1
A. Introduction deactivated. In that event, you shall be entitled to return to your
2.1 Existence of employer- employee relationship is
necessary for the application of labor laws
A. Employment not merely a contractual relationship
CAPITOL MEDICAL CENTER, INC. and DR. THELMA
NAVARETTE-CLEMENTE,
- versus - DR. CESAR E. MERIS,
G.R. No. 155098
September 16, 2005
CARPIO MORALES, J.:
Subject of the present appeal is the Court of Appeals
Decision[1] dated February 15, 2002 reversing the NLRC
Resolution[2] dated January 19, 1999 and Labor Arbiter
Decision[3] dated April 28, 1998 which both held that the
closure of the Industrial Service Unit of the
Capitol Medical Center, Inc., resulting to the termination of the
services of herein respondent Dr. Cesar Meris as Chief
thereof, was valid.
On January 16, 1974, petitioner Capitol Medical Center, Inc.
(Capitol) hired Dr. Cesar Meris (Dr. Meris),[4] one of its
stockholders,[5] as in charge of its Industrial Service Unit (ISU)
at a monthly salary of P10,270.00.
Until the closure of the ISU on April 30, 1992,[6] Dr. Meris
performed dual functions of providing medical services to
Capitols more than 500 employees and health workers as well
as to employees and workers of companies having retainer
contracts with it.[7]
On March 31, 1992, Dr. Meris received from Capitols president
and chairman of the board, Dr. Thelma Navarette-Clemente
(Dr. Clemente), a notice advising him of the managements
decision to close or abolish the ISU and the consequent
termination of his services as Chief thereof, effective April 30,
1992.[8] The notice reads as follows:
March 31, 1992
Dr. Cesar E. Meris
Chief, Industrial Service Unit
Capitol Medical Center
Dear Dr. Meris:
Greetings!
Please be formally advised that the hospital management has
decided to abolish CMCs Industrial Service Unit as of April 30,
1992 in view of the almost extinct demand for direct medical
services by the private and semi-government corporations in
providing health care for their employees. Such a decision was
arrived at, after considering the existing trend of industrial
companies allocating their health care requirements to Health
Maintenance Organizations (HMOs) or thru a tripartite
arrangement with medical insurance carriers and designated
hospitals.
As a consequence thereof, all positions in the unit will be
decommissioned at the same time industrial services [are]
its revenue for three years immediately preceding Dr. Meriss
private practice as a consultant staff of the institution and will
become eligible to receive your retirement benefits as a former
hospital employee. Miss Jane Telan on the other hand will be
transferred back to Nursing Service for reassignment at the
CSR.
We wish to thank you for your long and faithful service to the
institution and hope that our partnership in health care delivery
to our people will continue throughout the future. Best regards.
Very truly yours,
(SGD.) DR. THELMA NAVARETTE-CLEMENTE[9] (Emphasis
and underscoring supplied)
Dr. Meris, doubting the reason behind the managements
decision to close the ISU and believing that the ISU was not in
fact abolished as it continued to operate and offer services to
the client companies with Dr. Clemente as its head and the
notice of closure was a mere ploy for his ouster in view of his
refusal to retire despite Dr. Clementes previous prodding for
him to do so,[10] sought his reinstatement but it was
unheeded.
Dr. Meris thus filed on September 7, 1992 a complaint against
Capitol and Dr. Clemente for illegal dismissal and
reinstatement with claims for backwages, moral and exemplary
damages, plus attorneys fees.[11]
Finding for Capitol and Dr. Clemente, the Labor Arbiter held
that the abolition of the ISU was a valid and lawful exercise of
management prerogatives and there was convincing evidence
to show that ISU was being operated at a loss.[12] The
decretal text of the decision reads:
WHEREFORE, judgment is hereby rendered dismissing the
complaint. Respondents are however ordered to pay
complainant all sums due him under the hospital retirement
plan.
SO ORDERED.[13] (Emphasis supplied)
On appeal by Dr. Meris, the National Labor Relations
Commission (NLRC) modified the Labor Arbiters decision. It
held that in the exercise of Capitols management prerogatives,
it had the right to close the ISU even if it was not suffering
business losses in light of Article 283 of the Labor Code and
jurisprudence.[14]
And the NLRC set aside the Labor Arbiters directive for the
payment of retirement benefits to Dr. Meris because he did not
retire. Instead, it ordered the payment of separation pay as
provided under Article 283 as he was discharged due to
closure of ISU, to be charged against the retirement fund.[15]
Undaunted, Dr. Meris elevated the case to the Court of
Appeals via petition for review[16] which, in the interest of
substantial justice, was treated as one for certiorari.[17]
Discrediting Capitols assertion that the ISU was operating at a
loss as the evidence showed a continuous trend of increase in
dismissal on April 30, 1992,[18] and finding that the ISUs
Analysis of Income and Expenses which was prepared long
after Dr. Meriss dismissal, hence, not yet available, on or
before April 1992, was tainted with irregular entries, the
appellate court held that Capitols evidence failed to meet the
standard of a sufficient and adequate proof of loss necessary
to justify the abolition of the ISU.[19]
The appellate court went on to hold that the ISU was not in fact
abolished, its operation and management having merely
changed hands from Dr. Meris to Dr. Clemente; and that there
was a procedural lapse in terminating the services of Dr. Meris,
no written notice to the Department of Labor and Employment
(DOLE) of the ISU abolition having been made, thereby
violating the requirement embodied in Article 283.[20]
The appellate court, concluding that Capitol failed to strictly
comply with both procedural and substantive due process, a
condition sine qua non for the validity of a case of
termination,[21] held that Dr. Meris was illegally dismissed. It
accordingly reversed the NLRC Resolution and disposed as
follows:
IN VIEW OF ALL THE FOREGOING, the assailed resolutions
of the NLRC are hereby set aside, and another one entered
1 declaring illegal the dismissal of petitioner as Chief of the
Industrial Service Unit of respondent Medical Center;
2 ordering respondents to pay petitioner
a) backwages from the date of his separation in April 1992 until
this decision has attained finality;
b) separation pay in lieu of reinstatement computed at the rate
of one (1) month salary for every year of service with a fraction
of at least six (6) months being considered as one year;
c) other benefits due him or their money equivalent;
d) moral damages in the sum of P50,000.00;
e) exemplary damages in the sum of P50,000.00; and
f) attorneys fees of 10% of the total monetary award payable to
petitioner.
SO ORDERED.[22]
Hence, the present petition for review assigning to the
appellate court the following errors:
I
. . . IN OVERTURNING THE FACTUAL FINDINGS AND
CONCLUSIONS OF BOTH THE NATIONAL LABOR
RELATIONS COMMISSION (NLRC) AND THE LABOR
ARBITER.
II

. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH
THE LABOR ARBITER AND THE NATIONAL LABOR
RELATIONS COMMISSION, THAT THE INDUSTRIAL UNIT
(ISU) WAS NOT INCURRING LOSSES AND THAT IT WAS
NOT IN FACT ABOLISHED.
III
. . . IN NOT UPHOLDING PETITIONERS MANAGEMENT
PREROGATIVE TO ABOLISH THE INDUSTRIAL SERVICE
UNIT (ISU).
IV
. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT
BACKWAGES AS WELL AS DAMAGES AND ATTORNEYS
FEES.[23]
Capitol questions the appellate courts deciding of the petition
of Dr. Meris on the merits, instead of merely determining
whether the administrative bodies acted with grave abuse of
discretion amounting to lack or excess of jurisdiction.
The province of a special civil action for certiorari under Rule
65, no doubt the appropriate mode of review by the Court of
Appeals of the NLRC decision,[24] is limited only to correct
errors of jurisdiction or grave abuse of discretion amounting to
lack or excess of jurisdiction.[25] In light of the merits of Dr.
Meris claim, however, the relaxation by the appellate court of
procedural technicality to give way to a substantive
determination of a case, as this Court has held in several
cases,[26] to subserve the interest of justice, is in order.
Capitol argues that the factual findings of the NLRC,
particularly when they coincide with those of the Labor Arbiter,
as in the present case, should be accorded respect, even
finality.[27]
For factual findings of the NLRC which affirm those of the
Labor Arbiter to be accorded respect, if not finality, however,
the same must be sufficiently supported by evidence on
record.[28] Where there is a showing that such findings are
devoid of support, or that the judgment is based on a
misapprehension of facts,[29] the lower tribunals factual
findings will not be upheld.
As will be reflected in the following discussions, this Court finds
that the Labor Arbiter and the NLRC overlooked some material
facts decisive of the instant controversy.
Capitol further argues that the appellate courts conclusion that
the ISU was not incurring losses is arbitrary as it was based
solely on the supposed increase in revenues of the unit from
1989-1991, without taking into account the Analysis of Income
and Expenses of ISU from July 1, 1990 to July 1, 1991 which
shows that the unit operated at a loss;[30] and that the
demand for the services of ISU became almost extinct in view
of the affiliation of industrial establishments with HMOs such
as Fortunecare, Maxicare, Health Maintenance, Inc. and
Philamcare and of tripartite arrangements with medical
insurance carriers and designated hospitals,[31] and the trend
resulted in losses in the operation of the ISU.
Besides, Capitol stresses, the health care needs of the hospital
employees had been taken over by other units without added
expense to it;[32] the appellate courts decision is at best an
undue interference with, and curtailment of, the exercise by an
employer of its management prerogatives;[33] at the time of
the closure of the ISU, Dr. Meris was already eligible for
retirement under the Capitols retirement plan; and the
appellate court adverted to the alleged lack of notice to the
DOLE regarding Dr. Meriss dismissal but the latter never
raised such issue in his appeal to the NLRC or even in his
petition for review before the Court of Appeals, hence, the
latter did not have authority to pass on the matter.[34]
Work is a necessity that has economic significance deserving
legal protection. The social justice and protection to labor
provisions in the Constitution dictate so.
Employers are also accorded rights and privileges to assure
their self-determination and independence and reasonable
return of capital. This mass of privileges comprises the so-
called management prerogatives. Although they may be broad
and unlimited in scope, the State has the right to determine
whether an employers privilege is exercised in a manner that
complies with the legal requirements and does not offend the
protected rights of labor. One of the rights accorded an
employer is the right to close an establishment or undertaking.
The right to close the operation of an establishment or
undertaking is explicitly recognized under the Labor Code as
one of the authorized causes in terminating employment of
workers, the only limitation being that the closure must not be
for the purpose of circumventing the provisions on termination
of employment embodied in the Labor Code.
ART. 283. Closure of establishment and reduction of
personnel. The employer may also terminate the employment
of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or
redundancy, the worker affected shall be entitled to a
separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service,
whichever is higher. In case retrenchment to prevent losses
and in cases of closures or cessation of
operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (Emphasis and underscoring supplied)
The phrase closures or cessation of operations of
establishment or undertaking includes a partial or total closure
or cessation.[35]
2
x x x Ordinarily, the closing of a warehouse facility and the
termination of the services of employees there assigned is a
matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The
applicable law in such a case is Article 283 of the Labor Code
which permits closure or cessation of operation of an
establishment or undertaking not due to serious business
losses or financial reverses, which, in our reading includes
both the complete cessation of operations and the cessation of
only part of a companys business. (Emphasis supplied)
And the phrase closures or cessation x x x not due to serious
business losses or financial reverses recognizes the right of
the employer to close or cease his business operations or
undertaking even if he is not suffering from serious business
losses or financial reverses, as long as he pays his employees
their termination pay in the amount corresponding to their
length of service.[36]
It would indeed be stretching the intent and spirit of the law if a
court were to unjustly interfere in managements prerogative to
close or cease its business operations just because said
business operation or undertaking is not suffering from any
loss.[37] As long as the companys exercise of the same is in
good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the
law or a valid agreement, such exercise will be upheld.[38]
Clearly then, the right to close an establishment or undertaking
may be justified on grounds other than business losses but it
cannot be an unbridled prerogative to suit the whims of the
employer.
The ultimate test of the validity of closure or cessation of
establishment or undertaking is that it must be bona fide in
character.[39] And the burden of proving such falls upon the
employer.[40]
In the case at bar, Capitol failed to sufficiently prove its good
faith in closing the ISU.
From the letter of Dr. Clemente to Dr. Meris, it is gathered that
the abolition of the ISU was due to the almost extinct demand
for direct medical service by the private and semi-government
corporations in providing health care for their employees; and
that such extinct demand was brought about by the existing
trend of industrial companies allocating their health care
requirements to Health Maintenance Organizations (HMOs) or
thru a tripartite arrangement with medical insurance carriers
and designated hospitals.
The records of the case, however, fail to impress that there
was indeed extinct demand for the medical services rendered
by the ISU. The ISUs Annual Report for the fiscal years 1986
to 1991, submitted by Dr. Meris to Dr. Clemente, and
uncontroverted by Capitol, shows the following:
Fiscal Year No. of Industrial No of No. of Capitol
Patients Companies Employees
1986-1987 466 11 1445

1987-1988 580 17 1707
1988-1989 676 14 1888
1989-1990 571 16 2731
1990-1991 759 18 2320[41]
If there was extinct demand for the ISU medical services as
what Capitol and Dr. Clemente purport to convey, why the
number of client companies of the ISU increased from 11 to 18
from 1986 to 1991, as well as the number of patients from both
industrial corporations and Capitol employees, they did not
explain.
The Analysis of Income and Expenses adduced by Capitol
showing that the ISU incurred losses from July 1990 to
February 1992, to wit:
July 1, 1990 to July 1, 1991 to
June 30, 1991 February 29, 1992
INCOME P16, 772.00 P35, 236.00
TOTAL EXPENSES P225, 583.70 P169,244.34
NET LOSS P(208,811.70) P(134,008.34),[42]
was prepared by its internal auditor Vicenta Fernandez,[43] a
relative of Dr. Clemente, and not by an independent external
auditor, hence, not beyond doubt. It is the financial statements
audited by independent external auditors which constitute the
normal method of proof of the profit and loss performance of a
company.[44]
At all events, the claimed losses are contradicted by the
accounting records of Capitol itself which show that ISU had
increasing revenue from 1989 to 1991.
Year In-Patient Out-Patient Total Income
1989 P230,316.38 P 79,477.50 P309,793.88
1990 P278,438.10 P124,256.65 P402,694.75
1991 P305,126.35 P152,920.15 P458,046.50[45]
The foregoing disquisition notwithstanding, as reflected above,
the existence of business losses is not required to justify the
closure or cessation of establishment or undertaking as a
ground to terminate employment of employees. Even if the ISU
were not incurring losses, its abolition or closure could be
justified on other grounds like that proffered by Capitol extinct
demand. Capitol failed, however, to present sufficient and
convincing evidence to support such claim of extinct demand.
In fact, the employees of Capitol submitted a petition[46] dated
April 21, 1992 addressed to Dr. Clemente opposing the
abolition of the ISU.
The closure of ISU then surfaces to be contrary to the
provisions of the Labor Code on termination of employment.
The termination of the services of Dr. Meris not having been
premised on a just or authorized cause, he is entitled to either
reinstatement or separation pay if reinstatement is no longer
viable, and to backwages.
Reinstatement, however, is not feasible in case of a strained
employer-employee relationship or when the work or position
formerly held by the dismissed employee no longer exists, as
in the instant case.[47] Dr. Meris is thus entitled to payment of
separation pay at the rate of one (1) month salary for every
year of his employment, with a fraction of at least six (6)
months being considered as one(1) year,[48] and full
backwages from the time of his dismissal from April 30, 1992
until the expiration of his term as Chief of ISU or his mandatory
retirement, whichever comes first.
The award by the appellate court of moral damages,[49]
however, cannot be sustained, solely upon the premise that
the employer fired his employee without just cause or due
process. Additional facts must be pleaded and proven to
warrant the grant of moral damages under the Civil Code, such
as that the act of dismissal was attended by bad faith or fraud,
or was oppressive to labor, or done in a manner contrary to
morals, good customs, or public policy; and of course, that
social humiliation, wounded feelings, grave anxiety, etc.,
resulted therefrom.[50] Such circumstances, however, do not
obtain in the instant case. More specifically on bad faith, lack
of it is mirrored in Dr. Clementes offer to Dr. Meris to be a
consultant of Capitol, despite the abolition of the ISU.
There being no moral damages, the award of exemplary
damages does not lie.[51]
The award for attorneys fees, however, remains.[52]
WHEREFORE, the decision of the Court of Appeals dated
February 15, 2002 is hereby AFFIRMED with MODIFICATION.
As modified, judgment is hereby rendered ordering Capitol
Medical Center, Inc. to pay Dr. Cesar Meris separation pay at
the rate of One (1) Month salary for every year of his
employment, with a fraction of at least Six (6) Months being
considered as One (1) Year, full backwages from the time of
his dismissal from April 30, 1992 until the expiration of his term
as Chief of the ISU or his mandatory retirement, whichever
comes first; other benefits due him or their money equivalent;
and attorneys fees.
Costs against petitioners.
SO ORDERED.
B. Who has initial burden of proving existence of an
employer- employee relationship?
G.R. No. 192558 February 15, 2012
BITOY JAVIER (DANILO P. JAVIER), Petitioner,
vs. FLY ACE CORPORATION/FLORDELYN CASTILLO,
Respondents.
MENDOZA, J.:
3
This is a petition under Rule 45 of the Rules of Civil Procedure
assailing the March 18, 2010 Decision1 of the Court of
Appeals (CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP
No. 109975, which reversed the May 28, 2009 Decision3 of the
National Labor Relations Commission (NLRC) in the case
entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding that
petitioner Bitoy Javier (Javier) was illegally dismissed from
employment and ordering Fly Ace Corporation (Fly Ace) to pay
backwages and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for
underpayment of salaries and other labor standard benefits.
He alleged that he was an employee of Fly Ace since
September 2007, performing various tasks at the respondent’s
warehouse such as cleaning and arranging the canned items
before their delivery to certain locations, except in instances
when he would be ordered to accompany the company’s
delivery vehicles, as pahinante; that he reported for work from
Monday to Saturday from 7:00 o’clock in the morning to 5:00
o’clock in the afternoon; that during his employment, he was
not issued an identification card and payslips by the company;
that on May 6, 2008, he reported for work but he was no longer
allowed to enter the company premises by the security guard
upon the instruction of Ruben Ong (Mr. Ong), his superior;5
that after several minutes of begging to the guard to allow him
to enter, he saw Ong whom he approached and asked why he
was being barred from entering the premises; that Ong replied
by saying, "Tanungin mo anak mo;" 6 that he then went home
and discussed the matter with his family; that he discovered
that Ong had been courting his daughter Annalyn after the two
met at a fiesta celebration in Malabon City; that Annalyn tried
to talk to Ong and convince him to spare her father from
trouble but he refused to accede; that thereafter, Javier was
terminated from his employment without notice; and that he
was neither given the opportunity to refute the cause/s of his
dismissal from work.
To support his allegations, Javier presented an affidavit of one
Bengie Valenzuela who alleged that Javier was a stevedore or
pahinante of Fly Ace from September 2007 to January 2008.
The said affidavit was subscribed before the Labor Arbiter
(LA).7
For its part, Fly Ace averred that it was engaged in the
business of importation and sales of groceries. Sometime in
December 2007, Javier was contracted by its employee, Mr.
Ong, as extra helper on a pakyaw basis at an agreed rate of ₱
300.00 per trip, which was later increased to ₱ 325.00 in
January 2008. Mr. Ong contracted Javier roughly 5 to 6 times
only in a month whenever the vehicle of its contracted hauler,
Milmar Hauling Services, was not available. On April 30, 2008,
Fly Ace no longer needed the services of Javier. Denying that
he was their employee, Fly Ace insisted that there was no
illegal dismissal.8 Fly Ace submitted a copy of its agreement
with Milmar Hauling Services and copies of acknowledgment
receipts evidencing payment to Javier for his contracted
services bearing the words, "daily manpower (pakyaw/piece
rate pay)" and the latter’s signatures/initials.
Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for
lack of merit on the ground that Javier failed to present proof
that he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment
with the Respondent nor any document showing that he
received the benefits accorded to regular employees of the
Respondents. His contention that Respondent failed to give
him said ID and payslips implies that indeed he was not a
regular employee of Fly Ace considering that complainant was
a helper and that Respondent company has contracted a
regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in
the importation and sales of groceries. Since there is a regular
hauler to deliver its products, we give credence to
Respondents’ claim that complainant was contracted on
"pakiao" basis.
As to the claim for underpayment of salaries, the payroll
presented by the Respondents showing salaries of workers on
"pakiao" basis has evidentiary weight because although the
signature of the complainant appearing thereon are not
uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown
by the above described payrolls, Respondents are not liable
for salary differentials. 9
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the
LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed
to present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer-
employee relationship. "Payment by result x x x is a method of
compensation and does not define the essence of the relation.
It is a mere method of computing compensation, not a basis for
determining the existence or absence of an employer-
employee relationship.10 " The NLRC further averred that it
did not follow that a worker was a job contractor and not an
employee, just because the work he was doing was not directly
related to the employer’s trade or business or the work may be
considered as "extra" helper as in this case; and that the
relationship of an employer and an employee was determined
by law and the same would prevail whatever the parties may
call it. In this case, the NLRC held that substantial evidence
was sufficient basis for judgment on the existence of the
employer-employee relationship. Javier was a regular
employee of Fly Ace because there was reasonable
connection between the particular activity performed by the
employee (as a "pahinante") in relation to the usual business
or trade of the employer (importation, sales and delivery of
groceries). He may not be considered as an independent
contractor because he could not exercise any judgment in the
delivery of company products. He was only engaged as a
"helper."
Finding Javier to be a regular employee, the NLRC ruled that
he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, Fly Ace was found to
be liable for illegal dismissal of Javier who was likewise entitled
to backwages and separation pay in lieu of reinstatement. The
NLRC thus ordered:
WHEREFORE, premises considered, complainant’s appeal is
partially GRANTED. The assailed Decision of the labor arbiter
is VACATED and a new one is hereby entered holding
respondent FLY ACE CORPORATION guilty of illegal
dismissal and non-payment of 13th month pay. Consequently,
it is hereby ordered to pay complainant DANILO "Bitoy"
JAVIER the following:
1. Backwages -₱ 45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -₱ 59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.11
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that
Javier was indeed a former employee of Fly Ace and
reinstated the dismissal of Javier’s complaint as ordered by the
LA. The CA exercised its authority to make its own factual
determination anent the issue of the existence of an employer-
employee relationship between the parties. According to the
CA:
xxx
In an illegal dismissal case the onus probandi rests on the
employer to prove that its dismissal was for a valid cause.
However, before a case for illegal dismissal can prosper, an
employer-employee relationship must first be established. x x x
it is incumbent upon private respondent to prove the
employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by
substantial evidence, that he is an employee of petitioners, but
he failed to discharge his burden. The non-issuance of a
company-issued identification card to private respondent
supports petitioners’ contention that private respondent was
not its employee.12
The CA likewise added that Javier’s failure to present salary
vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was
not an employee of Fly Ace. Further, it found that Javier’s work
was not necessary and desirable to the business or trade of
the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver,
4
that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged by Javier
did not pass the "control test."
He contracted work outside the company premises; he was not
required to observe definite hours of work; he was not required
to report daily; and he was free to accept other work elsewhere
as there was no exclusivity of his contracted service to the
company, the same being co-terminous with the trip only.13
Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal
could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER WAS NOT A
REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.14
The petitioner contends that other than its bare allegations and
self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javier was engaged on a
pakyaw basis. Assuming that Javier was indeed hired on a
pakyaw basis, it does not preclude his regular employment
with the company. Even the acknowledgment receipts bearing
his signature and the confirming receipt of his salaries will not
show the true nature of his employment as they do not reflect
the necessary details of the commissioned task. Besides,
Javier’s tasks as pahinante are related, necessary and
desirable to the line of business by Fly Ace which is engaged
in the importation and sale of grocery items. "On days when
there were no scheduled deliveries, he worked in petitioners’
warehouse, arranging and cleaning the stored cans for delivery
to clients."15 More importantly, Javier was subject to the
control and supervision of the company, as he was made to
report to the office from Monday to Saturday, from 7:00 o’clock
in the morning until 5:00 o’clock in the afternoon. The list of
deliverable goods, together with the corresponding clients and
their respective purchases and addresses, would necessarily
have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards
working hours, delivery schedule and output, and his other
duties in the warehouse.16
The petitioner chiefly relied on Chavez v. NLRC,17 where the
Court ruled that payment to a worker on a per trip basis is not
significant because "this is merely a method of computing
compensation and not a basis for determining the existence of
employer-employee relationship." Javier likewise invokes the
rule that, "in controversies between a laborer and his master, x
x x doubts reasonably arising from the evidence should be

resolved in the former’s favour. The policy is reflected is no
less than the Constitution, Labor Code and Civil Code."18
Claiming to be an employee of Fly Ace, petitioner asserts that
he was illegally dismissed by the latter’s failure to observe
substantive and procedural due process. Since his dismissal
was not based on any of the causes recognized by law, and
was implemented without notice, Javier is entitled to
separation pay and backwages.
In its Comment,19 Fly Ace insists that there was no substantial
evidence to prove employer-employee relationship. Having a
service contract with Milmar Hauling Services for the purpose
of transporting and delivering company products to customers,
Fly Ace contracted Javier as an extra helper or pahinante on a
mere "per trip basis." Javier, who was actually a loiterer in the
area, only accompanied and assisted the company driver
when Milmar could not deliver or when the exigency of extra
deliveries arises for roughly five to six times a month. Before
making a delivery, Fly Ace would turn over to the driver and
Javier the delivery vehicle with its loaded company products.
With the vehicle and products in their custody, the driver and
Javier "would leave the company premises using their own
means, method, best judgment and discretion on how to
deliver, time to deliver, where and [when] to start, and manner
of delivering the products."20
Fly Ace dismisses Javier’s claims of employment as baseless
assertions. Aside from his bare allegations, he presented
nothing to substantiate his status as an employee. "It is a basic
rule of evidence that each party must prove his affirmative
allegation. If he claims a right granted by law, he must prove
his claim by competent evidence, relying on the strength of his
own evidence and not upon the weakness of his opponent."21
Invoking the case of Lopez v. Bodega City,22 Fly Ace insists
that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that
an employer-employee relationship be proved by substantial
evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for a
valid cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be
established.
Fly Ace points out that Javier merely offers factual assertions
that he was an employee of Fly Ace, "which are unfortunately
not supported by proof, documentary or otherwise."23 Javier
simply assumed that he was an employee of Fly Ace, absent
any competent or relevant evidence to support it. "He
performed his contracted work outside the premises of the
respondent; he was not even required to report to work at
regular hours; he was not made to register his time in and time
out every time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to other
employees for company violations; he was not issued a
company I.D.; he was not accorded the same benefits given to
other employees; he was not registered with the Social
Security System (SSS) as petitioner’s employee; and, he was
free to leave, accept and engage in other means of livelihood
as there is no exclusivity of his contracted services with the
petitioner, his services being co-terminus with the trip only. All
these lead to the conclusion that petitioner is not an employee
of the respondents."24
Moreover, Fly Ace claims that it had "no right to control the
result, means, manner and methods by which Javier would
perform his work or by which the same is to be
accomplished."25 In other words, Javier and the company
driver were given a free hand as to how they would perform
their contracted services and neither were they subjected to
definite hours or condition of work.
Fly Ace likewise claims that Javier’s function as a pahinante
was not directly related or necessary to its principal business
of importation and sales of groceries. Even without Javier, the
business could operate its usual course as it did not involve
the business of inland transportation. Lastly, the
acknowledgment receipts bearing Javier’s signature and words
"pakiao rate," referring to his earned salaries on a per trip
basis, have evidentiary weight that the LA correctly considered
in arriving at the conclusion that Javier was not an employee of
the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javier’s alleged illegal
dismissal is anchored on the existence of an employer-
employee relationship between him and Fly Ace. This is
essentially a question of fact. Generally, the Court does not
review errors that raise factual questions. However, when
there is conflict among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, "it is
proper, in the exercise of Our equity jurisdiction, to review and
re-evaluate the factual issues and to look into the records of
the case and re-examine the questioned findings."26 In
dealing with factual issues in labor cases, "substantial
evidence – that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a
conclusion – is sufficient."27
As the records bear out, the LA and the CA found Javier’s
claim of employment with Fly Ace as wanting and deficient.
The Court is constrained to agree. Although Section 10, Rule
VII of the New Rules of Procedure of the NLRC28 allows a
relaxation of the rules of procedure and evidence in labor
cases, this rule of liberality does not mean a complete
dispensation of proof. Labor officials are enjoined to use
reasonable means to ascertain the facts speedily and
objectively with little regard to technicalities or formalities but
nowhere in the rules are they provided a license to completely
discount evidence, or the lack of it. The quantum of proof
required, however, must still be satisfied. Hence, "when
confronted with conflicting versions on factual matters, it is for
them in the exercise of discretion to determine which party
deserves credence on the basis of evidence received, subject
only to the requirement that their decision must be supported
by substantial evidence."29 Accordingly, the petitioner needs
to show by substantial evidence that he was indeed an
employee of the company against which he claims illegal
dismissal.
5
Expectedly, opposing parties would stand poles apart and
proffer allegations as different as chalk and cheese. It is,
therefore, incumbent upon the Court to determine whether the
party on whom the burden to prove lies was able to hurdle the
same. "No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be
admitted.http://www.lawphil.net/judjuris/juri2009/may2009/gr_1
79652_2009.html - fnt31 Hence, while no particular form of
evidence is required, a finding that such relationship exists
must still rest on some substantial evidence. Moreover, the
substantiality of the evidence depends on its quantitative as
well as its qualitative aspects."30 Although substantial
evidence is not a function of quantity but rather of quality, the x
x x circumstances of the instant case demand that something
more should have been proffered. Had there been other proofs
of employment, such as x x x inclusion in petitioner’s payroll, or
a clear exercise of control, the Court would have affirmed the
finding of employer-employee relationship."31
In sum, the rule of thumb remains: the onus probandi falls on
petitioner to establish or substantiate such claim by the
requisite quantum of evidence.32 "Whoever claims entitlement
to the benefits provided by law should establish his or her right
thereto x x x."33 Sadly, Javier failed to adduce substantial
evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier
failed to establish his employment with Fly Ace. By way of
evidence on this point, all that Javier presented were his self-
serving statements purportedly showing his activities as an
employee of Fly Ace. Clearly, Javier failed to pass the
substantiality requirement to support his claim. Hence, the
Court sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed
stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery
items for delivery to clients, no other proof was submitted to
fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javier’s cause.
In said document, all Valenzuela attested to was that he would
frequently see Javier at the workplace where the latter was
also hired as stevedore.34 Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable
conclusion that his mere presence at the workplace falls short
in proving employment therein. The supporting affidavit could
have, to an extent, bolstered Javier’s claim of being tasked to
clean grocery items when there were no scheduled delivery
trips, but no information was offered in this subject simply
because the witness had no personal knowledge of Javier’s
employment status in the company. Verily, the Court cannot
accept Javier’s statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the
burden to pass the well-settled tests to determine the
existence of an employer-employee relationship, viz: (1) the
selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control
the employee’s conduct. Of these elements, the most
important criterion is whether the employer controls or has

reserved the right to control the employee not only as to the
result of the work but also as to the means and methods by
which the result is to be accomplished.35
In this case, Javier was not able to persuade the Court that the
above elements exist in his case.1avvphi1 He could not submit
competent proof that Fly Ace engaged his services as a
regular employee; that Fly Ace paid his wages as an
employee, or that Fly Ace could dictate what his conduct
should be while at work. In other words, Javier’s allegations did
not establish that his relationship with Fly Ace had the
attributes of an employer-employee relationship on the basis of
the above-mentioned four-fold test. Worse, Javier was not able
to refute Fly Ace’s assertion that it had an agreement with a
hauling company to undertake the delivery of its goods. It was
also baffling to realize that Javier did not dispute Fly Ace’s
denial of his services’ exclusivity to the company. In short, all
that Javier laid down were bare allegations without
corroborative proof.
Fly Ace does not dispute having contracted Javier and paid
him on a "per trip" rate as a stevedore, albeit on a pakyaw
basis. The Court cannot fail to note that Fly Ace presented
documentary proof that Javier was indeed paid on a pakyaw
basis per the acknowledgment receipts admitted as competent
evidence by the LA. Unfortunately for Javier, his mere denial of
the signatures affixed therein cannot automatically sway us to
ignore the documents because "forgery cannot be presumed
and must be proved by clear, positive and convincing evidence
and the burden of proof lies on the party alleging forgery."36
Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.
One final note. The Court’s decision does not contradict the
settled rule that "payment by the piece is just a method of
compensation and does not define the essence of the
relation."37 Payment on a piece-rate basis does not negate
regular employment. "The term ‘wage’ is broadly defined in
Article 97 of the Labor Code as remuneration or earnings,
capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece or commission basis.
Payment by the piece is just a method of compensation and
does not define the essence of the relations. Nor does the fact
that the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining
whether the relationship is that of employer and employee or
one of an independent contractor, each case must be
determined on its own facts and all the features of the
relationship are to be considered."38 Unfortunately for Javier,
the attendant facts and circumstances of the instant case do
not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its rights which
are entitled to respect and enforcement in the interest of
simple fair play. Out of its concern for the less privileged in life,
the Court has inclined, more often than not, toward the worker
and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and
doctrine.39
WHEREFORE, the petition is DENIED. The March 18, 2010
Decision of the Court of Appeals and its June 7, 2010
Resolution, in CA-G.R. SP No. 109975, are hereby
AFFIRMED.
SO ORDERED.
G.R. No. 192998 April 2, 2014
BERNARD A. TENAZAS, JAIME M. FRANCISCO and
ISIDRO G. ENDRACA, Petitioners,
vs. R. VILLEGAS TAXI TRANSPORT and ROMUALDO
VILLEGAS, Respondents.
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45 of
the Rules of Court, assailing the Decision2 dated March 11,
2010 and Resolution3 dated June 28, 2010 of the Court of
Appeals (CA) in CA-G.R. SP No. 111150, which affirmed with
modification the Decision4 dated June 23, 2009 of the National
Labor Relations Commission (NLRC) in NLRC LAC Case No.
07-002648-08.
The Antecedent Facts
On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M.
Francisco (Francisco) filed a complaint for illegal dismissal
against R. Villegas Taxi Transport and/or Romualdo Villegas
(Romualdo) and Andy Villegas (Andy) (respondents). At that
time, a similar case had already been filed by Isidro G.
Endraca (Endraca) against the same respondents. The two (2)
cases were subsequently consolidated.5
In their position paper,6 Tenazas, Francisco and Endraca
(petitioners) alleged that they were hired and dismissed by the
respondents on the following dates:
Name Date of Hiring Date of Dismissal Salary
Bernard A. Tenazas 10/1997 07/03/07 Boundary System
Jaime M. Francisco 04/10/04 06/04/07 Boundary System
Isidro G. Endraca 04/2000 03/06/06 Boundary System7
Relaying the circumstances of his dismissal, Tenazas alleged
that on July 1, 2007, the taxi unit assigned to him was
sideswiped by another vehicle, causing a dent on the left
fender near the driver seat. The cost of repair for the damage
was estimated at ₱500.00. Upon reporting the incident to the
company, he was scolded by respondents Romualdo and
Andy and was told to leave the garage for he is already fired.
He was even threatened with physical harm should he ever be
seen in the company’s premises again. Despite the warning,
Tenazas reported for work on the following day but was told
that he can no longer drive any of the company’s units as he is
already fired.8
Francisco, on the other hand, averred that his dismissal was
brought about by the company’s unfounded suspicion that he
was organizing a labor union. He was instantaneously
terminated, without the benefit of procedural due process, on
June 4, 2007.9
6
Endraca, for his part, alleged that his dismissal was instigated
by an occasion when he fell short of the required boundary for
his taxi unit. He related that before he was dismissed, he
brought his taxi unit to an auto shop for an urgent repair. He
was charged the amount of ₱700.00 for the repair services and
the replacement parts. As a result, he was not able to meet his
boundary for the day. Upon returning to the company garage
and informing the management of the incident, his driver’s
license was confiscated and was told to settle the deficiency in
his boundary first before his license will be returned to him. He
was no longer allowed to drive a taxi unit despite his persistent
pleas.10
For their part, the respondents admitted that Tenazas and
Endraca were employees of the company, the former being a
regular driver and the latter a spare driver. The respondents,
however, denied that Francisco was an employee of the
company or that he was able to drive one of the company’s
units at any point in time.11
The respondents further alleged that Tenazas was never
terminated by the company. They claimed that on July 3, 2007,
Tenazas went to the company garage to get his taxi unit but
was informed that it is due for overhaul because of some
mechanical defects reported by the other driver who takes
turns with him in using the same. He was thus advised to wait
for further notice from the company if his unit has already been
fixed. On July 8, 2007, however, upon being informed that his
unit is ready for release, Tenazas failed to report back to work
for no apparent reason.12
As regards Endraca, the respondents alleged that they hired
him as a spare driver in February 2001. They allow him to
drive a taxi unit whenever their regular driver will not be able to
report for work. In July 2003, however, Endraca stopped
reporting for work without informing the company of his reason.
Subsequently, the respondents learned that a complaint for
illegal dismissal was filed by Endraca against them. They
strongly maintained, however, that they could never have
terminated Endraca in March 2006 since he already stopped
reporting for work as early as July 2003. Even then, they
expressed willingness to accommodate Endraca should he
wish to work as a spare driver for the company again since he
was never really dismissed from employment anyway.13
On May 29, 2008, the petitioners, by registered mail, filed a
Motion to Admit Additional Evidence.14 They alleged that after
diligent efforts, they were able to discover new pieces of
evidence that will substantiate the allegations in their position
paper. Attached with the motion are the following: (a) Joint
Affidavit of the petitioners;15 (2) Affidavit of Good Faith of
Aloney Rivera, a co-driver;16 (3) pictures of the petitioners
wearing company shirts;17 and (4) Tenazas’
Certification/Record of Social Security System (SSS)
contributions.18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a
Decision,19 which pertinently states, thus:

