Republic of the Philippines

SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 194813 April 25, 2012
Kakampi and its Members, Victor Panuelos, et al., represented by David Dayalo, Kakampi
Vice President and Attorney-in-Fact, Petitioner,
vs.
Kingspoint Express and Logistic and/or MARY Ann Co, Respondents.
D E C I S I O N
REYES, J .:
This is a petition for review under Rule 45 of the Rules of Court of the Amended Decision
1
dated
March 16, 2010 and Resolution
2
dated December 16, 2010 of the Court of Appeals (CA) in CA-G.R.
SP No. 106591.
Victor Pauelos (Pauelos), Bobby Dacara (Dacara), Alson Dizon (Dizon), Saldy Dimabayao
(Dimabayao), Fernando Lupangco, Jr. (Lupangco), Sandy Pazi (Pazi), Camilo Tabarangao, Jr.
(Tabarangao), Eduardo Hizole (Hizole) and Reginald Carillo (Carillo) were the former drivers of
Kingspoint Express and Logistic (Kingspoint Express), a sole proprietorship registered in the name
of Mary Ann Co (Co) and engaged in the business of transport of goods. They were dismissed from
service on January 20, 2006 on the grounds of serious misconduct, dishonesty, loss of trust and
confidence and commission of acts inimical to the interest of Kingspoint Express.
Prior thereto, Kingspoint Express issued separate notices to explain to the individual petitioners on
January 16, 2006, uniformly stating that:
RE: CHARGES OF DISHONESTY
SERIOUS MISCONDUCT &
LOSS OF CONFIDENCE
Dear Mr. Dacara:
You are hereby formally charged with DISHONESTY, SERIOUS MISCONDUCT, LOSS OF
CONFIDENCE, and acts inimical to the company, by filing with the National Labor Relations
Commission (NLRC) false, malicious, and fabricated cases against the company. Further, your
refusal to undergo drug testing is unwarranted and against company policy.
Please submit your answer or explanation to the foregoing charges within forty-eight (48) hours
[from] receipt hereof. Your failure to do so would mean that you waive your right to submit your
answer.
You may likewise opt for a formal investigation with the assistance of counsel, or proceed with the
investigation as you may choose.
In the meantime, you are place[d] under preventive suspension for thirty (30) days effective on
January 16, 2006. You are physically barred from company premises while the preventive
suspension exists[.]
3

The individual petitioners failed to submit their written explanation within the stated period.
Subsequently, Kingspoint Express issued to them separate yet uniformly worded notices on January
20, 2006, informing them of their dismissal. Kingspoint Express expressed its decision in this wise:
On January 16, 2006, you were formally charged with DISHONESTY, SERIOUS MISCONDUCT and
LOSS OF CONFIDENCE and ACTS INIMICAL TO THE COMPANY based on the following acts:
1. FABRICATION OF BASELESS MONEY CLAIMS against the company;
2. MISLEADING FELLOW CO-WORKERS to sign the MALICIOUS COMPLAINT FOR
MONEY CLAIMS against the company;
3. REFUSAL TO UNDERGO THE COMPANYS GENERAL DRUG TEST[;]
4. EXTORTING MONEY FROM CO-WORKERS TO FUND ACTIVITIES THAT THEY WERE
NEVER FULLY INFORMED OF;
You were given two (2) days to respond to these charges, but you failed to do [so].
4

In addition to the foregoing, Dacara was dismissed for consummating his sexual relations with one of
Cos household helpers inside Cos residence thus impregnating her.
5

A complaint for illegal dismissal was subsequently filed, alleging that the charges against them were
fabricated and that their dismissal was prompted by Kingspoint Express aversion to their union
activities.
In a Decision
6
dated April 23, 2007, Labor Arbiter Cresencio G. Ramos, Jr. (LA Ramos) found
Dacara, Lupangco, Pazi, Tabarangao, Hizole and Carillo illegally dismissed. On the other hand, the
complaint was dismissed insofar as Panuelos, Dizon and Dimabayao are concerned as they were
deemed not to have filed their position papers. While the allegation of anti-unionism as the primordial
motivation for the dismissal is considered unfounded, the respondents failed to prove that the
dismissal was for a just cause. The pertinent portion of the decision reads:
From a perusal and examination of the pieces of evidence adduced by the respondents in support of
their defense, this Office finds the same as not being sufficient and substantial to establish the
charges of serious misconduct and breach of trust. Consider the following:
On the complainants alleged refusal to undergo the companys general drug testing, the same is
explicitly nothing but an unsubstantiated allegation, therefore, undeserving of judicial and quasi-
judicial cognizance.
On the alleged act of the complainants in extorting money from co-workers to fund activities that they
were not fully informed of as well as the alleged misleading of co-workers to sign "malicious money
claims" against the company, it is to be noticed that respondents support or evidence thereto are the
joint affidavit of drivers and helpers as well as that of one Ronie Dizon. On said pieces of evidence,
this Office could not give much probative or evidentiary value and weight thereto as said sworn
statements may definitely not be said to have genuinely emanated from the affiants (sic) drivers and
helpers. To be precise, the joint-affidavit of the drivers and helpers (annex "B", respondents position
paper) obviously was "tailor-made", so to speak, to conform with the respondents position or
defense in the instant case. Said joint-affidavit in fact is couched in english, thus, tremendously
lowering the probability that the statements therein really came from the "hearts and souls" of the
lowly-educated drivers and helpers.
On the breach of trust allegedly committed by Bobby Dacara with respect to the alleged act of
repeatedly sneaking in the household of respondent Mary Ann Co and thereafter impregnating one
of the latters househelps, the same is nothing but an unsubstantiated allegation and therefore,
undeserving of judicial and quasi-judicial cognizance. Jurisprudence definitely is explicit on this point
that an affirmative allegation made by a party must duly be proven to merit acceptance (People vs.
Calayca, 301 SCRA 192).
7

On appeal, the National Labor Relations Commission (NLRC) affirmed LA Ramos Decision dated
April 23, 2007 in its Resolution
8
dated April 30, 2008, thus:
In the case at bar, We are persuaded to agree with the findings of the Labor Arbiter that "the pieces
of evidence adduced by the respondents in support of their defense x x x not being sufficient and
substantial to establish the charges of serious misconduct and breach of trust" (Records, p. 96).
9

In addition, the NLRC ruled that the respondents failed to comply with the procedural requirements
of due process. Specifically:
It is also observed that much is to be desired insofar as the observance of the procedural due
process aspect is concerned. Firstly, there was no compliance with the due process requirement of
the law considering that the uniformly worded first notice, all dated January 16, 2006, sent by
respondents-appellants to the complainants-appellees, did not apprise them of the particular acts or
omission for which their dismissal were sought. As clearly shown by the said individual notices, each
of the complainants-appellees was merely informed that he or she is "formally charged with
DISHONESTY, SERIOUS MISCONDUCT, LOSS OF CONFIDENCE and acts inimical to the
Company" x x x without specifying the particular or specific acts or omissions constituting the
grounds for their dismissal.
The purpose of the first notice is to sufficiently apprise the employee of the acts complained of and
to enable the employee to prepare his defense. In this case, though, the said first notice did not
identify the particular acts or omissions committed by each of the complainants-appellees. The
extent of their knowledge and participation in the generally described charges were not specified in
the said first notice, hence, the complainants-appellee could not be expected to intelligently and
adequately prepare their defense. The first notice should neither be pro-forma nor vague; that it
should set out clearly what each of the employees is being held liable for. They should be given
ample opportunity to be heard and not mere opportunity. Ample opportunity means that each of the
complainants-appellees should be specifically informed of the charges in order to give each of them,
an opportunity to refute such accusations. Since, the said first notices are inadequate, their dismissal
could not be in accordance with due process x x x.
Secondly, there was no just or authorized cause for the respondents-appellants to terminate the
complainants-appellees services. It is observed that the Notices of Termination, all dated January
20, 2006, merely mentioned the ground relied upon, to wit:
x x x x
Placing side by side the first (1st) notices and the Notice of Termination, We can easily notice the
wide disparity between them. In the first (1st) notices, the alleged charges leveled against each of
complainants-appellees were couched in general terms, such as: DISHONESTY, SERIOUS
MISCONDUCT, LOSS OF CONFIDENCE and ACTS INIMICAL TO THE COMPANY, such that the
complainants-appellees could not be expected to prepare their responsive pleadings; while the
uniformly worded Notices of Termination, as earlier quoted, the charges leveled against of (sic) them
are more specific.
10

