision1 of the Court of Appeals (CA) in CA-GR SP No. 81961. Said
judgment affirmed the dismissal of bus conductor Santiago O. Mamac from petitioner King of
Kings Transport, Inc. (KKTI), but ordered the bus company to pay full backwages for violation of
the twin-notice requirement and 13th-month pay. Likewise assailed is the December 2, 2004 CA
Resolution2 rejecting KKTI’s Motion for Reconsideration.

The Facts

Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela
Fuente and Melissa Lim.

Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on
April 29, 1999. The DMTC employees including respondent formed the Damayan ng mga
Manggagawa, Tsuper at Conductor-Transport Workers Union and registered it with the
Department of Labor and Employment. Pending the holding of a certification election in DMTC,
petitioner KKTI was incorporated with the Securities and Exchange Commission which acquired
new buses. Many DMTC employees were subsequently transferred to KKTI and excluded from
the election.

The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which
was registered with DOLE. Respondent was elected KKKK president.

Respondent was required to accomplish a “Conductor’s Trip Report” and submit it to the
company after each trip. As a background, this report indicates the ticket opening and closing
for the particular day of duty. After submission, the company audits the reports. Once an
irregularity is discovered, the company issues an “Irregularity Report” against the employee,
indicating the nature and details of the irregularity. Thereafter, the concerned employee is
asked to explain the incident by making a written statement or counter-affidavit at the back of
the same Irregularity Report. After considering the explanation of the employee, the company
then makes a determination of whether to accept the explanation or impose upon the
employee a penalty for committing an infraction. That decision shall be stated on said
Irregularity Report and will be furnished to the employee.

Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted an
irregularity. It discovered that respondent declared several sold tickets as returned tickets
causing KKTI to lose an income of eight hundred and ninety pesos. While no irregularity report
was prepared on the Octo-ber 28, 2001 incident, KKTI nevertheless asked respondent to explain
the discrepancy. In his letter,3 respondent said that the erroneous declaration in his October 28,
2001 Trip Report was unintentional. He explained that during that day’s trip, the windshield of
the bus assigned to them was smashed; and they had to cut short the trip in order to
immediately report the matter to the police. As a result of the incident, he got confused in
making the trip report.

On November 26, 2001, respondent received a letter4 terminating his employment effective
November 29, 2001. The dismissal letter alleged that the October 28, 2001 irregularity was an
act of fraud against the company. KKTI also cited as basis for respondent’s dismissal the other
offenses he allegedly committed since 1999.

On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions,
nonpayment of 13th-month pay, service incentive leave, and separation pay. He denied
committing any infraction and alleged that his dismissal was intended to bust union activities.
Moreover, he claimed that his dismissal was effected without due process.

In its April 3, 2002 Position Paper,5 KKTI contended that respondent was legally dismissed after
his commission of a series of misconducts and misdeeds. It claimed that respondent had
violated the trust and confidence reposed upon him by KKTI. Also, it averred that it had
observed due process in dismissing respondent and maintained that respondent was not
entitled to his money claims such as service incentive leave and 13th-month pay because he
was paid on commission or percentage basis.

On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment dismissing
respondent’s Complaint for lack of merit.6

Aggrieved, respondent appealed to the National Labor Relations Commission (NLRC). On August
29, 2003, the NLRC rendered a Decision, the dispositive portion of which reads:

“WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that respondent King of
Kings Transport Inc. is hereby ordered to indemnify complainant in the amount of ten thousand
pesos (P10,000) for failure to comply with due process prior to termination.

The other findings are AFFIRMED.

SO ORDERED.”7

Respondent moved for reconsideration but it was denied through the November 14, 2003
Resolution8 of the NLRC.

Thereafter, respondent filed a Petition for Certiorari before the CA urging the nullification of
the NLRC Decision and Resolution.
The Ruling of the Court of Appeals

Affirming the NLRC, the CA held that there was just cause for respondent’s dismissal. It ruled
that respondent’s act in “declaring sold tickets as returned tickets x x x constituted fraud or acts
of dishonesty justifying his dismissal.”9

Also, the appellate court sustained the finding that petitioners failed to comply with the
required procedural due process prior to respondent’s termination. However, following the
doctrine in Serrano v. NLRC,10 it modified the award of PhP 10,000 as indemnification by
awarding full backwages from the time respondent’s employment was terminated until finality
of the decision.

Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.

Hence, we have this petition.

The Issues

Petitioner raises the following assignment of errors for our consideration:

Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private
respondent, full back wages, despite the denial of his petition for certiorari.

Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the
requirements of procedural due process before dismissing the services of the
complainant/private respondent.

Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic] it awarded
in favor of the complaint/private respondent, 13th month pay benefits contrary to PD 851.11

The Court’s Ruling

The petition is partly meritorious.

The disposition of the first assigned error depends on whether petitioner KKTI complied with
the due process requirements in terminating respondent’s employment; thus, it shall be
discussed secondly.

Non-compliance with the Due Process Requirements

Due process under the Labor Code involves two aspects: first, substantive—the valid and
authorized causes of termination of employment under the Labor Code; and second,
procedural—the manner of dismissal.12 In the present case, the CA affirmed the findings of the
labor arbiter and the NLRC that the termination of employment of respondent was based on a
“just cause.” This ruling is not at issue in this case. The question to be determined is whether
the procedural requirements were complied with.

Art. 277 of the Labor Code provides the manner of termination of employment, thus:

“Art. 277. Miscellaneous Provisions.—x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause without prejudice to the
requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer.”