In the case of complainant Jaime Francisco, respondents
categorically denied the existence of an employer-employee
relationship. In this situation, the burden of proof shifts to the
complainant to prove the existence of a regular employment.
Complainant Francisco failed to present evidence of regular
employment available to all regular employees, such as an
employment contract, company ID, SSS, withholding tax
certificates, SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim
that he was only an extra driver who stopped reporting to
queue for available taxi units which he could drive. In fact,
respondents offered him in their Position Paper on record,
immediate reinstatement as extra taxi driver which offer he
refused.
In case of Bernard Tenazas, he was told to wait while his taxi
was under repair but he did not report for work after the taxi
was repaired. Respondents[,] in their Position Paper, on record
likewise, offered him immediate reinstatement, which offer he
refused.
We must bear in mind that the complaint herein is one of
actual dismissal. But there was no formal investigations, no
show cause memos, suspension memos or termination
memos were never issued. Otherwise stated, there is no proof
of overt act of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal
dismissal in the case at bar.
The situations contemplated by law for entitlement to
separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated
complaints are hereby dismissed for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to
the NLRC. Subsequently, on June 23, 2009, the NLRC
rendered a Decision,21 reversing the appealed decision of the
LA, holding that the additional pieces of evidence belatedly
submitted by the petitioners sufficed to establish the existence
of employer-employee relationship and their illegal dismissal. It
held, thus:
In the challenged decision, the Labor Arbiter found that it
cannot be said that the complainants were illegally dismissed,
there being no showing, in the first place, that the respondent
[sic] terminated their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of
actual dismissal. But there were no formal investigations, no
show cause memos, suspension memos or termination
memos were never issued. Otherwise stated, there is no proof
of overt act of dismissal committed by herein respondents.
We are therefore constrained to rule that there was no illegal
dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally
dismissed from employment.
It is possible that the complainants’ Motion to Admit Additional
Evidence did not reach the Labor Arbiter’s attention because
he had drafted the challenged decision even before they
submitted it, and thereafter, his staff attended only to clerical
matters, and failed to bring the motion in question to his
attention. It is now up to this Commission to consider the
complainants’ additional evidence. Anyway, if this Commission
must consider evidence submitted for the first time on appeal
(Andaya vs. NLRC, G.R. No. 157371, July 15, 2005), much
more so must it consider evidence that was simply overlooked
by the Labor Arbiter.
Among the additional pieces of evidence submitted by the
complainants are the following: (1) joint affidavit (records, p.
51-52) of the three (3) complainants; (2) affidavit (records, p.
53) of Aloney Rivera y Aldo; and (3) three (3) pictures (records,
p. 54) referred to by the complainant in their joint affidavit
showing them wearing t-shirts bearing the name and logo of
the respondent’s company.
xxxx
WHEREFORE, the decision appealed from is hereby
REVERSED. Respondent Rom[u]aldo Villegas doing business
under the name and style Villegas Taxi Transport is hereby
ordered to pay the complainants the following (1) full
backwages from the date of their dismissal (July 3, 2007 for
Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for
Endraca[)] up to the date of the finality of this decision[;] (2)
separation pay equivalent to one month for every year of
service; and (3) attorney’s fees equivalent to ten percent (10%)
of the total judgment awards.
SO ORDERED.22
On July 24, 2009, the respondents filed a motion for
reconsideration but the NLRC denied the same in its
Resolution23 dated September 23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with
the CA. On March 11, 2010, the CA rendered a Decision,24
affirming with modification the Decision dated June 23, 2009 of
the NLRC. The CA agreed with the NLRC’s finding that
Tenazas and Endraca were employees of the company, but
ruled otherwise in the case of Francisco for failing to establish
his relationship with the company. It also deleted the award of
separation pay and ordered for reinstatement of Tenazas and
Endraca. The pertinent portions of the decision read as
follows:
At the outset, We declare that respondent Francisco failed to
prove that an employer-employee relationship exists between
him and R. Transport. If there is no employer-employee
relationship in the first place, the duty of R. Transport to
adhere to the labor standards provisions of the Labor Code
with respect to Francisco is questionable.
7
xxxx
Although substantial evidence is not a function of quantity but
rather of quality, the peculiar environmental circumstances of
the instant case demand that something more should have
been proffered. Had there been other proofs of employment,
such as Francisco’s inclusion in R.R.
Transport’s payroll, this Court would have affirmed the finding
of employer-employee relationship.1âwphi1 The NLRC,
therefore, committed grievous error in ordering R. Transport to
answer for Francisco’s claims.
We now tackle R. Transport’s petition with respect to Tenazas
and Endraca, who are both admitted to be R. Transport’s
employees. In its petition, R. Transport puts forth the theory
that it did not terminate the services of respondents but that
the latter deliberately abandoned their work. We cannot
subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed
soon after the alleged dates of dismissal, it cannot be inferred
that respondents Tenazas and Endraca intended to abandon
their employment. The complainants for dismissal are, in
themselves, pleas for the continuance of employment. They
are incompatible with the allegation of abandonment. x x x.
For R. Transport’s failure to discharge the burden of proving
that the dismissal of respondents Tenazas and Endraca was
for a just cause, We are constrained to uphold the NLRC’s
conclusion that their dismissal was not justified and that they
are entitled to back wages. Because they were illegally
dismissed, private respondents Tenazas and Endraca are
entitled to reinstatement and back wages x x x.
xxxx
However, R. Transport is correct in its contention that
separation pay should not be awarded because reinstatement
is still possible and has been offered. It is well[-]settled that
separation pay is granted only in instances where
reinstatement is no longer feasible or appropriate, which is not
the case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations
Commission dated 23 June 2009, in NLRC LAC Case No. 07-
002648-08, and its Resolution dated 23 September 2009
denying reconsideration thereof are AFFIRMED with
MODIFICATION in that the award of Jaime Francisco’s claims
is DELETED. The separation pay granted in favor of Bernard
Tenazas and Isidro Endraca is, likewise, DELETED and their
reinstatement is ordered instead.
SO ORDERED.25 (Citations omitted)

On March 19, 2010, the petitioners filed a motion for
reconsideration but the same was denied by the CA in its
Resolution26 dated June 28, 2010.
Undeterred, the petitioners filed the instant petition for review
on certiorari before this Court on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination
of the existence of employer-employee relationship and
whether there was an illegal dismissal. Remarkably, the LA,
NLRC and the CA had varying assessment on the matters at
hand. The LA believed that, with the admission of the
respondents, there is no longer any question regarding the
status of both Tenazas and Endraca being employees of the
company. However, he ruled that the same conclusion does
not hold with respect to Francisco whom the respondents
denied to have ever employed or known. With the
respondents’ denial, the burden of proof shifts to Francisco to
establish his regular employment. Unfortunately, the LA found
that Francisco failed to present sufficient evidence to prove
regular employment such as company ID, SSS membership,
withholding tax certificates or similar articles. Thus, he was not
considered an employee of the company. Even then, the LA
held that Tenazas and Endraca could not have been illegally
dismissed since there was no overt act of dismissal committed
by the respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled
that the petitioners were all employees of the company. The
NLRC premised its conclusion on the additional pieces of
evidence belatedly submitted by the petitioners, which it
supposed, have been overlooked by the LA owing to the time
when it was received by the said office. It opined that the said
pieces of evidence are sufficient to establish the circumstances
of their illegal termination. In particular, it noted that in the
affidavit of the petitioners, there were allegations about the
company’s practice of not issuing employment records and this
was not rebutted by the respondents. It underscored that in a
situation where doubt exists between evidence presented by
the employer and the employee, the scales of justice must be
tilted in favor of the employee. It awarded the petitioners with:
(1) full backwages from the date of their dismissal up to the
finality of the decision; (2) separation pay equivalent to one
month of salary for every year of service; and (3) attorney’s
fees.
On petition for certiorari, the CA affirmed with modification the
decision of the NLRC, holding that there was indeed an illegal
dismissal on the part of Tenazas and Endraca but not with
respect to Francisco who failed to present substantial
evidence, proving that he was an employee of the
respondents. The CA likewise dismissed the respondents’
claim that Tenazas and Endraca abandoned their work,
asseverating that immediate filing of a complaint for illegal
dismissal and persistent pleas for continuance of employment
are incompatible with abandonment. It also deleted the
NLRC’s award of separation pay and instead ordered that
Tenazas and Endraca be reinstated.28
"Well-settled is the rule that the jurisdiction of this Court in a
petition for review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of law, not of
fact, unless the factual findings complained of are completely
devoid of support from the evidence on record, or the assailed
judgment is based on a gross misapprehension of facts."29
The Court finds that none of the mentioned circumstances is
present in this case.
In reviewing the decision of the NLRC, the CA found that no
substantial evidence was presented to support the conclusion
that Francisco was an employee of the respondents and
accordingly modified the NLRC decision. It stressed that with
the respondents’ denial of employer-employee relationship, it
behooved Francisco to present substantial evidence to prove
that he is an employee before any question on the legality of
his supposed dismissal becomes appropriate for discussion.
Francisco, however, did not offer evidence to substantiate his
claim of employment with the respondents. Short of the
required quantum of proof, the CA correctly ruled that the
NLRC’s finding of illegal dismissal and the monetary awards
which necessarily follow such ruling lacked factual and legal
basis and must therefore be deleted.
The action of the CA finds support in Anonas Construction and
Industrial Supply Corp., et al. v. NLRC, et al.,30 where the
Court reiterated:
[J]udicial review of decisions of the NLRC via petition for
certiorari under Rule 65, as a general rule, is confined only to
issues of lack or excess of jurisdiction and grave abuse of
discretion on the part of the NLRC. The CA does not assess
and weigh the sufficiency of evidence upon which the LA and
the NLRC based their conclusions. The issue is limited to the
determination of whether or not the NLRC acted without or in
excess of its jurisdiction, or with grave abuse of discretion in
rendering the resolution, except if the findings of the NLRC are
not supported by substantial evidence.31 (Citation omitted and
emphasis ours)
It is an oft-repeated rule that in labor cases, as in other
administrative and quasi-judicial proceedings, "the quantum of
proof necessary is substantial evidence, or such amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion."32 "[T]he burden of proof
rests upon the party who asserts the affirmative of an issue."33
Corollarily, as Francisco was claiming to be an employee of
the respondents, it is incumbent upon him to proffer evidence
to prove the existence of said relationship.
"[I]n determining the presence or absence of an employer-
employee relationship, the Court has consistently looked for
the following incidents, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer’s power to control
the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is
the most important element."34
There is no hard and fast rule designed to establish the
aforesaid elements. Any competent and relevant evidence to
8
prove the relationship may be admitted. Identification cards,
cash vouchers, social security registration, appointment letters
or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status.35
In this case, however, Francisco failed to present any proof
substantial enough to establish his relationship with the
respondents. He failed to present documentary evidence like
attendance logbook, payroll, SSS record or any personnel file
that could somehow depict his status as an employee. Anent
his claim that he was not issued with employment records, he
could have, at least, produced his social security records which
state his contributions, name and address of his employer, as
his co-petitioner Tenazas did. He could have also presented
testimonial evidence showing the respondents’ exercise of
control over the means and methods by which he undertakes
his work. This is imperative in light of the respondents’ denial
of his employment and the claim of another taxi operator,
Emmanuel Villegas (Emmanuel), that he was his employer.
Specifically, in his Affidavit,36 Emmanuel alleged that
Francisco was employed as a spare driver in his taxi garage
from January 2006 to December 2006, a fact that the latter
failed to deny or question in any of the pleadings attached to
the records of this case. The utter lack of evidence is fatal to
Francisco’s case especially in cases like his present
predicament when the law has been very lenient in not
requiring any particular form of evidence or manner of proving
the presence of employer-employee relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court
emphasized, thus:
No particular form of evidence is required to prove the
existence of an employer-employee relationship. Any
competent and relevant evidence to prove the relationship may
be admitted. For, if only documentary evidence would be
required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no
employer would wish to come out with any trace of the illegality
he has authored considering that it should take much weightier
proof to invalidate a written instrument.38
Here, Francisco simply relied on his allegation that he was an
employee of the company without any other evidence
supporting his claim. Unfortunately for him, a mere allegation
in the position paper is not tantamount to evidence.39 Bereft of
any evidence, the CA correctly ruled that Francisco could not
be considered an employee of the respondents.
The CA’s order of reinstatement of Tenazas and Endraca,
instead of the payment of separation pay, is also well in
accordance with prevailing jurisprudence. In Macasero v.
Southern Industrial Gases Philippines,40 the Court reiterated,
thus:
[A]n illegally dismissed employee is entitled to two reliefs:
backwages and reinstatement.1âwphi1 The two reliefs
provided are separate and distinct. In instances where
reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation
pay is granted. In effect, an illegally dismissed employee is

entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal,
then, are reinstatement without loss of seniority rights, and
payment of backwages computed from the time compensation
was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of
separation pay is in addition to payment of backwages.41
(Emphasis supplied)
Clearly, it is only when reinstatement is no longer feasible that
the payment of separation pay is ordered in lieu thereof. For
instance, if reinstatement would only exacerbate the tension
and strained relations between the parties, or where the
relationship between the employer and the employee has been
unduly strained by reason of their irreconcilable differences, it
would be more prudent to order payment of separation pay
instead of reinstatement.42
This doctrine of strained relations, however, should not be
used recklessly or applied loosely43 nor be based on
impression alone. "It bears to stress that reinstatement is the
rule and, for the exception of strained relations to apply, it
should be proved that it is likely that if reinstated, an
atmosphere of antipathy and antagonism would be generated
as to adversely affect the efficiency and productivity of the
employee concerned."44
Moreover, the existence of strained relations, it must be
emphasized, is a question of fact. In Golden Ace Builders v.
Talde,45 the Court underscored:
Strained relations must be demonstrated as a fact, however, to
be adequately supported by evidence—substantial evidence to
show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of
the judicial controversy.46 (Citations omitted and emphasis
ours)
After a perusal of the NLRC decision, this Court failed to find
the factual basis of the award of separation pay to the
petitioners. The NLRC decision did not state the facts which
demonstrate that reinstatement is no longer a feasible option
that could have justified the alternative relief of granting
separation pay instead.
The petitioners themselves likewise overlooked to allege
circumstances which may have rendered their reinstatement
unlikely or unwise and even prayed for reinstatement
alongside the payment of separation pay in their position
paper.47 A bare claim of strained relations by reason of
termination is insufficient to warrant the granting of separation
pay. Likewise, the filing of the complaint by the petitioners
does not necessarily translate to strained relations between
the parties. As a rule, no strained relations should arise from a
valid and legal act asserting one’s right.48 Although litigation
may also engender a certain degree of hostility, the
understandable strain in the parties’ relation would not
necessarily rule out reinstatement which would, otherwise,
become the rule rather the exception in illegal dismissal
cases.49 Thus, it was a prudent call for the CA to delete the
award of separation pay and order for reinstatement instead, in
accordance with the general rule stated in Article 27950 of the
Labor Code.
Finally, the Court finds the computation of the petitioners'
backwages at the rate of ₱800.00 daily reasonable and just
under the circumstances. The said rate is consistent with the
ruling of this Court in Hyatt Taxi Services, Inc. v. Catinoy,51
which dealt with the same matter.
WHEREFORE, in view of the foregoing disquisition, the
petition for review on certiorari is DENIED. The Decision dated
March 11, 2010 and Resolution dated June 28, 2010 of the
Court of Appeals in CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.
2.3 Only substantial evidence is required in administrative
proceedings
G.R. No. 173489 February 25, 2013
ALILEM CREDIT COOPERATIVE, INC., now known as
ALILEM MULTIPURPOSE COOPERATIVE, INC., Petitioner,
vs. SALVADOR M. BANDIOLA, JR., Respondent.
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court filed by petitioner Alilem Credit Cooperative,
Inc. against respondent Salvador M. Bandiola, Jr. assailing the
Court of Appeals (CA) Decision1 dated January 16, 2006 and
Resolution2 dated July 5, 2006 in CAG. R. SP No. 64554.
The case stemmed from the following facts:
Respondent was employed by petitioner as bookkeeper.
Petitioner's Board of Directors (the Board) received a letter
from a certain Napoleon Gao-ay (Napoleon) reporting the
alleged immoral coaduct and unbecoming behavior of
respondent by having an illicit relationship with Napoleon’s
sister, Thelma G. Palma (Thelma). This prompted the Board to
conduct a preliminary investigation.3
During the preliminary investigation, the Board received the
following evidence of respondent’s alleged extramarital affair:
1. Melanie Gao-ay’s (Melanie) sworn statement declaring that
sometime in December 1996, respondent slept on the same
bed with Thelma in a boarding house in San Fernando, La
Union where she (Melanie) and Thelma resided. She
personally witnessed the intimacy of respondent and Thelma
when they engaged in lovemaking as they slept in one room
and openly displayed their affection for each other.4
2. Rosita Tegon’s (Rosita) sworn statement that on May 23,
1997, she saw Thelma talk to respondent in petitioner’s office
asking him to accompany her in San Fernando, La Union.5
3. Emma Gao-ay Lubrin’s (Emma, Thelma’s sister) interview
wherein she admitted that she and her family confronted
Thelma about the alleged extramarital affair which Thelma
allegedly admitted.6
9
4. Napoleon’s interview with the Board wherein he claimed that
their family tried to convince Thelma to end her extramarital
affair with respondent but instead of complying, she in fact
lived together with respondent.7
The Board decided to form an Ad Hoc Committee to
investigate the charges against respondent yielding the
following additional evidence:
1. Agustina Boteras’ (Agustina) sworn statement that she
witnessed a confrontation between Thelma and her sister in
the latter’s residence concerning the alleged extramarital affair.
At that time, respondent’s wife was allegedly present who in
fact pleaded Thelma to end her relationship with respondent
but she supposedly said "No way!"8
2. Milagros Villacorte’s sworn statement that while she was at
the Bethany Hospital in San Fernando, La Union where her
husband was confined, respondent approached her and asked
her to look for Thelma who was then having her class. When
he finally found her, respondent and Thelma met and talked in
the hospital premises.9
3. Julienne Marie L. Dalangey’s certification that on August 9
to 10, 1996, respondent attended a seminar on Internal Control
and Systems Design I at the Northern Luzon Federation of
Cooperatives and Development Center (NORLU) Pension
House in Baguio City, together with a lady companion whom
he introduced as his wife. Apparently, the lady was not his wife
because at that time, his wife reported for work in the
Municipal Hall of Alilem.10
Respondent, on the other hand, denied the accusation against
him. He, instead, claimed that the accusation was a result of
the insecurity felt by some members of the cooperative and of
the Board because of his growing popularity owing to his
exemplary record as an employee.11 Thelma executed an
affidavit likewise denying the allegations of extra-marital
affair.12
Meanwhile, on June 7, 1997, the Board received a petition
from about fifty members of the cooperative asking the relief of
respondent due to his illicit affair with Thelma.13
In its Summary Investigation Report, the Ad Hoc Committee
concluded that respondent was involved in an extra-marital
affair with Thelma. On July 10, 1997, the Chairman of the
Board sent a letter14 to respondent informing him of the
existence of a prima facie case against him for "illicit marital
affair, an act that brings discredit to the cooperative
organization and a cause for termination per AMPC (Alilem
Multi-Purpose Cooperative) Personnel Policy. Respondent was
directed to appear and be present at the AMPC office for a
hearing. He was likewise advised of his right to be assisted by
counsel.
On the day of the hearing, respondent requested15 for
postponement on the ground that his lawyer was not available.
The request was, however, denied and the hearing proceeded
as scheduled.

In a Memorandum16 dated July 16, 1997, respondent was
informed of Board Resolution No. 05, series of 199717
embodying the Board’s decision to terminate his services as
bookkeeper of petitioner, effective July 31, 1997, without any
compensation or benefit except the unpaid balance of his
regular salary for services actually rendered.18
Aggrieved, respondent filed a Complaint for Illegal Dismissal
against petitioner before the Regional Arbitration Branch of the
National Labor Relations Commission (NLRC).19
On April 30, 1998, the Labor Arbiter (LA) dismissed20
respondent’s complaint for lack of merit. The LA concluded
that respondent had been or might still be carrying on an affair
with a married woman. The LA found it unforgiving in the case
of a married employee who sleeps with or has illicit relations
with another married person for in such case, the employee
sullies not only the reputation of his spouse and his family but
the reputation as well of the spouse of his paramour and the
latter’s family.21 As opposed to respondent’s claim that the
accusation is a mere fabrication of some of the directors or
cooperative members who were allegedly envious of his
growing popularity, the LA gave more credence to the
testimonies of petitioner’s witnesses who were relatives of
Thelma and who had no motive to falsely testify because their
family reputation was likewise at a risk of being tarnished.22
The LA, thus, found respondent to have been validly dismissed
from employment for violation of the cooperative’s Personnel
Policy, specifically "the commission of acts that bring discredit
to the cooperative organization, especially, but not limited to
conviction of any crime, illicit marital affairs, scandalous acts
inimical to established and accepted social mores." The LA
also found no violation of respondent’s right to due process as
he was given ample opportunity to defend himself from the
accusation against him.23
On appeal, the NLRC set aside24 the LA decision and
rendered a judgment disposed in this wise:
WHEREFORE, the appealed Decision of the Executive Labor
Arbiter is SET ASIDE. Judgment is hereby rendered:
1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI)
also known as Alilem Multi-Purpose Cooperative (AMPC) guilty
of illegal dismissal for the reasons above-discussed;
2. directing the said respondent to pay complainant Salvador
Bandiola, Jr. full backwages computed from the time of (sic)
his wages were withheld until finality of this judgment;
3. directing, on account of strained relationship between the
parties, the above-named respondent to pay complainant, in
lieu of reinstatement, separation pay computed at one (1)
month pay for every year of service, a fraction of six (6)
months to be computed as one (1) whole year; [and]
4. directing respondent to pay complainant ten (10%) percent
attorney’s fees based on the total monetary award.
SO ORDERED.25
The NLRC found petitioner’s Personnel Policy to be of
questionable existence and validity because it was
unnumbered.26 It held that even assuming that respondent
had an extra-marital affair with a married woman, the latter is
not his fellow worker in petitioner’s business establishment.27
It, thus, concluded that respondent’s dismissal was not
founded on any of the just causes for termination of
employment under Article 282 of the Labor Code, as
amended.28 It, likewise, declared that respondent was not
afforded his right to his counsel of choice as his request for
postponement was not allowed.29 Therefore, the NLRC
declared respondent’s dismissal from employment illegal,
entitling him to the payment of backwages, separation pay,
and attorney’s fees.30
Petitioner elevated the matter to the CA, but it failed to obtain a
favorable decision. The CA found respondent’s dismissal being
founded on the serious misconduct he allegedly committed by
carrying an illicit relationship with a married woman.31 While
considering said act a serious misconduct, it refused to
consider it sufficient to justify respondent’s dismissal, because
it was not done in the performance of his duties as would make
him unfit to continue working for petitioner.32 Petitioner’s
motion for reconsideration was likewise denied in the assailed
July 5, 2006 resolution.
Unsatisfied, petitioner now comes before the Court in this
petition for review on certiorari insisting on the validity of
respondent’s dismissal from employment.
We find merit in the petition.
It is undisputed that respondent was dismissed from
employment for engaging in extramarital affairs, a ground for
termination of employment stated in petitioner’s Personnel
Policy. This basis of termination was made known to
respondent as early as the first communication made by
petitioner. In its June 20, 1997 letter, petitioner directed
respondent to explain in writing or personal confrontation why
he should not be terminated for violation of Section 4.1.4 of the
Personnel Policy.33 Respondent merely denied the accusation
against him34 and did not question the basis of such
termination. When the LA was called upon to decide the illegal
dismissal case, it ruled in favor of petitioner and upheld the
basis of such dismissal which is the cited Personnel
Policy.1âwphi1 The NLRC, however, refused to recognize the
existence and validity of petitioner’s Personnel Policy on which
the ground for termination was embodied.35
The existence of the Personnel Policy containing provisions on
the grounds for termination of employees was not questioned
by respondent. In his position paper, respondent only assailed
the effectivity of the policy, as for him as it was amended on
the same date as the letter-complaints against him. In other
words, he claimed that the policy was amended in order to
include therein the ground for his termination to make sure that
he is removed from his position.36
We do not subscribe to such an argument.
A comparison of petitioner’s old and new Personnel Policies
attached by respondent himself to his Position Paper shows
10
that under the old policy, one of the grounds for termination of
an employee is "commission of acts or commission (sic) of
duties that bring discredit to the organization,37" while under
the new policy, one of the grounds is the "commission of acts
that brings (sic) discredit to the cooperative organization,
especially, but not limited to, conviction of any crime, illicit
marital affairs, scandalous acts inimical to established and
accepted social mores."38 Contrary to respondent’s claim, with
the amendment of the Personnel Policy, petitioner did not
create a new ground for the termination of employment to
make sure that respondent is removed from his position. The
quoted ground under the old policy is similar to that provided
for in the new policy. The enumeration containing the specific
act of "illicit marital affairs" is not an additional ground, but an
example of an act that brings discredit to the cooperative. It is
merely an interpretation of what petitioner considers as such. It
is, thus, clear from the foregoing that engaging in extra-marital
affairs is a ground for termination of employment not only
under the new but even under the old Personnel Policy of
petitioner. The effectivity of the policy as to respondent cannot,
therefore, be questioned.
To be sure, an employer is free to regulate all aspects of
employment.39 It may make reasonable rules and regulations
for the government of its employees which become part of the
contract of employment provided they are made known to the
employee.40 In the event of a violation, an employee may be
validly terminated from employment on the ground that an
employer cannot rationally be expected to retain the
employment of a person whose lack of morals, respect and
loyalty to his employer, regard for his employer’s rules and
application of the dignity and responsibility, has so plainly and
completely been bared.41
Applying now the above-discussed ground for termination, we
now determine whether respondent was properly dismissed
from employment. In other words, did petitioner adequately
prove that respondent indeed engaged in extra-marital affairs,
an act which petitioner considers as would bring discredit to
the cooperative?
We answer in the affirmative.
The employer’s evidence consists of sworn statements of
either relatives or friends of Thelma and respondent. They
either had direct personal knowledge of the illicit relationship or
revealed circumstances indicating the existence of such
relationship. As aptly observed by the LA:
x x x Moreover, the credibility of the persons who bore witness
against him can hardly be questioned because some of these
persons are relatives or friends of either [respondent] or his
lover. In particular, it is hard to see how Napoleon Gao-ay, the
brother of his lover, Thelma, could have resorted to a lie just to
destroy him when the same scandal could also result in
tarnishing the reputation of his own family. The motive of
Napoleon in bringing the matter to the attention of the Board of
Directors, after all, was based on ethical grounds – he wanted
a stop to the affair because it was a disgrace to the
community.

There is also no reason to doubt the statement of Melanie
Gao-ay, the wife of Napoleon, who witnessed the
embarrassing "encounter", to borrow the term she used,
between [respondent] and Thelma in her own boarding
house.42
While respondent’s act of engaging in extra--marital affairs
may be considered personal to him and does not directly affect
the performance of his assigned task as bookkeeper, aside
from the fact that the act was specifically provided for by
petitioner’s Personnel Policy as one of the grounds for
termination of employment, said act raised concerns to
petitioner as the Board received numerous complaints and
petitions from the cooperative members themselves asking for
the removal of respondent because of his immoral conduct.43
The next question is whether procedural due process was
observed in the termination of respondent’s services. "Before
the services of an employee can be validly terminated, the
employer must furnish him two written notices: (a) a written
notice served on the employee specifying the ground or
grounds for termination, and giving the employee reasonable
opportunity to explain his side; and (b) a written notice of
termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been
established to justify his termination."44 The employer must
inform the employee of the charges against him and to hear
his defenses. A full adversarial proceeding is not necessary as
the parties may be heard through pleadings, written
explanations, position papers, memorandum or oral
argument.45
In this case, respondent was adequately afforded the
opportunity to defend himself and explain the accusation
against him. Upon receipt of the complaint, petitioner
conducted a preliminary investigation and even created an Ad
Hoc Committee to investigate the matter. Respondent was
directed to explain either in writing or by a personal
confrontation with the Board why he should not be terminated
for engaging in illicit affair.46 Not only did petitioner give him
the opportunity but respondent in fact informed petitioner that
he opted to present his side orally47 and did so as promised
when he specifically denied such allegations before the AdHoc
Committee.48 Moreover, respondent was also allowed to
peruse the investigation report prepared by the Ad Hoc
Committee and was advised that he was entitled to assistance
of counsel.49 Afterwhich, hearing was conducted. It was only
after thorough investigation and proper notice and hearing to
respondent that petitioner decided whether to dismiss the
former or not. The decision to terminate respondent from
employment was embodied in Board Resolution No. 05, series
of 1997 a copy of which was furnished respondent.50 With this
resolution, respondent was adequately notified of petitioner’s
decision to remove him from his position. Respondent cannot
now claim that his right to due process was infringed upon.
WHEREFORE, premises considered, the petition is hereby
GRANTED. The Court of Appeals Decision dated January 16,
2006 and Resolution dated July 5, 2006 in CA-G.R. SP No.
64554, are SET ASIDE. The Labor Arbiter's Decision dated
April 30, 1998 in NLRC Case No. RAB-1-08-1144-97 (IS)
dismissing respondent Salvador M. Bandiola, Jr.'s complaint
against petitioner Alilem Credit Cooperative, Inc.,
REINSTATED.
SO ORDERED.
2.4 In case of doubt or ambiguity, liberal interpretation of
law in favor of workers
CHERRY J. PRICE, STEPHANIE G. DOMINGO AND LOLITA
ARBILERA, Petitioners,
- versus - INNODATA PHILS. INC.,/ INNODATA
CORPORATION, LEO RABANG AND JANE NAVARETTE,
Respondents.
G.R. No. 178505
September 30, 2008
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the
Rules of Court assails the Decision1 dated 25 September 2006
and Resolution2 dated 15 June 2007 of the Court of Appeals in
CA-G.R. SP No. 72795, which affirmed the Decision dated 14
December 2001 of the National Labor Relations Commission
(NLRC) in NLRC NCR Case No. 30-03-01274-2000 finding
that petitioners were not illegally dismissed by respondents.
The factual antecedents of the case are as follows:
Respondent Innodata Philippines, Inc./Innodata Corporation
(INNODATA) was a domestic corporation engaged in the data
encoding and data conversion business. It employed
encoders, indexers, formatters, programmers, quality/quantity
staff, and others, to maintain its business and accomplish the
job orders of its clients. Respondent Leo Rabang was its
Human Resources and Development (HRAD) Manager, while
respondent Jane Navarette was its Project Manager.
INNODATA had since ceased operations due to business
losses in June 2002.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita
Arbilera were employed as formatters by INNODATA. The
parties executed an employment contract denominated as a
"Contract of Employment for a Fixed Period," stipulating that
the contract shall be for a period of one year,3 to wit:
CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD
xxxx
WITNESSETH: That
WHEREAS, the EMPLOYEE has applied for the position of
FORMATTER and in the course thereof and represented
himself/herself to be fully qualified and skilled for the said
position;
WHEREAS, the EMPLOYER, by reason of the aforesaid
representations, is desirous of engaging that the (sic) services
of the EMPLOYEE for a fixed period;
NOW, THEREFORE, for and in consideration of the foregoing
premises, the parties have mutually agreed as follows:
11
Is TERM/DURATION
The EMPLOYER hereby employs, engages and hires the
EMPLOYEE and the EMPLOYEE hereby accepts such
appointment as FORMATTER effective FEB. 16, 1999 to FEB.
16, 2000 a period of ONE YEAR.
xxxx
TERMINATION
6.1 In the event that EMPLOYER shall discontinue operating
its business, this CONTRACT shall also ipso facto terminate
on the last day of the month on which the EMPLOYER ceases
operations with the same force and effect as is such last day of
the month were originally set as the termination date of this
Contract. Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the
project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the
need for personnel, and/or overstaffing, this contract maybe
pre-terminated by the EMPLOYER upon giving of three (3)
days notice to the employee.
6.2 In the event period stipulated in item 1.2 occurs first vis-à-
vis the completion of the project, this contract shall
automatically terminate.
6.3 COMPANY’s Policy on monthly productivity shall also
apply to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate
this CONTRACT, with or without cause, by giving at least
Fifteen – (15) notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the
appropriate clearance in favor of the said EMPLOYEE.
6.5 Either of the parties may terminate this Contract by reason
of the breach or violation of the terms and conditions hereof by
giving at least Fifteen (15) days written notice. Termination
with cause under this paragraph shall be effective without need
of judicial action or approval.4
During their employment as formatters, petitioners were
assigned to handle jobs for various clients of INNODATA,
among which were CAS, Retro, Meridian, Adobe, Netlib, PSM,
and Earthweb. Once they finished the job for one client, they
were immediately assigned to do a new job for another client.
On 16 February 2000, the HRAD Manager of INNODATA
wrote petitioners informing them of their last day of work. The
letter reads:
RE: End of Contract
Date: February 16, 2000
Please be informed that your employment ceases effective at
the end of the close of business hours on February 16, 2000.5
According to INNODATA, petitioners’ employment already
ceased due to the end of their contract.