Respondents moved for reconsideration and in a Decision
11
dated July 17, 2008, the NLRC reversed
itself and declared the individual petitioners legally dismissed:
Respondent company is an entity engaged in the delivery of goods called "door-to-door" business.
As such, respondents are in custody of goods and moneys belonging to customers. Thus,
respondents want to ensure that their drivers are drug-free and honest. It is undeniable that persons
taking prohibited drugs tend to commit criminal activities when they are "high", as most of them are
out of their minds. Complainants are drivers and are on the road most of the time. Thus, they must
see to it that they do not cause damage to other motor vehicles and pedestrians.
Likewise, when delivering goods and money, it is not impossible that they could commit acts inimical
to the respondents interest, like failure to deliver the money or goods to the right person or do a
"hold-up me" scenario.
Thus, to guarantee complainants-drivers safety and effective performance of their assigned tasks,
respondents ordered complainants to undergo drug testing. However, they refused to follow the
directive. Neither did they give a clear explanation for their refusal to the respondents. This shows
complainants wrongful attitude to defy the reasonable orders which undoubtedly pertain to their
duties as drivers of the respondents. Such act is tantamount to willful disobedience of a lawful order,
a valid ground for dismissal under the Labor Code, as amended.
Furthermore, employees who are not complainants in this case, in a sworn statement attested to the
fact that complainants tricked them to sign papers which turned out to be a complaint for money
claims. They also accused them of abusing their trust in order to achieve their selfish motives.
Complainants even convinced them to shell out part of their salaries without authorization and
consent, as "panggatos para sa papeles, transportasyon ng abugado" but said money was used for
the Unions purposes. Worse, complainants even threatened them to file criminal charges against
them if they did not follow the complainants evil plans. x x x
In their Rejoinder, respondents also mentioned about the loss of cargoes to be delivered to
Pampanga and Nueva Ecija. Complainants failed to refute the allegations nor comment on the
matter. This led to respondents loss of trust and confidence reposed in them. Considering that the
drivers have in their possession money and goods to be delivered, the continuance of their
employment depends on the trust and confidence in them. Undeniably, trust, once lost is hard to
regain.
x x x x
We disagree.
On January 16, 2006, respondents sent each of the complainants a letter stating the infractions
committed by them. They directed them to explain the said infractions with a warning that failure to
do so would mean waiver of their right to submit their answer. They further advised them to "opt for a
formal investigation with assistance of the counsel, or proceed with the investigation you may
choose".
However, complainants failed to answer. Neither did they do any act to dispute the charges. They
remained silent on the infractions which a person would not normally do if he is not guilty of the said
charges. If they were really innocent, immediately, even without any notice, they should have
reacted and did everything to dispute the charges. But they failed, despite the notice to explain. This
would lead to the conclusion that they were guilty of the charges imputed against them. As a
consequence thereof, the complainants are considered to have waived their right to defend
themselves.
12

Petitioners moved for reconsideration but the same was denied in a Resolution
13
dated September
30, 2008.
Subsequently, the petitioners filed a petition for certiorari with the CA. In a Decision
14
dated July 17,
2009, the CA reversed and set aside the NLRC Decision dated July 17, 2008 and Resolution dated
September 30, 2008. Thus:
Initially, this Court must determine whether the petitioners violated the Company Policies as would
warrant their dismissal from the service. However, a painstaking review of the records of this case
negate[s] a finding of such culpability on the part of the petitioners.
The charges of dishonesty, serious misconduct and loss of confidence against the petitioners are
nothing more than bare allegations as neither the show cause orders nor the termination letters
specify in clear and unmistakable manner, the specific acts committed by the petitioners as would
amount to dishonesty, serious misconduct or loss of confidence. Neither of these notices even
contain any averments as to how and when the alleged infractions were committed by the
petitioners.
x x x
In this case, respondent company had not been able to identify an act of dishonesty, serious
misconduct or any illicit act, which the petitioners may have committed in connection with their work,
except the allegation that petitioners filed false, malicious, and fabricated cases against the company
which, under the Labor Code, is not a valid ground for termination of employment. There is even no
mention of any company policy or rule violated by any of the petitioners to warrant their dismissal.
The charges are clearly unfounded.
x x x x
The superficial compliance with two notices and a hearing in this case cannot be considered valid
where the notices to explain where issued four (4) days before the petitioners were terminated. The
termination was obviously hurriedly effected, as the respondent failed to give the petitioners the
avenue to contradict the charges against them either by submission of their answer or by the
conduct of an actual investigation in order to give spirit to the requirement of due process.
Petitioners were thus robbed of their rights to explain their side, to present evidence and rebut what
was presented against them, rights ensured by the proper observance of procedural due process.
15

Respondents promptly filed a motion for reconsideration. Similar to the NLRC, the CA reversed itself
and retracted its earlier finding that the individual petitioners were illegally dismissed. In its Amended
Decision
16
dated March 16, 2010, the CA concluded that the two (2) notices issued by Kingspoint
Express complied with the requirements of the law:
In the assailed Decision, We conceded that all the petitioners were actually furnished with a letter
dated 16 January 2006. In each letter, petitioners were individually charged with "dishonesty, serious
misconduct, loss of confidence for performing acts inimical to the company by filing with the NLRC
false, malicious and fabricated cases against the company and their refusal to undergo drug testing."
They were directed to submit an answer or explanation within forty-eight (48) hours and were even
given the option to avail of a formal investigation with the assistance of counsel. They were further
advised that failure to submit said answer/explanation would mean waiver on their part. Thus, when
they failed to submit an explanation/Answer, and failed to inform their employer that they wanted a
formal investigation on the matter, their employer was constrained to serve upon them on 20
January 2006, or four (4) days later, separate notices of termination stating the offenses they
committed, viz.:
x x x x
Show-cause letters/memoranda create a burden on the employees to explain their innocence. In
turn, it is from such explanation that the employer will be obliged to prove his case in an
investigation. Since the petitioners did not explain, much less invoke their right to investigation, it
follows that they are deemed to have waived their rights under Art. 277(b) of the Labor Code.
Technically, the law on evidence considers them to have admitted the charges against them. With
such admission, the employer is discharged from the need to prove the offenses charged. It is well-
settled that in any forum, whether judicial or administrative, a party need not prove what is
admitted.
17
(Citations omitted)
The CA also held that the individual petitioners performed acts, which constitute serious misconduct:
The assailed Decision admits what constitutes serious misconduct.
Here, except for Bobby Dacara, each of the three petitioners conceded the existence of the following
bases for their dismissal: (1) complainants refusal to undergo mandatory drug-testing; (2) creating
disharmony and distrust among the workers and misleading them to go against the employer; and
(3) losing cargo with a value of P250,000.00 entrusted to respondent company for door-to-door
delivery.
Verily, each of the aforestated grounds independently constitute[s] serious misconduct. Each of
them were (sic) committed in relation to petitioners work. And again, the commission of said
infractions constitutes a ground to dismiss under Art. 282(a) of the Code. The Court, therefore,
gravely erred when it held that no serious misconduct was committed by petitioners in this case.
On the other hand, in the case of Bobby Dacara, records show that he committed breach of trust and
confidence by sneaking into the house of private respondent Co and engaging one of Cos helpers in
repeated sexual congress leading to her pregnancy. As held in Santos, Jr. vs. NLRC, such behavior
amounts to immorality which is a case of serious misconduct; a just cause to dismiss an
employee.
18
(Citation omitted)
Petitioners moved for reconsideration but this was denied by the CA in its Resolution
19
dated
December 16, 2010.
The lone issue for the disposition of this Court is the validity of the individual petitioners dismissal.
It is fundamental that in order to validly dismiss an employee, the employer is required to observe
both substantive and procedural due process the termination of employment must be based on a
just or authorized cause and the dismissal must be effected after due notice and hearing.
20