Accordingly, the implementing rule of the aforesaid provision states:

“SEC. 2. Standards of due process; requirements of notice.—In all cases of termination of

employment, the following standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

1. (a) A written notice served on the employee specifying the ground or grounds for termination,
and giving said employee reasonable opportunity within which to explain his side.
2. (b) A hearing or conference during which the employee concerned, with the assistance of
counsel if he so desires is given opportunity to respond to the charge, present his evidence, or
rebut the evidence presented against him.
3. (c) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination.13

In case of termination, the foregoing notices shall be served on the employee’s last known
address.”14

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. “Reasonable
opportunity” under the Omnibus Rules means every kind of assistance that management must
accord to the employees to enable them to prepare adequately for their defense. 15 This should
be construed as a period of at least five (5) calendar days from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts and
circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support of their defenses; and (3)
rebut the evidence presented against them by the management. During the hearing or
conference, the employees are given the chance to defend themselves personally, with the
assistance of a representative or counsel of their choice. Moreover, this conference or hearing
could be used by the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) grounds have been established to
justify the severance of their employment.

In the instant case, KKTI admits that it had failed to provide respondent with a “charge sheet.” 16
However, it maintains that it had substantially complied with the rules, claiming that
“respondent would not have issued a written explanation had he not been informed of the
charges against him.”17

We are not convinced.

First, respondent was not issued a written notice charging him of committing an infraction. The
law is clear on the matter. A verbal appraisal of the charges against an employee does not
comply with the first notice requirement. In Pepsi Cola Bottling Co. v. NLRC,18 the Court held
that consultations or conferences are not a substitute for the actual observance of notice and
hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano,19 the Court, sanctioning the employer
for disregarding the due process requirements, held that the employee’s written explanation
did not excuse the fact that there was a complete absence of the first notice.

Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity
Report notifying him of his offense, such would not comply with the requirements of the law.
We observe from the irregularity reports against respondent for his other offenses that such
contained merely a general description of the charges against him. The reports did not even
state a company rule or policy that the employee had allegedly violated. Likewise, there is no
mention of any of the grounds for termination of employment under Art. 282 of the Labor
Code. Thus, KKTI’s “standard” charge sheet is not sufficient notice to the employee.

Third, no hearing was conducted. Regardless of respondent’s written explanation, a hearing

was still necessary in order for him to clarify and present evidence in support of his defense.
Moreover, respondent made the letter merely to explain the circumstances relating to the
irregularity in his October 28, 2001 Conductor’s Trip Report. He was unaware that a dismissal
proceeding was already being effected. Thus, he was surprised to receive the November 26,
2001 termination letter indicating as grounds, not only his October 28, 2001 infraction, but also
his previous infractions.

Sanction for Non-compliance with Due Process Requirements

As stated earlier, after a finding that petitioners failed to comply with the due process
requirements, the CA awarded full backwages in favor of respondent in accordance with the
doctrine in Serrano v. NLRC.20 However, the doctrine in Serrano had already been abandoned in
Agabon v. NLRC by ruling that if the dismissal is done without due process, the employer should
indemnify the employee with nominal damages.21

Thus, for non-compliance with the due process requirements in the termination of
respondent’s employment, petitioner KKTI is sanctioned to pay respondent the amount of
thirty thousand pesos (PhP 30,000) as damages.

Thirteenth (13th)-Month Pay

Section 3 of the Rules Implementing Presidential Decree No. 85122 provides the exceptions in
the coverage of the payment of the 13th-month benefit. The provision states:

“SEC. 3. Employers covered.––The Decree shall apply to all employers except to:

xxxx

e) Employers of those who are paid on purely commission, boundary, or task basis, and those
who are paid a fixed amount for performing a specific work, irrespective of the time consumed
in the performance thereof, except where the workers are paid on piece-rate basis in which
case the employer shall be covered by this issuance insofar as such workers are concerned.”

Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter
is not entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine
Agricultural Commercial and Industrial Workers Union v. NLRC,23 the CA held that respondent is
entitled to the said benefit.

It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and
Industrial Workers Union. Notably in the said case, it was established that the drivers and
conductors praying for 13th-month pay were not paid purely on commission. Instead, they
were receiving a commission in addition to a fixed or guaranteed wage or salary. Thus, the
Court held that bus drivers and conductors who are paid a fixed or guaranteed minimum wage
in case their commission be less than the statutory minimum, and commissions only in case
where they are over and above the statutory minimum, are entitled to a 13th-month pay
equivalent to one-twelfth of their total earnings during the calendar year.

On the other hand, in his Complaint,24 respondent admitted that he was paid on commission
only. Moreover, this fact is supported by his pay slips25 which indicated the varying amount of
commissions he was receiving each trip. Thus, he was excluded from receiving the 13th-month
pay benefit.

WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA
is MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI
is ordered to indemnify respondent the amount of thirty thousand pesos (PhP30,000) as
nominal damages for failure to comply with the due process requirements in terminating the
employment of respondent.

No costs.

SO ORDERED.

Quisumbing (Chairperson), Carpio, Carpio-Morales and Tinga, JJ., concur.

Petition partly granted, judgment modified.

Notes.—The 13th month pay of employees paid a fixed or guaranteed wage plus sales
commissions must be equivalent to one-twelfth (1/12) of the total earnings (fixed or
guaranteed wage-cum-sales commissions), during the calendar year. (Philippine Duplicators,
Inc. vs. National Labor Relations Commission, 227 SCRA 747 [1993])

Commissions do not form part of the “basic salary” for the computation of 13th month pay.
(Boie-Takeda Chemicals, Inc. vs. De La Serna, 228 SCRA 329 [1993])

——o0o——