On 22 May 2000, petitioners filed a Complaint6 for illegal
dismissal and damages against respondents. Petitioners
claimed that they should be considered regular employees
since their positions as formatters were necessary and
desirable to the usual business of INNODATA as an encoding,
conversion and data processing company. Petitioners also
averred that the decisions in Villanueva v. National Labor
Relations Commission7 and Servidad v. National Labor
Relations Commission,8 in which the Court already purportedly
ruled "that the nature of employment at Innodata Phils., Inc. is
regular,"9 constituted stare decisis to the present case.
Petitioners finally argued that they could not be considered
project employees considering that their employment was not
coterminous with any project or undertaking, the termination of
which was predetermined.
On the other hand, respondents explained that INNODATA
was engaged in the business of data processing, typesetting,
indexing, and abstracting for its foreign clients. The bulk of the
work was data processing, which involved data encoding. Data
encoding, or the typing of data into the computer, included pre-
encoding, encoding 1 and 2, editing, proofreading, and
scanning. Almost half of the employees of INNODATA did data
encoding work, while the other half monitored quality control.
Due to the wide range of services rendered to its clients,
INNODATA was constrained to hire new employees for a fixed
period of not more than one year. Respondents asserted that
petitioners were not illegally dismissed, for their employment
was terminated due to the expiration of their terms of
employment. Petitioners’ contracts of employment with
INNODATA were for a limited period only, commencing on 6
September 1999 and ending on 16 February 2000.10
Respondents further argued that petitioners were estopped
from asserting a position contrary to the contracts which they
had knowingly, voluntarily, and willfully agreed to or entered
into. There being no illegal dismissal, respondents likewise
maintained that petitioners were not entitled to reinstatement
and backwages.
On 17 October 2000, the Labor Arbiter11 issued its Decision12
finding petitioners’ complaint for illegal dismissal and damages
meritorious. The Labor Arbiter held that as formatters,
petitioners occupied jobs that were necessary, desirable, and
indispensable to the data processing and encoding business of
INNODATA. By the very nature of their work as formatters,
petitioners should be considered regular employees of
INNODATA, who were entitled to security of tenure. Thus, their
termination for no just or authorized cause was illegal. In the
end, the Labor Arbiter decreed:
FOREGOING PREMISES CONSIDERED, judgment is hereby
rendered declaring complainants’ dismissal illegal and ordering
respondent INNODATA PHILS. INC./INNODATA
CORPORATION to reinstate them to their former or equivalent
position without loss of seniority rights and benefits.
Respondent company is further ordered to pay complainants
their full backwages plus ten percent (10%) of the totality
thereof as attorney’s fees. The monetary awards due the
complainants as of the date of this decision are as follows:
A. Backwages
1. Cherry J. Price
2/17/2000 – 10/17/2000 at 223.50/day
P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00
(same computation)
3. Lolita Arbilera 46,488.00
(same computation)
Total Backwages P139,464.00
B. Attorney’s fees (10% of total award) 13,946.40
Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiter’s Decision
to the NLRC. The NLRC, in its Decision dated 14 December
2001, reversed the Labor Arbiter’s Decision dated 17 October
2000, and absolved INNODATA of the charge of illegal
dismissal.
The NLRC found that petitioners were not regular employees,
but were fixed-term employees as stipulated in their respective
contracts of employment. The NLRC applied Brent School, Inc.
v. Zamora13 and St. Theresa’s School of Novaliches
Foundation v. National Labor Relations Commission,14 in
which this Court upheld the validity of fixed-term contracts. The
determining factor of such contracts is not the duty of the
employee but the day certain agreed upon by the parties for
the commencement and termination of the employment
relationship. The NLRC observed that the petitioners freely
and voluntarily entered into the fixed-term employment
contracts with INNODATA. Hence, INNODATA was not guilty
of illegal dismissal when it terminated petitioners’ employment
upon the expiration of their contracts on 16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed
from is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the instant complaint for lack of merit.15
The NLRC denied petitioners’ Motion for Reconsideration in a
Resolution dated 28 June 2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court
filed before the Court of Appeals, petitioners prayed for the
annulment, reversal, modification, or setting aside of the
Decision dated 14 December 2001 and Resolution dated 28
June 2002 of the NLRC.lawphil.net
On 25 September 2006, the Court of Appeals promulgated its
Decision sustaining the ruling of the NLRC that petitioners
were not illegally dismissed.
12
The Court of Appeals ratiocinated that although this Court
declared in Villanueva and Servidad that the employees of
INNODATA working as data encoders and abstractors were
regular, and not contractual, petitioners admitted entering into
contracts of employment with INNODATA for a term of only
one year and for a project called Earthweb. According to the
Court of Appeals, there was no showing that petitioners
entered into the fixed-term contracts unknowingly and
involuntarily, or because INNODATA applied force, duress or
improper pressure on them. The appellate court also observed
that INNODATA and petitioners dealt with each other on more
or less equal terms, with no moral dominance exercised by the
former on latter. Petitioners were therefore bound by the
stipulations in their contracts terminating their employment
after the lapse of the fixed term.
The Court of Appeals further expounded that in fixed-term
contracts, the stipulated period of employment is governing
and not the nature thereof. Consequently, even though
petitioners were performing functions that are necessary or
desirable in the usual business or trade of the employer,
petitioners did not become regular employees because their
employment was for a fixed term, which began on 16 February
1999 and was predetermined to end on 16 February 2000.
The appellate court concluded that the periods in petitioners’
contracts of employment were not imposed to preclude
petitioners from acquiring security of tenure; and, applying the
ruling of this Court in Brent, declared that petitioners’ fixed-
term employment contracts were valid. INNODATA did not
commit illegal dismissal for terminating petitioners’
employment upon the expiration of their contracts.
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the
Resolution dated December 14, 2001 of the National Labor
Relations Commission declaring petitioners were not illegally
dismissed is AFFIRMED.17
The petitioners filed a Motion for Reconsideration of the afore-
mentioned Decision of the Court of Appeals, which was denied
by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition
for Review on Certiorari, based on the following assignment of
errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR OF LAW AND GRAVE ABUSE OF
DISCRETION WHEN IT DID NOT APPLY THE SUPREME
COURT RULING IN THE CASE OF NATIVIDAD & QUEJADA
THAT THE NATURE OF EMPLOYMENT OF RESPONDENTS
IS REGULAR NOT FIXED, AND AS SO RULED IN AT LEAST
TWO OTHER CASES AGAINST INNODATA PHILS. INC.
II.
THE HONORABLE COURT OF APPEALS COMMITTED
SERIOUS ERROR OF LAW IN RULING THAT THE

STIPULATION OF CONTRACT IS GOVERNING AND NOT
THE NATURE OF EMPLOYMENT AS DEFINED BY LAW.
III.
THE HONORABLE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT DID NOT CONSIDER THE
EVIDENCE ON RECORD SHOWING THAT THERE IS
CLEAR CIRCUMVENTION OF THE LAW ON SECURITY OF
TENURE THROUGH CONTRACT MANIPULATION.18
The issue of whether petitioners were illegally dismissed by
respondents is ultimately dependent on the question of
whether petitioners were hired by INNODATA under valid
fixed-term employment contracts.
After a painstaking review of the arguments and evidences of
the parties, the Court finds merit in the present Petition. There
were no valid fixed-term contracts and petitioners were regular
employees of the INNODATA who could not be dismissed
except for just or authorized cause.
The employment status of a person is defined and prescribed
by law and not by what the parties say it should be.19 Equally
important to consider is that a contract of employment is
impressed with public interest such that labor contracts must
yield to the common good.20 Thus, provisions of applicable
statutes are deemed written into the contract, and the parties
are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply
contracting with each other.21
Regular employment has been defined by Article 280 of the
Labor Code, as amended, which reads:
Art. 280. Regular and Casual Employment. The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific
project or undertaking the completion or termination of which
has been determined at the time of engagement of the
employee or where the work or services to be performed is
seasonal in nature and employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph. Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists. (Underscoring ours).
Based on the afore-quoted provision, the following employees
are accorded regular status: (1) those who are engaged to
perform activities which are necessary or desirable in the usual
business or trade of the employer, regardless of the length of
their employment; and (2) those who were initially hired as
casual employees, but have rendered at least one year of
service, whether continuous or broken, with respect to the
activity in which they are employed.
Undoubtedly, petitioners belong to the first type of regular
employees.
Under Article 280 of the Labor Code, the applicable test to
determine whether an employment should be considered
regular or non-regular is the reasonable connection between
the particular activity performed by the employee in relation to
the usual business or trade of the employer.22
In the case at bar, petitioners were employed by INNODATA
on 17 February 1999 as formatters. The primary business of
INNODATA is data encoding, and the formatting of the data
entered into the computers is an essential part of the process
of data encoding. Formatting organizes the data encoded,
making it easier to understand for the clients and/or the
intended end users thereof. Undeniably, the work performed
by petitioners was necessary or desirable in the business or
trade of INNODATA.
However, it is also true that while certain forms of employment
require the performance of usual or desirable functions and
exceed one year, these do not necessarily result in regular
employment under Article 280 of the Labor Code.23 Under the
Civil Code, fixed-term employment contracts are not limited, as
they are under the present Labor Code, to those by nature
seasonal or for specific projects with predetermined dates of
completion; they also include those to which the parties by free
choice have assigned a specific date of termination.24
The decisive determinant in term employment is the day
certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain
being understood to be that which must necessarily come,
although it may not be known when. Seasonal employment
and employment for a particular project are instances of
employment in which a period, where not expressly set down,
is necessarily implied.25
Respondents maintain that the contracts of employment
entered into by petitioners with INNDOATA were valid fixed-
term employment contracts which were automatically
terminated at the expiry of the period stipulated therein, i.e., 16
February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term
employment contracts, it has consistently held that this is the
exception rather than the general rule. More importantly, a
fixed-term employment is valid only under certain
circumstances. In Brent, the very same case invoked by
respondents, the Court identified several circumstances
wherein a fixed-term is an essential and natural appurtenance,
to wit:
Some familiar examples may be cited of employment contracts
which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and natural
13
appurtenance: overseas employment contracts, for one, to
which, whatever the nature of the engagement, the concept of
regular employment with all that it implies does not appear
ever to have been applied, Article 280 of the Labor Code
notwithstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other
administrative offices in educational institutions, which are by
practice or tradition rotated among the faculty members, and
where fixed terms are a necessity without which no reasonable
rotation would be possible. Similarly, despite the provisions of
Article 280, Policy Instructions No. 8 of the Minister of Labor
implicitly recognize that certain company officials may be
elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in
providing that these officials, "x x may lose their jobs as
president, executive vice-president or vice president, etc.
because the stockholders or the board of directors for one
reason or another did not reelect them."26
As a matter of fact, the Court, in its oft-quoted decision in
Brent, also issued a stern admonition that where, from the
circumstances, it is apparent that the period was imposed to
preclude the acquisition of tenurial security by the employee,
then it should be struck down as being contrary to law, morals,
good customs, public order and public policy.27
After considering petitioners’ contracts in their entirety, as well
as the circumstances surrounding petitioners’ employment at
INNODATA, the Court is convinced that the terms fixed therein
were meant only to circumvent petitioners’ right to security of
tenure and are, therefore, invalid.
The contracts of employment submitted by respondents are
highly suspect for not only being ambiguous, but also for
appearing to be tampered with.
Petitioners alleged that their employment contracts with
INNODATA became effective 16 February 1999, and the first
day they reported for work was on 17 February 1999. The
Certificate of Employment issued by the HRAD Manager of
INNODATA also indicated that petitioners Price and Domingo
were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that
petitioners’ employment contracts were effective only on 6
September 1999. They later on admitted in their Memorandum
filed with this Court that petitioners were originally hired on 16
February 1999 but the project for which they were employed
was completed before the expiration of one year. Petitioners
were merely rehired on 6 September 1999 for a new project.
While respondents submitted employment contracts with 6
September 1999 as beginning date of effectivity, it is obvious
that in one of them, the original beginning date of effectivity, 16
February 1999, was merely crossed out and replaced with 6
September 1999. The copies of the employment contracts
submitted by petitioners bore similar alterations.
The Court notes that the attempt to change the beginning date
of effectivity of petitioners’ contracts was very crudely done.
The alterations are very obvious, and they have not been
initialed by the petitioners to indicate their assent to the same.
If the contracts were truly fixed-term contracts, then a change

in the term or period agreed upon is material and would
already constitute a novation of the original contract.
Such modification and denial by respondents as to the real
beginning date of petitioners’ employment contracts render the
said contracts ambiguous. The contracts themselves state that
they would be effective until 16 February 2000 for a period of
one year. If the contracts took effect only on 6 September
1999, then its period of effectivity would obviously be less than
one year, or for a period of only about five months.
Obviously, respondents wanted to make it appear that
petitioners worked for INNODATA for a period of less than one
year. The only reason the Court can discern from such a move
on respondents’ part is so that they can preclude petitioners
from acquiring regular status based on their employment for
one year. Nonetheless, the Court emphasizes that it has
already found that petitioners should be considered regular
employees of INNODATA by the nature of the work they
performed as formatters, which was necessary in the business
or trade of INNODATA. Hence, the total period of their
employment becomes irrelevant.
Even assuming that petitioners’ length of employment is
material, given respondents’ muddled assertions, this Court
adheres to its pronouncement in Villanueva v. National Labor
Relations Commission,28 to the effect that where a contract of
employment, being a contract of adhesion, is ambiguous, any
ambiguity therein should be construed strictly against the party
who prepared it. The Court is, thus, compelled to conclude that
petitioners’ contracts of employment became effective on 16
February 1999, and that they were already working
continuously for INNODATA for a year.
Further attempting to exonerate itself from any liability for
illegal dismissal, INNODATA contends that petitioners were
project employees whose employment ceased at the end of a
specific project or undertaking. This contention is specious and
devoid of merit.
In Philex Mining Corp. v. National Labor Relations
Commission,29 the Court defined "project employees" as
those workers hired (1) for a specific project or undertaking,
and wherein (2) the completion or termination of such project
has been determined at the time of the engagement of the
employee.
Scrutinizing petitioners’ employment contracts with
INNODATA, however, failed to reveal any mention therein of
what specific project or undertaking petitioners were hired for.
Although the contracts made general references to a "project,"
such project was neither named nor described at all therein.
The conclusion by the Court of Appeals that petitioners were
hired for the Earthweb project is not supported by any
evidence on record. The one-year period for which petitioners
were hired was simply fixed in the employment contracts
without reference or connection to the period required for the
completion of a project. More importantly, there is also a
dearth of evidence that such project or undertaking had
already been completed or terminated to justify the dismissal
of petitioners. In fact, petitioners alleged - and respondents
failed to dispute that petitioners did not work on just one
project, but continuously worked for a series of projects for
various clients of INNODATA.
In Magcalas v. National Labor Relations Commission,30 the
Court struck down a similar claim by the employer therein that
the dismissed employees were fixed-term and project
employees. The Court here reiterates the rule that all doubts,
uncertainties, ambiguities and insufficiencies should be
resolved in favor of labor. It is a well-entrenched doctrine that
in illegal dismissal cases, the employer has the burden of
proof. This burden was not discharged in the present case.
As a final observation, the Court also takes note of several
other provisions in petitioners’ employment contracts that
display utter disregard for their security of tenure. Despite
fixing a period or term of employment, i.e., one year,
INNODATA reserved the right to pre-terminate petitioners’
employment under the following circumstances:
6.1 x x x Further should the Company have no more need for
the EMPLOYEE’s services on account of completion of the
project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the
need for personnel, and/or overstaffing, this contract maybe
pre-terminated by the EMPLOYER upon giving of three (3)
days notice to the employee.
xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate
this CONTRACT, with or without cause, by giving at least
Fifteen – (15) [day] notice to that effect. Provided, that such
pre-termination shall be effective only upon issuance of the
appropriate clearance in favor of the said EMPLOYEE.
(Emphasis ours.)
Pursuant to the afore-quoted provisions, petitioners have no
right at all to expect security of tenure, even for the supposedly
one-year period of employment provided in their contracts,
because they can still be pre-terminated (1) upon the
completion of an unspecified project; or (2) with or without
cause, for as long as they are given a three-day notice. Such
contract provisions are repugnant to the basic tenet in labor
law that no employee may be terminated except for just or
authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy
of the State to assure the workers of security of tenure and
free them from the bondage of uncertainty of tenure woven by
some employers into their contracts of employment. This was
exactly the purpose of the legislators in drafting Article 280 of
the Labor Code – to prevent the circumvention by
unscrupulous employers of the employee’s right to be secure
in his tenure by indiscriminately and completely ruling out all
written and oral agreements inconsistent with the concept of
regular employment.
In all, respondents’ insistence that it can legally dismiss
petitioners on the ground that their term of employment has
expired is untenable. To reiterate, petitioners, being regular
employees of INNODATA, are entitled to security of tenure. In
the words of Article 279 of the Labor Code:
14
ART. 279. Security of Tenure. – In cases of regular
employment, the employer shall not terminate the services of
an employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
By virtue of the foregoing, an illegally dismissed employee is
entitled to reinstatement without loss of seniority rights and
other privileges, with full back wages computed from the time
of dismissal up to the time of actual reinstatement.
Considering that reinstatement is no longer possible on the
ground that INNODATA had ceased its operations in June
2002 due to business losses, the proper award is separation
pay equivalent to one month pay31 for every year of service, to
be computed from the commencement of their employment up
to the closure of INNODATA.
The amount of back wages awarded to petitioners must be
computed from the time petitioners were illegally dismissed
until the time INNODATA ceased its operations in June
2002.32
Petitioners are further entitled to attorney’s fees equivalent to
10% of the total monetary award herein, for having been
forced to litigate and incur expenses to protect their rights and
interests herein.
Finally, unless they have exceeded their authority, corporate
officers are, as a general rule, not personally liable for their
official acts, because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders
and members. Although as an exception, corporate directors
and officers are solidarily held liable with the corporation,
where terminations of employment are done with malice or in
bad faith,33 in the absence of evidence that they acted with
malice or bad faith herein, the Court exempts the individual
respondents, Leo Rabang and Jane Navarette, from any
personal liability for the illegal dismissal of petitioners.
WHEREFORE, the Petition for Review on Certiorari is
GRANTED. The Decision dated 25 September 2006 and
Resolution dated 15 June 2007 of the Court of Appeals in CA-
G.R. SP No. 72795are hereby REVERSED and SET ASIDE.
RespondentInnodata Philippines, Inc./Innodata Corporation is
ORDERED to pay petitioners Cherry J. Price, Stephanie G.
Domingo, and Lolita Arbilera: (a) separation pay, in lieu of
reinstatement, equivalent to one month pay for every year of
service, to be computed from the commencement of their
employment up to the date respondent Innodata Philippines,
Inc./Innodata Corporation ceased operations; (b) full
backwages, computed from the time petitioners’ compensation
was withheld from them up to the time respondent Innodata
Philippines, Inc./Innodata Corporation ceased operations; and
(3) 10% of the total monetary award as attorney’s fees. Costs
against respondent Innodata Philippines, Inc./Innodata
Corporation.

SO ORDERED.
[ G.R. No. 175678, August 22, 2012 ]
BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS.
BANK OF THE PHILIPPINE ISLANDS EMPLOYEES UNION-
METRO MANILA, 22 AUGUST 2012 RESPONDENT.
DECISION
PERALTA, J.:
For resolution of this Court is the Petition for Review under
Rule 45 of the Revised Rules of Court, dated January 20,
2007, of petitioner Bank of the Philippine Islands (BPI) which
seeks to reverse and set aside the Court of Appeals' (CA)
Decision[1] and Resolution,[2] dated June 8, 2006 and
November 29, 2006, respectively, in CA-G.R. SP No. 83387.
The antecedent facts follow.
Respondent Bank of the Philippine Islands Employees Union-
Metro Manila (BPIEU-MM), a legitimate labor organization and
the sole and exclusive bargaining representative of all the
regular rank-and-file employees of petitioner BPI in Metro
Manila and petitioner BPI have an existing Collective
Bargaining Agreement (CBA)[3] which took effect on April 1,
2001. The CBA provides for loan benefits and relatively low
interest rates. The said provisions state:
Article VIII - Fringe Benefits
xxxx
Section 14. Multi-Purpose Loan, Real Estate Secured Housing
Loan and Car Loan. - The Bank agrees to continue and
maintain its present policy and practice, embodied in its
Collective Bargaining Agreement with the Union which expired
on 31 March 2001, extending to qualified regular employees
the multi-purpose and real estate secured housing loans,
subject to the increased limits and provisions hereinbelow, to
wit:
(a) Multi-Purpose Loan not exceeding FORTY THOUSAND
PESOS (P40,000.00), payable within the period not exceeding
three (3) years via semi-monthly salary deductions, with
interest at the rate of eight percent (8%) per annum computed
on the diminishing balance.
(b) Real Estate-Secured Housing Loan not exceeding FOUR
HUNDRED FIFTY THOUSAND " PESOS (P450,000.00),
payable over a period not exceeding fifteen (15) years via
semi-monthly salary deductions, with interest at the rate of
nine percent (9%) per annum computed on the diminishing
balance.
The rate of interest on real estate secured loans, however,
may be reduced to six percent (6%) per annum, subject to the
following conditions:
1. If the loan is accepted for coverage by the Home Insurance
and Guaranty Corporation (HIGC).
2. The HIGC premium shall be paid by the borrower.
3. The borrower procures a Mortgage Redemption Insurance
coverage from an insurance company selected by the BANK.
4. The BANK may increase the six percent (6%) interest if the
HIGC or the Government imposes new conditions or
restrictions necessitating a higher interest in order to maintain
the BANK'S position before such conditions or restrictions
were imposed.
5. Such other terms or conditions imposed or which may be
imposed by the HIGC.
6. It is distinctly understood that the rate of interest shall
automatically revert to nine percent (9%) per annum upon
cancellation of the HIGC coverage for any cause.
The BANK shall make strong representations with the Bangko
Sentral ng Pilipinas for a second upgrade and/or availment
under the Housing Loan Program.
(c) Car Loan. - The BANK shall submit a revised plan for the
approval of the Bangko Sentral ng Pilipinas which shall
incorporate a car loan program in its existing Housing Loan
Program. The said car loan shall be a sub-limit under the
program such that any availment thereof shall operate to
decrease the available housing loan limit. Therefore, the
combined amount of both housing and car loans that may be
availed of shall not exceed FOUR HUNDRED FIFTY
THOUSAND PESOS (P450,000.00). This supplemental
revision of the loan program shall be subject to the rules and
regulations {e.g., amount of sub-limit, credit ratio, type and age
of vehicle, interest rate, etc.) which the BANK may promulgate,
and to the terms of the approval of the Bangko Sentral ng
Pilipinas.
The multi-purpose and housing loans stated in the next
preceding paragraphs, as well as the car loan which shall be
incorporated in the housing loan program, shall be subject
further to the applicable provisions, guidelines and restrictions
set forth in the Central Bank Circular No. 561, as amended by
Central Bank Circular No. 689, and to the rules, regulations
and policies of the BANK on such loans insofar as they do not
violate the provisions, guidelines and restrictions set forth in
said Central Bank Circular No. 561, as amended.
Section 15. Emergency Loans. - The BANK agrees to increase
the amount of emergency loans assistance, upon approval by
the Central Bank of the Philippines, from a maximum amount
of Ten Thousand Pesos (PI 0,000.00) to a maximum amount
of Fifteen Thousand Pesos (P15,000.00) to qualified
employees intended to cover emergencies only, i.e., expenses
incurred but could not be foreseen such as those arising from
natural calamities, emergency medical treatment and/or
hospitalization of an employee and/or his immediate family and
other genuine emergency cases of serious hardship as the
BANK may determine. Hospital expenses for caesarian
delivery of a female employee or an employee's wife not
covered by the Group Hospitalization Insurance Plan shall
qualify for the emergency loan.
Emergency loans shall be playable in twenty-four (24) months
via semi-monthly salary deductions and shall be charged
15
interest at the minimal rate of Seven percent (7%) per annum
for the first P10,000.00 and Nine percent (9%) for the
additional P5.000.00 computed on the diminishing balance.
The emergency loan assistance program shall be governed by
the rules, regulations and policies of the BANK and such
amendments or modifications thereof which the BANK may
issue from time to time.[4]
Thereafter, petitioner issued a "no negative data bank
policy"[5] for the implementation/availment of the manpower
loans which the respondent objected to, thus, resulting into
labor-management dialogues. Unsatisfied with the result of
those dialogues, respondent brought the matter to the
grievance machinery and afterwards, the issue, not having
been resolved, the parties raised it to the Voluntary Arbitrator.
In his decision, the Voluntary Arbitrator found merit in the
respondent's cause. Hence, the dispositive portion of the said
decision reads as follows:
WHEREFORE, viewed in the light of the foregoing
circumstances, this Arbitrator hereby rules:
1. That the imposition of the NO NEGATIVE DATA BANK as a
new condition for the implementation and availment of the
manpower loan benefits by the employees evidently violates
the CBA;
2. That all employees who were not allowed or deprived of the
manpower loan benefits due to the NO NEGATIVE DATA
BANK POLICY be immediately granted in accordance with
their respective loan benefits applied for;
3. That the respondent herein is ordered likewise to pay ten
percent (10%) of the total amount of all loans to be granted to
all employees concerned as Attorney's Fees; and
4. That the parties herein are directed to report compliance
with the above directives within ten (10) days from receipt of
this ORDER.
SO ORDERED.[6]
Aggrieved, petitioner appealed the case to the CA via Rule 43,
but the latter affirmed the decision of the Voluntary Arbitrator
with the modification that the award of attorney's fees be
deleted. The dispositive portion states:
WHEREFORE, premises considered, the Voluntary Arbitrator's
Decision dated April 5, 2004 is hereby AFFIRMED with the
MODIFICATION that the award of attorney's fees is hereby
deleted.
SO ORDERED.[7]
Petitioner filed a motion for reconsideration, but it was denied
in a Resolution[8] dated November 29, 2006.
Hence, the present petition.
Petitioner raises the following arguments:

A. The "No NDB policy" is a valid and reasonable requirement
that is consistent with sound banking practice and is meant to
inculcate among officers and employees of the petitioner the
need for fiscal responsibility and discipline, especially in an
industry where the element of trust is paramount.
B. The "No NDB policy" does not violate the parties' Collective
Bargaining Agreement.
C. The "No NDB policy" conforms to existing BSP regulations
and circulars, and to safe and sound banking practices.[9]
Respondent, on the other hand, claims that the petition did not
comply with Section 4, Rule 45 of the Revised Rules of Court
and must be dismissed outright in accordance with Section 5
of the same rule; that the CA did not commit any reversible
error in the questioned judgment to warrant the exercise of its
discretionary appellate jurisdiction; and that the Voluntary
Arbitrator and the CA duly passed upon the same issues
raised in the instant petition and their decisions are based on
substantial evidence and are in accordance with law and
jurisprudence.[10]
Tn its Reply[11] dated September 21, 2007, petitioner
reiterates the issues it presented in its petition. It also argues
that the present petition must not be dismissed based on mere
technicality.
Subsequently, the parties submitted their respective
memoranda.
Petitioner's arguments are mere rehash of those it raised in the
CA. It insists that the rationale behind the use of the "no
negative data bank policy" aims to encourage employees of a
banking institution to exercise the highest standards of
conduct, considering the bank's fiduciary relationship with its
depositors and clients. It likewise contends that a scrutiny of
the CBA reveals an express conformity to petitioner's
prerogative to issue policies that would guide the parties in the
availment of manpower loans under the CBA.
Furthermore, petitioner avers that the subject policy does not
only conform to the provisions of the parties' CBA, but it is also
in harmony with the circulars and regulations of the Bangko
Sentral ng Pilipinas.
The petition lacks merit.
In a petition for review on certiorari, this Court's jurisdiction is
limited to reviewing errors of law in the absence of any
showing that the factual findings complained of are devoid of
support in the records or are glaringly erroneous.[13] Firm is
the doctrine that this Court is not a trier of facts, and this
applies with greater force in labor cases.[14] The issues
presented by the petitioner are factual in nature. Nevertheless,
the CA committed no error in its questioned decision and
resolution.
A CBA refers to the negotiated contract between a legitimate
labor organization and the employer concerning wages, hours
of work and all other terms and conditions of employment in a
bargaining unit, including mandatory provisions for grievances
and arbitration machineries.[15] As in all other contracts, there
must be clear indications that the parties reached a meeting of
the minds.[16] Therefore, the terms and conditions of a CBA
constitute the law between the parties.[17]
The CBA in this case contains no provision on the "no negative
data bank policy" as a prerequisite in the entitlement of the
benefits it set forth for the employees. In fact, a close reading
of the CBA would show that the terms and conditions
contained therein relative to the availment of the loans are
plain and clear, thus, all they need is the proper
implementation in order to reach their objective. The CA was,
therefore, correct when it ruled that, although it can be said
that petitioner is authorized to issue rules and regulations
pertinent to the availment and administration of the loans
under the CBA, the additional rules and regulations, however,
must not impose new conditions which are not contemplated in
the CBA and should be within the realm of reasonableness.
The "no negative data bank policy" is a new condition which is
never contemplated in the CBA and at some points,
unreasonable to the employees because it provides that before
an employee or his/her spouse can avail of the loan benefits
under the CBA, the said employee or his/her spouse must not
be listed in the negative data bank, or if previously listed
therein, must obtain a clearance at least one year or six
months as the case may be, prior to a loan application.
It must be remembered that negotiations between an employer
and a union transpire before they agree on the terms and
conditions contained in the CBA. If the petitioner, indeed,
intended to include a "no negative data bank policy" in the
CBA, it should have presented such proposal to the union
during the negotiations. To include such policy after the
effectivity of the CBA is deceptive and goes beyond the
original agreement between the contracting parties.
This Court also notes petitioner's argument that the "no
negative data bank policy" is intended to exact a high standard
of conduct from its employees. However, the terms and
conditions of the CBA must prevail. Petitioner can propose the
inclusion of the said policy upon the expiration of the CBA,
during the negotiations for a new CBA, but in the meantime, it
has to honor the provisions of the existing CBA.
Article 1702 of the New Civil Code provides that, in case of
doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living of the laborer.
Thus, this Court has ruled that any doubt or ambiguity in the
contract between management and the union members should
be resolved in favor of the latter.[18] Therefore, there is no
doubt, in this case, that the welfare of the laborers stands
supreme.
WHEREFORE, the Petition for Review under Rule 45 of the
Revised Rules of Court, dated January 20, 2007, of petitioner
Bank of the Philippine Islands, is hereby DENIED and the
Court of Appeals' Decision and Resolution, dated June 8, 2006
and November 29, 2006, respectively, are hereby AFFIRMED.
SO ORDERED.
G.R. No. 192601 June 3, 2013
16
PHILIPPINE JOURNALISTS, INC., Petitioner,
vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION
MEMBER, MICHAEL ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a
stipulation in a collective bargaining agreement (CBA) granting
funeral or bereavement benefit to a regular employee for the
death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous
social legislations have set. This is because the terms of such
social legislations are deemed incorporated in or adopted by
the CBA.
The decision of the Court of Appeals (CA) under review
summarizes the factual and procedural antecedents, as
follows:
Complainant Judith Pulido alleged that she was hired by
respondent as proofreader on 10 January 1991; that she was
receiving a monthly basic salary of P-15,493.66 plus P-155.00
longevity pay plus other benefits provided by law and their
Collective Bargaining Agreement; that on 21 February 2003,
as union president, she sent two letters to President Gloria
Arroyo, regarding their complaint of mismanagement being
committed by PIJ executive; that sometime in May 2003, the
union was furnished with a letter by Secretary Silvestre Afable,
Jr. head of Presidential Management Staff (PMS), endorsing
their letter-complaint to Ombudsman Simeon V. Marcelo; that
respondents took offense and started harassments to
complainant union president; that on 30 May 2003,
complainant received a letter from respondent Fundador
Soriano, International Edition managing editor, regarding
complainant’s attendance record; that complainant submitted
her reply to said memo on 02 June 2003; that on 06 June
2003, complainant received a memorandum of reprimand; that
on 04 July 2003, complainant received another memo from Mr.
Soriano, for not wearing her company ID, which she replied the
next day 05 July 2003; that on 04 August 2003, complainant
again received a memo regarding complainant’s tardiness; that
on 05 August 2003, complainant received another
memorandum asking her to explain why she should not be
accused of fraud, which she replied to on 07 August 2003; and
that on the same day between 3:00 to 4:00 P.M., Mr. Ernesto
"Estong" San Agustin, a staff of HRD handed her termination
paper.
Complainant added that in her thirteen (13) years with the
company and after so many changes in its management and
executives, she had never done anything that will cause them
to issue a memorandum against her or her work attitude, more
so, reasons to terminate her services; that she got dismissed
because she was the Union President who was very active in
defending and pursuing the rights of her union members, and
in fighting against the abuses of respondent Corporate
Officers; and that she got the ire of respondents when the
employees filed a complaint against the Corporate Officers
before Malacañang and which was later indorsed to the Office
of the Ombudsman.