As to whether Kingspoint Express complied with the substantive requirements of due process, this
Court agrees with the CA that the concerned employees refusal to submit themselves to drug test is
a just cause for their dismissal.
An employer may terminate an employment on the ground of serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or representative in connection
with his work.1wphi1 Willful disobedience requires the concurrence of two elements: (1) the employee's
assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude;
and (2) the order violated must have been reasonable, lawful, made known to the employee, and
must pertain to the duties which he had been engaged to discharge. Both elements are present in
this case.
As to the first element, that at no point did the dismissed employees deny Kingspoint Express claim
that they refused to comply with the directive for them to submit to a drug test or, at the very least,
explain their refusal gives rise to the impression that their non-compliance is deliberate. The utter
lack of reason or justification for their insubordination indicates that it was prompted by mere
obstinacy, hence, willful and warranting of dismissal.
It involves little difficulty to accuse Kingspoint Express of anti-unionism and allege that this was what
motivated the dismissal of the petitioners, but the duty to prove such an accusation is altogether
different. That the petitioners failed at the level of substantiation only goes to show that their claim of
unfair labor practice is a mere subterfuge for their willful disobedience.
As to the second element, no belabored and extensive discussion is necessary to recognize the
relevance of the subject order in the performance of their functions as drivers of Kingspoint Express.
As the NLRC correctly pointed out, drivers are indispensable to Kingspoint Express primary
business of rendering door-to-door delivery services. It is common knowledge that the use of
dangerous drugs has adverse effects on driving abilities that may render the dismissed employees
incapable of performing their duties to Kingspoint Express and acting against its interests, in addition
to the threat they pose to the public.
The existence of a single just cause is enough to order their dismissal and it is now inconsequential
if the other charges against them do not merit their dismissal from service. It is therefore
unnecessary to discuss whether the other acts enumerated in the notices of termination issued by
Kingspoint Express may be considered as any of the just causes.1wphi1
Nonetheless, while Kingspoint Express had reason to sever their employment relations, this Court
finds its supposed observance of the requirements of procedural due process pretentious. While
Kingspoint Express required the dismissed employees to explain their refusal to submit to a drug
test, the two (2) days afforded to them to do so cannot qualify as "reasonable opportunity", which the
Court construed in King of Kings Transport, Inc. v. Mamac
21
as a period of at least five (5) calendar
days from receipt of the notice.
Thus, even if Kingspoint Express defective attempt to comply with procedural due process does not
negate the existence of a just cause for their dismissal, Kingspoint Express is still liable to indemnify
the dismissed employees, with the exception of Panuelos, Dizon and Dimabayao, who did not
appeal the dismissal of their complaints, with nominal damages in the amount of P30,000.00.
WHEREFORE, premises considered, the Decision dated March 16, 2010 and Resolution dated
December 16, 2010 of the Court of Appeals are AFFIRMED with MODIFICATION in that respondent
Kingspoint Express and Logistic is hereby held liable for the payment of nominal damage, in the
amount of P30,000.00 each to petitioners Bobby Dacara, Fernando Lupangco, Jr., Sandy Pazi,
Camilo Tabarangao, Jr., Eduardo Hizole and Reginaldo Carillo, for non-observance of procedural
due process required in terminating employment.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 153511 July 18, 2012
LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in
his capacity as the President of Petitioner Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
D E C I S I O N
BERSAMIN, J .:
This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a
hotel. On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for
alleged unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment of his
premium pay for holidays, separation pay, service incentive leave pay, and 13111 month pay. He
prayed for attorney's fees, moral damages off P100,000.00 and exemplary damages for
P100,000.00.
1

Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant from
September 1992 with an initial rate of P400.00/night that was given to him after each nights
performance; that his rate had increased to P750.00/night; and that during his employment, he could
not choose the time of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six
times/week. He added that the Legend Hotels restaurant manager had required him to conform with
the venues motif; that he had been subjected to the rules on employees representation checks and
chits, a privilege granted to other employees; that on July 9, 1999, the management had notified him
that as a cost-cutting measure his services as a pianist would no longer be required effective July
30, 1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively operating as
of the filing of his complaint; and that the loss of his employment made him bring his complaint.
2

In its defense, petitioner denied the existence of an employer-employee relationship with
respondent, insisting that he had been only a talent engaged to provide live music at Legend Hotels
Madison Coffee Shop for three hours/day on two days each week; and stated that the economic
crisis that had hit the country constrained management to dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding
that the parties had no employer-employee relationship.
3
The LA explained thusly:
x x x
On the pivotal issue of whether or not there existed an employer-employee relationship between the
parties, our finding is in the negative. The finding finds support in the service contract dated
September 1, 1992 xxx.
x x x
Even if we grant the initial non-existence of the service contract, as complainant suggests in his
reply (third paragraph, page 4), the picture would not change because of the admission by
complainant in his letter dated October 8, 1996 (Annex "C") that what he was receiving was talent
fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the
regular employees of the hotel who are paid by monthly xxx.
x x x
And thus, absent the power to control with respect to the means and methods by which his work was
to be accomplished, there is no employer-employee relationship between the parties xxx.
x x x
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.
4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on
May 31, 2001.
5

Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC,
6
holding:
x x x
Applying the above-enumerated elements of the employee-employer relationship in this case, the
question to be asked is, are those elements present in this case?
The answer to this question is in the affirmative.
x x x
Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the
power of control that is more decisive.
In this regard, public respondent failed to take into consideration that in petitioners line of work, he
was supervised and controlled by respondents restaurant manager who at certain times would
require him to perform only tagalog songs or music, or wear barong tagalog to conform with
Filipiniana motif of the place and the time of his performance is fixed by the respondents from 7:00
pm to 10:00 pm, three to six times a week. Petitioner could not choose the time of his performance.
xxx.
As to the status of petitioner, he is considered a regular employee of private respondents since the
job of the petitioner was in furtherance of the restaurant business of respondent hotel. Granting that
petitioner was initially a contractual employee, by the sheer length of service he had rendered for
private respondents, he had been converted into a regular employee xxx.
x x x
xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business
losses, which is recognized by law under Article 283 of the Labor Code, xxx.
x x x
WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.
7

Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE
TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT
DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN
A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE
FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN
EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.
III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE
INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO
EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA
NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001
IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA
FAILED TO SHOW PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE
COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION IN THEIR
RESPECTIVE DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS
IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS
CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT
CONSIDERING THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED
ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF
JURISDICTION COMMITTED BY THE NLRC OR THE LABOR ARBITER, WHICH ISSUES
ARE NOT PRESENT IN THE CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or not the petition for certiorari
filed in the CA was the proper recourse; and into two substantive issues, namely: (a) whether or not
respondent was an employee of petitioner; and (b) if respondent was petitioners employee, whether
he was validly terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondents petition for certiorari was improper as a remedy against the
NLRC due to its raising mainly questions of fact and because it did not demonstrate that the NLRC
was guilty of grave abuse of discretion.
The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to
assail the decision of the NLRC may raise factual issues, and the CA may then review the decision
of the NLRC and pass upon such factual issues in the process.
8
The power of the CA to review
factual issues in the exercise of its original jurisdiction to issue writs of certiorari is based on Section
9 of Batas Pambansa Blg. 129, which pertinently provides that the CA "shall have the power to try
cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve
factual issues raised in cases falling within its original and appellate jurisdiction, including the power
to grant and conduct new trials or further proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship existed between
the parties.
The issue of whether or not an employer-employee relationship existed between petitioner and
respondent is essentially a question of fact.
9
The factors that determine the issue include who has
the power to select the employee, who pays the employees wages, who has the power to dismiss
the employee, and who exercises control of the methods and results by which the work of the
employee is accomplished.
10
Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant evidence to prove the relationship
may be admitted,
11
a finding that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a reasonable mind might accept as
adequate to justify a conclusion.
12

Generally, the Court does not review factual questions, primarily because the Court is not a trier of
facts. However, where, like here, there is a conflict between the factual findings of the Labor Arbiter
and the NLRC, on the one hand, and those of the CA, on the other hand, it becomes proper for the
Court, in the exercise of its 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.
13

A review of the circumstances reveals that respondent was, indeed, petitioners employee. He was
undeniably employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant from
September 1992 until his services were terminated on July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time it entered into the service
contract dated September 1, 1992 with respondent. This is true, notwithstanding petitioners
insistence that respondent had only offered his services to provide live music at petitioners Tanglaw
Restaurant, and despite petitioners position that what had really transpired was a negotiation of his
rate and time of availability. The power of selection was firmly evidenced by, among others, the
express written recommendation dated January 12, 1998 by Christine Velazco, petitioners
restaurant manager, for the increase of his remuneration.
14

Petitioner could not seek refuge behind the service contract entered into with respondent. It is the
law that defines and governs an employment relationship, whose terms are not restricted to those
fixed in the written contract, for other factors, like the nature of the work the employee has been
called upon to perform, are also considered. The law affords protection to an employee, and does
not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be ignored
when the employer utilizes the stipulation to deprive the employee of his security of tenure. The
inequality that characterizes employer-employee relations generally tips the scales in favor of the
employer, such that the employee is often scarcely provided real and better options.
15

Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent
fees that were not included in the definition of wage under the Labor Code; and that such talent fees
were but the consideration for the service contract entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to
six nights a week. Such rate of remuneration was later increased to P750.00 upon restaurant
manager Velazcos recommendation. There is no denying that the remuneration denominated as
talent fees was fixed on the basis of his talent and skill and the quality of the music he played during
the hours of performance each night, taking into account the prevailing rate for similar talents in the
entertainment industry.
16

Respondents remuneration, albeit denominated as talent fees, was still considered as included in
the term wage in the sense and context of the Labor Code, regardless of how petitioner chose to
designate the remuneration. Anent this, Article 97(f) of the Labor Code clearly states:
xxx wage paid to any employee shall mean the 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
services rendered or to be rendered, and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to
the employee.
Clearly, respondent received compensation for the services he rendered as a pianist in petitioners
hotel. Petitioner cannot use the service contract to rid itself of the consequences of its employment
of respondent. There is no denying that whatever amounts he received for his performance,
howsoever designated by petitioner, were his wages.
It is notable that under the Rules Implementing the Labor Code and as held in Tan v.
Lagrama,
17
every employer is required to pay his employees by means of a payroll, which should
show in each case, among others, the employees rate of pay, deductions made from such pay, and
the amounts actually paid to the employee. Yet, petitioner did not present the payroll of its
employees to bolster its insistence of respondent not being its employee.
That respondent worked for less than eight hours/day was of no consequence and did not detract
from the CAs finding on the existence of the employer-employee relationship. In providing that the "
normal hours of work of any employee shall not exceed eight (8) hours a day," Article 83 of the
Labor Code only set a maximum of number of hours as "normal hours of work" but did not prohibit
work of less than eight hours.
Thirdly, the power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship.
18
This is the so-called
control test, and is premised on whether the person for whom the services are performed reserves
the right to control both the end achieved and the manner and means used to achieve that end.
19

Petitioner submits that it did not exercise the power of control over respondent and cites the
following to buttress its submission, namely: (a) respondent could beg off from his nightly
performances in the restaurant for other engagements; (b) he had the sole prerogative to play and
perform any musical arrangements that he wished; (c) although petitioner, through its manager,
required him to play at certain times a particular music or song, the music, songs, or arrangements,
including the beat or tempo, were under his discretion, control and direction; (d) the requirement for
him to wear barong Tagalog to conform with the Filipiniana motif of the venue whenever he
performed was by no means evidence of control; (e) petitioner could not require him to do any other
work in the restaurant or to play the piano in any other places, areas, or establishments, whether or
not owned or operated by petitioner, during the three hour period from 7:00 pm to 10:00 pm, three to
six times a week; and (f) respondent could not be required to sing, dance or play another musical
instrument.
A review of the records shows, however, that respondent performed his work as a pianist under
petitioners supervision and control. Specifically, petitioners control of both the end achieved and the
manner and means used to achieve that end was demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm
to 10:00 pm, three to six times a week;
b. He could not choose the place of his performance;
c. The restaurants manager required him at certain times to perform only Tagalog songs or
music, or to wear barong Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees representation check and chits, a privilege
granted to other employees.
Relevantly, it is worth remembering that the employer need not actually supervise the performance
of duties by the employee, for it sufficed that the employer has the right to wield that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject
to its Code of Discipline, and that the power to terminate the working relationship was mutually
vested in the parties, in that either party might terminate at will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum informing respondent of the
discontinuance of his service because of the present business or financial condition of
petitioner
20
showed that the latter had the power to dismiss him from employment.
21

Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated to prevent losses,
the conclusion that his termination was by reason of retrenchment due to an authorized cause under
the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees recognized by the
Labor Code. It is a management prerogative resorted to by employers to avoid or to minimize
business losses. On this matter, Article 283 of the Labor Code states:
Article 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. xxx. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
The Court has laid down the following standards that an employer should meet to justify
retrenchment and to foil abuse, namely:
(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively prevent the
expected losses; and
(d) The alleged losses, if already incurred, and the expected imminent losses sought to be
forestalled must be proved by sufficient and convincing evidence.
22

Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less
exacting standard of proof would render too easy the abuse of retrenchment as a ground for
termination of services of employees.
23

Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or authorized cause
rests upon the employer. Here, petitioner did not submit evidence of the losses to its business
operations and the economic havoc it would thereby imminently sustain. It only claimed that
respondents termination was due to its "present business/financial condition." This bare statement
fell short of the norm to show a valid retrenchment. Hence, we hold that there was no valid cause for
the retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can justify
retrenchment.1wphi 1 The employer must prove, among others, that the losses are substantial and that the
retrenchment is reasonably necessary to avert such losses. Thus, by its failure to present sufficient
and convincing evidence to prove that retrenchment was necessary, respondents termination due to
retrenchment is not allowed.
The Court realizes that the lapse of time since the retrenchment might have rendered respondent's
reinstatement to his former job no longer feasible. If that should be true, then petitioner should
instead pay to him separation pay at the rate of one. month pay for every year of service computed
from September 1992 (when he commenced to work for the petitioners) until the finality of this
decision, and full backwages from the time his compensation was withheld until the finality of this
decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court
of Appeals promulgated on February 11, 2002, subject to the modification that should reinstatement
be no longer feasible, petitioner shall pay to respondent separation pay of one month for every year
of service computed from September 1992 until the finality of this decision, and full backwages from
the time his compensation was withheld until the finality of this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.
LUCAS P. BERSAMIN
Associate justice
Acting Chairperson, First Division
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171118 September 10, 2012
PARK HOTEL, J's PLAYHOUSE BURGOS CORP., INC., and/or GREGG HARBUTT, General
Manager, ATTY. ROBERTO ENRIQUEZ, President, and BILL PERCY, Petitioners,
vs.
MANOLO SORIANO, LESTER GONZALES, and YOLANDA BADILLA, Respondents.
D E C I S I O N
PERALTA, J .:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
set aside the Decision
1
and the Resolution
2
of the Court of Appeals (CA) in CA-G.R. SP No. 67766.
The antecedents are as follows:
Petitioner Park Hotel
3
is a corporation engaged in the hotel business. Petitioners Gregg
Harbutt
4
(Harbutt) and Bill Percy
5
(Percy) are the General Manager and owner, respectively, of Park
Hotel. Percy, Harbutt and Atty. Roberto Enriquez are also the officers and stockholders of Burgos
Corporation (Burgos),
6
a sister company of Park Hotel.
Respondent Manolo Soriano (Soriano) was hired by Park Hotel in July 1990 as Maintenance
Electrician, and then transferred to Burgos in 1992. Respondent Lester Gonzales (Gonzales) was
employed by Burgos as Doorman, and later promoted as Supervisor. Respondent Yolanda Badilla
(Badilla) was a bartender of J's Playhouse operated by Burgos.
In October of 1997, Soriano, Gonzales and Badilla
7
were dismissed from work for allegedly stealing
company properties. As a result, respondents filed complaints for illegal dismissal, unfair labor
practice, and payment of moral and exemplary damages and attorney's fees, before the Labor
Arbiter (LA). In their complaints, respondents alleged that the real reason for their dismissal was that
they were organizing a union for the company's employees.
On the other hand, petitioners alleged that aside from the charge of theft, Soriano and Gonzales
have violated various company rules and regulations
8
contained in several memoranda issued to
them. After dismissing respondents, Burgos filed a case for qualified theft against Soriano and
Gonzales before the Makati City Prosecutor's Office, but the case was dismissed for insufficiency of
evidence.
In his Affidavit,
9
Soriano claimed that on October 4, 1997, he was barred from entering the company
premises and that the following day, Harbutt shouted at him for having participated in the formation
of a union. He was later dismissed from work. For his part, Gonzales averred that he was coerced to
resign by Percy and Harbutt in the presence of their goons. Badilla
10
claimed that she was also
forced by Percy and Harbutt to sign a resignation letter, but she refused to do so because she was
innocent of the charges against her. She was nevertheless dismissed from service.
The three (3) respondents averred that they never received the memoranda containing their alleged
violation of company rules and they argued that these memoranda were fabricated to give a
semblance of cause to their termination. Soriano and Gonzales further claimed that the complaint
filed against them was only an afterthought as the same was filed after petitioners learned that a
complaint for illegal dismissal was already instituted against them.
On September 27, 1998, the LA rendered a Decision
11
finding that respondents were illegally
dismissed because the alleged violations they were charged with were not reduced in writing and
were not made known to them, thus, denying them due process. The LA found that respondents did
not actually receive the memoranda allegedly issued by petitioners, and that the same were mere
afterthought to conceal the illegal dismissal. The dispositive portion of the Decision reads:
WHEREFORE, premises all considered, respondents (petitioners herein) are hereby ordered, jointly
and severally:
a. To reinstate within ten (10) days herein complainants to their former positions without loss
of seniority rights with full backwages from actual dismissal to actual reinstatement;
b. To declare the respondents (petitioners herein) guilty of unfair labor practice for
terminating complainants due to their union activities, which is union-busting, and to pay a
fine of Ten Thousand Pesos (P 10,000.00) pursuant to Article 288 of the Labor Code, as
amended, payable to the Commission;
c. To pay the amount of One Hundred Fifty Thousand [Pesos] (P 150,000.00) each to
complainants by way of moral and exemplary damages, plus ten percent (10%) attorney's
fees of the total award, chargeable to the respondents (petitioners herein).
SO ORDERED.
12

Unsatisfied with the LA's decision, petitioners appealed to the National Labor Relations Commission
(NLRC). On August 31, 1999, the NLRC, First Division, rendered a Decision
13
remanding the case to
the arbitration branch of origin for further proceedings.
14
On August 3, 2000, the LA rendered a new
Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises all considered, respondents (petitioners herein) are hereby ORDERED,
jointly and severally:
a. to reinstate within ten (10) days herein three (3) complainants to their former positions
without loss of seniority rights with full backwages from actual dismissal to actual
reinstatement; to pay complainant Soriano his unpaid wages for seven (7) days in the
amount of P 1,680.00, his five (5) days incentive leave pay in the amount of P 1,200,00
(P 240x5), unpaid proportionate 13
th
month pay in the amount of P 4,992.00, plus other
benefits;
b. to cease and desist from committing unfair labor practice against the complainant and to
pay a fine of Ten Thousand (P 10,000.00) Pesos pursuant to Art. 288 of the Labor Code,
payable to the Commission; and
c. to pay the amount of P 150,000.00
15
each to the complainants by way of moral and
exemplary damages, plus ten percent (10%) attorney's fees of the total award, chargeable to
the respondents (petitioners herein).
SO ORDERED.
16

Discontented with the LA's decision, petitioners again appealed to the NLRC. On February 1, 2001,
the NLRC affirmed the LA's decision and dismissed the appeal for lack of merit.
17
Petitioners filed a
motion for reconsideration, but it was denied for lack of merit.
18

Undaunted, Park Hotel, Percy, and Harbutt filed a petition for certiorari with the CA ascribing grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC in holding
Park Hotel, Harbutt and Percy jointly and severally liable to respondents.
On January 24, 2005, the CA rendered a Decision
19
dismissing the petition and affirming with
modification the ruling of the NLRC, the dispositive portion of which states:
WHEREFORE, the instant Petition is DISMISSED for lack of merit and the assailed Decision dated 1
February 2001 of the 1
st
Division of the NLRC is hereby AFFIRMED with MODIFICATION in that the
award of damages is reduced to P 100,000.00 in favor of each of the Private Respondents, including
10% of the total amount of wages to be received as attorney's fees.
SO ORDERED.
20

The CA ruled that petitioners failed to observe the mandatory requirements provided by law in the
conduct of terminating respondents, i.e., lack of due process and just cause. The CA also found that
petitioners' primary objective in terminating respondents' employment was to suppress their right to
self-organization.
Petitioners filed a Motion for Reconsideration, but was denied in the Resolution
21
dated January 13,
2006.
Hence, the instant petition assigning the following errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND
ACTED WITHOUT AUTHORITY IN FINDING PARK HOTEL, BILL PERCY AND
[GREGORY] HARBUTT, TOGETHER WITH BURGOS CORPORATION AND ITS
PRESIDENT, AS ONE AND THE SAME ENTITY.
II
THE HONORABLE COURT OF APPEALS COMMITTED ERROR WHEN IT OVERLOOKED
MATERIAL CIRCUMSTANCES AND FACTS, WHICH IF TAKEN INTO ACCOUNT, WOULD
ALTER THE RESULTS OF ITS DECISION, PARTICULARLY IN FINDING [THAT] THE SAID
ENTITIES WERE FORMED IN PURSUANCE TO THE COMMISSION OF FRAUD.
III
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND
ACTED WITHOUT AUTHORITY IN FINDING PARK HOTEL, BILL PERCY AND GREGORY
HARBUTT, TOGETHER WITH BURGOS CORPORATION AND ITS PRESIDENT, GUILTY
OF UNFAIR LABOR PRACTICE.
22