The second complainant Michael L. Alfante alleged that he
started to work with respondents as computer technician at
Management Information System under manager Neri
Torrecampo on 16 May 2000; that on 15 July 2001, he was
regularized receiving a monthly salary of ₱9,070.00 plus other
monetary benefits; that sometime in 2001, Rico Pagkalinawan
replaced Torrecampo, which was opposed by complainant and
three other co-employees; that Pagkalinawan took offense of
their objection; that on 22 October 2002, complainant Alfante
received a memorandum from Pagkalinawan regarding his
excessive tardiness; that on 10 June 2003, complainant
Alfante received a memorandum from Executive Vice-
President Arnold Banares, requiring him to explain his side on
the evaluation of his performance submitted by manager
Pagkalinawan; that one week after complainant submitted his
explanation, he was handed his notice of dismissal on the
ground of "poor performance"; and that complainant was
dismissed effective 28 July 2003.
Complainant Alfante submitted that he was dismissed without
just cause.
Respondents, in their position paper, averred that
complainants Pulido and Alfante were dismissed for cause and
with due process.
With regard to complainant Pulido, respondents averred that in
a memorandum dated 30 May 2003, directed complainant to
explain her habitual tardiness, at least 75 times from January
to May of 2003. In a memorandum, dated 06 June 2003,
directed complainant to observe the 3 p.m. rule to avoid
grammatical lapses, use of stale stories just to beat the 10:00
p.m. deadline. In the same memorandum complainant was
given the warning that any repeated violation of the rules shall
be dealt with more severely. Once again, in a memorandum,
dated 04 August 2003, complainant Pulido was required to
explain why no disciplinary action should be taken against her
for habitual tardiness – 18 times out of the 23 reporting days
during the period from 27 June – 27 July 2003 and on 05
August 2003, complainant was directed to explain in writing
why complainant should not be administratively sanctioned for
committing fraud or attempting to commit fraud against
respondents. Respondents found complainant’s explanations
unsatisfactory. On 07 August 2003, respondents dismissed
complainant Pulido for habitual tardiness, gross
insubordination, utter disrespect for superiors, and committing
fraud or attempting to commit fraud which led to the
respondents’ loss of confidence upon complainant Pulido.
In case of complainant Alfante, respondents averred in
defense that complainant was dismissed for "poor
performance" after an evaluation by his superior, and after
being forewarned that complainant may be removed if there
was no showing of improvement in his skills and knowledge on
current technology.
In both instances, respondents maintained that they did not
commit any act of unfair labor practices; that they did not
commit acts tantamount to interfering, restraining, or coercing
employees in the exercise of their right to self-organization.
Respondents deny liabilities as far as complainants’ monetary
claims are concerned. Concerning violations of the provision
on wage distortion under Wage Order No. 9, respondents
stressed that complainants were not affected since their salary
is way over the minimum wage.
With respect to the alleged non-adjustment of longevity pay
and burial aid, respondent PJI pointed out that it complies with
the provisions of the CBA and that both complainants have not
claimed for the burial aid.
Respondents put forward the information that the alleged
nonpayment of rest days – every Monday for the past three (3)
years is a matter that is still at issue in NLRC Case No. 02-
0402973-93, which case is still pending before this
Commission.
Respondents asserted that the respondents Arturo Dela Cruz,
Bobby Capco, Arnold Banares, Ruby Ruiz-Bruno and
Fundador Soriano should not be held liable on account of
complainants’ dismissal as they merely acted as agents of
respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C.
Borbolla rendered her decision on March 29, 2006, disposing
thusly:
WHEREFORE, foregoing premises considered, judgment is
hereby rendered, finding complainant Judith Pulido to have
been illegally dismissed. As such, she is entitled to
reinstatement and backwages from 07 August 2003 up to her
actual or payroll reinstatement. To date, complainant’s
backwages is ₱294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay
complainant Judith Pulido her backwages from 07 August
2003 up to her actual or payroll reinstatement and to reinstate
her to her former position without loss of seniority right.
Respondent is further ordered to submit a report to this Office
on complainant’s reinstatement ten (10) days from receipt of
this decision.
The charge of illegal dismissal by Michael Alfante is hereby
dismissed for lack of merit.
The charge of unfair labor practice is dismissed for lack of
basis.
SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor
organization, Journal Employees Union (JEU), filed a partial
appeal in the National Labor Relations Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido
(Pulido), the other complainant, jointly manifested to the NLRC
that the decision of March 29, 2006 had been fully satisfied as
to Pulido under the following terms, namely: (a) she would be
reinstated to her former position as editorial staffmember, or an
equivalent position, without loss of seniority rights, effective
May 15, 2006; (b) she would go on maternity leave, and report
17
to work after giving birth; (c) she would be entitled to
backwages of ₱130,000.00; and (d) she would execute the
quitclaim and release on May 11, 2006 in favor of petitioner.4
This left Alfante as the remaining complainant.
On January 31, 2007, the NLRC rendered its decision
dismissing the partial appeal for lack of merit.
JEU and Alfante moved for the reconsideration of the decision,
but the NLRC denied their motion on April 24, 2007.
Thereafter, JEU and Alfante assailed the decision of the NLRC
before the CA on certiorari (C.A.-G.R. SP No. 99407).
On February 5, 2010, the CA promulgated its decision in C.A.-
G.R. SP No. 99407,7 decreeing:
WHEREFORE, premises considered, the instant petition is
PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24,
2007, respectively, of the Third Division of the National Labor
Relations Commission (NLRC), in NLRC NCR CA No. 048785-
06 (NLRC NCR Case No. 00-10-11413-04), are MODIFIED
insofar as the funeral or bereavement aid is concerned, which
is hereby GRANTED, but only after submission of conclusive
proofs that the deceased is a parent, either father or mother, of
the employees concerned, as well as the death certificate to
establish the fact of death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed
Resolutions are hereby AFFIRMED.
SO ORDERED.
Both parties moved for reconsideration, but the CA denied
their respective motions for reconsideration on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to
challenge the CA’s dispositions regarding the legality of: (a)
Alfante’s dismissal; (b) the non-compliance with Minimum
Wage Order No. 9; and (c) the non-payment of the rest day.9
On August 18, 2010, the Court denied due course to the
petition in G.R. No. 192478 for failure of petitioners to
sufficiently show that the CA had committed any reversible
error to warrant the Court’s exercise of its discretionary
appellate jurisdiction.10
The Court denied with finality JEU and Alfante’s ensuing
motion for reconsideration through the resolution of December
8, 2010.11 The entry of judgment in G.R. No. 192478 issued in
due course on February 1, 2011.12
On its part, petitioner likewise appealed (G.R. No. 192601),
seeking the review of the CA’s disposition in the decision of
February 5, 2010 on the granting of the funeral and
bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under
Section 4, Article XIII of the CBA, funeral and bereavement aid
should be granted upon the death of a legal dependent of a

regular employee; that consistent with the definition provided
by the Social Security System (SSS), the term legal dependent
referred to the spouse and children of a married regular
employee, and to the parents and siblings, 18 years old and
below, of a single regular employee;13 that the CBA
considered the term dependents to have the same meaning as
beneficiaries, as provided in Section 5, Article XIII of the CBA
on the payment of death benefits;14 that its earlier granting of
claims for funeral and bereavement aid without regard to the
foregoing definition of the legal dependents of married or
single regular employees did not ripen into a company policy
whose unilateral withdrawal would constitute a violation of
Article 100 of the Labor Code,15 the law disallowing the non-
diminution of benefits;16 that it had approved only four claims
from 1999 to 2003 based on its mistaken interpretation of the
term legal dependents, but later corrected the same in 2000;17
that the grant of funeral and bereavement aid for the death of
an employee’s legal dependent, regardless of the employee’s
civil status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in
appreciating a doubtful question of law; and that its denial of
subsequent claims did not amount to a violation of the law
against the non-diminution of benefits.18
In their comment,19 JEU and Alfante countered that the CBA
was a bilateral contractual agreement that could not be
unilaterally changed by any party during its lifetime; and that
the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore be
reduced, diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478,
JEU and Alfante’s submissions on the illegality of his
dismissal, the non-payment of his rest days, and the violation
of Minimum Wage Order No. 9 shall no longer be considered
and passed upon.
The sole remaining issue is whether or not petitioner’s denial
of respondents’ claims for funeral and bereavement aid
granted under Section 4, Article XIII of their CBA constituted a
diminution of benefits in violation of Article 100 of the Labor
Code.
Ruling
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda Phils.,
Inc. v. Samahan ng Malayang Manggagawa sa Honda,20
thuswise:
A collective bargaining agreement (or CBA) refers to the
negotiated contract between a legitimate labor organization
and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit.
As in all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem
convenient provided these are not contrary to law, morals,
good customs, public order or public policy. Thus, where the
CBA is clear and unambiguous, it becomes the law between
the parties and compliance therewith is mandated by the
express policy of the law.
Accordingly, the stipulations, clauses, terms and conditions of
the CBA, being the law between the parties, must be complied
with by them. The literal meaning of the stipulations of the
CBA, as with every other contract, control if they are clear and
leave no doubt upon the intention of the contracting parties.22
Here, a conflict has arisen regarding the interpretation of the
term legal dependent in connection with the grant of funeral
and bereavement aid to a regular employee under Section 4,
Article XIII of the CBA,23 which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY
agrees to grant a funeral/bereavement aid in the following
instances:
a. Death of a regular employee in line of duty – ₱50,000
b. Death of a regular employee not in line of duty – ₱40,000
c. Death of legal dependent of a regular employee – ₱15,000.
(Emphasis supplied)
Petitioner insists that notwithstanding the silence of the CBA,
the term legal dependent should follow the definition of it under
Republic Act (R.A.) No. 8282 (Social Security Law),24 so that
in the case of a married regular employee, his or her legal
dependents include only his or her spouse and children, and in
the case of a single regular employee, his or her legal
dependents include only his or her parents and siblings, 18
years old and below; and that the term dependents has the
same meaning as beneficiaries as used in Section 5, Article
XIII of the CBA.
We cannot agree with petitioner’s insistence.
Social legislations contemporaneous with the execution of the
CBA have given a meaning to the term legal dependent. First
of all, Section 8(e) of the Social Security Law provides that a
dependent shall be the following, namely: (a) the legal spouse
entitled by law to receive support from the member; (b) the
legitimate, legitimated, or legally adopted, and illegitimate child
who is unmarried, not gainfully employed and has not reached
21 of age, or, if over 21 years of age, is congenitally or while
still a minor has been permanently incapacitated and incapable
of self-support, physically or mentally; and (c) the parent who
is receiving regular support from the member. Secondly,
Section 4(f) of R.A. No. 7875, as amended by R.A. No.
9241,25 enumerates who are the legal dependents, to wit: (a)
the legitimate spouse who is not a member; (b) the unmarried
and unemployed legitimate, legitimated, illegitimate,
acknowledged children as appearing in the birth certificate;
legally adopted or step-children below 21 years of age; (c)
children who are 21 years old and order but suffering from
congenital disability, either physical or mental, or any disability
acquired that renders them totally dependent on the member
of our support; and (d) the parents who are 60 years old or
older whose monthly income is below an amount to be
determined by the Philippine Health Insurance Corporation in
accordance with the guiding principles set forth in Article I of
18
R.A. No. 7875. And, thirdly, Section 2(f) of Presidential Decree
No. 1146, as amended by R.A. No. 8291,dependent for
support upon the member or pensioner; (b) the legitimate,
legitimated, legally adopted child, including the illegitimate
child, who is unmarried, not gainfully employed, not over the
age of majority, or is over the age of majority but incapacitated
and incapable of self-support due to a mental or physical
defect acquired prior to age of majority; and (c) the parents
dependent upon the member for support.1âwphi1
It is clear from these statutory definitions of dependent that the
civil status of the employee as either married or single is not
the controlling consideration in order that a person may qualify
as the employee’s legal dependent. What is rather decidedly
controlling is the fact that the spouse, child, or parent is
actually dependent for support upon the employee. Indeed, the
Court has adopted this understanding of the term dependent in
Social Security System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in determining
the extent of the required "dependency" under the SS Law. In
Aguas, the Court ruled that although a husband and wife are
obliged to support each other, whether one is actually
dependent for support upon the other cannot be presumed
from the fact of marriage alone.
Further, Aguas pointed out that a wife who left her family until
her husband died and lived with other men, was not dependent
upon her husband for support, financial or otherwise, during
the entire period.
Said the Court:
In a parallel case involving a claim for benefits under the GSIS
law, the Court defined a dependent as "one who derives his or
her main support from another. Meaning, relying on, or subject
to, someone else for support; not able to exist or sustain
oneself, or to perform anything without the will, power, or aid of
someone else." It should be noted that the GSIS law likewise
defines a dependent spouse as "the legitimate spouse
dependent for support upon the member or pensioner." In that
case, the Court found it obvious that a wife who abandoned
the family for more than 17 years until her husband died, and
lived with other men, was not dependent on her husband for
support, financial or otherwise, during that entire period.
Hence, the Court denied her claim for death benefits.
The obvious conclusion then is that a wife who is already
separated de facto from her husband cannot be said to be
"dependent for support" upon the husband, absent any
showing to the contrary. Conversely, if it is proved that the
husband and wife were still living together at the time of his
death, it would be safe to presume that she was dependent on
the husband for support, unless it is shown that she is capable
of providing for herself.
Considering that existing laws always form part of any
contract, and are deemed incorporated in each and every
contract,28 the definition of legal dependents under the
aforecited social legislations applies herein in the absence of a
contrary or different definition mutually intended and adopted
by the parties in the CBA. Accordingly, the concurrence of a

legitimate spouse does not disqualify a child or a parent of the
employee from being a legal dependent provided substantial
evidence is adduced to prove the actual dependency of the
child or parent on the support of the employee.
In this regard, the differentiation among the legal dependents
is significant only in the event the CBA has prescribed a
hierarchy among them for the granting of a benefit; hence, the
use of the terms primary beneficiaries and secondary
beneficiaries for that purpose. But considering that Section 4,
Article XIII of the CBA has not included that differentiation,
petitioner had no basis to deny the claim for funeral and
bereavement aid of Alfante for the death of his parent whose
death and fact of legal dependency on him could be
substantially proved.
Pursuant to Article 100 of the Labor Code, petitioner as the
employer could not reduce, diminish, discontinue or eliminate
any benefit and supplement being enjoyed by or granted to its
employees. This prohibition against the diminution of benefits
is founded on the constitutional mandate to protect the rights of
workers and to promote their welfare and to afford labor full
protection.29 The application of the prohibition against the
diminution of benefits presupposes that a company practice,
policy or tradition favorable to the employees has been clearly
established; and that the payments made by the employer
pursuant to the practice, policy, or tradition have ripened into
benefits enjoyed by them.30 To be considered as a practice,
policy or tradition, however, the giving of the benefits should
have been done over a long period of time, and must be
shown to have been consistent and deliberate.31 It is relevant
to mention that we have not yet settled on the specific
minimum number of years as the length of time sufficient to
ripen the practice, policy or tradition into a benefit that the
employer cannot unilaterally withdraw.32
The argument of petitioner that the grant of the funeral and
bereavement benefit was not voluntary but resulted from its
mistaken interpretation as to who was considered a legal
dependent of a regular employee deserves scant
consideration. To be sure, no doubtful or difficult question of
law was involved inasmuch as the several cogent statutes
existing at the time the CBA was entered into already defined
who were qualified as the legal dependents of another.
Moreover, the voluntariness of the grant of the benefit became
even manifest from petitioner’s admission that, despite the
memorandum it issued in 200033 in order to "correct" the
interpretation of the term legal dependent, it still approved in
2003 the claims for funeral and bereavement aid of two
employees, namely: (a) Cecille Bulacan, for the death of her
father; and (b) Charito Cartel, for the death of her mother,
based on its supposedly mistaken interpretation.34
It is further worthy to note that petitioner granted claims for
funeral and bereavement aid as early as 1999, then issued a
memorandum in 2000 to correct its erroneous interpretation of
legal dependent under Section 4, Article XIII of the CBA. This
notwithstanding, the 2001-2004 CBA35 still contained the
same provision granting funeral or bereavement aid in case of
the death of a legal dependent of a regular employee without
differentiating the legal dependents according to the
employee's civil status as married or single. The continuity in
the grant of the funeral and bereavement aid to regular
employees for the death of their legal dependents has
undoubtedly ripened into a company policy. With that, the
denial of Alfante's qualified claim for such benefit pursuant to
Section 4, Article XIII of the CBA violated the law prohibiting
the diminution of benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated
on February 5, 201 0; and ORDERS petitioner to pay the costs
of suit.
SO ORDERED.
G.R. No. 177524 July 23, 2014
NATIONAL UNION OF WORKERS IN HOTEL
RESTAURANT AND ALLIED INDUSTRIES (NUWHRAIN-
APL-IUF), PHILIPPINE PLAZA CHAPTER, Petitioner,
vs.
PHILIPPINE PLAZA HOLDINGS, INC., Respondent.
BRION, J.:
We resolve the petition for review on certiorari,1 challenging
the January 31, 2007 decision2 and the April 20, 2007
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
93698.
This CA decision reversed the July 4, 2005 decision4 of the
National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in tum,
reversed and set aside the April 30, 2002 decision5 of the
Labor Arbiter (LA).
The LA dismissed the complaint for non-payment of service
charges filed by petitioner National Union of Workers in Hotel
Restaurant and Allied Industries (NUWHRAIN-APL-IUF),
Philippine Plaza Chapter (Union).
The Factual Antecedents
The Union is the collective bargaining agent of the rank-and-
file employees of respondent Philippine Plaza Holdings, Inc.
(PPHI).
On November 24, 1998, the PPHI and the Union executed the
"Third Rank-and-File Collective Bargaining Agreement as
Amended"6 (CBA). The CBA provided, among others, for the
collection, by the PPHI, of a ten percent (10%) service charge
on the saleof food, beverage, transportation, laundry and
rooms. The pertinent CBA provisions read:
SECTION 68. COLLECTION. The HOTEL shall continue to
collect ten percent (10%) service charge on the sale of food,
beverage, transportation, laundry and rooms except on
negotiated contracts and special rates. [Emphasis supplied]
SECTION 69. DISTRIBUTION. The service charge to be
distributed shall consist of the following:
Effective Food & Beverage Room, Transportation & valet
1998 95% 100%
1997 95% 100%
19
The distributable amount will beshared equally by all HOTEL
employees, including managerial employees but excluding
expatriates, with three shares to be given to PPHI Staff and
three shares to the UNION (one for the national and two for the
local funds) that may be utilized by them for purposes for
which the UNION may decide.
These provisions merely reiterated similar provisions found in
the PPHIUnion’s earlier collective bargaining agreement
executed on August 29, 1995.7
On February 25, 1999, the Union’s Service Charge Committee
informed the Union President, through an audit report (1st
audit report),8 of uncollected service charges for the last
quarter of 1998 amounting to ₱2,952,467.61. Specifically, the
audit report referred to the service charges from the following
items: (1) "Journal Vouchers;" (2) "Banquet Other Revenue;"
and (3) "Staff and Promo." The Union presented this audit
report to the PPHI’s management during the February 26,
1999 Labor Management Cooperation Meeting (LMCM).9 The
PPHI’s management responded that the Hotel Financial
Controller would need to verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted
liability for ₱80,063.88 out of the ₱2,952,467.61 thatthe Union
claimed as uncollected service charges. The PPHI denied the
rest of the Union’s claims because: (1) they were exempted
from the service charge being revenues from "special
promotions" (revenue from the Westin Gold Card sales) or
"negotiated contracts" (alleged revenue from the Maxi-Media
contract); (2) the revenues did not belong to the PPHI but to
third-party suppliers; and (3) no revenue was realized from
these transactions as they were actually expenses incurred for
the benefit of executives or by way of good-will to clients and
government officials.
During the July 12, 1999 LMCM,11 the Union maintained its
position on uncollected service charges so that a deadlock on
the issue ensued. The parties agreed to refer the matter to a
third party for the solution. They considered two options –
voluntary arbitration or court action – and promised to get back
to each other on their chosen option.
In its formal reply (to the PPHI’sJune 9, 1999 letter) dated July
21, 1999 (2nd audit report),12 the Union modified its claims. It
claimed uncollected service charges from: (1) "Journal
Vouchers - Westin Gold Revenue and Maxi-Media" (F&B and
Rooms Barter); (2) "Banquet and Other Revenue;" and (3)
"Staff and Promo."
On August 10, 2000, the Union’s Service Charge Committee
made another service charge audit report for the years 1997,
1998 and 1999 (3rd audit report).13 This 3rd audit report
reflected total uncollected service charges of ₱5,566,007.62
from the following entries: (1) "Journal Vouchers;" (2)
"Guaranteed No Show;" (3) "Promotions;" and (4) "F & B
Revenue." The Union President presented the 3rd audit report
to the PPHI on August 29, 2000.
When the parties failed to reachan agreement, the Union, on
May 3, 2001, filed before the LA (Regional Arbitration Branch
of the NLRC) a complaint14 for non-payment of specified

service charges. The Union additionally charged the PPHI with
unfair labor practice (ULP) under Article 248 of the Labor
Code, i.e., for violation of their collective bargaining
agreement.
In its decision15 dated April 30, 2002, the LA dismissed the
Union’s complaint for lack of merit. The LA declared that the
Union failed to show, by law, contract and practice, its
entitlement to the payment of service charges from the entries
specified in its audit reports (specified entries/transactions).
The LA pointed out that Section 68 of the CBA explicitly
requires, as a precondition for the distribution of service
charges in favor of the covered employees, the collection of
the 10% service charge on the "sale of food, beverage,
transportation, laundry and rooms;" at the same time, the
provision exempts from its coverage "negotiated contracts"
and "special rates" that the LA deemed as non-revenue
generating transactions involving "food, beverage,
transportation, laundry and rooms." The Union failed to prove
that the PPHI collected 10% service charges on the specified
entries/transactions that could have triggered the PPHI’s
obligation under this provision.
Particularly, the LA pointed out that, first, the only evidence on
record that could have formed the basis of the Union’s claim
for service charges was the PPHI’s admission that, as a matter
of policy, it has been charging, collecting and distributing to the
covered employees 10% service charge on the fifty percent
(50%) of the total selling price of the "Maxi-Media F & B" and
on the "Average House" rate of the "Maxi-Media Rooms." And
it did so, notwithstanding the fact that the "Maxi-Media F & B
and Rooms Barter" is a "negotiated contract" and/or "special
rate" that Section 68 explicitly excludes from the service
charge coverage.
Second,while the PPHI derived revenues from the sale of the
Westin Gold Cards (Westin Gold Revenue), the PPHI did not
and could not have collected a 10% service charge as these
transactions could not be considered as sale of food,
beverage, transportation, laundry and rooms that Section 68
contemplates.
Third, the "Staff and Business Promotion and Banquet" entry
refers to the expenses incurred by the PPHI’s Marketing
Department and Department Heads and Hotel executives
either as part of their perks or the PPHI’s marketing tool/public
relations. These are special rates that are essentially non-
revenue generating items.
Fourth, the "Backdrop" entry refers to services undertaken by
third parties payment for which were made of course to them;
hence, this entry/transaction could not likewise be considered
as sale of services by PPHI for which collection of the 10%
service charge was warranted.
Lastly, the LA equally brushed aside the Union’s claim of ULP
declaring that the PPHI was well within its legal and
contractual right to refuse payment of service charges for
entries from which it did not collect any service charge
pursuant tothe provision of their CBA.
The NLRC’s ruling
In its decision16 of July 4, 2005, the NLRC reversed the LA’s
decision and considered the specified entries/transactions as
"service chargeable." As the PPHI failed to prove that it paid or
remitted the required service charges, the NLRC held the PPHI
liable to pay the Union ₱5,566,007.62 representing the claimed
uncollected service charges for the years 1997, 1998 and 1999
per the 3rd audit report.
The PHHI went to the CA on a petition for certiorari17 after the
NLRC denied its motion for reconsideration.18
The CA’s ruling
The CA granted the PPHI’s petition in its January 31, 2007
decision.19 It affirmed the LA’s decision but ordered the PPHI
to pay the Union the amount of ₱80,063.88 as service charges
that it found was due under the circumstances. The CA
declared that no service charges were due from the specified
entries/transactions; either these constituted "negotiated
contracts" and "special rates" that Section 68 of the CBA
explicitly excludes from the coverage of service charges, or
they were cited bases that the Union failed to sufficiently
prove.
The CA pointed out that: one, the "Westin Gold Card
Revenues" entry involved the sale, not of food, beverage,
transportation, laundry and rooms, but of a "contractual right"
to be charged a lesser rate for the products and services that
the Hotel and the stores within it provide. At any rate, the PPHI
charges, collects and distributes to the covered employees the
CBAagreed service charges whenever any Westin Gold Card
member purchases food, beverage, etc. Two, the "Maxi-Media
F & B and Rooms and Barter" entry did not involve any sale
transaction that Section 68 contemplates. The CA pointed out
that the arrangement20 between the PPHI and Maxi-Media
International, Inc. was not one of sale but an innominate
contract of facio ut des, i.e., in exchange for the professional
entertainment services provided by Maxi-Media, the Hotel
agreed to give the former ₱2,800,000.00 worth of products and
services.The CA added that this agreement falls under
"negotiated contracts" that Section 68 explicitly exempts.
Three, the sale of "Gift Certificates" does not involve the CBA-
contemplated "sale of food, beverage, etc." Four, the Union
failed to show the source of its computations for its
"Guaranteed No Show" and "F & B Revenue" claims. Five, the
"Business Promotions" entry likewise did not involve any sale;
these were part of the PPHI’s business expenses in the form of
either signing benefits for the PPHI’s executives or
asmarketing tool used by the PPHI’s marketing personnel to
generate goodwill. And six, the Union’s claims for service
charges that the PPHI allegedly collected prior to May 3, 1998
or three years before the Union filed itscomplaint on May 3,
2001 had already prescribed per Article 291 of the Labor
Code.
The Union filed the present petition after the CA denied its
motion for Reconsideration21
in the CA’s April 20, 2007 resolution.22
20
The Petition
The Union argues that the CA clearly misapprehended and
misappreciated, with grave abuse of discretion, the facts and
evidence on record. It maintains that the specified
entries/transactions are revenue based transactions which, per
Section 68 and 69 of the CBA, clearly called for the collection
and distribution of a 10% service charge in favor of the
covered employees. Particularly, the Union argues that: (1) the
"Westin Gold Cards" serve not only as a discount card but also
as a "pre-paid" card that provide its purchasing members
complimentary amenities for which the Hotel employees
rendered services and should, therefore, had been subjected
to the 10% service charge; (2) the PPHI failed to prove that it
had paid and distributed to the covered employees the service
charge due on the actual discounted sales of food, beverage,
etc., generated by the "Westin Gold Cards;" (3) the Hotel
employees likewise rendered services whenever the Maxi-
Media International, Inc. consumed or availed part of the
2,800,000.00 worth of goods and services pursuant to its
agreement with the PPHI; (4) the "Maxi-Media" discounts
should be charged to the PPHI as part of its expenses and not
the Union’s share in the service charges; (5) the PPHI has a
separate budget for promotions, hence the "Business
Promotions" entry should likewise had been subjected to the
10% service charge; (6) the sale of "Gift Certificates," recorded
in the PPHI’s "Journal Vouchers" as "other revenue/income,"
constituted a revenue transaction for which service charges
were due; (7) the PPHI admitted that service charges from
"Guaranteed No Show" were due; and (8) it properly identified
through reference numbers the uncollected service charges
from "Food and Beverage Revenue."
The Union contends that inrefusing to collect and remit the
CBA-mandated service charges that the PPHI insists were
non-revenue transactions falling under "Negotiated Contracts"
and/or "Special Rates," the PPHI, in effect, contravened the
employees’ rights to service charges under the law and the
CBA. The Union also contends that the term "Negotiated
Contracts" should be applied to "airline contracts" only that
they (the Union and the PPHI) intended when they executed
the CBA. It points out that at the time the CBA was executed,
the PPHI had an existing agreement with Northwest Airlines to
which the term "Negotiated Contracts" clearly referred to.
Further, the Union argues that its claim for unpaid services
charges for the year 1997 and part of 1998 had not yet
prescribed. Applying Article 1155 of the Civil Code in relation
toArticle 291 of the Labor Code, the Union points out that the
running of the prescriptive period for the filing of its claim was
interrupted when it presented to the PPHI its 1st audit report
during the February 26, 1999 LMCMand when the PPHI
admitted the service charges due to the Union inthe PPHI’s
June 9, 1999 letter.
The Union additionally argues that the PPHI failed to conform
to the generally accepted accounting standards when it
reclassified the revenue items as expense items.
Finally, the Union contends that the PPHI’s refusal, despite
repeated demands, to distribute the unremitted service
charges and recognize its right to service charges on the
specified entries; the PPHI’s deliberate failure to disclose its

financial transactions and audit reports; and the PPHI’s
reclassification of the revenues into expense items constitute
gross violation of the CBA that amounts to whatthe law
considers as ULP.
The Case for the Respondent
The PPHI primarily counters, in its comment,23 that the
Union’s call for the Court to thoroughly re-examinethe records
violates the Rule 45 proscription against questions of facts.The
PPHI points out that Rule 45 of the Rules of Court under which
the petition is filed requires that only questions of law be
raised. In addition, the factual findings of the LA that had been
affirmed by the CA deserve not only respect but even finality.
On the petition’s merits, the PPHI argues that the specified
entries/transactions for which the Union claims service
charges: (1) were not revenue generating transactions; (2) that
did not involve a sale of food, beverage, rooms, transportation
or laundry; and/or (3) were in the nature of negotiated
contracts and special rates that Section 68 of the CBA
specifically excepts from the collection of service charges.
Correlatively, Article 96 of the Labor Code requires the
collection of service charges as a condition precedent to its
distribution or payment. Thus, as no service charges were
collected on the specified entries/transactions that the CBA
expressly excepts, the Union’s claim for unpaid service
charges clearly had no basis.
To be precise, the PPHI points out that, first, the sale per se of
the "Westin Gold Cards" did not involve a sale of food,
beverage, etc. that Section 68 of the CBA contemplates. The
discounted sales of food, beverage, etc. to Westin Gold Card
holders, on the other hand, had already been subjected to
service charges inclusive of the discount, i.e., computed on the
gross sales of food, beverage, etc. to the card holders, and
which service charges it had already distributed to the covered
employees. Second, its agreement with Maxi-Media involved
an exchange or barter transaction, i.e., its food and Hotel
services in exchange for Maxi-Media’s entertainment services
that did not generate income. This agreement likewise falls
under "Negotiated Contracts" that Section 68 clearly excepts.
And, in any case, it had already collected, and distributed to
the covered employees, the service charges on the food,
beverage, etc. that Maxi-Media consumed based on the
monthly average rate of the rooms and on the 50% rate of the
price of the consumed food and beverage. Third, the Union
failed to prove its claims for uncollected service charges from
"Guaranteed No Show" and "Business Promotions." Fourth,
the "Food and Beverage other Revenue" entry refers to the
PPHI’s transactions with external service providers the
payment for whose services could not be considered as the
PPHI’s revenue. Fifth, the sale per se of the "Gift Certificates"
also did not involve the Section 68-contemplated sale of food,
beverage, etc. and the Union failed to prove that the presented
Gift Certificateshad actually been consumed, i.e., used within
the Hotel premises for food, beverage, etc. And sixth, it had
never been its practice to collect service charges on the
specified entries/transactions that could have otherwise
resulted in what the Union considers as "partial abolition of
service charges" when it refused to collect service charges
from them.
The PPHI also disputes what it considers as the Union’s
strained interpretation of the CBA exception of "Negotiated
Contracts" as applicable to airline contracts only. It points out
that the clear wordings of Section 68 of the CBA plainly show
the intent to except, in a general and broad sense, "Negotiated
Contracts" and "Special Rates" as to include the "Westin Gold
Cards" and "Maxi-Media" barter agreement. The PPHI
additionally argues that the CBA’s exception of "Negotiated
Contracts" and "Special Rates" from the collection of service
charges does not violate Article 96 of the Labor Code. It points
out that Article 96 merely provides for the minimum percentage
distribution, between it (the PPHI) as the employer and the
Hotel’s covered employees, of the collected service charges
which their CBA more than satisfied. It also points out that
Article 96 does not prohibit the exception of certain
transactions from the coverage and/or collection of service
charges that it (as the employer) and the Union (in behalf of
the covered Hotel employees) had voluntarily and mutually
agreed on in their CBA.1âwphi1 And in fact, the Union’s
refusal to recognize these clear and express exceptions
constituted a violation of their agreement.
Further, the PPHI maintains that the Union’s claim for the
alleged uncollected service charges for the year 1997 and the
early months of 1998 had already prescribed per Article 291 of
the Labor Code.
Finally, the PPHI points out that the issue in this case is not
whether service charges had been paid. Rather, the clear
issue is whether or not service charges should have been
collected (and distributed to the covered employees) for the
specified entries/transactions that the LA and the CA correctly
addressed and which the NLRC clearly missed as it rendered
a decision without any factual or legal basis.
The Court's Ruling
We find the petition unmeritorious.
Preliminary considerations: jurisdictional limitations of the
Court’s Rule 45 review of the CA’s Rule 65 decision in labor
cases; the Montoya ruling and factual-issue-bar-rule
In a petition for review on certiorari under Rule 45 of the Rules
of Court, we review the legal errors that the CA may have
committed in the assailed decision, in contrastwith the review
for jurisdictional errors that we undertake in an original
certiorari action. In reviewing the legal correctness of the CA
decision in a labor case taken under Rule 65 of the Rules of
Court, we examine the CA decision in the context that it
determined the presence or the absence of grave abuse of
discretion in the NLRC decision before it and not on the basis
of whether the NLRC decision, on the merits of the case, was
correct. In other words, we proceed from the premise that the
CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. Within this limited scope
of our Rule 45 review, the question that we ask is: Did the CA
correctly determine whether the NLRC committed grave abuse
of discretion in ruling on the case?24
21
In addition, the Court’s jurisdiction in a Rule 45 petition for
review on certiorari is limited to resolving only questions of law.
A question of law arises when the doubt or controversy exists
as to what law pertains to a particular set of facts; and a
question of fact arises when the doubt or controversy pertains
to the truth or falsity of the alleged facts.25
The present petition essentially raises the question – whether
the Union may collect from the PPHI, under the terms of the
CBA, its share of the service charges. This is a clear question
of law that falls well within the Court’s power in a Rule 45
petition.
Resolution of this question of law, however, is inextricably
linked with the largely factual issue of whether the specified
entries/transactions fall within the generally covered sale of
food, beverage, transportation, etc. from which service charges
are due or within the CBA excepted "Negotiated Contracts"
and "Special Rates." It also unavoidably requires resolution of
another factual issue, i.e., whether the Union’s claim for
service charges collected for the year 1997 and the early
months of 1998 had already prescribed. As questions of fact,
they are proscribed by our Rule 45 jurisdiction; we generally
cannot address these factual issues except to the extent
necessary to determine whether the CA correctly found the
NLRC in grave abuse of discretion in granting the Union’s
claim for service charges from the specified
entries/transactions.
The jurisdictional limitations of our Rule 45 review of the CA’s
Rule 65 decision in labor cases constrain us to deny the
present petition for clear lack of legal error in the CA’s
decision.Our consideration of the facts taken within this limited
scope of our factual review power, convinces us that grave
abuse of discretion attended the NLRC’s decision. At what
point and to what extent the NLRC gravely abusedits discretion
is the matter we shall discuss below.
The NLRC’s patently erroneous appreciation of the real issue
in the present controversy, along with the facts and the
evidence, amounted to grave abuse of discretion
In granting the Union’s claim, the NLRC simply declared that
the PPHI "has not shown any proof that it paid or remitted what
is due to the Union and its members" and concluded that the
specified entries/transactions were "service chargeable." This
NLRC conclusion plainly failed to appreciate that it involved
only the alleged uncollected service charges from the specified
entries/transactions. The NLRC likewise, in the course of its
ruling, did not point to any evidence supporting its conclusion.
In deciding as it did, the NLRC patently proceeded from the
wrong premise, i.e., that the PPHI did not at all distribute to the
Hotel’s covered employees their share in the collected service
charges. It likewise erroneously assumed that all the specified
entries/transactions were subject to service charges and that
the PPHI collected service charges from them as its ruling was
patently silent on this point. The NLRC also erroneously
assumed that each and every transaction that the PPHI
entered into was subject to a service charge.

What the NLRC clearly and conveniently overlooked was the
underlying issue of whether service charges are due from the
specified entries/transactions, i.e., whether the specified
entries/transactions are covered by the CBA’s general-rule
provisions on the collection of service charges or whether they
are excepted because they fall within the excepted "Negotiated
Contracts" and "Special Rates" or simply did not involve a
"sale of food, beverage, etc." from which service charges are
due. This understanding of this case’s real issue is an
indispensable requisite in the proper resolution of the
controversy and a task that the NLRC, as a tribunal exercising
quasi-judicial power, mustperform with circumspection and
utmost diligence. The patent failure led to its manifestly flawed
conclusions that were belied by the underlying facts. By so
doing, the NLRC acted outside the clear contemplation of the
law.26
Accordingly, we affirm the CA’s decision to be legally correct
as it correctly reversed the NLRC decision for grave abuse of
discretion.
Nature of a CBA; rules inthe interpretation of CBA provisions
A collective bargaining agreement, as used in Article 252 (now
Article 262)27 of the Labor Code, is a contract executed at the
request of either the employer or the employees’ exclusive
bargaining representative with respect to wages, hours of work
and all other terms and conditions of employment, including
proposals for adjusting any grievances or questions under
such agreement.28 Jurisprudence settles that a CBA is the law
between the contracting parties who are obliged under the law
to comply with its provisions.29
As a contract and the governing law between the parties, the
general rules of statutory construction apply in the
interpretation of its provisions. Thus, if the terms of the CBA
are plain, clear and leave no doubt on the intention of the
contracting parties, the literal meaning of its stipulations, as
they appear on the face of the contract, shall prevail.30 Only
when the words used are ambiguous and doubtful or leading to
several interpretations of the parties’ agreement that a resort to
interpretation and construction is called for.31
No service charges were due from the specified
entries/transactions; they either fall within the CBA-excepted
"Negotiated Contracts" and "Special Rates" or did not involve
"a sale of food, beverage, etc."
The Union anchors its claim for services charges on Sections
68 and 69 of the CBA, in relation with Article96 of the Labor
Code. Section 68 states that the sale of food, beverage,
transportation, laundry and rooms are subject to service
charge at the rate often percent (10%). Excepted from the
coverage of the 10% service charge are the so-called
"negotiated contracts" and "special rates."
Following the wordings of Section 68 of the CBA, three
requisites must be present for the provisions on service
charges to operate: (1) the transaction from which service
charge is sought to be collected is a sale; (2) the sale
transaction covers food, beverage, transportation, laundry and
rooms; and (3) the sale does not result from negotiated
contracts and/or at special rates.
In plain terms, all transactions involving a "sale of food,
beverage, transportation, laundry and rooms" are generally
covered. Excepted from the coverage are, first, non-sale
transactions or transactions that do not involve any sale even
though they involve "food, beverage, etc." Second,
transactions that involve a sale but do not involve "food,
beverage, etc." And third, transactions involving "negotiated
contracts" and "special rates" i.e., a "sale of food, beverage,
etc." resulting from "negotiated contracts" or at "special rates;"
non-sale transactions involving "food, beverage, etc." resulting
from "negotiated contracts" and/or "special rates;" and sale
transactions, but not involving "food, beverage, etc.," resulting
from "negotiated contracts" and "special rates." Notably, the
CBA does not specifically define the terms "negotiated
contracts" and "special rates." Nonetheless, the CBA likewise
does not explicitly limit the use of these terms to specified
transactions. With particular reference to "negotiated
contracts," the CBA does not confine its application to "airline
contracts" as argued by the Union. Thus, as correctly declared
by the CA, the term "negotiated contracts" should be read as
applying to all types of negotiated contracts and not to "airlines
contracts" only. This is in line with the basic rule of
construction that when the terms are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning
of its stipulations shall prevail. A constricted interpretation of
this term, i.e., as applicable to "airlines contracts" only, must
be positively shown either by the wordings of the CBA or by
sufficient evidence of the parties’ intention to limit its
application. The Union completely failed to provide support for
its constricted reading of the term "negotiated contracts," either
from the wordings of the CBA or from the evidence.
In reversing the NLRC’s ruling and denying the Union’s claim,
the CA found the specified entries/transactions as either falling
under the excepted negotiated contracts and/or special rates
or not involving a sale of food, beverage, etc. Specifically, it
considered the entries "Westin Gold
Cards Revenue" and "Maxi Media Barter" to be negotiated
contracts or contracts under special rates, and the entries
"Business Promotions" and "Gift Certificates" as contracts that
did not involve a sale of food, beverage, etc. The CA also
found no factual and evidentiary basis to support the Union’s
claim for service charges on the entries "Guaranteed No show"
and "F & B Revenue."
Our consideration of the records taken under our limited
factual review power convinces us that these specified
entries/transactions are indeed not subject to a 10% service
charge. We thus see no reason to disturb the CA’s findings on
these points.
The PPHI did not violate Article 96 of the Labor Code when
they refused the Union’s claim for service charges on the
specified entries/transactions
Article 96 of the Labor Code provides for the minimum
percentage distribution between the employer and the
employees of the collected service charges, and its integration
22
inthe covered employees’ wages in the event the employer
terminates its policy of providing for its collection. It pertinently
reads:
Art. 96. Service Charges.
x x x In case the service charge is abolished, the share of the
covered employees shall be considered integrated in their
wages.
This last paragraph of Article 96 of the Labor Code presumes
the practice of collecting service charges and the employer’s
termination of this practice. When this happens, Article 96
requires the employer to incorporate the amount that the
employees had been receiving as share of the collected
service charges into their wages. Incases where no service
charges had previously been collected (as where the employer
never had any policy providing for collection of service charges
or had never imposed the collection of service charges on
certain specified transactions), Article 96 will not operate.
In this case, the CA found that the PPHI had not in fact been
collecting services charges on the specified
entries/transactions that we pointed out as either falling under
"negotiated contracts" and/or "special rates" or did not involve
a "sale of food, beverage, etc." Accordingly, Article 96 of the
Labor Code finds no application in this case; the PPHI did not
abolish or terminate the implementation of any company policy
providing for the collection of service charges on specified
entries/transactions that could have otherwise rendered it
liable to pay an amount representing the covered employees’
share in the alleged abolished service charges.
The Union’s claim for service charges for the year 1997 and
the early months of 1998 could not have yet prescribed at the
time it filed its complaint on May 3, 2001; Article 1155 of the
Civil Code applies suppletorily to Article 291 of the Labor Code
Article 291 (now Article 305)32 of the Labor Code states that
"all money claims arising from employer-employee relations x
x x shall be filed within three (3) years from the time the cause
of action accrued; otherwise, they shall forever be barred."
[Emphasis supplied]
Like other causes of action, the prescriptive period for money
claims under Article 291 of the Labor Code is subject to
interruption. And, in the absence of an equivalent Labor
Codeprovision for determining whether Article 291’s three-year
prescriptive period may be interrupted, Article 1155 of the Civil
Code33 may be applied. Thus, the period of prescription of
money claims under Article 291 is interrupted by: (1) the filing
of an action; (2) a written extrajudicial demand by the creditor;
and (3) a written acknowledgment of the debt by the debtor.
In the present petition, the facts indisputably showed that as
early as 1998, the Union demanded, via the 1st audit report,
from the PPHI the payment and/or distribution of the alleged
uncollected service charges for the year 1997. From thereon,
the parties went through negotiations (LCMC) to settle and
reconcile on their respective positions and claims.