For brevity and clarity, the issues in this case may be re-stated and simplified as follows: (1) whether
the respondents were validly dismissed; and (2) if petitioners are liable, whether Park Hotel, Percy
and Harbutt are jointly and severally liable with Burgos for the dismissal of respondents.
Park Hotel argued that it is not liable on the ground that respondents were not its employees. On the
other hand, Percy and Harbutt argued that the CA committed error in piercing the corporate veil
between them and respondent corporations, thereby making them all solidarily liable to the
respondents.
To begin with, it is significant to note that the LA, the NLRC and the CA were unanimous in their
findings that respondents were dismissed without just cause and due process. They were also in
agreement that unfair labor practice was committed against respondents. We reiterate the rule that
findings of fact of the Court of Appeals, particularly where it is in absolute agreement with that of the
NLRC and the LA, as in this case, are accorded not only respect but even finality and are deemed
binding upon this Court so long as they are supported by substantial evidence.
23
The function of this
Court is limited to the review of the appellate courts alleged errors of law. It is not required to weigh
all over again the factual evidence already considered in the proceedings below.
24
In any event, we
found no compelling reason to disturb the unanimous findings and conclusions of the CA, the NLRC
and the LA with respect to the finding of illegal dismissal.
The requisites for a valid dismissal are: (a) the employee must be afforded due process, i.e., he
must be given an opportunity to be heard and defend himself; and (b) the dismissal must be for a
valid cause as provided in Article 282 of the Labor Code, or for any of the authorized causes under
Articles 283 and 284 of the same Code.
25
In the case before us, both elements are completely
lacking. Respondents were dismissed without any just or authorized cause and without being given
the opportunity to be heard and defend themselves. The law mandates that the burden of proving
the validity of the termination of employment rests with the employer. Failure to discharge this
evidentiary burden would necessarily mean that the dismissal was not justified and, therefore, illegal.
Unsubstantiated suspicions, accusations, and conclusions of employers do not provide for legal
justification for dismissing employees. In case of doubt, such cases should be resolved in favor of
labor, pursuant to the social justice policy of labor laws and the Constitution.
26

Anent the unfair labor practice, Article 248 (a) of the Labor Code
27
considers it an unfair labor
practice when an employer interferes, restrains or coerces employees in the exercise of their right to
self-organization or the right to form an association.
28
In order to show that the employer committed
unfair labor practice under the Labor Code, substantial evidence is required to support the claim.
Substantial evidence has been defined as such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.
29
In the case at bar, respondents were indeed
unceremoniously dismissed from work by reason of their intent to form and organize a union. As
found by the LA:
The immediate impulse of respondents (petitioners herein), as in the case at bar, was to terminate
the organizers. Respondents (petitioners herein) have to cripple the union at sight, to frustrate
attempts of employees from joining or supporting it, preventing them, at all cost and to frustrate the
employees bid to exercise their right to self-organization. x x x
30

Having settled that respondents were illegally dismissed and were victims of unfair labor practice,
the question that comes to fore is who are liable for the illegal dismissal and unfair labor practice?
A perusal of the records would show that Burgos is the respondents' employer at the time they were
dismissed. Notwithstanding, the CA held that despite Soriano's transfer to Burgos in 1992, he was
still an employee of Park Hotel at the time of his dismissal in 1997. The Court, however, rules that
the CA's finding is clearly contrary to the evidence presented. From the documents presented by
Soriano, it appears that Soriano's payroll passbook
31
contained withdrawals and deposits, made in
1991, and that Soriano's payslip
32
issued by Park Hotel covered the period from September to
October 1990. Hence, these documents merely show that Soriano was employed by Park Hotel
before he was transferred to Burgos in 1992. Nowhere in these documents does it state that Soriano
continued to work for Park Hotel in 1992 and onwards. Clearly therefore, Park Hotel cannot be made
liable for illegal dismissal as it no longer had Soriano in its employ at the time he was dismissed from
work.
As to whether Park Hotel may be held solidarily liable with Burgos, the Court rules that before a
corporation can be held accountable for the corporate liabilities of another, the veil of corporate
fiction must first be pierced.
33
Thus, before Park Hotel can be held answerable for the obligations of
Burgos to its employees, it must be sufficiently established that the two companies are actually a
single corporate entity, such that the liability of one is the liability of the other.
34

A corporation is an artificial being invested by law with a personality separate and distinct from that
of its stockholders and from that of other corporations to which it may be connected.
35
While a
corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in
case of two corporations, merge them into one, when its corporate legal entity is used as a cloak for
fraud or illegality. This is the doctrine of piercing the veil of corporate fiction. The doctrine applies
only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or
defend crime, or when it is made as a shield to confuse the legitimate issues, or where a corporation
is the mere alter ego or business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit
or adjunct of another corporation.
36
To disregard the separate juridical personality of a corporation,
the wrongdoing must be established clearly and convincingly. It cannot be presumed.
37

In the case at bar, respondents utterly failed to prove by competent evidence that Park Hotel was a
mere instrumentality, agency, conduit or adjunct of Burgos, or that its separate corporate veil had
been used to cover any fraud or illegality committed by Burgos against the respondents.
Accordingly, Park Hotel and Burgos cannot be considered as one and the same entity, and Park
Hotel cannot be held solidary liable with Burgos.
Nonetheless, although the corporate veil between Park Hotel and Burgos cannot be pierced, it does
not necessarily mean that Percy and Harbutt are exempt from liability towards respondents. Verily, a
corporation, being a juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, while acting as corporate agents, are not their personal liability but the
direct accountability of the corporation they represent.
38
However, corporate officers may be deemed
solidarily liable with the corporation for the termination of employees if they acted with malice or bad
faith.
39
In the present case, the lower tribunals unanimously found that Percy and Harbutt, in their
capacity as corporate officers of Burgos, acted maliciously in terminating the services of respondents
without any valid ground and in order to suppress their right to self-organization.
Section 31
40
of the Corporation Code makes a director personally liable for corporate debts if he
willfully and knowingly votes for or assents to patently unlawful acts of the corporation. It also makes
a director personally liable if he is guilty of gross negligence or bad faith in directing the affairs of the
corporation.1wphi1 Thus, Percy and Harbutt, having acted in bad faith in directing the affairs of Burgos, are
jointly and severally liable with the latter for respondents' dismissal.
In cases when an employee is unjustly dismissed from work, he shall be entitled to reinstatement
without loss of seniority rights and other privileges, inclusive of allowances, and other benefits or
their monetary equivalent from the time the compensation was withheld up to the time of actual
reinstatement.
41

In the case at bar, the Court finds that it would be best to award separation pay instead of
reinstatement, in view of the passage of a long period of time since respondents' dismissal. In St.
Luke's Medical Center, Inc. v. Notario,
42
the Court held that if reinstatement proves impracticable, and
hardly in the best interest of the parties, due to the lapse of time since the employee's dismissal, the
latter should be awarded separation pay in lieu of reinstatement.
In view of the foregoing, respondents are entitled to the payment of full backwages, inclusive of
allowances, and other benefits or their monetary equivalent, and separation pay in lieu of
reinstatement equivalent to one month salary for every year of service.
43
The awards of separation
pay and backwages are not mutually exclusive, and both may be given to respondents.
44

The awards of moral and exemplary damages
45
in favor of respondents are also in order. Moral
damages may be recovered where the dismissal of the employee was tainted by bad faith or fraud,
or where it constituted an act oppressive to labor, and done in a manner contrary to morals, good
customs or public policy, while exemplary damages are recoverable only if the dismissal was done in
a wanton, oppressive, or malevolent manner.
46
The grant of attorney's fees is likewise proper.
Attorney's fees may likewise be awarded to respondents who were illegally dismissed in bad faith
and were compelled to litigate or incur expenses to protect their rights by reason of the oppressive
acts
47
of petitioners. The unjustified act of petitioners had obviously compelled respondents to
institute an action primarily to protect their rights and interests which warrants the granting of the
award.
WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67766,
dated January 24, 2005 and January 13, 2006, respectively, are AFFIRMED with the
following MODIFICATIONS: (a) Petitioner Park Hotel is exonerated from any liability to respondents;
and (b) The award of reinstatement is deleted, and in lieu thereof, respondents are awarded
separation pay.
The case is REMANDED to the Labor Arbiter for the purpose of computing respondents' full
backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed from
the date of their dismissal up to the finality of the decision, and separation pay in lieu of
reinstatement equivalent to one month salary for every year of service, computed from the time of
their engagement up to the finality of this Decision.
SO ORDERED:
DIOSDADO M. PERALTA
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 171664 March 6, 2013
BANKARD, INC., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION- FIRST DIVISION, PAULO
BUENCONSEJO,BANKARD EMPLOYEES UNION-AWATU, Respondents.
D E C I S I O N
MENDOZA, J .:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to review, reverse
and set aside the October 20, 2005 Decision
1
and the February 21, 2006 Resolution
2
of the Court of
Appeals {CA), in CA-G.R. SP No. 68303, which affirmed the May 31, 2001 Resolution
3
and the
September 24, 2001 Order
4
of the National Labor Relations Commission (NLRC) in Certified Cases
No. 000-185-00 and 000-191-00.
The Facts
On June 26, 2000, respondent Bankard Employees Union-AWATU (Union) filed before the National
Conciliation and Mediation Board (NCMB) its first Notice of Strike (NOS), docketed as NS-06-225-
00,
5
alleging commission of unfair labor practices by petitioner Bankard, Inc. (Bankard), to wit: 1) job
contractualization; 2) outsourcing/contracting-out jobs; 3) manpower rationalizing program; and 4)
discrimination.
On July 3, 2000, the initial conference was held where the Union clarified the issues cited in the
NOS. On July 5, 2000, the Union held its strike vote balloting where the members voted in favor of a
strike. On July 10, 2000, Bankard asked the Office of the Secretary of Labor to assume jurisdiction
over the labor dispute or to certify the same to the NLRC for compulsory arbitration. On July 12,
2000, Secretary Bienvenido Laguesma (Labor Secretary) of the Department of Labor and
Employment (DOLE) issued the order certifying the labor dispute to the NLRC.
6

On July 25, 2000, the Union declared a CBA bargaining deadlock. The following day, the Union filed
its second NOS, docketed as NS-07-265-00,
7
alleging bargaining in bad faith on the part of Bankard.
Bankard then again asked the Office of the Secretary of Labor to assume jurisdiction, which was
granted. Thus, the Order, dated August 9, 2000, certifying the labor dispute to the NLRC, was
issued.
8

The Union, despite the two certification orders issued by the Labor Secretary enjoining them from
conducting a strike or lockout and from committing any act that would exacerbate the situation, went
on strike on August 11, 2000.
9

During the conciliatory conferences, the parties failed to amicably settle their dispute. Consequently,
they were asked to submit their respective position papers. Both agreed to the following issues:
1. Whether job contractualization or outsourcing or contracting-out is an unfair labor practice
on the part of the management.
2. Whether there was bad faith on the part of the management when it bargained with the
Union.
10

As regards the first issue, it was Bankards position that job contractualization or outsourcing or
contracting-out of jobs was a legitimate exercise of management prerogative and did not constitute
unfair labor practice. It had to implement new policies and programs, one of which was the
Manpower Rationalization Program (MRP) in December 1999, to further enhance its efficiency and
be more competitive in the credit card industry. The MRP was an invitation to the employees to
tender their voluntary resignation, with entitlement to separation pay equivalent to at least two (2)
months salary for every year of service. Those eligible under the companys retirement plan would
still receive additional pay. Thereafter, majority of the Phone Center and the Service Fulfilment
Division availed of the MRP. Thus, Bankard contracted an independent agency to handle its call
center needs.
11

As to the second issue, Bankard denied that there was bad faith on its part in bargaining with the
Union. It came up with counter-offers to the Unions proposals, but the latters demands were far
beyond what management could give. Nonetheless, Bankard continued to negotiate in good faith
until the Memorandum of Agreement (MOA) re-negotiating the provisions of the 1997-2002,
Collective Bargaining Agreement (CBA) was entered into between Bankard and the Union. The CBA
was overwhelmingly ratified by the Union members. For said reason, Bankard contended that the
issue of bad faith in bargaining had become moot and academic.
12

On the other hand, the Union alleged that contractualization started in Bankard in 1995 in the
Records Communications Management Division, particularly in the mailing unit, which was
composed of two (2) employees and fourteen (14) messengers. They were hired as contractual
workers to perform the functions of the regular employees who had earlier resigned and availed of
the MRP.
13
According to the Union, there were other departments in Bankard utilizing messengers to
perform work load considered for regular employees, like the Marketing Department, Voice
Authorizational Department, Computer Services Department, and Records Retention Department.
The Union contended that the number of regular employees had been reduced substantially through
the management scheme of freeze-hiring policy on positions vacated by regular employees on the
basis of cost-cutting measures and the introduction of a more drastic formula of streamlining its
regular employees through the MRP.
14

With regard to the second issue, the Union averred that Bankards proposals were way below their
demands, showing that the management had no intention of reaching an agreement. It was a
scheme calculated to force the Union to declare a bargaining deadlock.
15

On May 31, 2001, the NLRC issued its Resolution
16
declaring that the management committed acts
considered as unfair labor practice (ULP) under Article 248(c) of the Labor Code. It ruled that:
The act of management of reducing its number of employees thru application of the Manpower
Rationalization Program and subsequently contracting the same to other contractual employees
defeats the purpose or reason for streamlining the employees. The ultimate effect is to reduce the
number of union members and increasing the number of contractual employees who could never be
members of the union for lack of qualification. Consequently, the union was effectively restrained in
their movements as a union on their rights to self-organization. Management had successfully limited
and prevented the growth of the Union and the acts are clear violation of the provisions of the Labor
Code and could be considered as Unfair Labor Practice in the light of the provisions of Article 248
paragraph (c) of the Labor Code.
17

The NLRC, however, agreed with Bankard that the issue of bargaining in bad faith was rendered
moot and academic by virtue of the finalization and signing of the CBA between the management
and the Union.
18

Unsatisfied, both parties filed their respective motions for partial reconsideration.1wphi1 Bankard assailed
the NLRC's finding of acts of ULP on its part. The Union, on the other hand, assailed the NLRC
ruling on the issue of bad faith bargaining.
On September 24, 2001, the NLRC issued the Order
19
denying both parties' motions for lack of merit.
On December 28, 2001, Bankard filed a petition for certiorari under Rule 65 with the CA arguing that
the NLRC gravely abused its discretion amounting to lack or excess of jurisdiction when:
1. It issued the Resolution, dated May 31, 2001, particularly in finding that Bankard
committed acts of unfair labor practice; and,
2. It issued the Order dated September 24, 2001 denying Bankard's partial motion for
reconsideration.
20

The Union filed two (2) comments, dated January 22, 2002, through its NCR Director, Cornelio
Santiago, and another, dated February 6, 2002, through its President, Paulo Buenconsejo, both
praying for the dismissal of the petition and insisting that Bankard's resort to contractualization or
outsourcing of contracts constituted ULP. It further alleged that Bankard committed ULP when it
conducted CBA negotiations in bad faith with the Union.
Ruling of the Court of Appeals
The CA dismissed the petition, finding that the NLRC ruling was supported by substantial evidence.
The CA agreed with Bankard that job contracting, outsourcing and/or contracting out of jobs did not
per se constitute ULP, especially when made in good faith and for valid purposes. Despite Bankard's
claim of good faith in resorting to job contractualization for purposes of cost-efficient operations and
its non-interference with the employees' right to self-organization, the CA agreed with the NLRC that
Bankard's acts impaired the employees right to self-organization and should be struck down as
illegal and invalid pursuant to Article 248(c)
21
of the Labor Code. The CA thus, ruled in this wise:
We cannot agree more with public respondent. Incontrovertible is the fact that petitioner's acts,
particularly its promotion of the program enticing employees to tender their voluntary resignation in
exchange for financial packages, resulted to a union dramatically reduced in numbers. Coupled with
the management's policy of "freeze-hiring" of regular employees and contracting out jobs to
contractual workers, petitioner was able to limit and prevent the growth of the Union, an act that
clearly constituted unfair labor practice.
22