Under these facts – the Union’s written extrajudicial demand
through its 1st audit report and the successive negotiation
meetings between the Union and the PPHI – the running of the
three-year prescriptive period under Article 291 of the Labor
Code could have effectively been interrupted. Consequently,
the Union’s claims for the alleged uncollected service charges
for the year 1997 could not have yet prescribed at the time it
filed its complaint on May 3, 2001.
This non-barring effect of prescription, notwithstanding (i.e.,
that the running of the three-year prescriptive period had
effectively been interrupted – by the Union's written
extrajudicial demand on the PPHI), the CA, as it affirmed the
LA, still correctly denied the Union's claims for the alleged
uncollected and/or undistributed service charges on the
specified entries/transactions for the year 1997 and the early
part of 1998. As the CA found and discussed in its decision,
and with which we agree as amply supported by factual and
legal bases, the nature of these specified entries/transactions
as either excepted from the collection of service charges or not
constituting a "sale of food, beverage, etc.," and the Union's
failure to support its claims by sufficient evidence warranted,
without doubt, the denial of the Union's action.
In sum, we find the CA's denial of the Union's claim for service
charges from the specified entries/transactions legally correct
and to be well supported by the facts and the law. The CA
correctly reversed for grave abuse of discretion the NLRC's
decision.
WHEREFORE, in light of these considerations, we hereby
DENY the petition. We AFFIRM the decision dated January 31,
2007 and resolution dated April 20, 2007 of the Court of
Appeals in CA-G.R. Sp No. 93698.
SO ORDERED.
G.R. No. 175773 June 17, 2013
MITSUBISHI MOTORS PHILIPPINES SALARIED
EMPLOYEES UNION (MMPSEU), Petitioner,
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION,
Respondent.
DEL CASTILLO, J.:
The Collective Bargaining Agreement (CBA) of the parties in
this case provides that the company shoulder the
hospitalization expenses of the dependents of covered
employees subject to certain limitations and restrictions.
Accordingly, covered employees pay part of the hospitalization
insurance premium through monthly salary deduction while the
company, upon hospitalization of the covered employees'
dependents, shall pay the hospitalization expenses incurred for
the same. The conflict arose when a portion of the
hospitalization expenses of the covered employees'
dependents were paid/shouldered by the dependent's own
health insurance. While the company refused to pay the
portion of the hospital expenses already shouldered by the
dependents' own health insurance, the union insists that the
covered employees are entitled to the whole and undiminished
amount of said hospital expenses.
By this Petition for Review on Certiorari,1 petitioner Mitsubishi
Motors Philippines Salaried Employees Union (MMPSEU)
assails the March 31, 2006 Decision2 and December 5, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
75630, which reversed and set aside the Voluntary Arbitrator’s
December 3, 2002 Decision4 and declared respondent
Mitsubishi Motors Philippines Corporation (MMPC) to be under
no legal obligation to pay its covered employees’ dependents’
hospitalization expenses which were already shouldered by
other health insurance companies.
Factual Antecedents
The parties’ CBA5 covering the period August 1, 1996 to July
31, 1999 provides for the hospitalization insurance benefits for
the covered dependents, thus:
SECTION 4. DEPENDENTS’ GROUP HOSPITALIZATION
INSURANCE – The COMPANY shall obtain group
hospitalization insurance coverage or assume under a self-
insurance basis hospitalization for the dependents of regular
employees up to a maximum amount of forty thousand pesos
(₱40,000.00) per confinement subject to the following:
a. The room and board must not exceed three hundred pesos
(₱300.00) per day up to a maximum of thirty-one (31) days.
Similarly, Doctor’s Call fees must not exceed three hundred
pesos (₱300.00) per day for a maximum of thirty-one (31)
days. Any excess of this amount shall be borne by the
employee.
b. Confinement must be in a hospital designated by the
COMPANY. For this purpose, the COMPANY shall designate
hospitals in different convenient places to be availed of by the
dependents of employees. In cases of emergency where the
dependent is confined without the recommendation of the
company doctor or in a hospital not designated by the
COMPANY, the COMPANY shall look into the circumstances
of such confinement and arrange for the payment of the
amount to the extent of the hospitalization benefit.
c. The limitations and restrictions listed in Annex "B" must be
observed.
d. Payment shall be direct to the hospital and doctor and must
be covered by actual billings.
Each employee shall pay one hundred pesos (₱100.00) per
month through salary deduction as his share in the payment of
the insurance premium for the above coverage with the
balance of the premium to be paid by the COMPANY. If the
COMPANY is self-insured the one hundred pesos (₱100.00)
per employee monthly contribution shall be given to the
COMPANY which shall shoulder the expenses subject to the
above level of benefits and subject to the same limitations and
restrictions provided for in Annex "B" hereof.
The hospitalization expenses must be covered by actual
hospital and doctor’s bills and any amount in excess of the
above mentioned level of benefits will be for the account of the
employee.
23
For purposes of this provision, eligible dependents are the
covered employees’ natural parents, legal spouse and
legitimate or legally adopted or step children who are
unmarried, unemployed who have not attained twenty-one (21)
years of age and wholly dependent upon the employee for
support.
This provision applies only in cases of actual confinement in
the hospital for at least six (6) hours.
Maternity cases are not covered by this section but will be
under the next succeeding section on maternity benefits.6
When the CBA expired on July 31, 1999, the parties executed
another CBA7 effective August 1, 1999 to July 31, 2002
incorporating the same provisions on dependents’
hospitalization insurance benefits but in the increased amount
of ₱50,000.00. The room and board expenses, as well as the
doctor’s call fees, were also increased to ₱375.00.
On separate occasions, three members of MMPSEU, namely,
Ernesto Calida (Calida), Hermie Juan Oabel (Oabel) and
Jocelyn Martin (Martin), filed claims for reimbursement of
hospitalization expenses of their dependents.
MMPC paid only a portion of their hospitalization insurance
claims, not the full amount. In the case of Calida, his wife,
Lanie, was confined at Sto. Tomas University Hospital from
September 4 to 9, 1998 due to Thyroidectomy. The medical
expenses incurred totalled ₱29,967.10. Of this amount,
₱9,000.00 representing professional fees was paid by
MEDICard Philippines, Inc. (MEDICard) which provides health
maintenance to Lanie.8 MMPC only paid ₱12,148.63.9 It did
not pay the ₱9,000.00 already paid by MEDICard and the
₱6,278.47 not covered by official receipts. It refused to give to
Calida the difference between the amount of medical expenses
of ₱27,427.1010 which he claimed to be entitled to under the
CBA and the ₱12,148.63 which MMPC directly paid to the
hospital.
In the case of Martin, his father, Jose, was admitted at The
Medical City from March 26 to 27, 2000 due to Acid Peptic
Disease and incurred medical expenses amounting to
₱9,101.30.14 MEDICard paid ₱8,496.00.15 Consequently,
MMPC only paid ₱288.40,16 after deducting from the total
medical expenses the amount paid by MEDICard and the
₱316.90 discount given by the hospital.
Claiming that under the CBA, they are entitled to hospital
benefits amounting to ₱27,427.10, ₱6,769.35 and ₱8,123.80,
respectively, which should not be reduced by the amounts paid
by MEDICard and by Prosper, Calida, Oabel and Martin asked
for reimbursement from MMPC. However, MMPC denied the
claims contending that double insurance would result if the
said employees would receive from the company the full
amount of hospitalization expenses despite having already
received payment of portions thereof from other health
insurance providers.
This prompted the MMPSEU President to write the MMPC
President17 demanding full payment of the hospitalization
benefits. Alleging discrimination against MMPSEU union

members, she pointed out that full reimbursement was given in
a similar claim filed by Luisito Cruz (Cruz), a member of the
Hourly Union. In a letter-reply,18 MMPC, through its Vice-
President for Industrial Relations Division, clarified that the
claims of the said MMPSEU members have already been paid
on the basis of official receipts submitted. It also denied the
charge of discrimination and explained that the case of Cruz
involved an entirely different matter since it concerned the
admissibility of certified true copies of documents for
reimbursement purposes, which case had been settled through
voluntary arbitration.
On August 28, 2000, MMPSEU referred the dispute to the
National Conciliation and Mediation Board and requested for
preventive mediation.19
Proceedings before the Voluntary Arbitrator
On October 3, 2000, the case was referred to Voluntary
Arbitrator Rolando Capocyan for resolution of the issue
involving the interpretation of the subject CBA provision.20
MMPSEU alleged that there is nothing in the CBA which
prohibits an employee from obtaining other insurance or
declares that medical expenses can be reimbursed only upon
presentation of original official receipts. It stressed that the
hospitalization benefits should be computed based on the
formula indicated in the CBA without deducting the benefits
derived from other insurance providers. Besides, if reduction is
permitted, MMPC would be unjustly benefited from the monthly
premium contributed by the employees through salary
deduction. MMPSEU added that its members had legitimate
claims under the CBA and that any doubt as to any of its
provisions should be resolved in favor of its members.
Moreover, any ambiguity should be resolved in favor of
labor.21
On the other hand, MMPC argued that the reimbursement of
the entire amounts being claimed by the covered employees,
including those already paid by other insurance companies,
would constitute double indemnity or double insurance, which
is circumscribed under the Insurance Code. Moreover, a
contract of insurance is a contract of indemnity and the
employees cannot be allowed to profit from their dependents’
loss.22
Meanwhile, the parties separately sought for a legal opinion
from the Insurance Commission relative to the issue at hand.
In its letter23 to the Insurance Commission, MMPC requested
for confirmation of its position that the covered employees
cannot claim insurance benefits for a loss that had already
been covered or paid by another insurance company.
However, the Office of the Insurance Commission opted not to
render an opinion on the matter as the same may become the
subject of a formal complaint before it.24 On the other hand,
when queried by MMPSEU,25 the Insurance Commission,
through Atty. Richard David C. Funk II (Atty. Funk) of the
Claims Adjudication Division, rendered an opinion contained in
a letter,26 viz:
Ms. Cecilia L. ParasPresident
Mitsubishi Motors Phils.
[Salaried] Employees Union
Ortigas Avenue Extension,
Cainta, Rizal
Madam:
We acknowledge receipt of your letter which, to our
impression, basically poses the question of whether or not
recovery of medical expenses from a Health Maintenance
Organization bars recovery of the same reimbursable amount
of medical expenses under a contract of health or medical
insurance.
We wish to opine that in cases of claims for reimbursement of
medical expenses where there are two contracts providing
benefits to that effect, recovery may be had on both
simultaneously. In the absence of an Other Insurance
provision in these coverages, the courts have uniformly held
that an insured is entitled to receive the insurance benefits
without regard to the amount of total benefits provided by other
insurance. (INSURANCE LAW, A Guide to Fundamental
Principles, Legal Doctrines, and Commercial Practices; Robert
E. Keeton, Alau I. Widiss, p. 261). The result is consistent with
the public policy underlying the collateral source rule – that is,
x x x the courts have usually concluded that the liability of a
health or accident insurer is not reduced by other possible
sources of indemnification or compensation. (ibid).
Very truly yours,
RICHARD DAVID C. FUNK II
Officer-in-Charge
Claims Adjudication Division
(SGD.)
Attorney IV
On December 3, 2002, the Voluntary Arbitrator rendered a
Decision27 finding MMPC liable to pay or reimburse the
amount of hospitalization expenses already paid by other
health insurance companies. The Voluntary Arbitrator held that
the employees may demand simultaneous payment from both
the CBA and their dependents’ separate health insurance
without resulting to double insurance, since separate
premiums were paid for each contract. He also noted that the
CBA does not prohibit reimbursement in case there are other
health insurers.
Proceedings before the Court of Appeals
MMPC filed a Petition for Review with Prayer for the Issuance
of a Temporary Restraining Order and/or Writ of Preliminary
Injunction28 before the CA. It claimed that the Voluntary
Arbitrator committed grave abuse of discretion in not finding
that recovery under both insurance policies constitutes double
insurance as both had the same subject matter, interest
insured and risk or peril insured against; in relying solely on the
unauthorized legal opinion of Atty. Funk; and in not finding that
the employees will be benefited twice for the same loss. In its
Comment,29 MMPSEU countered that MMPC will unjustly
24
enrich itself and profit from the monthly premiums paid if full
reimbursement is not made.
On March 31, 2006, the CA found merit in MMPC’s Petition. It
ruled that despite the lack of a provision which bars recovery in
case of payment by other insurers, the wordings of the subject
provision of the CBA showed that the parties intended to make
MMPC liable only for expenses actually incurred by an
employee’s qualified dependent. In particular, the provision
stipulates that payment should be made directly to the hospital
and that the claim should be supported by actual hospital and
doctor’s bills. These mean that the employees shall only be
paid amounts not covered by other health insurance and is
more in keeping with the principle of indemnity in insurance
contracts. Besides, a contrary interpretation would "allow
unscrupulous employees to unduly profit from the x x x
benefits" and shall "open the floodgates to questionable claims
x x x."30
The dispositive portion of the CA Decision31 reads:
WHEREFORE, the instant petition is GRANTED. The decision
of the voluntary arbitrator dated December 3, 2002 is
REVERSED and SET ASIDE and judgment is rendered
declaring that under Art. XI, Sec. 4 of the Collective Bargaining
Agreement between petitioner and respondent effective
August 1, 1999 to July 31, 2002, the former’s obligation to
reimburse the Union members for the hospitalization expenses
incurred by their dependents is exclusive of those paid by the
Union members to the hospital.
SO ORDERED.32
In its Motion for Reconsideration,33 MMPSEU pointed out that
the alleged oppression that may be committed by abusive
employees is a mere possibility whereas the resulting losses to
the employees are real. MMPSEU cited Samsel v. Allstate
Insurance Co.,34 wherein the Arizona Supreme Court explicitly
ruled that an insured may recover from separate health
insurance providers, regardless of whether one of them has
already paid the medical expenses incurred. On the other
hand, MMPC argued in its Comment35 that the cited foreign
case involves a different set of facts.
The CA, in its Resolution36 dated December 5, 2006, denied
MMPSEU’s motion.
Hence, this Petition.
Issues
MMPSEU presented the following grounds in support of its
Petition:
A.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT
REVERSED THE DECISION DATED 03 [DECEMBER] 2002
OF THE VOLUNTARY ARBITRATOR BELOW WHEN THE
SAME WAS SUPPORTED BY SUBSTANTIAL EVIDENCE,
INCLUDING THE OPINION OF THE INSURANCE
COMMISSION THAT RECOVERY FROM BOTH THE CBA

AND SEPARATE HEALTH CARDS IS NOT PROHIBITED IN
THE ABSENCE OF ANY SPECIFIC PROVISION IN THE
CBA.
B.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN OVERTURNING THE DECISION OF THE
VOLUNTARY ARBITRATOR WITHOUT EVEN GIVING ANY
LEGAL OR JUSTIFIABLE BASIS FOR SUCH REVERSAL.
C.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN
REFUSING TO CONSIDER OR EVEN MENTION ANYTHING
ABOUT THE AMERICAN AUTHORITIES CITED IN THE
RECORDS THAT DO NOT PROHIBIT, BUT IN FACT ALLOW,
RECOVERY FROM TWO SEPARATE HEALTH PLANS.
D.
THE COURT OF APPEALS GRAVELY ERRED IN GIVING
MORE IMPORTANCE TO A POSSIBLE, HENCE MERELY
SPECULATIVE, ABUSE BY EMPLOYEES OF THE
BENEFITS IF DOUBLE RECOVERY WERE ALLOWED
INSTEAD OF THE REAL INJURY TO THE EMPLOYEES
WHO ARE PAYING FOR THE CBA HOSPITALIZATION
BENEFITS THROUGH MONTHLY SALARY DEDUCTIONS
BUT WHO MAY NOT BE ABLE TO AVAIL OF THE SAME IF
THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH
INSURANCE.37
MMPSEU avers that the Decision of the Voluntary Arbitrator
deserves utmost respect and finality because it is supported by
substantial evidence and is in accordance with the opinion
rendered by the Insurance Commission, an agency equipped
with vast knowledge concerning insurance contracts. It
maintains that under the CBA, member-employees are entitled
to full reimbursement of medical expenses incurred by their
dependents regardless of any amounts paid by the latter’s
health insurance provider. Otherwise, non-recovery will
constitute unjust enrichment on the part of MMPC. It avers that
recovery from both the CBA and other insurance companies is
allowed under their CBA and not prohibited by law nor by
jurisprudence.
Our Ruling
The Petition has no merit.
Atty. Funk erred in applying the
collateral source rule.
The Voluntary Arbitrator based his ruling on the opinion of Atty.
Funk that the employees may recover benefits from different
insurance providers without regard to the amount of benefits
paid by each. According to him, this view is consistent with the
theory of the collateral source rule.
As part of American personal injury law, the collateral source
rule was originally applied to tort cases wherein the defendant
is prevented from benefiting from the plaintiff’s receipt of
money from other sources.38 Under this rule, if an injured
person receives compensation for his injuries from a source
wholly independent of the tortfeasor, the payment should not
be deducted from the damages which he would otherwise
collect from the tortfeasor.39 In a recent Decision40 by the
Illinois Supreme Court, the rule has been described as "an
established exception to the general rule that damages in
negligence actions must be compensatory." The Court went on
to explain that although the rule appears to allow a double
recovery, the collateral source will have a lien or subrogation
right to prevent such a double recovery.41 In Mitchell v.
Haldar,42 the collateral source rule was rationalized by the
Supreme Court of Delaware:
The collateral source rule is ‘predicated on the theory that a
tortfeasor has no interest in, and therefore no right to benefit
from monies received by the injured person from sources
unconnected with the defendant’. According to the collateral
source rule, ‘a tortfeasor has no right to any mitigation of
damages because of payments or compensation received by
the injured person from an independent source.’ The rationale
for the collateral source rule is based upon the quasi-punitive
nature of tort law liability. It has been explained as follows:
The collateral source rule is designed to strike a balance
between two competing principles of tort law: (1) a plaintiff is
entitled to compensation sufficient to make him whole, but no
more; and (2) a defendant is liable for all damages that
proximately result from his wrong. A plaintiff who receives a
double recovery for a single tort enjoys a windfall; a defendant
who escapes, in whole or in part, liability for his wrong enjoys a
windfall. Because the law must sanction one windfall and deny
the other, it favors the victim of the wrong rather than the
wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full
value of his or her negligent conduct even if it results in a
windfall for the innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the
responsibility for losses on the party causing them.43 Its
application is justified so that "'the wrongdoer should not
benefit from the expenditures made by the injured party or take
advantage of contracts or other relations that may exist
between the injured party and third persons."44 Thus, it finds
no application to cases involving no-fault insurances under
which the insured is indemnified for losses by insurance
companies, regardless of who was at fault in the incident
generating the losses.45 Here, it is clear that MMPC is a no-
fault insurer. Hence, it cannot be obliged to pay the
hospitalization expenses of the dependents of its employees
which had already been paid by separate health insurance
providers of said dependents.
The Voluntary Arbitrator therefore erred in adopting Atty.
Funk’s view that the covered employees are entitled to full
payment of the hospital expenses incurred by their
dependents, including the amounts already paid by other
health insurance companies based on the theory of collateral
source rule.
25
The conditions set forth in the CBA provision indicate an
intention to limit MMPC’s liability only to actual expenses
incurred by the employees’ dependents, that is, excluding the
amounts paid by dependents’ other health insurance providers.
The Voluntary Arbitrator ruled that the CBA has no express
provision barring claims for hospitalization expenses already
paid by other insurers. Hence, the covered employees can
recover from both. The CA did not agree, saying that the
conditions set forth in the CBA implied an intention of the
parties to limit MMPC’s liability only to the extent of the
expenses actually incurred by their dependents which
excludes the amounts shouldered by other health insurance
companies.
We agree with the CA. The condition that payment should be
direct to the hospital and doctor implies that MMPC is only
liable to pay medical expenses actually shouldered by the
employees’ dependents. It follows that MMPC’s liability is
limited, that is, it does not include the amounts paid by other
health insurance providers. This condition is obviously
intended to thwart not only fraudulent claims but also double
claims for the same loss of the dependents of covered
employees.
It is well to note at this point that the CBA constitutes a
contract between the parties and as such, it should be strictly
construed for the purpose of limiting the amount of the
employer’s liability.46 The terms of the subject provision are
clear and provide no room for any other interpretation. As there
is no ambiguity, the terms must be taken in their plain, ordinary
and popular sense.47 Consequently, MMPSEU cannot rely on
the rule that a contract of insurance is to be liberally construed
in favor of the insured. Neither can it rely on the theory that any
doubt must be resolved in favor of labor.
Samsel v. Allstate Insurance Co. is not
on all fours with the case at bar.
MMPSEU cannot rely on Samsel v. Allstate Insurance Co.
where the Supreme Court of Arizona allowed the insured to
enjoy medical benefits under an automobile policy insurance
despite being able to also recover from a separate health
insurer. In that case, the Allstate automobile policy does not
contain any clause restricting medical payment coverage to
expenses actually paid by the insured nor does it specifically
provide for reduction of medical payments benefits by a
coordination of benefits.48 However, in the case before us, the
dependents’ group hospitalization insurance provision in the
CBA specifically contains a condition which limits MMPC’s
liability only up to the extent of the expenses that should be
paid by the covered employee’s dependent to the hospital and
doctor. This is evident from the portion which states that
"payment by MMPC shall be direct to the hospital and
doctor."49 In contrast, the Allstate automobile policy expressly
gives Allstate the authority to pay directly to the insured person
or on the latter’s behalf all reasonable expenses actually
incurred. Therefore, reliance on Samsel is unavailing because
the facts therein are different and not decisive of the issues in
the present case.
To allow reimbursement of amounts paid

under other insurance policies shall
constitute double recovery which is not
sanctioned by law.
MMPSEU insists that MMPC is also liable for the amounts
covered under other insurance policies; otherwise, MMPC will
unjustly profit from the premiums the employees contribute
through monthly salary deductions.
This contention is unmeritorious.
To constitute unjust enrichment, it must be shown that a party
was unjustly enriched in the sense that the term unjustly could
mean illegally or unlawfully.50 A claim for unjust enrichment
fails when the person who will benefit has a valid claim to such
benefit.51
The CBA has provided for MMPC’s limited liability which
extends only up to the amount to be paid to the hospital and
doctor by the employees’ dependents, excluding those paid by
other insurers. Consequently, the covered employees will not
receive more than what is due them; neither is MMPC under
any obligation to give more than what is due under the CBA.
Moreover, since the subject CBA provision is an insurance
contract, the rights and obligations of the parties must be
determined in accordance with the general principles of
insurance law.52 Being in the nature of a non-life insurance
contract and essentially a contract of indemnity, the CBA
provision obligates MMPC to indemnify the covered
employees’ medical expenses incurred by their dependents
but only up to the extent of the expenses actually incurred.53
This is consistent with the principle of indemnity which
proscribes the insured from recovering greater than the loss.54
Indeed, to profit from a loss will lead to unjust enrichment and
therefore should not be countenanced. As aptly ruled by the
CA, to grant the claims of MMPSEU will permit possible abuse
by employees.
WHEREFORE, the Petition is DENIED. The Decision dated
March 31, 2006 and Resolution dated December 5, 2006 of
the Court of Appeals in CA-G.R. SP No. 75630, are
AFFIRMED.
SO ORDERED.
2.5 But management rights likewise protected
G.R. No. 191281 December 5, 2012
BEST WEAR GARMENTS and/or WARREN PARDILLA,
Petitioners,
vs.
ADELAIDA B. DE LEMOS and CECILE M. OCUBILLO,
Respondents.
DECISION
VILLARAMA, J.:
This is a petition for review on certiorari under Rule 45
assailing the Decision1 dated February 24, 2009 and
Resolution2 dated February 10, 2010 of the Court of Appeals
(CA) in CA-G.R. SP No. 102002. TheCA reversed the
Decision3 dated August 28, 2007 of the National Labor
Relations Commission (NLRC) and reinstated the September
5, 2005 Decision 4 of the Labor Arbiter.
Petitioner Best Wear Garments is a sole proprietorship
represented by its General Manager Alex Sitosta.
Respondents Cecile M. Ocubillo and Adelaida B. De Lemos
were hired as sewers on piece-rate basis by petitioners on
October 27, 1993 andJuly 12, 1994, respectively.
On May 20, 2004, De Lemos filed a complaint5 for illegal
dismissal with prayer for backwages and other accrued
benefits, separation pay, service incentive leave pay and
attorney’s fees. A similar complaint6 was filed by Ocubillo on
June 10, 2004. Both alleged in their position paper that in
August 2003, Sitosta arbitrarily transferred them to other areas
of operation of petitioner’s garments company, which they said
amounted to constructive dismissal as it resulted in less
earnings for them.
De Lemos claimed that after two months in her new
assignment, she was able to adjust but Sitosta again
transferred her to a "different operation where she could not
earn [as] much as before because by-products require long
period of time to finish." She averred that the reason for her
transfer was her refusal "to render [overtime work] up to 7:00
p.m." Her request to be returned to her previous assignment
was rejected and she was "constrained not to report for work
as Sitosta had become indifferent to her since said transfer of
operation." She further alleged that her last salary was
withheld by petitioner company.7
On her part, Ocubillo alleged that her transfer was precipitated
by her having "incurred excessive absences since 2001." Her
absences were due to the fact that her father became very sick
since 2001 until his untimely demise on November 9, 2003;
aside from this, she herself became very sickly. She claimed
that from September to October 2003, Sitosta assigned her to
different machines "whichever is available" and that "there
were times, she could not earn for a day because there was no
available machine to work for [sic]." Sitosta also allegedly
required her to render overtime work up to 7:00 p.m. which she
refused "because she was only paid up to 6:25 p.m."8
Petitioners denied having terminated the employment of
respondents who supposedly committed numerous absences
without leave (AWOL). They claimed that sometime in
February 2004, De Lemos informed Sitosta that due to
personal problem, she intends to resign from the company.
She then demanded the payment of separation pay. In March
2004, Ocubillo likewise intimated her intention to resign and
demanded separation pay. Sitosta explained to both De Lemos
and Ocubillo that the company had no existing policy on
granting separation pay, and hence he could not act on their
request. De Lemos never reported back to work since March
2004, while Ocubillo failed to report for work from October
2004 to the present.
As to the allegation of respondents that the reason for their
transfer was their refusal to render overtime work until 7:00
26
p.m., petitioners asserted that respondents are piece-rate
workers and hence they are not paid according to the number
of hours worked.
On September 5, 2005, Labor Arbiter Arden S. Anni rendered
a Decision granting respondents’ claims, as follows:
WHEREFORE, ALL THE FOREGOING CONSIDERED,
judgment is rendered, as follows:
1. Declaring that complainants were constructively, nay,
illegally dismissed from employment;
2. Ordering respondents to pay each of the complainants
SEPARATION PAY equivalent to one-month salary for every
year of service, a fraction of at least six (6) months being
considered as one (1) whole year;
3. Ordering respondents to pay each of the complainants
BACKWAGES computed from the time of their dismissal up to
the finality of this decision.
For this purpose, both parties are directed to submit their
respective computations of the total amount awarded for
approval by this office.
All other claims are dismissed for lack of merit.
SO ORDERED.9
Labor Arbiter Anni ruled that since respondents neither
resigned nor abandoned their jobs, the ambiguities in the
circumstances surrounding their dismissal are resolved in favor
of the workers. It was emphasized that respondents could no
longer be deemed terminated for reason of AWOL because
this prerogative should have been exercised before the
dismissals have been effected. Moreover, it would have been
illogical for respondents to resign and then file a complaint for
illegal dismissal.
Petitioners appealed to the NLRC which reversed the Labor
Arbiter’s decision and dismissed respondents’ complaints. The
NLRC found no basis for the charge of constructive dismissal,
thus:
Complainants’ alleged demotion is vague. They simply allege
that by reason of their transfer in August 2003, they did not
earn as much as they earned in their previous assignments.
They failed to state how much they earned before and after
their transfer, if only to determine whether or not there was
indeed a diminution in their earnings. Further, it is to be
stressed that complainants were paid on a piece rate basis,
which simply means that the more output, they produced the
more earnings they will have. In other words, the earning is
dependent upon complainants.
We find more credible respondents’ assertion that
complainants’ transfer was a valid exercise of management
prerogative. Respondent company points out that it is engaged
in the business of garments manufacturing as a sub-
contractor. That, the kind of work it performs is dependent into
with its client which specifies the work it has to perform. And,

that corollary thereto, the work to be performed by its
employees will depend on the work specifications in the
contract. Thus, if complainants have been assigned to different
operations, it was pursuant to the requirements of its contracts.
x x x.
In furtherance of their defense that complainants were not
dismissed, either actual or constructive in August 2003,
respondents allege that complainants continued to report for
work until February 2004 for complainant De Lemos and
August 2004 for complainant Ocubillo. We lend credence to
this allegation of respondents because it remains unrebutted
by complainants.
It is to be noted that it was only [on] May 20, 2004 and June
10, 2004 that the instant consolidated cases were filed by
complainant De Lemos and Ocubillo, respectively. It may not
be amiss to state that the date of filing jibe with respondents’
allegation that sometime in February and March 2004,
complainants intimated their intention to resign and demanded
for payment of separation pay but was not favorably acted
upon by management.
Be that as it may, considering that complainants were not
dismissed by respondents, they should be ordered to report
back to work without backwages and for the respondents to
accept them.
WHEREFORE, premises considered, the Decision dated
September 5, 2005 is hereby SET ASIDE and a new one
entered dismissing complainants’ charge of illegal dismissal for
lack of merit. However, there being no dismissal, complainants
Adelaida B. De Lemos and Cecile M. Ocubillo are hereby
directed to report back to work without backwages within ten
(10) days from receipt of this Resolution and for the
respondent Company to accept them under the same terms
and conditions at the time of their employment.
SO ORDERED.10 (Italics in the original; emphasis supplied)
Respondents filed a motion for reconsideration which the
NLRC denied. Thus, they elevated the case to the CA alleging
grave abuse of discretion on the part of the NLRC.
By Decision dated February 24, 2009, the CA granted the
petition for certiorari, reversed the ruling of the NLRC and
reinstated the Labor Arbiter’s decision with modification that
the service incentive leave pay shall be excluded in the
computation of the monetary award. The CA found no valid
and legitimate business reason for the transfer order which
entailed the reduction of respondents’ earnings. Because
respondents’ plea to be returned to their former posts was not
heeded by petitioners, no other conclusion "is discernible from
the attendant circumstances except the fact that [respondents’]
transfer was unreasonable, inconvenient and prejudicial to
them which [is] tantamount to a constructive dismissal."11
Moreover, the unauthorized absences of respondents did not
warrant a finding of abandonment in view of the length of their
service with petitioner company and the difficulty in finding
similar employment. The CA further invoked the rule that an
employee who forthwith takes steps to protest his layoff cannot
by any logic be said to have abandoned his work.
Petitioners filed a motion for partial reconsideration which was
denied by the CA.
Hence, this petition alleging that the CA has glaringly
overlooked and clearly erred in its findings of fact and in
applying the law on constructive dismissal.
At the outset, it must bestated that the main issue in this case
involves a question of fact. It is an established rule that the
jurisdiction of the Supreme Court in cases brought before it
from the CA via Rule 45 of the 1997 Rules of Civil Procedure is
generally limited to reviewing errors of law. This Court is not a
trier of facts. In the exercise of its power of review, the findings
of fact of the CA are conclusive and binding and consequently,
it is not our function to analyze or weigh evidence all over
again.12
There are, however, recognized exceptions13 to this rule such
as when there is a divergence between the findings of facts of
the NLRC and that of the CA.14 In this case, the CA’s findings
are contrary to those of the NLRC. There is, therefore, a need
to review the records to determine which of them should be
preferred as more conformable to evidentiary facts.15
The right of employees to security of tenure does not give
them vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or
to transfer them. Thus, an employer may transfer or assign
employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary,
benefits, and other privileges, and the action is not motivated
by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause.16
In Blue Dairy Corporation v. NLRC,17 we held that:
x x x. The managerial prerogative to transfer personnel must
be exercised without grave abuse of discretion, bearing in
mind the basic elements of justice and fair play. Having the
right should not be confused with the manner in which that
right is exercised. Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker. In
particular, the employer must be able to show that the transfer
is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other benefits. Should
the employer fail to overcome this burden of proof, the
employee’s transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because
continued employment is rendered impossible, unreasonable
or unlikely; as an offer involving a demotion in rank and
diminution in pay. Likewise, constructive dismissal exists when
an act of clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee leaving
him with no option but to forego with his continued
employment.18
With the foregoing as guidepost, we hold that the CA erred in
reversing the NLRC’s ruling that respondents were not
constructively dismissed.
27
Being piece-rate workers assigned to individual sewing
machines, respondents’ earnings depended on the quality and
quantity of finished products. That their work output might have
been affected by the change in their specific work assignments
does not necessarily implythat any resultingreduction in payis
tantamount to constructive dismissal. Workers under piece-
rate employment have no fixed salaries and their
compensation is computed on the basis of accomplished
tasks. As admitted by respondent De Lemos, some garments
or by-products took a longer time to finish so they could not
earn as much as before. Also,the type of sewing jobs available
would depend on the specifications made by the clients of
petitioner company. Under these circumstances, it cannot be
said that the transfer was unreasonable, inconvenient or
prejudicial to the respondents. Such deployment of sewers to
work on different types of garments as dictated by present
business necessity is within the ambit of management
prerogative which, in the absence of bad faith, ill motive or
discrimination, should not be interfered with by the courts.
The records are bereft of any showing of clear discrimination,
insensibility or disdain on the part of petitioners in transferring
respondents to perform a different type of sewing job.It is
unfair to charge petitioners with constructive dismissal simply
because the respondents insist that their transfer to a new
work assignment was against their will. We have long stated
that "the objection to the transfer being grounded on solely
upon the personal inconvenience or hardship that will be
caused to the employee by reason of the transfer is not a valid
reason to disobey an order of transfer."19 That respondents
eventually discontinued reporting for work after their plea to be
returned to their former work assignment was their personal
decision, for which the petitioners should not be held liable
particularly as the latter did not, in fact, dismiss them.
Indeed, there was no evidence that respondents were
dismissed from employment.1âwphi1 In fact, petitioners
expressed willingness to accept them back to work. There
being no termination of employment by the employer, the
award of backwages cannot be sustained. It is well settled that
backwages may be granted only when there is a finding of
illegal dismissal.20 In cases where there is no evidence of
dismissal, the remedy is reinstatement but without
backwages.21
The constitutional policy of providing full protection to labor is
not intended to oppress or destroy management.22 While the
Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that
every labor dispute will be automatically decided in favor of
labor. Management also has its rights which are entitled to
respect and enforcement in the interest of simple fair play.23
Thus, where management prerogative to transfer employees is
validly exercised, as in this case, courts will decline to
interfere.
WHEREFORE, the petition for review on certiorari is
GRANTED. The Decision dated February 24, 2009 and
Resolution dated February 10, 2010 of the Court of Appeals in
CA-G.R. SP No. 102002 are SET ASIDE. The Decision dated
August 28, 2007 of the National Labor Relations Commission
is hereby REINSTATED and UPHELD.

No pronouncement as to costs.
SO ORDERED.
2.6 Paradigm shift towards mutual cooperation
G.R. Nos. 158786 &158789
VELASCO, JR., JJ.
TOYOTA MOTOR PHILS. CORP. WORKERS ASSOCIATION
(TMPCWA) - versus – NATIONAL LABOR RELATIONS
COMMISSION, (NLRC-2ND DIVISION), HON.
COMMISSIONERS: VICTORINO CALAYCAY, ANGELITA
GACUTAN, and RAUL AQUINO, TOYOTA MOTOR
PHILIPPINES CORPORATION, TAKESHI FUKUDA, and
DAVID GO, Respondents,
VELASCO, JR., J.:
The Case
In the instant petition under Rule 45 subject of G.R. Nos.
158786 and 158789, Toyota Motor Philippines Corporation
Workers Association (Union) and its dismissed officers and
members seek to set aside the February 27, 2003 Decision[1]
of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and
67561, which affirmed the August 9, 2001 Decision[2] and
September 14, 2001 Resolution[3] of the National Labor
Relations Commission (NLRC), declaring illegal the strikes
staged by the Union and upholding the dismissal of the 227
Union officers and members.
On the other hand, in the related cases docketed as G.R. Nos.
158798-99, Toyota Motor Philippines Corporation (Toyota)
prays for the recall of the award of severance compensation to
the 227 dismissed employees, which was granted under the
June 20, 2003 CA Resolution[4] in CA-G.R. SP Nos. 67100
and 67561.
In view of the fact that the parties are petitioner/s and
respondent/s and vice-versa in the four (4) interrelated cases,
they will be referred to as simply the Union and Toyota
hereafter.
The Facts
The Union is a legitimate labor organization duly registered
with the Department of Labor and Employment (DOLE) and is
the sole and exclusive bargaining agent of all Toyota rank and
file employees.[5]
Toyota, on the other hand, is a domestic corporation engaged
in the assembly and sale of vehicles and parts.[6] It is a Board
of Investments (BOI) participant in the Car Development
Program and the Commercial Vehicle Development Program.
It is likewise a BOI-preferred non-pioneer export trader of
automotive parts and is under the Special Economic Zone Act
of 1995. It is one of the largest motor vehicle manufacturers in
the country employing around 1,400 workers for its plants in
Bicutan and Sta. Rosa, Laguna. It is claimed that its assets
amount to PhP 5.525 billion, with net sales of PhP 14.646
billion and provisions for income tax of PhP 120.9 million.
On February 14, 1999, the Union filed a petition for certification
election among the Toyota rank and file employees with the
National Conciliation and Mediation Board (NCMB), which was
docketed as Case No. NCR-OD-M-9902-001. Med-Arbiter Ma.
Zosima C. Lameyra denied the petition, but, on appeal, the
DOLE Secretary granted the Unions prayer, and, through the
June 25, 1999 Order, directed the immediate holding of the
certification election.[7]
After Toyotas plea for reconsideration was denied, the
certification election was conducted. Med-Arbiter Lameyras
May 12, 2000 Order certified the Union as the sole and
exclusive bargaining agent of all the Toyota rank and file
employees. Toyota challenged said Order via an appeal to the
DOLE Secretary.[8]
In the meantime, the Union submitted its Collective Bargaining
Agreement (CBA) proposals to Toyota, but the latter refused to
negotiate in view of its pending appeal. Consequently, the
Union filed a notice of strike on January 16, 2001 with the
NCMB, docketed as NCMB-NCR-NS-01-011-01, based on
Toyotas refusal to bargain. On February 5, 2001, the NCMB-
NCR converted the notice of strike into a preventive mediation
case on the ground that the issue of whether or not the Union
is the exclusive bargaining agent of all Toyota rank and file
employees was still unresolved by the DOLE Secretary.
In connection with Toyotas appeal, Toyota and the Union were
required to attend a hearing on February 21, 2001 before the
Bureau of Labor Relations (BLR) in relation to the exclusion of
the votes of alleged supervisory employees from the votes cast
during the certification election. The February 21, 2001 hearing
was cancelled and reset to February 22, 2001. On February
21, 2001, 135 Union officers and members failed to render the
required overtime work, and instead marched to and staged a
picket in front of the BLR office in Intramuros, Manila.[9] The
Union, in a letter of the same date, also requested that its
members be allowed to be absent on February 22, 2001 to
attend the hearing and instead work on their next scheduled
rest day. This request however was denied by Toyota.
Despite denial of the Unions request, more than 200
employees staged mass actions on February 22 and 23, 2001
in front of the BLR and the DOLE offices, to protest the
partisan and anti-union stance of Toyota. Due to the deliberate
absence of a considerable number of employees on February
22 to 23, 2001, Toyota experienced acute lack of manpower in
its manufacturing and production lines, and was unable to
meet its production goals resulting in huge losses of PhP
53,849,991.
Soon thereafter, on February 27, 2001, Toyota sent individual
letters to some 360 employees requiring them to explain within
24 hours why they should not be dismissed for their obstinate
defiance of the companys directive to render overtime work on
February 21, 2001, for their failure to report for work on
February 22 and 23, 2001, and for their participation in the
concerted actions which severely disrupted and paralyzed the
plants operations.[10] These letters specifically cited Section
D, paragraph 6 of the Companys Code of Conduct, to wit:
28
Inciting or participating in riots, disorders, alleged strikes, or
concerted actions detrimental to [Toyotas] interest.
1st offense dismissal.[11]
Meanwhile, a February 27, 2001 Manifesto was circulated by
the Union which urged its members to participate in a
strike/picket and to abandon their posts, the pertinent portion
of which reads, as follows:
YANIG sa kanyang komportableng upuan ang management ng
TOYOTA. And dating takot, kimi, at mahiyaing manggagawa
ay walang takot na nagmartsa at nagprotesta laban sa
desperadong pagtatangkang baguhin ang desisyon ng DOLE
na pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa
tatlong daang manggagawa ang lumahok.
xxxx
HANDA na tayong lumabas anumang oras kung patuloy na
ipagkakait ng management ang CBA. Oo maari tayong
masaktan sa welga. Oo, maari tayong magutom sa piketlayn.
Subalit may pagkakaiba ba ito sa unti-unting pagpatay sa atin
sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang
taon na lang ay magkakabutas na ang ating mga baga sa mga
alipato at usok ng welding. Ilang taon na lang ay marupok na
ang ating mga buto sa kabubuhat. Kung dumating na ang
panahong ito at wala pa tayong CBA, paano na? Hahayaan ba
nating ang kumpanya lang ang makinabang sa yamang likha
ng higit sa isang dekadang pagpapagal natin?
HUWAG BIBITIW SA NASIMULANG TAGUMPAY!
PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG
MAKATARUNGANG CBA!
HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA
MANGGAGAWA SA TOYOTA![12] (Emphasis supplied.)
On the next day, the Union filed with the NCMB another notice
of strike docketed as NCMB-NCR-NS-02-061-01 for union
busting amounting to unfair labor practice.
On March 1, 2001, the Union nonetheless submitted an
explanation in compliance with the February 27, 2001 notices
sent by Toyota to the erring employees. The Union members
explained that their refusal to work on their scheduled work
time for two consecutive days was simply an exercise of their
constitutional right to peaceably assemble and to petition the
government for redress of grievances. It further argued that the
demonstrations staged by the employees on February 22 and
23, 2001 could not be classified as an illegal strike or picket,
and that Toyota had already condoned the alleged acts when it
accepted back the subject employees.[13]
Consequently, on March 2 and 5, 2001, Toyota issued two (2)
memoranda to the concerned employees to clarify whether or
not they are adopting the March 1, 2001 Unions explanation as
their own. The employees were also required to attend an
investigative interview,[14] but they refused to do so.

On March 16, 2001, Toyota terminated the employment of 227
employees[15] for participation in concerted actions in violation
of its Code of Conduct and for misconduct under Article 282 of
the Labor Code. The notice of termination reads:
After a careful evaluation of the evidence on hand, and a
thorough assessment of your explanation, TMP has concluded
that there are overwhelming reasons to terminate your
services based on Article 282 of the Labor Code and TMPs
Code of Conduct.
Your repeated absences without permission on February 22 to
23, 2001 to participate in a concerted action against TMP
constitute abandonment of work and/or very serious
misconduct under Article 282 of the Labor Code.
The degree of your offense is aggravated by the following
circumstances:
1. You expressed to management that you will
adopt the unions letter dated March 1, 2001, as your own
explanation to the charges contained in the Due Process Form
dated February 27, 2001. It is evident from such explanation
that you did not come to work because you deliberately
participated together with other Team Members in a plan to
engage in concerted actions detrimental to TMPs interest. As a
result of your participation in the widespread abandonment of
work by Team Members from February 22 to 23, 2001, TMP
suffered substantial damage.
It is significant that the absences you incurred in order to
attend the clarificatory hearing conducted by the Bureau of
Labor Relations were unnecessary because the union was
amply represented in the said hearings by its counsel and
certain members who sought and were granted leave for the
purpose. Your reason for being absent is, therefore, not
acceptable; and
2. Your participation in the organized work boycott
by Team Members on February 22 and 23 led to work
disruptions that prevented the Company from meeting its
production targets, resulting [in] foregone sales of more than
eighty (80) vehicles, mostly new-model Revos, valued at more
than Fifty Million Pesos (50,000,000.00).
The foregoing is also a violation of TMPs Code of Conduct
(Section D, Paragraph 6) to wit:
Inciting or participating in riots, disorders, illegal strikes or
concerted actions detrimental to TMPs interest.
Based on the above, TMP Management is left with no other
recourse but to terminate your employment effective upon your
receipt thereof.
[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager[16]
In reaction to the dismissal of its union members and officers,
the Union went on strike on March 17, 2001. Subsequently,
from March 28, 2001 to April 12, 2001, the Union intensified its
strike by barricading the gates of Toyotas Bicutan and Sta.
Rosa plants. The strikers prevented workers who reported for
work from entering the plants. In his Affidavit, Mr. Eduardo
Nicolas III, Security Department Head, stated that:
3. On March 17, 2001, members of the Toyota Motor
Philippines Corporation Workers Association (TMPCWA), in
response to the dismissal of some two hundred twenty seven
(227) leaders and members of TMPCWA and without
observing the requirements mandated by the Labor Code,
refused to report for work and picketed TMPC premises from
8:00 a.m. to 5:00 p.m. The strikers badmouthed people coming
in and hurled invectives such as bakeru at Japanese officers of
the company. The strikers likewise pounded the officers
vehicle as they tried to enter the premises of the company.
4. On March 28, 2001, the strikers intensified their picketing
and barricaded the gates of TMPCs Bicutan and Sta. Rosa
plants, thus, blocking the free ingress/egress to and from the
premises. Shuttle buses and cars containing TMPC
employees, suppliers, dealers, customers and other people
having business with the company, were prevented by the
strikers from entering the plants.
5. As a standard operating procedure, I instructed my men to
take photographs and video footages of those who participated
in the strike. Seen on video footages taken on various dates
actively participating in the strike were union officers Emilio C.
Completo, Alexander Esteva, Joey Javellonar and Lorenzo
Caraqueo.
6. Based on the pictures, among those identified to have
participated in the March 28, 2001 strike were Grant Robert
Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel
Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya,
Feliciano Mercado, Charlie Oliveria, Philip Roxas, June
Lamberte, Manjolito Puno, Baldwin San Pablo, Joseph Naguit,
Federico Torres, Larry Gerola, Roderick Bayani, Allan
Oclarino, Reynaldo Cuevas, Jorge Polutan, Arman Ercillo,
Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy Palisoc,
Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo
Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino,
Allan Palomares, Arturo Murillo and Robert Gonzales.
Attached hereto as Annexes 1 to 18 are the pictures taken on
March 28, 2001 at the Bicutan and Sta. Rosa plants.
7. From March 29 to 31, 2001, the strikers continued to
barricade the entrances to TMPCs two (2) plants. Once again,
the strikers hurled nasty remarks and prevented employees
aboard shuttle buses from entering the plants. Among the
strikers were Christopher Saldivar, Basilio Laqui, Sabas
Bernabise, Federico Torres, Freddie Olit, Josel Agosto, Arthur
Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie
Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial,
Manjolito Puno, Delmar Espadilla, Domingo Javier, Apollo
Violeta and Elvis Tabinao.[17]
On March 29, 2001, Toyota filed a petition for injunction with a
prayer for the issuance of a temporary restraining order (TRO)
with the NLRC, which was docketed as NLRC NCR Case No.
INJ-0001054-01. It sought free ingress to and egress from its
29
Bicutan and Sta. Rosa manufacturing plants. Acting on said
petition, the NLRC, on April 5, 2001, issued a TRO against the
Union, ordering its leaders and members as well as its
sympathizers to remove their barricades and all forms of
obstruction to ensure free ingress to and egress from the
companys premises. In addition, the NLRC rejected the Unions
motion to dismiss based on lack of jurisdiction.[18]
Meanwhile, Toyota filed a petition to declare the strike illegal
with the NLRC arbitration branch, which was docketed as
NLRC NCR (South) Case No. 30-04-01775-01, and prayed
that the erring Union officers, directors, and members be
dismissed.[19]
On April 10, 2001, the DOLE Secretary assumed jurisdiction
over the labor dispute and issued an Order[20] certifying the
labor dispute to the NLRC. In said Order, the DOLE Secretary
directed all striking workers to return to work at their regular
shifts by April 16, 2001. On the other hand, it ordered Toyota
to accept the returning employees under the same terms and
conditions obtaining prior to the strike or at its option, put them
under payroll reinstatement. The parties were also enjoined
from committing acts that may worsen the situation.
The Union ended the strike on April 12, 2001. The union
members and officers tried to return to work on April 16, 2001
but were told that Toyota opted for payroll-reinstatement
authorized by the Order of the DOLE Secretary.
In the meantime, the Union filed a motion for reconsideration of
the DOLE Secretarys April 10, 2001 certification Order, which,
however, was denied by the DOLE Secretary in her May 25,
2001 Resolution. Consequently, a petition for certiorari was
filed before the CA, which was docketed as CA-G.R. SP No.
64998.
In the intervening time, the NLRC, in compliance with the April
10, 2001 Order of the DOLE Secretary, docketed the case as
Certified Case No. 000203-01.
Meanwhile, on May 23, 2001, at around 12:00 nn., despite the
issuance of the DOLE Secretarys certification Order, several
payroll-reinstated members of the Union staged a protest rally
in front of Toyotas Bicutan Plant bearing placards and
streamers in defiance of the April 10, 2001 Order.
Then, on May 28, 2001, around forty-four (44) Union members
staged another protest action in front of the Bicutan Plant. At
the same time, some twenty-nine (29) payroll-reinstated
employees picketed in front of the Santa Rosa Plants main
entrance, and were later joined by other Union members.
On June 5, 2001, notwithstanding the certification Order, the
Union filed another notice of strike, which was docketed as
NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE
Secretary directed the second notice of strike to be subsumed
in the April 10, 2001 certification Order.
In the meantime, the NLRC, in Certified Case No. 000203-01,
ordered both parties to submit their respective position papers

on June 8, 2001. The union, however, requested for abeyance
of the proceedings considering that there is a pending petition
for certiorari with the CA assailing the validity of the DOLE
Secretarys Assumption of Jurisdiction Order
Thereafter, on June 19, 2001, the NLRC issued an Order,
reiterating its previous order for both parties to submit their
respective position papers on or before June 2, 2001. The
same Order also denied the Unions verbal motion to defer
hearing on the certified cases
On June 27, 2001, the Union filed a Motion for
Reconsideration of the NLRCs June 19, 2001 Order, praying
for the deferment of the submission of position papers until its
petition for certiorari is resolved by the CA.
On June 29, 2001, only Toyota submitted its position paper.
On July 11, 2001, the NLRC again ordered the Union to submit
its position paper by July 19, 2001, with a warning that upon
failure for it to do so, the case shall be considered submitted
for decision.
Meanwhile, on July 17, 2001, the CA dismissed the Unions
petition for certiorari in CA-G.R. SP No. 64998, assailing the
DOLE Secretarys April 10, 2001 Order.
Notwithstanding repeated orders to file its position paper, the
Union still failed to submit its position paper on July 19, 2001.
Consequently, the NLRC issued an Order directing the Union
to submit its position paper on the scheduled August 3, 2001
hearing; otherwise, the case shall be deemed submitted for
resolution based on the evidence on record.
During the August 3, 2001 hearing, the Union, despite several
accommodations, still failed to submit its position paper. Later
that day, the Union claimed it filed its position paper by
registered mail.
Subsequently, the NLRC, in its August 9, 2001 Decision,
declared the strikes staged by the Union on February 21 to 23,
2001 and May 23 and 28, 2001 as illegal. The decretal portion
reads:
WHEREFORE, premises considered, it is hereby ordered:
(1) Declaring the strikes staged by the Union to be illegal.
(2) Declared [sic] that the dismissal of the 227 who
participated in the illegal strike on February 21-23, 2001 is
legal.
(3) However, the Company is ordered to pay the 227 Union
members, who participated in the illegal strike severance
compensation in an amount equivalent to one month salary for
every year of service, as an alternative relief to continued
employment
(4) Declared [sic] that the following Union officers and directors
to have forfeited their employment status for having led the
illegal strikes on February 21-23, 2001 and May 23 and 28,
2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito
Hugo, Virgilio Colandog, Rommel Digma, Federico Torres,
Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo
Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil,
Jr., and Mayo Mata.[21]
SO ORDERED.[22]
The NLRC considered the mass actions staged on February
21 to 23, 2001 illegal as the Union failed to comply with the
procedural requirements of a valid strike under Art. 263 of the
Labor Code.
After the DOLE Secretary assumed jurisdiction over the Toyota
dispute on April 10, 2001, the Union again staged strikes on
May 23 and 28, 2001. The NLRC found the strikes illegal as
they violated Art. 264 of the Labor Code which proscribes any
strike or lockout after jurisdiction is assumed over the dispute
by the President or the DOLE Secretary.
The NLRC held that both parties must have maintained the
status quo after the DOLE Secretary issued the
assumption/certification Order, and ruled that the Union did not
respect the DOLE Secretarys directive.
Accordingly, both Toyota and the Union filed Motions for
Reconsideration, which the NLRC denied in its September 14,
2001 Resolution.[23] Consequently, both parties questioned
the August 9, 2001 Decision[24] and September 14, 2001
Resolution of the NLRC in separate petitions for certiorari filed
with the CA, which were docketed as CA-G.R. SP Nos. 67100
and 67561, respectively. The CA then consolidated the
petitions.
In its February 27, 2003 Decision,[25] the CA ruled that the
Unions petition is defective in form for its failure to append a
proper verification and certificate of non-forum shopping, given
that, out of the 227 petitioners, only 159 signed the verification
and certificate of non-forum shopping. Despite the flaw, the CA
proceeded to resolve the petitions on the merits and affirmed
the assailed NLRC Decision and Resolution with a
modification, however, of deleting the award of severance
compensation to the dismissed Union members.
In justifying the recall of the severance compensation, the CA
considered the participation in illegal strikes as serious
misconduct. It defined serious misconduct as a transgression
of some established and definite rule of action, a forbidden act,
a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. It cited Panay Electric
Company, Inc. v. NLRC,[26] where we revoked the grant of
separation benefits to employees who lawfully participated in
an illegal strike based on Art. 264 of the Labor Code, which
states that any union officer who knowingly participates in an
illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike
may be declared to have lost his employment status.[27]
However, in its June 20, 2003 Resolution,[28] the CA modified
its February 27, 2003 Decision by reinstating severance
compensation to the dismissed employees based on social
justice.
The Issues
30
Petitioner Union now comes to this Court and raises the
following issues for our consideration:
I. Whether the mere participation of ordinary
employees in an illegal strike is enough reason to warrant their
dismissal.
II. Whether the Union officers and members act of
holding the protest rallies in front of the BLR office and the
Office of the Secretary of Labor and Employment on February
22 and 23, 2001 should be held as illegal strikes. In relation
hereto, whether the protests committed on May 23 and 28,
2001, should be held as illegal strikes. Lastly, whether the
Union violated the Assumption of Jurisdiction Order issued by
the Secretary of Labor and Employment.
III. Whether the dismissal of 227 Union officers and
members constitutes unfair labor practice.
IV. Whether the CA erred in affirming the Decision of
the NLRC which excluded the Unions Position Paper which the
Union filed by mail. In the same vein, whether the Unions right
to due process was violated when the NLRC excluded their
Position Paper.
V. Whether the CA erred in dismissing the Unions
Petition for Certiorari.
Toyota, on the other hand, presents this sole issue for our
determination:
I. Whether the Court of Appeals erred in issuing its
Resolution dated June 20, 2003, partially modifying its
Decision dated February 27, 2003, and awarding severance
compensation to the dismissed Union members.
In sum, two main issues are brought to the fore:
(1) Whether the mass actions committed by the Union on
different occasions are illegal strikes; and
(2) Whether separation pay should be awarded to the Union
members who participated in the illegal strikes.
The Courts Ruling
The Union contends that the NLRC violated its right to due
process when it disregarded its position paper in deciding
Toyotas petition to declare the strike illegal.
We rule otherwise.
It is entirely the Unions fault that its position paper was not
considered by the NLRC. Records readily reveal that the
NLRC was even too generous in affording due process to the
Union. It issued no less than three (3) orders for the parties to
submit its position papers, which the Union ignored until the
last minute. No sufficient justification was offered why the
Union belatedly filed its position paper. In Datu Eduardo Ampo
v. The Hon. Court of Appeals, it was explained that a party
cannot complain of deprivation of due process if he was
afforded an opportunity to participate in the proceedings but

failed to do so. If he does not avail himself of the chance to be
heard, then it is deemed waived or forfeited without violating
the constitutional guarantee.[29] Thus, there was no violation
of the Unions right to due process on the part of the NLRC.
On a procedural aspect, the Union faults the CA for treating its
petition as an unsigned pleading and posits that the verification
signed by 159 out of the 227 petitioners has already
substantially complied with and satisfied the requirements
under Secs. 4 and 5 of Rule 7 of the Rules of Court.
The Unions proposition is partly correct.
Sec. 4 of Rule 7 of the Rules of Court states:
Sec. 4. Verification.Except when otherwise specifically
required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read
the pleading and that the allegations therein are true and
correct of his personal knowledge or based on authentic
records.
A pleading required to be verified which contains a verification
based on information and belief or upon knowledge,
information and belief, or lacks a proper verification, shall be
treated as an unsigned pleading.
The verification requirement is significant, as it is intended to
secure an assurance that the allegations in the pleading are
true and correct and not the product of the imagination or a
matter of speculation.[30] This requirement is simply a
condition affecting the form of pleadings, and noncompliance
with the requirement does not necessarily render it fatally
defective. Indeed, verification is only a formal and not a
jurisdictional requirement.[31]
In this case, the problem is not the absence but the adequacy
of the Unions verification, since only 159 out of the 227
petitioners executed the verification. Undeniably, the petition
meets the requirement on the verification with respect to the
159 petitioners who executed the verification, attesting that
they have sufficient knowledge of the truth and correctness of
the allegations of the petition. However, their signatures cannot
be considered as verification of the petition by the other 68
named petitioners unless the latter gave written authorization
to the 159 petitioners to sign the verification on their behalf.
Thus, in Loquias v. Office of the Ombudsman, we ruled that
the petition satisfies the formal requirements only with regard
to the petitioner who signed the petition but not his co-
petitioner who did not sign nor authorize the other petitioner to
sign it on his behalf.[32] The proper ruling in this situation is to
consider the petition as compliant with the formal requirements
with respect to the parties who signed it and, therefore, can be
given due course only with regard to them. The other
petitioners who did not sign the verification and certificate
against forum shopping cannot be recognized as petitioners
have no legal standing before the Court. The petition should be
dismissed outright with respect to the non-conforming
petitioners.
In the case at bench, however, the CA, in the exercise of
sound discretion, did not strictly apply the ruling in Loquias and
instead proceeded to decide the case on the merits.
The alleged protest rallies in front of the offices of BLR and
DOLE Secretary and at the Toyota plants constituted illegal
strikes
When is a strike illegal?
Noted authority on labor law, Ludwig Teller, lists six (6)
categories of an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such as
strike by employees performing governmental functions; or
(2) [when it] violates a specific requirement of law[, such as
Article 263 of the Labor Code on the requisites of a valid
strike]; or
(3) [when it] is declared for an unlawful purpose, such as
inducing the employer to commit an unfair labor practice
against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its
objective, such as a widespread terrorism of non-strikers [for
example, prohibited acts under Art. 264(e) of the Labor Code];
or
(5) [when it] is declared in violation of an existing injunction[,
such as injunction, prohibition, or order issued by the DOLE
Secretary and the NLRC under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-
strike clause or conclusive arbitration clause.[33]
Petitioner Union contends that the protests or rallies conducted
on February 21 and 23, 2001 are not within the ambit of strikes
as defined in the Labor Code, since they were legitimate
exercises of their right to peaceably assemble and petition the
government for redress of grievances. Mainly relying on the
doctrine laid down in the case of Philippine Blooming Mills
Employees Organization v. Philippine Blooming Mills Co.,
Inc.,[34] it argues that the protest was not directed at Toyota
but towards the Government (DOLE and BLR). It explains that
the protest is not a strike as contemplated in the Labor Code.
The Union points out that in Philippine Blooming Mills
Employees Organization, the mass action staged in
Malacaang to petition the Chief Executive against the abusive
behavior of some police officers was a proper exercise of the
employees right to speak out and to peaceably gather and ask
government for redress of their grievances.
The Unions position fails to convince us.
While the facts in Philippine Blooming Mills Employees
Organization are similar in some respects to that of the present
case, the Union fails to realize one major difference: there was
no labor dispute in Philippine Blooming Mills Employees
Organization. In the present case, there was an on-going labor
dispute arising from Toyotas refusal to recognize and negotiate
with the Union, which was the subject of the notice of strike
31
filed by the Union on January 16, 2001. Thus, the Unions
reliance on Phililippine Blooming Mills Employees Organization
is misplaced, as it cannot be considered a precedent to the
case at bar.
A strike means any temporary stoppage of work by the
concerted action of employees as a result of an industrial or
labor dispute. A labor dispute, in turn, includes any controversy
or matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions
of employment, regardless of whether the disputants stand in
the proximate relation of the employer and the employee.[35]
In Bangalisan v. Court of Appeals, it was explained that [t]he
fact that the conventional term strike was not used by the
striking employees to describe their common course of action
is inconsequential, since the substance of the situation and not
its appearance, will be deemed controlling.[36] The term strike
has been elucidated to encompass not only concerted work
stoppages, but also slowdowns, mass leaves, sit-downs,
attempts to damage, destroy, or sabotage plant equipment and
facilities, and similar activities.[37]
Applying pertinent legal provisions and jurisprudence, we rule
that the protest actions undertaken by the Union officials and
members on February 21 to 23, 2001 are not valid and proper
exercises of their right to assemble and ask government for
redress of their complaints, but are illegal strikes in breach of
the Labor Code. The Unions position is weakened by the lack
of permit from the City of Manila to hold rallies. Shrouded as
demonstrations, they were in reality temporary stoppages of
work perpetrated through the concerted action of the
employees who deliberately failed to report for work on the
convenient excuse that they will hold a rally at the BLR and
DOLE offices in Intramuros, Manila, on February 21 to 23,
2001. The purported reason for these protest actions was to
safeguard their rights against any abuse which the med-arbiter
may commit against their cause. However, the Union failed to
advance convincing proof that the med-arbiter was biased
against them. The acts of the med-arbiter in the performance
of his duties are presumed regular. Sans ample evidence to
the contrary, the Union was unable to justify the February 2001
mass actions. What comes to the fore is that the decision not
to work for two days was designed and calculated to cripple
the manufacturing arm of Toyota. It becomes obvious that the
real and ultimate goal of the Union is to coerce Toyota to finally
acknowledge the Union as the sole bargaining agent of the
company. This is not a legal and valid exercise of the right of
assembly and to demand redress of grievance.
We sustain the CAs affirmance of the NLRCs finding that the
protest rallies staged on February 21 to 23, 2001 were actually
illegal strikes. The illegality of the Unions mass actions was
succinctly elaborated by the labor tribunal, thus:
We have stated in our questioned decision that such mass
actions staged before the Bureau of Labor Relations on
February 21-23, 2001 by the union officers and members fall
squarely within the definition of a strike (Article 212 (o), Labor
Code). These concerted actions resulted in the temporary
stoppage of work causing the latter substantial losses. Thus,

without the requirements for a valid strike having been
complied with, we were constrained to consider the strike
staged on such dates as illegal and all employees who
participated in the concerted actions to have consequently lost
their employment status.
If we are going to stamp a color of legality on the two (2) [day-]
walk out/strike of respondents without filing a notice of strike, in
effect we are giving license to all the unions in the country to
paralyze the operations of their companies/employers every
time they wish to hold a demonstration in front of any
government agency. While we recognize the right of every
person or a group to peaceably assemble and petition the
government for redress of grievances, the exercise of such
right is governed by existing laws, rules and regulations.
Although the respondent union admittedly made earnest
representations with the company to hold a mass protest
before the BLR, together with their officers and members, the
denial of the request by the management should have been
heeded and ended their insistence to hold the planned mass
demonstration. Verily, the violation of the company rule cannot
be dismissed as mere absences of two days as being
suggested by the union [are but] concerted actions detrimental
to Petitioner Toyotas interest.[38] (Emphasis supplied.)
It is obvious that the February 21 to 23, 2001 concerted
actions were undertaken without satisfying the prerequisites for
a valid strike under Art. 263 of the Labor Code. The Union
failed to comply with the following requirements: (1) a notice of
strike filed with the DOLE 30 days before the intended date of
strike, or 15 days in case of unfair labor practice;[39] (2) strike
vote approved by a majority of the total union membership in
the bargaining unit concerned obtained by secret ballot in a
meeting called for that purpose; and (3) notice given to the
DOLE of the results of the voting at least seven days before
the intended strike. These requirements are mandatory and
the failure of a union to comply with them renders the strike
illegal.[40] The evident intention of the law in requiring the
strike notice and the strike-vote report is to reasonably regulate
the right to strike, which is essential to the attainment of
legitimate policy objectives embodied in the law.[41] As they
failed to conform to the law, the strikes on February 21, 22,
and 23, 2001 were illegal.
Moreover, the aforementioned February 2001 strikes are in
blatant violation of Sec. D, par. 6 of Toyotas Code of Conduct
which prohibits inciting or participating in riots, disorders,
alleged strikes or concerted actions detrimental to [Toyotas]
interest. The penalty for the offense is dismissal. The Union
and its members are bound by the company rules, and the
February 2001 mass actions and deliberate refusal to render
regular and overtime work on said days violated these rules. In
sum, the February 2001 strikes and walk-outs were illegal as
these were in violation of specific requirements of the Labor
Code and a company rule against illegal strikes or concerted
actions.
With respect to the strikes committed from March 17 to April
12, 2001, those were initially legal as the legal requirements
were met. However, on March 28 to April 12, 2001, the Union
barricaded the gates of the Bicutan and Sta. Rosa plants and
blocked the free ingress to and egress from the company
premises. Toyota employees, customers, and other people
having business with the company were intimidated and were
refused entry to the plants. As earlier explained, these strikes
were illegal because unlawful means were employed. The acts
of the Union officers and members are in palpable violation of
Art. 264(e), which proscribes acts of violence, coercion, or
intimidation, or which obstruct the free ingress to and egress
from the company premises. Undeniably, the strikes from
March 28 to April 12, 2001 were illegal.
Petitioner Union also posits that strikes were not committed on
May 23 and 28, 2001. The Union asserts that the rallies held
on May 23 and 28, 2001 could not be considered strikes, as
the participants were the dismissed employees who were on
payroll reinstatement. It concludes that there was no work
stoppage.
This contention has no basis.
It is clear that once the DOLE Secretary assumes jurisdiction
over the labor dispute and certifies the case for compulsory
arbitration with the NLRC, the parties have to revert to the
status quo ante (the state of things as it was before). The
intended normalcy of operations is apparent from the fallo of
the April 10, 2001 Order of then DOLE Secretary Patricia A.
Sto. Tomas, which reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby
CERTIFIES the labor dispute at Toyota Motors Philippines
Corporation to the [NLRC] pursuant to Article 263 (g) of the
Labor Code, as amended. This Certification covers the current
labor cases filed in relation with the Toyota strike, particularly,
the Petition for Injunction filed with the National Labor
Relations Commission entitled Toyota Motor Philippines
Corporation vs. Toyota Motor Philippines Corporation Workers
Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction
Case No. 3401054-01; Toyota Motor Philippines Corporation
vs. Toyota Motor Philippines Corporation Workers Association,
et al., NLRC NCR Case No. 3004-01775-01, and such other
labor cases that the parties may file relating to the strike and
its effects while this Certification is in effect.
As provided under Article 2634(g) of the Labor Code, all
striking workers are directed to return to work at their regular
shifts by April 16, 2001; the Company is in turn directed to
accept them back to work under the same terms and
conditions obtaining prior to the work stoppage, subject to the
option of the company to merely reinstate a worker or workers
in the payroll in light of the negative emotions that the strike
has generated and the need to prevent the further deterioration
of the relationship between the company and its workers.
Further, the parties are hereby ordered to cease and desist
from committing any act that might lead to the worsening of an
already deteriorated situation.[42] (Emphasis supplied.)
It is explicit from this directive that the Union and its members
shall refrain from engaging in any activity that might
exacerbate the tense labor situation in Toyota, which certainly
includes concerted actions.
32
This was not heeded by the Union and the individual
respondents who staged illegal concerted actions on May 23
and 28, 2001 in contravention of the Order of the DOLE
Secretary that no acts should be undertaken by them to
aggravate the already deteriorated situation.
While it may be conceded that there was no work disruption in
the two Toyota plants, the fact still remains that the Union and
its members picketed and performed concerted actions in front
of the Company premises. This is a patent violation of the
assumption of jurisdiction and certification Order of the DOLE
Secretary, which ordered the parties to cease and desist from
committing any act that might lead to the worsening of an
already deteriorated situation. While there are no work
stoppages, the pickets and concerted actions outside the
plants have a demoralizing and even chilling effect on the
workers inside the plants and can be considered as veiled
threats of possible trouble to the workers when they go out of
the company premises after work and of impending disruption
of operations to company officials and even to customers in
the days to come. The pictures presented by Toyota
undoubtedly show that the company officials and employees
are being intimidated and threatened by the strikers. In short,
the Union, by its mass actions, has inflamed an already volatile
situation, which was explicitly proscribed by the DOLE
Secretarys Order. We do not find any compelling reason to
reverse the NLRC findings that the pickets on May 23 and 28,
2001 were unlawful strikes.
From the foregoing discussion, we rule that the February 21 to
23, 2001 concerted actions, the March 17 to April 12, 2001
strikes, and the May 23 and 28, 2001 mass actions were illegal
strikes.
Union officers are liable for unlawful strikes or illegal acts
during a strike
Art. 264 (a) of the Labor Code provides:
ART. 264. PROHIBITED ACTIVITIES
(a) x x x
Any worker whose employment has been terminated as a
consequence of an unlawful lockout shall be entitled to
reinstatement with full backwages. Any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground
for termination of his employment, even if a replacement had
been hired by the employer during such lawful strike.
Art. 264(a) sanctions the dismissal of a union officer who
knowingly participates in an illegal strike or who knowingly
participates in the commission of illegal acts during a lawful
strike.

It is clear that the responsibility of union officials is greater than
that of the members. They are tasked with the duty to lead and
guide the membership in decision making on union activities in
accordance with the law, government rules and regulations,
and established labor practices. The leaders are expected to
recommend actions that are arrived at with circumspection and
contemplation, and always keep paramount the best interests
of the members and union within the bounds of law. If the
implementation of an illegal strike is recommended, then they
would mislead and deceive the membership and the supreme
penalty of dismissal is appropriate. On the other hand, if the
strike is legal at the beginning and the officials commit illegal
acts during the duration of the strike, then they cannot evade
personal and individual liability for said acts.
The Union officials were in clear breach of Art. 264(a) when
they knowingly participated in the illegal strikes held from
February 21 to 23, 2001, from March 17 to April 12, 2001, and
on May 23 and 28, 2001. We uphold the findings of fact of the
NLRC on the involvement of said union officials in the unlawful
concerted actions as affirmed by the CA, thus:
As regards to the Union officers and directors, there is
overwhelming justification to declare their termination from
service. Having instigated the Union members to stage and
carry out all illegal strikes from February 21-23, 2001, and May
23 and 28, 2001, the following Union officers are hereby
terminated for cause pursuant to Article 264(a) of the Labor
Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito
Hugo, Virgilio Colandog, Rommel Digma, Federico Torres,
Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo
Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil,
Jr., and Mayo Mata.[43]
The rule is well entrenched in this jurisdiction that factual
findings of the labor tribunal, when affirmed by the appellate
court, are generally accorded great respect, even finality.[44]
Likewise, we are not duty-bound to delve into the accuracy of
the factual findings of the NLRC in the absence of clear
showing that these were arbitrary and bereft of any rational
basis.[45] In the case at bench, the Union failed to convince us
that the NLRC findings that the Union officials instigated, led,
and knowingly participated in the series of illegal strikes are
not reinforced by substantial evidence. Verily, said findings
have to be maintained and upheld. We reiterate, as a reminder
to labor leaders, the rule that [u]nion officers are duty bound to
guide their members to respect the law.[46] Contrarily, if the
officers urge the members to violate the law and defy the duly
constituted authorities, their dismissal from the service is a just
penalty or sanction for their unlawful acts.[47]
Members liability depends on participation in illegal acts
Art. 264(a) of the Labor Code provides that a member is liable
when he knowingly participates in an illegal act during a strike.
While the provision is silent on whether the strike is legal or
illegal, we find that the same is irrelevant. As long as the
members commit illegal acts, in a legal or illegal strike, then
they can be terminated.[48] However, when union members
merely participate in an illegal strike without committing any
illegal act, are they liable?
This was squarely answered in Gold City Integrated Port
Service, Inc. v. NLRC,[49] where it was held that an ordinary
striking worker cannot be terminated for mere participation in
an illegal strike. This was an affirmation of the rulings in Bacus
v. Ople[50] and Progressive Workers Union v. Aguas,[51]
where it was held that though the strike is illegal, the ordinary
member who merely participates in the strike should not be
meted loss of employment on the considerations of
compassion and good faith and in view of the security of
tenure provisions under the Constitution. In Esso Philippines,
Inc. v. Malayang Manggagawa sa Esso (MME), it was
explained that a member is not responsible for the unions
illegal strike even if he voted for the holding of a strike which
became illegal.[52]
Noted labor law expert, Professor Cesario A. Azucena, Jr.,
traced the history relating to the liability of a union member in
an illegal strike, starting with the rule of vicarious liability, thus:
Under [the rule of vicarious liability], mere membership in a
labor union serves as basis of liability for acts of individuals, or
for a labor activity, done on behalf of the union. The union
member is made liable on the theory that all the members are
engaged in a general conspiracy, and the unlawful acts of the
particular members are viewed as necessary incidents of the
conspiracy. It has been said that in the absence of statute
providing otherwise, the rule of vicarious liability applies.
Even the Industrial Peace Act, however, which was in effect
from 1953 to 1974, did not adopt the vicarious liability concept.
It expressly provided that:
No officer or member of any association or organization, and
no association or organization participating or interested in a
labor dispute shall be held responsible or liable for the unlawful
acts of individual officers, members, or agents, except upon
proof of actual participation in, or actual authorization of, such
acts or of ratifying of such acts after actual knowledge thereof.
Replacing the Industrial Peace Act, the Labor Code has not
adopted the vicarious liability rule.[53]
Thus, the rule on vicarious liability of a union member was
abandoned and it is only when a striking worker knowingly
participates in the commission of illegal acts during a strike
that he will be penalized with dismissal.
Now, what are considered illegal acts under Art. 264(a)?
No precise meaning was given to the phrase illegal acts. It
may encompass a number of acts that violate existing labor or
criminal laws, such as the following:
(1) Violation of Art. 264(e) of the Labor Code which provides
that [n]o person engaged in picketing shall commit any act of
violence, coercion or intimidation or obstruct the free ingress to
or egress from the employers premises for lawful purposes, or
obstruct public thoroughfares;
(2) Commission of crimes and other unlawful acts in carrying
out the strike;[54] and
33
(3) Violation of any order, prohibition, or injunction issued by
the DOLE Secretary or NLRC in connection with the
assumption of jurisdiction/certification Order under Art. 263(g)
of the Labor Code.
As earlier explained, this enumeration is not exclusive and it
may cover other breaches of existing laws.
In the cases at bench, the individual respondents participated
in several mass actions, viz:
(1) The rallies held at the DOLE and BLR offices on February
21, 22, and 23, 2001;
(2) The strikes held on March 17 to April 12, 2001; and
(3) The rallies and picketing on May 23 and 28, 2001 in front
of the Toyota Bicutan and Sta. Rosa plants.
Did they commit illegal acts during the illegal strikes on
February 21 to 23, 2001, from March 17 to April 12, 2001, and
on May 23 and 28, 2001?
The answer is in the affirmative.
As we have ruled that the strikes by the Union on the three
different occasions were illegal, we now proceed to determine
the individual liabilities of the affected union members for acts
committed during these forbidden concerted actions.
Our ruling in Association of Independent Unions in the
Philippines v. NLRC lays down the rule on the liability of the
union members:
Decisive on the matter is the pertinent provisions of Article 264
(a) of the Labor Code that: [x x x] any worker [x x x] who
knowingly participates in the commission of illegal acts during
a strike may be declared to have lost his employment status. [x
x x] It can be gleaned unerringly from the aforecited provision
of law in point, however, that an ordinary striking employee can
not be terminated for mere participation in an illegal strike.
There must be proof that he committed illegal acts during the
strike and the striker who participated in the commission of
illegal act[s] must be identified. But proof beyond reasonable
doubt is not required. Substantial evidence available under the
circumstances, which may justify the imposition of the penalty
of dismissal, may suffice.
In the landmark case of Ang Tibay vs. CIR, the court ruled Not
only must there be some evidence to support a finding or
conclusion, but the evidence must be substantial. Substantial
evidence is more than a mere scintilla. It means such relevant
evidence that a reasonable mind might accept as sufficient to
support a conclusion.[55] (Emphasis supplied.)
Thus, it is necessary for the company to adduce proof on the
participation of the striking employee in the commission of
illegal acts during the strikes.

After a scrutiny of the records, we find that the 227 employees
indeed joined the February 21, 22, and 23, 2001 rallies and
refused to render overtime work or report for work. These
rallies, as we earlier ruled, are in reality illegal strikes, as the
procedural requirements for strikes under Art. 263 were not
complied with. Worse, said strikes were in violation of the
company rule prohibiting acts in citing or participating in riots,
disorders, alleged strikes or concerted action detrimental to
Toyotas interest.
With respect to the February 21, 22, and 23, 2001 concerted
actions, Toyota submitted the list of employees who did not
render overtime work on February 21, 2001 and who did not
report for work on February 22 and 23, 2001 as shown by
Annex I of Toyotas Position Paper in NLRC Certified Case No.
000203-01 entitled In Re: Labor Dispute at Toyota Motor
Philippines Corp. The employees who participated in the illegal
concerted actions were as follows:
1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4.
Alarana, Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin; 7. Apolinario,
Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano,
Ruel; 11. Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola,
Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut,
Rolando; 17. Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19.
Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22.
Birondo, Alberto; 23. Blanco, Melchor; 24. Bolanos, Dexter; 25.
Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28.
Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31.
Bustillo, Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug,
Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36.
Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate, Leo
Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41.
Caringal, Dennis; 42. Casaba, Gienell; 43. Catapusan,
Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense,
Joey; 47. Cometa, Julius; 48. Completo, Emilio; 49.
Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa,
Claudio Jr.; 52. Cuevas, Reynaldo; 53. Dacalcap, Albert; 54.
Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay, Rene; 57.
David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz,
Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62.
De Leon, Leonardo; 63. Delos Santos, Rogelio; 64. De
Ocampo, Joselito; 65. De Silva, Leodegario; 66. Del Mundo,
Alex; 67. Del Rio, Rey; 68. Dela Ysla, Alex; 69. Dia, Frank
Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72.
Dumalag, Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75.
Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78.
Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George;
81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio;
84. Franco, Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87.
Gado, Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90.
Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93.
Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95. Gerola, Larry; 96.
Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99.
Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga,
Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay;
104. Imperial, Alejandro; 105. Jaen, Ferdinand; 106. Jalea,
Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109.
Lalisan, Victorio; 110. Landicho, Danny; 111. Laqui, Basilio;
112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel;
115. Lising, Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy,
Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell;
120. Lucido, Johny; 121. Macalindong, Rommel; 122.
Madrazo, Nixon; 123. Magbalita, Valentin; 124. Magistrado,
Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan
John; 127. Malabrigo, Angelito; 128. Malaluan, Rolando Jr.;
129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig,
Roger; 132. Manalang, Joseph Patrick; 133. Manalo, Manuel
Jr.; 134. Manaog, Jonamar; 135. Manaog, Melchor; 136.
Mandolado, Melvin; 137. Maneclang, Jovito; 138. Manego,
Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141.
Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan,
Carlito; 144. Marcial, Nilo; 145. Mariano, Rommel; 146. Mata,
Mayo; 147. Mendoza, Bobit; 148. Mendoza, Roberto; 149.
Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis;
152. Montero, Ericson; 153. Montero, Marlaw; 154. Montes,
Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157.
Nava, Ronaldo; 158. Nevalga, Alexander; 159. Nicanor, Edwin;
160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito;
163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo;
166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169.
Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172.
Ortiz, Felimon; 173. Paniterce, Alvin; 174. Parallag, Gerald;
175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante,
Jowald; 178. Piamonte, Melvin; 179. Piamonte, Rogelio; 180.
Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183.
Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando;
186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David
Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191.
San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago,
Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196.
Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex;
199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao,
Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio; 204.
Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson
Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick;
209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino,
Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214.
Toral, Grant Robert; 215. Torres, Dennis; 216. Torres,
Federico; 217. Trazona, Jose Rommel; 218. Tulio, Emmanuel;
219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara,
Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224.
Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar,
Christopher; and 227. Zamora, Dominador Jr.
Toyotas Position Paper containing the list of striking workers
was attested to as true and correct under oath by Mr. Jose Ma.
Aligada, First Vice President of the Group Administration
Division of Toyota. Mr. Emerito Dumaraos, Assistant
Department Manager of the Production Department of Toyota,
likewise submitted a June 29, 2001 Affidavit[56] confirming the
low attendance of employees on February 21, 22, and 23,
2001, which resulted from the intentional absences of the
aforelisted striking workers. The Union, on the other hand, did
not refute Toyotas categorical assertions on the participation of
said workers in the mass actions and their deliberate refusal to
perform their assigned work on February 21, 22, and 23, 2001.
More importantly, it did not deny the fact of absence of the
employees on those days from the Toyota manufacturing
plants and their deliberate refusal to render work. Their
admission that they participated in the February 21 to 23, 2001
mass actions necessarily means they were absent from their
work on those days.
34
Anent the March 28 to April 12, 2001 strikes, evidence is
ample to show commission of illegal acts like acts of coercion
or intimidation and obstructing free ingress to or egress from
the company premises. Mr. Eduardo Nicolas III, Toyotas
Security Chief, attested in his affidavit that the strikers
badmouthed people coming in and shouted invectives such as
bakeru at Japanese officers of the company. The strikers even
pounded the vehicles of Toyota officials. More importantly,
they prevented the ingress of Toyota employees, customers,
suppliers, and other persons who wanted to transact business
with the company. These were patent violations of Art. 264(e)
of the Labor Code, and may even constitute crimes under the
Revised Penal Code such as threats or coercion among
others.
On March 28, 2001, the following have committed illegal
actsblocking the ingress to or egress from the two (2) Toyota
plants and preventing the ingress of Toyota employees on
board the company shuttle at the Bicutan and Sta. Rosa
Plants, viz
1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan
John Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7. Charlie
Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico
Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan
Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16.
Arman Ercillo; 17. Joey Llanera; and 18. Roberto Gonzales
Photographs were submitted by Toyota marked as Annexes 1
through 18 of its Position Paper, vividly showing the
participation of the aforelisted employees in illegal acts.[57]
To further aggravate the situation, a number of union members
committed illegal acts (blocking the ingress to and egress from
the plant) during the strike staged on March 29, 2001 at the
Toyota plant in Bicutan, to wit:
1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4.
Freddie Olit; and 5. Joel Agosto
Pictures marked as Annexes 21 to 22 of Toyotas Position
Paper reveal the illegal acts committed by the aforelisted
workers.[58]
On the next day, March 30, 2001, several employees again
committed illegal acts (blocking ingress to and egress from the
plant) during the strike at the Bicutan plant, to wit:
1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4.
Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro Imperial; 7.
Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10.
Elvis Tabirao
Pictures marked as Annexes 25 to 26 and 28 of Toyotas
Position Paper show the participation of these workers in
unlawful acts.[59]
On April 5, 2001, seven (7) Toyota employees were identified
to have committed illegal acts (blocking ingress to and egress
from the plant) during the strike held at the Bicutan plant, to
wit:

1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4.
Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel Borebor;
and 7. Alberto Lomboy
The participations of the strikers in illegal acts are manifest in
the pictures marked as Annexes 32 and 33 of Toyotas Position
Paper.[60]
On April 6, 2001, only Rogelio Piamonte was identified to have
committed illegal acts (blocking ingress to and egress from the
Toyota plant) during the strike at the Toyota Santa Rosa
plant.[61] Then, on April 9, 2001, Alvin Paniterce, Dennis
Apolinario, and Eduardo Miranda[62] were identified to have
committed illegal acts (blocking ingress to and egress from the
Toyota plant) during the strike at the Toyota Santa Rosa plant
and were validly dismissed by Toyota.
Lastly, the strikers, though on payroll reinstatement, staged
protest rallies on May 23, 2001 and May 28, 2001 in front of
the Bicutan and Sta. Rosa plants. These workers acts in
joining and participating in the May 23 and 28, 2001 rallies or
pickets were patent violations of the April 10, 2001 assumption
of jurisdiction/certification Order issued by the DOLE
Secretary, which proscribed the commission of acts that might
lead to the worsening of an already deteriorated situation. Art.
263(g) is clear that strikers who violate the
assumption/certification Order may suffer dismissal from work.
This was the situation in the May 23 and 28, 2001 pickets and
concerted actions, with the following employees who
committed illegal acts:
a. Strikers who joined the illegal pickets on May 23, 2001 were
(1) Dennis Apolinario; (2) Abel Berces; (3) Benny Bering; (4)
Dexter Bolaos; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7)
Randy Consignado; (8) Herbert Dalanon; (9) Leodegario De
Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12)
Nikko Franco; (13) Genaro Gerola, Jr.; (14) Michael Gohilde;
(15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17)
Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19) Nila Marcial;
(20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz;
(23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric
Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28)
Rommel Tagala.
Pictures show the illegal acts (participation in pickets/strikes
despite the issuance of a return-to-work order) committed by
the aforelisted strikers.[63]
b. Strikers who participated in the May 28, 2001 were (1) Joel
Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis
Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester
Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter Bolanos;
(11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo
Caraqueo; (14) Christopher Catapusan; (15) Ricky Chavez;
(16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo;
(19) Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David,
Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel
Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar
Espadilla; (28) Alexander Esteva; (29) Nikko Franco; (30)
Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33)
Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey
Javillonar; (36) Basilio Laqui; (37) Alberto Lomboy; (38)
Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon
Madrazo; (41) Valentin Magbalita; (42) Allan Jon Malabanan;
(43) Jonamar Manaog; (44) Bayani Manguil; (45) June
Manigbas; (46) Alfred Manjares; (47) Edwin Manzanilla; (48)
Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio
Piamonte; (52) George Polutan; (53) Eric Santiago; (54)
Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo
Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin
Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62) Joseph
Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.
Toyota presented photographs which show said employees
conducting mass pickets and concerted actions.[64]
Anent the grant of severance compensation to legally
dismissed union members, Toyota assails the turn-around by
the CA in granting separation pay in its June 20, 2003
Resolution after initially denying it in its February 27, 2003
Decision. The company asseverates that based on the CA
finding that the illegal acts of said union members constitute
gross misconduct, not to mention the huge losses it suffered,
then the grant of separation pay was not proper.
The general rule is that when just causes for terminating the
services of an employee under Art. 282 of the Labor Code
exist, the employee is not entitled to separation pay. The
apparent reason behind the forfeiture of the right to termination
pay is that lawbreakers should not benefit from their illegal
acts. The dismissed employee, however, is entitled to
whatever rights, benefits and privileges [s/he] may have under
the applicable individual or collective bargaining agreement
with the employer or voluntary employer policy or practice[65]
or under the Labor Code and other existing laws. This means
that the employee, despite the dismissal for a valid cause,
retains the right to receive from the employer benefits provided
by law, like accrued service incentive leaves. With respect to
benefits granted by the CBA provisions and voluntary
management policy or practice, the entitlement of the
dismissed employees to the benefits depends on the
stipulations of the CBA or the company rules and policies.
As in any rule, there are exceptions. One exception where
separation pay is given even though an employee is validly
dismissed is when the court finds justification in applying the
principle of social justice well entrenched in the 1987
Constitution. In Phil. Long Distance Telephone Co. (PLDT) v.
NLRC, the Court elucidated why social justice can validate the
grant of separation pay, thus:
The reason is that our Constitution is replete with positive
commands for the promotion of social justice, and particularly
the protection of the rights of the workers. The enhancement of
their welfare is one of the primary concerns of the present
charter. In fact, instead of confining itself to the general
commitment to the cause of labor in Article II on the
Declaration of Principles of State Policies, the new Constitution
contains a separate article devoted to the promotion of social
justice and human rights with a separate sub-topic for labor.
Article XIII expressly recognizes the vital role of labor, hand in
hand with management, in the advancement of the national
economy and the welfare of the people in general. The
categorical mandates in the Constitution for the improvement
35
of the lot of the workers are more than sufficient basis to justify
the award of separation pay in proper cases even if the
dismissal be for cause.[66]
In the same case, the Court laid down the rule that severance
compensation shall be allowed only when the cause of the
dismissal is other than serious misconduct or that which
reflects adversely on the employees moral character. The
Court succinctly discussed the propriety of the grant of
separation pay in this wise:
We hold that henceforth separation pay shall be allowed as a
measure of social justice only in those instances where the
employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where
the reason for the valid dismissal is, for example, habitual
intoxication or an offense involving moral turpitude, like theft or
illicit sexual relations with a fellow worker, the employer may
not be required to give the dismissed employee separation
pay, or financial assistance, or whatever other name it is
called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring
employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is
granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if
he is again found out. This kind of misplaced compassion is
not going to do labor in general any good as it will encourage
the infiltration of its ranks by those who do not deserve the
protection and concern of the Constitution.
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if
their hands are clean and their motives blameless and not
simply because they happen to be poor. This great policy of
our Constitution is not meant for the protection of those who
have proved they are not worthy of it, like the workers who
have tainted the cause of labor with the blemishes of their own
character.[67]
Explicit in PLDT are two exceptions when the NLRC or the
courts should not grant separation pay based on social
justiceserious misconduct (which is the first ground for
dismissal under Art. 282) or acts that reflect on the moral
character of the employee. What is unclear is whether the
ruling likewise precludes the grant of separation pay when the
employee is validly terminated from work on grounds laid down
in Art. 282 of the Labor Code other than serious misconduct.

A recall of recent cases decided bearing on the issue reveals
that when the termination is legally justified on any of the
grounds under Art. 282, separation pay was not allowed. In Ha
Yuan Restaurant v. NLRC,[68] we deleted the award of
separation pay to an employee who, while unprovoked, hit her
co-workers face, causing injuries, which then resulted in a
series of fights and scuffles between them. We viewed her act
as serious misconduct which did not warrant the award of
separation pay. In House of Sara Lee v. Rey,[69] this Court
deleted the award of separation pay to a branch supervisor
who regularly, without authorization, extended the payment
deadlines of the companys sales agents. Since the cause for
the supervisors dismissal involved her integrity (which can be
considered as breach of trust), she was not worthy of
compassion as to deserve separation pay based on her length
of service. In Gustilo v. Wyeth Phils., Inc.,[70] this Court found
no exceptional circumstance to warrant the grant of financial
assistance to an employee who repeatedly violated the
companys disciplinary rules and regulations and whose
employment was thus terminated for gross and habitual
neglect of his duties. In the doctrinal case of San Miguel v.
Lao,[71] this Court reversed and set aside the ruling of the CA
granting retirement benefits or separation pay to an employee
who was dismissed for willful breach of trust and confidence by
causing the delivery of raw materials, which are needed for its
glass production plant, to its competitor. While a review of the
case reports does not reveal a case involving a termination by
reason of the commission of a crime against the employer or
his/her family which dealt with the issue of separation pay, it
would be adding insult to injury if the employer would still be
compelled to shell out money to the offender after the harm
done.
In all of the foregoing situations, the Court declined to grant
termination pay because the causes for dismissal recognized
under Art. 282 of the Labor Code were serious or grave in
nature and attended by willful or wrongful intent or they
reflected adversely on the moral character of the employees.
We therefore find that in addition to serious misconduct, in
dismissals based on other grounds under Art. 282 like willful
disobedience, gross and habitual neglect of duty, fraud or
willful breach of trust, and commission of a crime against the
employer or his family, separation pay should not be conceded
to the dismissed employee.
In analogous causes for termination like inefficiency, drug use,
and others, the NLRC or the courts may opt to grant
separation pay anchored on social justice in consideration of
the length of service of the employee, the amount involved,
whether the act is the first offense, the performance of the
employee and the like, using the guideposts enunciated in
PLDT on the propriety of the award of separation pay.
In the case at bench, are the 227 striking employees entitled to
separation pay?
In the instant case, the CA concluded that the illegal strikes
committed by the Union members constituted serious
misconduct.[72]
The CA ratiocinated in this manner:
Neither can social justice justify the award to them of
severance compensation or any other form of financial
assistance. x x x
xxxx
Considering that the dismissal of the employees was due to
their participation in the illegal strikes as well as violation of the
Code of Conduct of the company, the same constitutes serious
misconduct. A serious misconduct is a transgression of some
established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. In fact, in Panay Electric
Company, Inc. v. NLRC, the Supreme Court nullified the grant
of separation benefits to employees who unlawfully
participated in an illegal strike in light of Article 264, Title VIII,
Book V of the Labor Code, that, any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his
employment status.
The constitutional guarantee on social justice is not intended
only for the poor but for the rich as well. It is a policy of fairness
to both labor and management.[73] (Emphasis supplied.)
In disposing of the Unions plea for reconsideration of its
February 27, 2003 Decision, the CA however performed a
volte-face by reinstating the award of separation pay.
The CAs grant of separation pay is an erroneous departure
from our ruling in Phil. Long Distance Telephone Co. v. NLRC
that serious misconduct forecloses the award of separation
pay. Secondly, the advertence to the alleged honest belief on
the part of the 227 employees that Toyota committed a breach
of the duty to bargain collectively and an abuse of valid
exercise of management prerogative has not been
substantiated by the evidence extant on record. There can be
no good faith in intentionally incurring absences in a collective
fashion from work on February 22 and 23, 2001 just to attend
the DOLE hearings. The Unions strategy was plainly to cripple
the operations and bring Toyota to its knees by inflicting
substantial financial damage to the latter to compel union
recognition. The Union officials and members are supposed to
know through common sense that huge losses would befall the
company by the abandonment of their regular work. It was not
disputed that Toyota lost more than PhP 50 million because of
the willful desertion of company operations in February 2001
by the dismissed union members. In addition, further damage
was experienced by Toyota when the Union again resorted to
illegal strikes from March 28 to April 12, 2001, when the gates
of Toyota were blocked and barricaded, and the company
officials, employees, and customers were intimidated and
harassed. Moreover, they were fully aware of the company rule
on prohibition against concerted action inimical to the interests
of the company and hence, their resort to mass actions on
several occasions in clear violation of the company regulation
cannot be excused nor justified. Lastly, they blatantly violated
the assumption/certification Order of the DOLE Secretary,
exhibiting their lack of obeisance to the rule of law. These acts
indeed constituted serious misconduct.
36
A painstaking review of case law renders obtuse the Unions
claim for separation pay. In a slew of cases, this Court
refrained from awarding separation pay or financial assistance
to union officers and members who were separated from
service due to their participation in or commission of illegal
acts during strikes. In the recent case of Pilipino Telephone
Corporation v. Pilipino Telephone Employees Association
(PILTEA),[74] this Court upheld the dismissal of union officers
who participated and openly defied the return-to-work order
issued by the DOLE Secretary. No separation pay or financial
assistance was granted. In Sukhothai Cuisine and Restaurant
v. Court of Appeals,[75] this Court declared that the union
officers who participated in and the union members who
committed illegal acts during the illegal strike have lost their
employment status. In this case, the strike was held illegal
because it violated agreements providing for arbitration. Again,
there was no award of separation pay nor financial assistance.
In Philippine Diamond Hotel and Resort, Inc. v. Manila
Diamond Hotel Employees Union,[76] the strike was declared
illegal because the means employed was illegal. We upheld
the validity of dismissing union members who committed illegal
acts during the strike, but again, without awarding separation
pay or financial assistance to the erring employees. In
Samahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio
Lines,[77] this Court upheld the dismissal of union officers who
participated in an illegal strike sans any award of separation
pay. Earlier, in Grand Boulevard Hotel v. Genuine Labor
Organization of Workers in Hotel, Restaurant and Allied
Industries,[78] we affirmed the dismissal of the Unions officers
who participated in an illegal strike without awarding
separation pay, despite the NLRCs declaration urging the
company to give financial assistance to the dismissed
employees.[79] In Interphil Laboratories Union-FFW, et al. v.
Interphil Laboratories, Inc.,[80] this Court affirmed the
dismissal of the union officers who led the concerted action in
refusing to render overtime work and causing work slowdowns.
However, no separation pay or financial assistance was
allowed. In CCBPI Postmix Workers Union v. NLRC,[81] this
Court affirmed the dismissal of union officers who participated
in the strike and the union members who committed illegal acts
while on strike, without awarding them separation pay or
financial assistance. In 1996, in Allied Banking Corporation v.
NLRC,[82] this Court affirmed the dismissal of Union officers
and members, who staged a strike despite the DOLE
Secretarys issuance of a return to work order but did not award
separation pay. In the earlier but more relevant case of Chua
v. NLRC,[83] this Court deleted the NLRCs award of
separation benefits to an employee who participated in an
unlawful and violent strike, which strike resulted in multiple
deaths and extensive property damage. In Chua, we viewed
the infractions committed by the union officers and members
as a serious misconduct which resulted in the deletion of the
award of separation pay in conformance to the ruling in PLDT.
Based on existing jurisprudence, the award of separation pay
to the Union officials and members in the instant petitions
cannot be sustained.
One last point to considerit is high time that employer and
employee cease to view each other as adversaries and instead
recognize that theirs is a symbiotic relationship, wherein they
must rely on each other to ensure the success of the business.
When they consider only their own self-interests, and when

they act only with their own benefit in mind, both parties suffer
from short-sightedness, failing to realize that they both have a
stake in the business. The employer wants the business to
succeed, considering the investment that has been made. The
employee in turn, also wants the business to succeed, as
continued employment means a living, and the chance to
better ones lot in life. It is clear then that they both have the
same goal, even if the benefit that results may be greater for
one party than the other. If this becomes a source of conflict,
there are various, more amicable means of settling disputes
and of balancing interests that do not add fuel to the fire, and
instead open avenues for understanding and cooperation
between the employer and the employee. Even though strikes
and lockouts have been recognized as effective bargaining
tools, it is an antiquated notion that they are truly beneficial, as
they only provide short-term solutions by forcing concessions
from one party; but staging such strikes would damage the
working relationship between employers and employees, thus
endangering the business that they both want to succeed. The
more progressive and truly effective means of dispute
resolution lies in mediation, conciliation, and arbitration, which
do not increase tension but instead provide relief from them. In
the end, an atmosphere of trust and understanding has much
more to offer a business relationship than the traditional enmity
that has long divided the employer and the employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and 158789
are DENIED while those in G.R. Nos. 158798-99 are
GRANTED.
The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100
and 67561 restoring the grant of severance compensation is
ANNULLED and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos.
67100 and 67561, which affirmed the August 9, 2001 Decision
of the NLRC but deleted the grant of severance compensation,
is REINSTATED and AFFIRMED.
No costs.
SO ORDERED.
2.7 Principle of Social and Distributive Justice: Balancing
of interests in case workers and management’s right
collide
G.R. No. 169712 January 20, 2009
MA. WENELITA S. TIRAZONA, Petitioner,
vs.
PHILIPPINE EDS TECHNO- SERVICE INC. (PET INC.)
AND/OR KEN KUBOTA, MAMORU ONO and JUNICHI
HIROSE, Respondents.
CHICO-NAZARIO, J.:
Before Us is a Motion for Leave to File [a] Second Motion for
Reconsideration,1 with the Second Motion for Reconsideration
incorporated therein, where petitioner Ma. Wenelita Tirazona
(Tirazona) seeks the reconsideration of the Resolution2 of this
Court dated 23 June 2008. Said Resolution denied for lack of
merit petitioner’s previous Motion for Reconsideration,3 which
sought the reversal of our Decision4 dated 14 March 2008 or,
in the alternative, modification thereof by awarding her
separation pay and retirement benefits under existing laws.
In our 14 March 2008 Decision, we subscribed to the factual
findings of the National Labor Relations Commission (NLRC)
and the Court of Appeals that Tirazona, being the
Administrative Manager of Philippine EDS Techno-Service,
Inc. (PET), was a managerial employee who held a position of
trust and confidence; that after PET officers/directors called
her attention to her improper handling of a situation involving a
rank-and-file employee, she claimed that she was denied due
process for which she demanded ₱2,000,000.00 indemnity
from PET and its officers/directors; that she admitted to
reading a confidential letter addressed to PET officers/directors
containing the legal opinion of the counsel of PET regarding
her case; and that she was validly terminated from her
employment on the ground that she willfully breached the trust
and confidence reposed in her by her employer. In the end, we
concluded that:
Tirazona, in this case, has given PET more than enough
reasons to distrust her. The arrogance and hostility she has
shown towards the company and her stubborn,
uncompromising stance in almost all instances justify the
company’s termination of her employment. Moreover,
Tirazona’s reading of what was supposed to be a confidential
letter between the counsel and directors of the PET, even if it
concerns her, only further supports her employer’s view that
she cannot be trusted. In fine, the Court cannot fault the
actions of PET in dismissing petitioner.5
Hence, the fallo of our 14 March 2008 Decision reads:
WHEREFORE, premises considered, the instant petition is
hereby DENIED for lack of merit and the Decision of the Court
of Appeals dated 24 May 2005 is hereby AFFIRMED. Costs
against the petitioner.6
On 29 April 2008, Tirazona moved for reconsideration7 of our
afore-mentioned Decision. She argued therein that the Court
failed to consider the length of her service to PET in affirming
her termination from employment. She prayed that her
dismissal be declared illegal. Alternatively, should the Court
uphold the legality of her dismissal, Tirazona pleaded that she
be awarded separation pay and retirement benefits, out of
humanitarian considerations.
In our Resolution8 dated 23 June 2008, we denied Tirazona’s
Motion for Reconsideration, as the same did not present any
substantial arguments that would warrant a modification of our
previous ruling. We thus decreed:
ACCORDINGLY, the Court resolves to DENY the motion for
reconsideration with FINALITY for lack of merit.
On 21 August 2008, Tirazona filed the instant Motion for Leave
to File [a] Second Motion for Reconsideration, with the Second
Motion for Reconsideration incorporated therein, raising
essentially the same arguments and prayers contained in her
first Motion for Reconsideration.
37
The Court thereafter required PET to comment on the above
motion. On 19 November 2008, PET filed its
Comment/Opposition,9 to which Tirazona filed her Reply10 on
8 December 2008.
After thoroughly scrutinizing the averments of the present
Motion, the Court unhesitatingly declares the same to be
completely unmeritorious.
Section 2, Rule 52 of the Rules of Court explicitly decrees that
no second motion for reconsideration of a judgment or final
resolution by the same party shall be entertained. Accordingly,
a second motion for reconsideration is a prohibited
pleading,http://www.supremecourt.gov.ph/resolutions/2006/july
/122472.htm - _ftn6 which shall not be allowed, except for
extraordinarily persuasive reasons and only after an express
leave shall have first been obtained.11 In this case, we fail to
find any such extraordinarily persuasive reason to allow
Tirazona’s Second Motion for Reconsideration.
As a general rule, an employee who has been dismissed for
any of the just causes enumerated under Article 28212 of the
Labor Code is not entitled to separation pay.13 In Sy v.
Metropolitan Bank & Trust Company,14 we declared that only
unjustly dismissed employees are entitled to retirement
benefits and other privileges including reinstatement and
backwages.
Although by way of exception, the grant of separation pay or
some other financial assistance may be allowed to an
employee dismissed for just causes on the basis of equity,15
in Philippine Long Distance Telephone Company v. National
Labor Relations Commission,16 we set the limits for such a
grant and gave the following ratio for the same:
[S]eparation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character. x x x.
A contrary rule would, as the petitioner correctly argues, have
the effect, of rewarding rather than punishing the erring
employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay
has nothing to do with the wrong he has committed. Of course
it has. Indeed, if the employee who steals from the company is
granted separation pay even as he is validly dismissed, it is not
unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if
he is again found out. This kind of misplaced compassion is
not going to do labor in general any good as it will encourage
the infiltration of its ranks by those who do not deserve the
protection and concern of the Constitution.
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be [a] refuge of
scoundrels any more than can equity be an impediment to the

punishment of the guilty. Those who invoke social justice may
do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great
policy of our Constitution is not meant for the protection of
those who have proved they are not worthy of it, like the
workers who have tainted the cause of labor with the
blemishes of their own character. (Emphasis ours.)
In accordance with the above pronouncements, Tirazona is not
entitled to the award of separation pay.
Contrary to her exaggerated claims, Tirazona was not just
"gracelessly expelled" or "simply terminated" from the
company on 22 April 2002. She was found to have violated the
trust and confidence reposed in her by her employer when she
arrogantly and unreasonably demanded from PET and its
officers/directors the exorbitant amount of ₱2,000,000.00 in
damages, coupled with a threat of a lawsuit if the same was
not promptly paid within five days. This unwarranted imposition
on PET and its officers/directors was made after the company
sent Tirazona a letter, finding her handling of the situation
involving a rank-and-file employee to be less than ideal, and
merely reminding her to be more circumspect when dealing
with the more delicate concerns of their employees. To
aggravate the situation, Tirazona adamantly and continually
refused to cooperate with PET’s investigation of her case and
to provide an adequate explanation for her actions.
Verily, the actions of Tirazona reflected an obdurate character
that is arrogant, uncompromising, and hostile. By immediately
and unreasonably adopting an adverse stance against PET,
she sought to impose her will on the company and placed her
own interests above those of her employer. Her motive for her
actions was rendered even more questionable by her
exorbitant and arbitrary demand for ₱2,000,000.00 payable
within five days from demand. Her attitude towards her
employer was clearly inconsistent with her position of trust and
confidence. Her poor character became even more evident
when she read what was supposed to be a confidential letter of
the legal counsel of PET to PET officers/directors expressing
his legal opinion on Tirazona’s administrative case. PET was,
therefore, fully justified in terminating Tirazona’s employment
for loss of trust and confidence.
Tirazona also failed to persuade us to consider in her favor her
length of service to PET.
In the Motion for Reconsideration filed on 29 April 2008 and in
the instant motion, Tirazona prays for this Court to grant her
separation and other retirement benefits, should we uphold the
legality of her dismissal. She anchors her claim on the fact that
she had allegedly been in the employ of PET for twenty-six
(26) years and that the Court must give due consideration to
the length of her service to the company.17 However, in her
Reply to the Comment/Opposition to the instant motion filed by
PET, Tirazona retracted the above allegation and stated that
the claim of twenty-six (26) years of employment with PET was
an error committed through inadvertence. She then averred
that the length of her employment with PET should indeed be
counted from July 1999, which up to the present time will result
in a period of eight (8) years, more or less.
We find that the above statement is still inaccurate. As this
Court ruled in our Decision dated 14 March 2008, Tirazona
was validly terminated from her employment on 22 April 2002.
Therefore, counting from the time when Tirazona was
employed by PET on 19 July 1999 up to the time when she
was dismissed, she had only rendered a little more than two
(2) years and nine (9) months of service to PET.
Finally, the cases cited by Tirazona hardly support her cause.
In Soco v. Mercantile Corporation of Davao18 and Firestone
Tire and Rubber Company of the Philippines v. Lariosa,19
separation pay was granted to the dismissed employees, as
they were mere rank-and-file employees who did not have any
previous derogatory record with their companies and in
equitable regard for their long years of service spanning more
than ten (10) years.
In Farrol v. Court of Appeals,20 separation pay was awarded
because the penalty of dismissal was held to be harsh and
disproportionate to the offense committed and the dismissed
employee had been at the service of the company for twenty
four (24) years.
In Negros Navigation Co. Inc. v. National Labor Relations
Commission,21 separation pay was awarded to the employee
dismissed, as it was the employer itself that prayed for the
award of the same, in lieu of the employee’s reinstatement.
Lastly, in Philippine Commercial International Bank v. Abad,22
separation pay was ordered granted to a dismissed managerial
employee because there was an express finding that the
violation of the bank policies was not perpetrated for the
employee’s self-interest, nor did the employee exhibit any lack
of moral depravity. The employee had also been in the service
of the company for twenty-five (25) years.
Obviously, Tirazona’s reliance upon the above-cited cases is
misleading, as the circumstances therein are markedly
different from those in the case at bar.
In sum, we hold that the award of separation pay or any other
kind of financial assistance to Tirazona, under the guise of
compassionate justice, is not warranted in this case. To hold
otherwise would only cause a disturbance of the sound
jurisprudence on the matter and a perversion of the noble
dictates of social justice.
While the Court commiserates with the plight of Tirazona, who
has recently manifested23 that she has since been suffering
from her poor health condition, the Court cannot grant her plea
for the award of financial benefits based solely on this
unfortunate circumstance. For all its conceded merit, equity is
available only in the absence of law and not as its
replacement. Equity as an exceptional extenuating
circumstance does not favor, nor may it be used to reward, the
indolent24 or the wrongdoer, for that matter. This Court will not
allow a party, in the guise of equity, to benefit from its own
fault.25
WHEREFORE, the Motion for Leave to File [a] Second Motion
for Reconsideration is hereby DENIED for lack of merit and the
38
Second Motion for Reconsideration incorporated therein is
NOTED WITHOUT ACTION in view of the denial of the former.
SO ORDERED.
G.R. No. 184011 September 18, 2013
REYNALDO HAYAN MOYA, Petitioner,
vs. FIRST SOLID RUBBER INDUSTRIES, INC.,
Respondent.
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari1 from
the Decision2 of the Special Third Division of the Court of
Appeals in CA-G.R. SP No. 99500 dated 30 April 2008,
modifying the Decision of the National Labor Relations
Commission (NLRC) by deleting the award of separation pay
in favor of Reynaldo Hayan Moya (Moya). The dispositive
portion of the assailed decision reads:
WHEREFORE, premises considered, the petition is hereby
GRANTED. The Resolutions dated January 31, 2007 and April
24, 2007 of the National Labor Relations Commission in NLRC
NCR CA No. 048653-06 (NLRC NCR Case No. 00-11-12626
2004) affirming the Decision dated February 28, 2006 of the
Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting
the award for separation pay in favor of private respondent
Reynaldo Hayan Moya.3
The facts as gathered by this Court follow:
On 25 January 2005, Moya filed before the NLRC-National
Capital Region a complaint for illegal dismissal against First
Solid Rubber Industries, Inc. (First Solid) and its President
Edward Lee Sumulong. In his complaint-affidavit,4 Moya
alleged that:
1. Sometime in May 1993, he was hired by the company First
Solid, a business engaged in manufacturing of tires and
rubbers, as a machine operator;
2. Through years of dedication to his job, he was promoted as
head of the Tire Curing Department of the company;
3. On October 15, 2004, he reported an incident about an
under curing of tires within his department which led to the
damage of five tires;
4. The company conducted an investigation of the incident and
he was later required to explain;
5. In his explanation, he stated that the damage was caused
by machine failure and the incident was without any fault of the
operator;
6. Despite his explanation of what transpired, he was
terminated by the company through a letter dated November 9,
2004.
From the foregoing, he prayed that payment of backwages,
separation pay, moral damages and exemplary damages be
adjudged in his favor due to the illegal dismissal he suffered
from the company.

Moya, through his Reply,5 added that his termination fell short
of any of the just causes of serious misconduct, gross and
habitual neglect of duties and willful breach of trust. He pointed
out that the company failed to prove that his act fell within the
purview of improper or wrong misconduct, and that a single act
of negligence as compared to eleven (11) years of service of
good record with the company will not justify his dismissal.
First Solid, in its Position Paper,6 Reply7 and Memorandum,8
admitted that Moya was a former employee of the company
and was holding the position of Officer-in-Charge of the Tire
Curing Department until his valid dismissal. However, it denied
that it illegally dismissed Moya and maintained that his
severance from the company was due to a valid exercise of
management prerogative.9 The company insisted on its right
to validly dismiss an employee in good faith if it has a
reasonable ground to believe that its employee is responsible
of misconduct, and the nature of his participation therein
renders him absolutely unworthy of the trust and confidence
demanded by his position.10
Opposing the story of Moya, the company countered that
Moya, who was exercising supervision and control over the
employees as a department head, failed to exercise the
diligence required of him to see to it that the machine operator,
Melandro Autor, properly operated the machine. This act is
considered as a gross and habitual neglect of duty which
caused actual losses to the company.11
During the initial investigation, Moya, in his Explanation
Letter12 dated 15 October 2004, insisted that the cause of the
damage of five (5) tires was due to premature hauling of the
tires below curing time. Unsatisfied with the explanation, the
company sent Moya a Letter13 dated 26 October 2004 stating
that he failed to explain what really transpired in the under
curing of tires. The company informed Moya that the damage
was caused by the operator’s unlawful setting of the timer from
manual to automatic without Moya’s permission. To make the
matter worse, Moya failed to disclose the real situation that the
operator was at fault.
Moya was given twenty-four (24) hours to defend himself and
explain the matter. In response, Moya admitted in a letter
dated 29 October 2004 his mistake of not disclosing the true
incident and explained that he found it more considerate to just
let the operator be suspended and be fined for the damage
committed. He denied any willful intention to conceal the truth
or cover up the mistake of his employee. Finally, he asked for
the company’s forgiveness for the fault he had committed.14 In
a letter dated 3 November 2004, Moya reiterated his plea for
forgiveness and asked for another chance to continue his
employment with the company.15
Procedural due process, through issuance of twin notices, was
also complied with by the company. Moya was informed of the
charges against him through a memorandum16 indicating his
violation and was given an opportunity to answer or rebut the
charges. After giving his explanation through several letters to
the company, a notice was sent informing him of the
management’s decision of his dismissal and termination from
services on9 November 2004 based on serious misconduct,
gross and habitual neglect of duty and willful breach of trust
reposed upon him by the company.17
On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr.
rendered a judgment18 finding sufficient and valid grounds to
dismiss Moya for concealing and lying to First Solid about the
factual circumstances leading to the damage of five (5) tires on
15 October 2004. However, it ruled that the dismissal from
service of the complainant was too harsh as a penalty since it
was a first offense and there was no willful and malicious
intention on his part to cause damage. The dispositive portion
reads:
WHEREFORE, judgment is hereby rendered ordering
Respondents First Solid Rubber Industrial, Inc. and Edward
Lee Sumulong to jointly and severally pay complainant
separation pay in lieu of reinstatement the amount of ₱63,
654.00.
All other claims whether monetary or otherwise are hereby
DISMISSED for lack of merit.19
In justifying his decision, the Labor Arbiter explained that the
length of time during which the complainant was deprived of
employment was sufficient penalty for the act he had
committed against the company. As a result, his reinstatement
without backwages to his former position was in order.
However, since the employment was already strained and
Moya was no longer seeking to be reinstated, he decided that
it was for the best interest of both parties to award instead a
separation pay of one (1) month salary for every year of
credited service less the total of cash advances of the
complainant amounting to ₱19,000.00.20
Not in total accord with the outcome of the decision, First Solid
filed its partial appeal before the NLRC on 13 April 2006. The
company assailed as error on the part of the Labor Arbiter the
grant of separation pay in favor of Moya despite the finding
that there was a just cause for the employee’s dismissal from
service. It was submitted that the complainant’s length of
service to the company cannot be invoked to justify the award.
It was argued that Moya was dismissed for just causes; hence,
to award separation pay would be tantamount to giving a prize
for disloyalty and breach of trust.21
On 31 January 2007, the NLRC affirmed the Decision of the
Labor Arbiter in its entirety.22
The NLRC affirmed the finding of the Labor Arbiter that a
separation pay should be given to Moya in lieu of
reinstatement citing primarily his length of service and years of
contribution to the profitable business operation of the
company. It also noted that this transgression was the first
mistake of Moya in the performance of his functions. Finally, it
cited as justification the Court’s ruling in St. Michael’s Institute
v. Santos,23 wherein the Court held that "even when an
employee is found to have transgressed the employer’s rules,
in the actual imposition of penalties upon the erring employee,
due consideration must still be given to his length of service
and the number of violations committed during his
employment."24
39
In its Motion for Reconsideration,25 First Solid insisted that
length of service cannot mitigate breach of trust which is
penalized with dismissal.
On 24 April 2007, the NLRC denied the motion of First Solid as
it found no compelling justification to overturn its findings.26
In its Petition for Certiorari before the Court of Appeals, the
company reiterated its previous arguments that separation pay
cannot be awarded to validly dismissed employees and that
length of service was not a ground to reduce the penalty of
dismissal due to breach of trust.27
In his Comment28 and Memorandum,29 Moya capitalized on
the pronouncement of the Labor Arbiter that his alleged
infraction does not merit a penalty of dismissal from service
given his length of service to the company as well as the
failure of the company to prove that he acted maliciously and
with the intention to cause damage.
First Solid, in its Reply30 and Memorandum,31 argued that
Moya, being a supervisor, the company reposed on him its
trust and confidence. He was expected to remain loyal and
trustworthy and promote the best interest of the company. His
act of concealing, by making a fraudulent report to the
company regarding the transgression of the machine operator
under him, is a valid basis for dismissal based on breach of
trust and confidence. The company further contended that the
award of separation pay made by the labor tribunals was
contrary to law and jurisprudence.
In its Decision,32 the Court of Appeals ruled in favor of the
company and reversed the decisions of the labor tribunals. The
dispositive portions reads:
WHEREFORE, premises considered, the petition is
GRANTED. The Resolutions dated January 31, 2007 and April
24, 2007 of the National Labor Relations Commission in NLRC
NCR CA No. 048653-06(NLRC NCR Case No. 00-11-12626-
2004) affirming the Decision dated February 28, 2006 of the
Labor Arbiter Pablo C. Espiritu, Jr. is MODIFIED by deleting
the award for separation pay in favor of private respondent
Reynaldo Hayan Moya.33
The appellate court ruled that an employee found to be guilty
of serious misconduct or other acts reflecting his moral
character is not entitled to separation pay. Moya who held a
supervisory position as the Head of the Curing Department
breached the trust reposed upon him when he did not disclose
what was actually done by the machine operator which
eventually caused the damage. It was only when the company
discovered that the report was not in accordance with what
really transpired that Moya admitted its mistake. In sum, the
appellate court agreed that First Solid presented substantial
proof to consider Moya as dishonest and disloyal to the
company.
It took the position that instead of being a basis for the award
of separation pay, Moya’s length of service should have been
taken against him. The reason for his dismissal was his lack of
integrity and loyalty to the company reflecting upon his moral
character.

The appellate court emphasized that while the law is
considerate to the welfare of the employees whenever there is
a labor conflict, it also protects the right of an employer to
exercise its management prerogative in good faith.
The Court’s Ruling
That there is a valid ground for the dismissal of Moya based on
breach and loss of trust and confidence is no longer at issue.
The Labor Arbiter, NLRC and the appellate court were
unanimous in their rulings on this matter. The remaining
question is whether or not petitioner employee is entitled to
separation pay based on his length of service.
Petitioner is not entitled to separation pay. Payment of
separation pay cannot be justified by his length of service.
It must be stressed that Moya was not an ordinary rank-and-
file employee. He was holding a supervisory rank being an
Officer-in-Charge of the Tire Curing Department. The position,
naturally one of trust, required of him abiding honesty as
compared to ordinary rank-and-file employees. When he made
a false report attributing the damage of five tires to machine
failure, he breached the trust and confidence reposed upon
him by the company.
In a number of cases,34 this Court put emphasis on the right of
an employer to exercise its management prerogative in dealing
with its company’s affairs including its right to dismiss its erring
employees. We recognized the right of the employer to
regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to
be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal
and recall of workers.35 It is a general principle of labor law to
discourage interference with an employer’s judgment in the
conduct of his business. As already noted, even as the law is
solicitous of the welfare of the employees, it also recognizes
employer’s exercise of management prerogatives. As long as
the company’s exercise of judgment is in good faith to advance
its interest and not for the purpose of defeating or
circumventing the rights of employees under the laws or valid
agreements, such exercise will be upheld.36
Following the ruling in The Coca-Cola Export Corporation v.
Gacayan,37 the employers have a right to impose a penalty of
dismissal on employees by reason of loss of trust and
confidence. More so, in the case of supervisors or personnel
occupying positions of responsibility, does loss of trust justify
termination. Loss of confidence as a just cause for termination
of employment is premised on the fact that an employee
concerned holds a position of trust and confidence. This
situation holds where a person is entrusted with confidence on
delicate matters, such as the custody, handling, or care and
protection of the employer’s property. But, in order to constitute
a just cause for dismissal, the act complained of must be
"work-related" such as would show the employee concerned to
be unfit to continue working for the employer.38
The foregoing as viewpoint, the right of First Solid to handle its
own affairs in managing its business must be respected. The
clear consequence is the denial of the grant of separation pay
in favor of Moya.
As pronounced in the recent case of Unilever Philippines, Inc.,
v. Rivera,39 an employee who has been dismissed for any of
the just causes enumerated under Article 28240 of the Labor
Code, including breach of trust, is not entitled to separation
pay.41 This is further bolstered by Section 7,Rule I, Book VI of
the Omnibus Rules Implementing the Labor Code which
provides that:
Sec. 7. Termination of employment by employer. — The just
causes for terminating the services of an employee shall be
those provided in Article 282 of the Code. The separation from
work of an employee for a just cause does not entitle him to
the termination pay provided in the Code, without prejudice,
however, to whatever rights, benefits and privileges he may
have under the applicable individual or collective agreement
with the employer or voluntary employer policy or
practice.1âwphi1
However, this Court also provides exceptions to the rule based
on "social justice" or on "equitable grounds" following the ruling
in Philippine Long Distance Telephone Co. v. NLRC,42 stating
that separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the
valid dismissal is, for example, habitual intoxication or an
offense involving moral turpitude, like theft or illicit sexual
relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the
ground of social justice.43
The PLDT case further elucidates why an erring employee
could not benefit under the cloak of social justice in the award
of separation pay, we quote:
The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it
certainly will not condone the offense. Compassion for the poor
is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege.
Social justice cannot be permitted to be refuge of scoundrels
any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if
their hands are clean and their motives blameless and not
simply because they happen to be poor. This great policy of
our Constitution is not meant for the protection of those who
have proved they are not worthy of it, like the workers who
have tainted the cause of labor with the blemishes of their own
character.44
Moya’s dismissal is based on one of the grounds under Art.
282 of the Labor Code which is willful breach by the employee
of the trust reposed in him by his employer. Also, he is outside
the protective mantle of the principle of social justice as his act
of concealing the truth from the company is clear disloyalty to
the company which has long employed him.1âwphi1
40
Indeed, as found below, Moya’s length of service should be
taken against him. The pronouncement in Reno Foods, Inc. v.
Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan45 is
instructive on the matter:
x x x Length of service is not a bargaining chip that can simply
be stacked against the employer. After all, an employer-
employee relationship is symbiotic where both parties benefit
from mutual loyalty and dedicated service. If an employer had
treated his employee well, has accorded him fairness and
adequate compensation as determined by law, it is only fair to
expect a long-time employee to return such fairness with at
least some respect and honesty. Thus, it may be said that
betrayal by a long-time employee is more insulting and odious
for a fair employer.46 (Emphasis supplied).
WHEREFORE, we DENY the petition for review on certiorari.
The Decision dated 30 April 2008 and Resolution dated 1
August 2008 of the Special Third Division of the Court of
Appeals in CA-G.R. SP No. 99500 are hereby AFFIRMED.
B. Employer- Employee Relationship
3.2 Tests to determine the existence of employer-
employee relationship
G.R. No. 172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the
SOCIAL SECURITY COMMISSION and SOCIAL SECURITY
SYSTEM, Petitioners,
vs. ASIAPRO COOPERATIVE, Respondent.
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under
Rule 45 of the 1997 Revised Rules of Civil Procedure seeking
to annul and set aside the Decision1 and Resolution2 of the
Court of Appeals in CA-G.R. SP No. 87236, dated 5 January
2006 and 20 March 2006, respectively, which annulled and set
aside the Orders of the Social Security Commission (SSC) in
SSC Case No. 6-15507-03, dated 17 February 20043 and 16
September 2004,4 respectively, thereby dismissing the
petition-complaint dated 12 June 2003 filed by herein petitioner
Social Security System (SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by
the SSC, a quasi-judicial body authorized by law to resolve
disputes arising under Republic Act No. 1161, as amended by
Republic Act No. 8282.5 Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as
amended. On the other hand, herein respondent Asiapro
Cooperative (Asiapro) is a multi-purpose cooperative created
pursuant to Republic Act No. 69386 and duly registered with
the Cooperative Development Authority (CDA) on 23
November 1999 with Registration Certificate No. 0-623-2460.7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of
owners-members. Under its by-laws, owners-members are of
two categories, to wit: (1) regular member, who is entitled to all
the rights and privileges of membership; and (2) associate
member, who has no right to vote and be voted upon and shall
be entitled only to such rights and privileges provided in its by-

laws.8 Its primary objectives are to provide savings and credit
facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service
Contracts9 with Stanfilco - a division of DOLE Philippines, Inc.
and a company based in Bukidnon. The owners-members do
not receive compensation or wages from the respondent
cooperative. Instead, they receive a share in the service
surplus10 which the respondent cooperative earns from
different areas of trade it engages in, such as the income
derived from the said Service Contracts with Stanfilco. The
owners-members get their income from the service surplus
generated by the quality and amount of services they
rendered, which is determined by the Board of Directors of the
respondent cooperative.
In order to enjoy the benefits under the Social Security Law of
1997, the owners-members of the respondent cooperative,
who were assigned to Stanfilco requested the services of the
latter to register them with petitioner SSS as self-employed
and to remit their contributions as such. Also, to comply with
Section 19-A of Republic Act No. 1161, as amended by
Republic Act No. 8282, the SSS contributions of the said
owners-members were equal to the share of both the employer
and the employee.
On 26 September 2002, however, petitioner SSS through its
Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent
a letter11 to the respondent cooperative, addressed to its Chief
Executive Officer (CEO) and General Manager Leo G. Parma,
informing the latter that based on the Service Contracts it
executed with Stanfilco, respondent cooperative is actually a
manpower contractor supplying employees to Stanfilco and for
that reason, it is an employer of its owners-members working
with Stanfilco. Thus, respondent cooperative should register
itself with petitioner SSS as an employer and make the
corresponding report and remittance of premium contributions
in accordance with the Social Security Law of 1997. On 9
October 2002,12 respondent cooperative, through its counsel,
sent a reply to petitioner SSS’s letter asserting that it is not an
employer because its owners-members are the cooperative
itself; hence, it cannot be its own employer. Again, on 21
October 2002,13 petitioner SSS sent a letter to respondent
cooperative ordering the latter to register as an employer and
report its owners-members as employees for compulsory
coverage with the petitioner SSS. Respondent cooperative
continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a
Petition14 before petitioner SSC against the respondent
cooperative and Stanfilco praying that the respondent
cooperative or, in the alternative, Stanfilco be directed to
register as an employer and to report respondent cooperative’s
owners-members as covered employees under the compulsory
coverage of SSS and to remit the necessary contributions in
accordance with the Social Security Law of 1997. The same
was docketed as SSC Case No. 6-15507-03. Respondent
cooperative filed its Answer with Motion to Dismiss alleging
that no employer-employee relationship exists between it and
its owners-members, thus, petitioner SSC has no jurisdiction
over the respondent cooperative. Stanfilco, on the other hand,
filed an Answer with Cross-claim against the respondent
cooperative.
On 17 February 2004, petitioner SSC issued an Order denying
the Motion to Dismiss filed by the respondent cooperative. The
respondent cooperative moved for the reconsideration of the
said Order, but it was likewise denied in another Order issued
by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative
filed a Motion for Extension of Time to File a Petition for
Review before the Court of Appeals. Subsequently,
respondent cooperative filed a Manifestation stating that it was
no longer filing a Petition for Review. In its place, respondent
cooperative filed a Petition for Certiorari before the Court of
Appeals, docketed as CA-G.R. SP No. 87236, with the
following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004
of [herein petitioner] SSC were issued with grave abuse of
discretion amounting to a (sic) lack or excess of jurisdiction in
that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it
has jurisdiction over the petition a quo, considering that it failed
to first resolve the issue of the existence of an employer-
employee relationship between [respondent] cooperative and
its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to coverage,
benefits, contributions, and related matters, it is respectfully
submitted that [petitioner] SSC may only assume jurisdiction in
cases where there is no dispute as to the existence of an
employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal
issue of employer-employee relationship raised in
[respondent’s] Motion to Dismiss can be preliminarily resolved
through summary hearings prior to the hearing on the merits.
However, any inquiry beyond a preliminary determination, as
what [petitioner SSC] wants to accomplish, would be to
encroach on the jurisdiction of the National Labor Relations
Commission [NLRC], which is the more competent body
clothed with power to resolve issues relating to the existence
of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take
cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation of
the Labor Law but is a multi-purpose cooperative created
pursuant to Republic Act No. 6938 and composed of owners-
members, not employees.
B. The rights and obligations of the owners-members of
[respondent] cooperative are derived from their Membership
Agreements, the Cooperatives By-Laws, and Republic Act No.
6938, and not from any contract of employment or from the
Labor Laws. Moreover, said owners-members enjoy rights that
are not consistent with being mere employees of a company,
41
such as the right to participate and vote in decision-making for
the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the
owners-members of [respondent] cooperative are not paid any
compensation income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision
granting the petition filed by the respondent cooperative. The
decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders
dated [17 February 2004] and [16 September 2004], are
ANNULLED and SET ASIDE and a new one is entered
DISMISSING the petition-complaint dated [12 June 2003] of
[herein petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for
a reconsideration, but it was denied by the appellate court in its
Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or
not the Court of Appeals erred in not finding that the SSC has
jurisdiction over the subject matter and it has a valid basis in
denying respondent’s Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-
complaint filed before it by the [petitioner SSS] under R.A. No.
8282.
II. Respondent [cooperative] is estopped from questioning the
jurisdiction of petitioner SSC after invoking its jurisdiction by
filing an [A]nswer with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of
discretion in denying respondent [cooperative’s] [M]otion to
[D]ismiss.
IV. The existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between
[respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-
complaint filed before it by petitioner SSS as it involved an
issue of whether or not a worker is entitled to compulsory
coverage under the SSS Law. Petitioners avow that Section 5
of Republic Act No. 1161, as amended by Republic Act No.
8282, expressly confers upon petitioner SSC the power to
settle disputes on compulsory coverage, benefits, contributions
and penalties thereon or any other matter related thereto.
Likewise, Section 9 of the same law clearly provides that SSS
coverage is compulsory upon all employees. Thus, when
petitioner SSS filed a petition-complaint against the respondent
cooperative and Stanfilco before the petitioner SSC for the
compulsory coverage of respondent cooperative’s owners-
members as well as for collection of unpaid SSS contributions,
it was very obvious that the subject matter of the aforesaid

petition-complaint was within the expertise and jurisdiction of
the SSC.
Petitioners similarly assert that granting arguendo that there is
a prior need to determine the existence of an employer-
employee relationship between the respondent cooperative
and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid
petition-complaint. Considering that the principal relief sought
in the said petition-complaint has to be resolved by reference
to the Social Security Law and not to the Labor Code or other
labor relations statutes, therefore, jurisdiction over the same
solely belongs to petitioner SSC.
Petitioners further claim that the denial of the respondent
cooperative’s Motion to Dismiss grounded on the alleged lack
of employer-employee relationship does not constitute grave
abuse of discretion on the part of petitioner SSC because the
latter has the authority and power to deny the same. Moreover,
the existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
Petitioners also maintain that the respondent cooperative is
already estopped from assailing the jurisdiction of the
petitioner SSC because it has already filed its Answer before it,
thus, respondent cooperative has already submitted itself to
the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee
relationship between the respondent cooperative and its
owners-members. The respondent cooperative is the employer
of its owners-members considering that it undertook to provide
services to Stanfilco, the performance of which is under the full
and sole control of the respondent cooperative.
On the other hand, respondent cooperative alleges that its
owners-members own the cooperative, thus, no employer-
employee relationship can arise between them. The persons of
the employer and the employee are merged in the owners-
members themselves. Likewise, respondent cooperative’s
owners-members even requested the respondent cooperative
to register them with the petitioner SSS as self-employed
individuals. Hence, petitioner SSC has no jurisdiction over the
petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of
Appeals correctly ruled that petitioner SSC acted with grave
abuse of discretion when it assumed jurisdiction over the
petition-complaint without determining first if there was an
employer-employee relationship between the respondent
cooperative and its owners-members. Respondent cooperative
claims that the question of whether an employer-employee
relationship exists between it and its owners-members is a
legal and not a factual issue as the facts are undisputed and
need only to be interpreted by the applicable law and
jurisprudence.
Lastly, respondent cooperative asserts that it cannot be
considered estopped from assailing the jurisdiction of petitioner
SSC simply because it filed an Answer with Motion to Dismiss,
especially where the issue of jurisdiction is raised at the very
first instance and where the only relief being sought is the
dismissal of the petition-complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may
be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-
complaint filed before it by petitioner SSS against the
respondent cooperative.
II. Whether the respondent cooperative is estopped from
assailing the jurisdiction of petitioner SSC since it had already
filed an Answer with Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of
Republic Act No. 8282 as well as in Section 1, Rule III of the
1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising
under this Act with respect to coverage, benefits, contributions
and penalties thereon or any other matter related thereto, shall
be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of
Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social
Security Act with respect to coverage, entitlement of benefits,
collection and settlement of contributions and penalties
thereon, or any other matter related thereto, shall be
cognizable by the Commission after the SSS through its
President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first
taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue
regarding the compulsory coverage of the SSS is well within
the exclusive domain of the petitioner SSC. It is important to
note, though, that the mandatory coverage under the SSS Law
is premised on the existence of an employer-employee
relationship17 except in cases of compulsory coverage of the
self-employed.
It is axiomatic that the allegations in the complaint, not the
defenses set up in the Answer or in the Motion to Dismiss,
determine which court has jurisdiction over an action;
otherwise, the question of jurisdiction would depend almost
entirely upon the defendant.18 Moreover, it is well-settled that
once jurisdiction is acquired by the court, it remains with it until
the full termination of the case.19 The said principle may be
applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS
before the petitioner SSC against the respondent cooperative
and Stanfilco alleges that the owners-members of the
respondent cooperative are subject to the compulsory
coverage of the SSS because they are employees of the
respondent cooperative. Consequently, the respondent
cooperative being the employer of its owners-members must
register as employer and report its owners-members as
covered members of the SSS and remit the necessary
premium contributions in accordance with the Social Security
42
Law of 1997. Accordingly, based on the aforesaid allegations
in the petition-complaint filed before the petitioner SSC, the
case clearly falls within its jurisdiction. Although the Answer
with Motion to Dismiss filed by the respondent cooperative
challenged the jurisdiction of the petitioner SSC on the alleged
lack of employer-employee relationship between itself and its
owners-members, the same is not enough to deprive the
petitioner SSC of its jurisdiction over the petition-complaint
filed before it. Thus, the petitioner SSC cannot be faulted for
initially assuming jurisdiction over the petition-complaint of the
petitioner SSS.
Nonetheless, since the existence of an employer-employee
relationship between the respondent cooperative and its
owners-members was put in issue and considering that the
compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC
to determine if there is really an employer-employee
relationship that exists between the respondent cooperative
and its owners-members.
The question on the existence of an employer-employee
relationship is not within the exclusive jurisdiction of the
National Labor Relations Commission (NLRC). Article 217 of
the Labor Code enumerating the jurisdiction of the Labor
Arbiters and the NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE
COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for
Social Security, it would necessarily include issues on the
coverage thereof, because claims are undeniably rooted in the
coverage by the system. Hence, the question on the existence
of an employer-employee relationship for the purpose of
determining the coverage of the Social Security System is
explicitly excluded from the jurisdiction of the NLRC and falls
within the jurisdiction of the SSC which is primarily charged
with the duty of settling disputes arising under the Social
Security Law of 1997.
On the basis thereof, considering that the petition-complaint of
the petitioner SSS involved the issue of compulsory coverage
of the owners-members of the respondent cooperative, this
Court agrees with the petitioner SSC when it declared in its
Order dated 17 February 2004 that as an incident to the issue
of compulsory coverage, it may inquire into the presence or
absence of an employer-employee relationship without need of
waiting for a prior pronouncement or submitting the issue to
the NLRC for prior determination. Since both the petitioner
SSC and the NLRC are independent bodies and their
jurisdiction are well-defined by the separate statutes creating
them, petitioner SSC has the authority to inquire into the

relationship existing between the worker and the person or
entity to whom he renders service to determine if the
employment, indeed, is one that is excepted by the Social
Security Law of 1997 from compulsory coverage.21
Even before the petitioner SSC could make a determination of
the existence of an employer-employee relationship, however,
the respondent cooperative already elevated the Order of the
petitioner SSC, denying its Motion to Dismiss, to the Court of
Appeals by filing a Petition for Certiorari. As a consequence
thereof, the petitioner SSC became a party to the said Petition
for Certiorari pursuant to Section 5(b)22 of Republic Act No.
8282. The appellate court ruled in favor of the respondent
cooperative by declaring that the petitioner SSC has no
jurisdiction over the petition-complaint filed before it because
there was no employer-employee relationship between the
respondent cooperative and its owners-members. Resultantly,
the petitioners SSS and SSC, representing the Republic of the
Philippines, filed a Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s
power of review, the Court is not a trier of facts and the
findings of fact of the Court of Appeals are conclusive and
binding on the Court,23 said rule is not without exceptions.
There are several recognized exceptions24 in which factual
issues may be resolved by this Court. One of these exceptions
finds application in this present case which is, when the
findings of fact are conflicting. There are, indeed, conflicting
findings espoused by the petitioner SSC and the appellate
court relative to the existence of employer-employee
relationship between the respondent cooperative and its
owners-members, which necessitates a departure from the oft-
repeated rule that factual issues may not be the subject of
appeals to this Court.
In determining the existence of an employer-employee
relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of
wages by whatever means; (3) the power of dismissal; and (4)
the power to control the worker’s conduct, with the latter
assuming primacy in the overall consideration.25 The most
important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish.26 The
power of control refers to the existence of the power and not
necessarily to the actual exercise thereof. It is not essential for
the employer to actually supervise the performance of duties of
the employee; it is enough that the employer has the right to
wield that power.27 All the aforesaid elements are present in
this case.
First. It is expressly provided in the Service Contracts that it is
the respondent cooperative which has the exclusive discretion
in the selection and engagement of the owners-members as
well as its team leaders who will be assigned at Stanfilco.28
Second. Wages are defined as "remuneration or earnings,
however designated, capable of being expressed in terms of
money, whether fixed or ascertained, on a time, task, piece or
commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for service rendered or to be rendered."29 In this
case, the weekly stipends or the so-called shares in the
service surplus given by the respondent cooperative to its
owners-members were in reality wages, as the same were
equivalent to an amount not lower than that prescribed by
existing labor laws, rules and regulations, including the wage
order applicable to the area and industry; or the same shall not
be lower than the prevailing rates of wages.30 It cannot be
doubted then that those stipends or shares in the service
surplus are indeed wages, because these are given to the
owners-members as compensation in rendering services to
respondent cooperative’s client, Stanfilco. Third. It is also
stated in the above-mentioned Service Contracts that it is the
respondent cooperative which has the power to investigate,
discipline and remove the owners-members and its team
leaders who were rendering services at Stanfilco.31 Fourth. As
earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. In the
case at bar, it is the respondent cooperative which has the sole
control over the manner and means of performing the services
under the Service Contracts with Stanfilco as well as the
means and methods of work.32 Also, the respondent
cooperative is solely and entirely responsible for its owners-
members, team leaders and other representatives at
Stanfilco.33 All these clearly prove that, indeed, there is an
employer-employee relationship between the respondent
cooperative and its owners-members.
It is true that the Service Contracts executed between the
respondent cooperative and Stanfilco expressly provide that
there shall be no employer-employee relationship between the
respondent cooperative and its owners-members.34 This
Court, however, cannot give the said provision force and
effect.
As previously pointed out by this Court, an employee-employer
relationship actually exists between the respondent
cooperative and its owners-members. The four elements in the
four-fold test for the existence of an employment relationship
have been complied with. The respondent cooperative must
not be allowed to deny its employment relationship with its
owners-members by invoking the questionable Service
Contracts provision, when in actuality, it does exist. The
existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract, when the
terms and surrounding circumstances show otherwise. The
employment status of a person is defined and prescribed by
law and not by what the parties say it should be.35
It is settled that the contracting parties may establish such
stipulations, clauses, terms and conditions as they want, and
their agreement would have the force of law between them.
However, the agreed terms and conditions must not be
contrary to law, morals, customs, public policy or public
order.36 The Service Contract provision in question must be
struck down for being contrary to law and public policy since it
is apparently being used by the respondent cooperative merely
to circumvent the compulsory coverage of its employees, who
are also its owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in
Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37
wherein it held that:
43
A cooperative, therefore, is by its nature different from an
ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are
the ones who run and operate the business while the others
are its employees x x x.
An employee therefore of such a cooperative who is a member
and co-owner thereof cannot invoke the right to collective
bargaining for certainly an owner cannot bargain with himself
or his co-owners. In the opinion of August 14, 1981 of the
Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative
have no right to form or join labor organizations for purposes of
collective bargaining for being themselves co-owners of the
cooperative.1awp++i1
However, in so far as it involves cooperatives with employees
who are not members or co-owners thereof, certainly such
employees are entitled to exercise the rights of all workers to
organization, collective bargaining, negotiations and others as
are enshrined in the Constitution and existing laws of the
country.
The situation in the aforesaid case is very much different from
the present case. The declaration made by the Court in the
aforesaid case was made in the context of whether an
employee who is also an owner-member of a cooperative can
exercise the right to bargain collectively with the employer who
is the cooperative wherein he is an owner-member. Obviously,
an owner-member cannot bargain collectively with the
cooperative of which he is also the owner because an owner
cannot bargain with himself. In the instant case, there is no
issue regarding an owner-member’s right to bargain
collectively with the cooperative. The question involved here is
whether an employer-employee relationship can exist between
the cooperative and an owner-member. In fact, a closer look at
Cooperative Rural Bank of Davao City, Inc. will show that it
actually recognized that an owner-member of a cooperative
can be its own employee.
It bears stressing, too, that a cooperative acquires juridical
personality upon its registration with the Cooperative
Development Authority.38 It has its Board of Directors, which
directs and supervises its business; meaning, its Board of
Directors is the one in charge in the conduct and management
of its affairs.39 With that, a cooperative can be likened to a
corporation with a personality separate and distinct from its
owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-
employee relationship can exist between them.
In the present case, it is not disputed that the respondent
cooperative had registered itself with the Cooperative
Development Authority, as evidenced by its Certificate of
Registration No. 0-623-2460.40 In its by-laws,41 its Board of
Directors directs, controls, and supervises the business and
manages the property of the respondent cooperative. Clearly
then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its
owners-members as a whole. Therefore, it is completely logical
that the respondent cooperative, as a juridical person
 44

represented by its Board of Directors, can enter into an

employment with its owners-members.

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

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

WHEREFORE, premises considered, the instant Petition is

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

SO ORDERED.