In its assailed decision, the CA affirmed the May 31, 2001 Resolution and the September 24, 2001
Order of the NLRC.
Aggrieved, Bankard filed a motion for reconsideration. The CA subsequently denied it for being a
mere repetition of the grounds previously raised. Hence, the present petition bringing up this lone
issue:
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER BANKARD, INC.
COMMITTED ACTS OF UNFAIR LABOR PRACTICE WHEN IT DISMISSED THE PETITION FOR
CERTIORARI AND DENIED THE MOTION FOR RECONSIDERATION FILED BY PETITIONER.
23

Ruling of the Court
The Court finds merit in the petition.
Well-settled is the rule that "factual findings of labor officials, who are deemed to have acquired
expertise in matters within their jurisdiction, are generally accorded not only respect but even finality
by the courts when supported by substantial evidence."
24
Furthermore, the factual findings of the
NLRC, when affirmed by the CA, are generally conclusive on this Court.
25
When the petitioner,
however, persuasively alleges that there is insufficient or insubstantial evidence on record to support
the factual findings of the tribunal or court a quo, then the Court, exceptionally, may review factual
issues raised in a petition under Rule 45 in the exercise of its discretionary appellate jurisdiction.
26

This case involves determination of whether or not Bankard committed acts considered as ULP. The
underlying concept of ULP is found in Article 247 of the Labor Code, to wit:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor
practices violate the constitutional right of workers and employees to self-organization, are inimical
to the legitimate interests of both labor and management, including their right to bargain collectively
and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt
industrial peace and hinder the promotion of healthy and stable labor-management relations. x x x
The Court has ruled that the prohibited acts considered as ULP relate to the workers right to self-
organization and to the observance of a CBA. It refers to "acts that violate the workers right to
organize."
27
Without that element, the acts, even if unfair, are not ULP.
28
Thus, an employer may only
be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the
right of his employees to self-organize.
29

In this case, the Union claims that Bankard, in implementing its MRP which eventually reduced the
number of employees, clearly violated Article 248(c) of the Labor Code which states that:
Art. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of
the following unfair labor practice:
x x x x
(c) To contract out services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their rights to self-organization;
x x x x
Because of said reduction, Bankard subsequently contracted out the jobs held by former employees
to other contractual employees. The Union specifically alleges that there were other departments in
Bankard, Inc. which utilized messengers to perform work load considered for regular employees like
the Marketing Department, Voice Authorizational Department, Computer Services Department, and
Records Retention Department.
30
As a result, the number of union members was reduced, and the
number of contractual employees, who were never eligible for union membership for lack of
qualification, increased.
The general principle is that the one who makes an allegation has the burden of proving it.1avvphi1 While
there are exceptions to this general rule, in ULP cases, the alleging party has the burden of proving
the ULP;
31
and in order to show that the employer committed ULP under the Labor Code, substantial
evidence is required to support the claim.
32
Such principle finds justification in the fact that ULP is
punishable with both civil and/or criminal sanctions.
33

Aside from the bare allegations of the Union, nothing in the records strongly proves that Bankard
intended its program, the MRP, as a tool to drastically and deliberately reduce union membership.
Contrary to the findings and conclusions of both the NLRC and the CA, there was no proof that the
program was meant to encourage the employees to disassociate themselves from the Union or to
restrain them from joining any union or organization. There was no showing that it was intentionally
implemented to stunt the growth of the Union or that Bankard discriminated, or in any way singled
out the union members who had availed of the retirement package under the MRP. True, the
program might have affected the number of union membership because of the employees voluntary
resignation and availment of the package, but it does not necessarily follow that Bankard indeed
purposely sought such result. It must be recalled that the MRP was implemented as a valid cost-
cutting measure, well within the ambit of the so-called management prerogatives. Bankard
contracted an independent agency to meet business exigencies. In the absence of any showing that
Bankard was motivated by ill will, bad faith or malice, or that it was aimed at interfering with its
employees right to self-organize, it cannot be said to have committed an act of unfair labor
practice.
34

"Substantial evidence is more than a mere scintilla of evidence. It means such relevant evidence as
a reasonable mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise."
35
Unfortunately, the Union, which had the burden of
adducing substantial evidence to support its allegations of ULP, failed to discharge such burden.
36

The employers right to conduct the affairs of its business, according to its own discretion and
judgment, is well-recognized.
37
Management has a wide latitude to conduct its own affairs in
accordance with the necessities of its business.
38
As the Court once said:
The Court has always respected a company's exercise of its prerogative to devise means to improve
its operations. Thus, we have held that management is free to regulate, according to its own
discretion and judgment, all aspects of employment, including hiring, work assignments, supervision
and transfer of employees, working methods, time, place and manner of work.
This is so because the law on unfair labor practices is not intended to deprive employers of their
fundamental right to prescribe and enforce such rules as they honestly believe to be necessary to
the proper, productive and profitable operation of their business.
39

Contracting out of services is an exercise of business judgment or management prerogative. Absent
any proof that management acted in a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer.
40
Furthermore, bear in mind that ULP is punishable with
both civil and/or criminal sanctions.
41
As such, the party so alleging must necessarily prove it by
substantial evidence. The Union, as earlier noted, failed to do this. Bankard merely validly exercised
its management prerogative. Not shown to have acted maliciously or arbitrarily, no act of ULP can
be imputed against it.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No.
68303, dated October 20, 2005, and its Resolution, dated February 21, 2006, are REVERSED and
SET ASIDE. Petitioner Bankard, Inc. is hereby declared as not having committed any act
constituting Unfair Labor Practice under Article 248 of the Labor Code.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 185665 February 8, 2012
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,
vs.
EASTERN TELECOMS EMPLOYEES UNION, Respondent.
D E C I S I O N
MENDOZA, J .:
Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008
Decision
1
of the Court of Appeals (CA) and its December 12, 2008 Resolution,
2
in CA-G.R. SP No.
91974, annulling the April 28, 2005 Resolution
3
of the National Labor Relations
Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled "In the Matter of the Labor Dispute in
Eastern Telecommunications, Philippines, Inc."
The Facts
As synthesized by the NLRC, the facts of the case are as follows, viz:
Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of
providing telecommunications facilities, particularly leasing international date lines or circuits, regular
landlines, internet and data services, employing approximately 400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the
companys rank and file employees with a strong following of 147 regular members. It has an
existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side
Agreement signed on September 3, 2001.
In essence, the labor dispute was a spin-off of the companys plan to defer payment of the 2003
14th, 15th and 16th month bonuses sometime in April 2004. The companys main ground in
postponing the payment of bonuses is due to allege continuing deterioration of companys financial
position which started in the year 2000. However, ETPI while postponing payment of bonuses
sometime in April 2004, such payment would also be subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-
2004 between ETPI and ETEU which stated as follows:
"4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month
bonuses (other than 13th month pay) are granted."
The union strongly opposed the deferment in payment of the bonuses by filing a preventive
mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine
the date when the bonus should be paid.
In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would
only be made in April 2004 to which date of payment, the union agreed. Thus, considering the
agreement forged between the parties, the said agreement was reduced to a Memorandum of
Agreement. The union requested that the President of the company should be made a signatory to
the agreement, however, the latter refused to sign. In addition to such a refusal, the company made
a sudden turnaround in its position by declaring that they will no longer pay the bonuses until the
issue is resolved through compulsory arbitration.
The companys change in position was contained in a letter dated April 14, 2004 written to the union
by Mr. Sonny Javier, Vice-President for Human Resources and Administration, stating that "the
deferred release of bonuses had been superseded and voided due to the unions filing of the issue
to the NCMB on July 18, 2003." He declared that "until the matter is resolved in a compulsory
arbitration, the company cannot and will not pay any bonuses to any and all union members."
Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for
failure of ETPI to pay the bonuses in gross violation of the economic provision of the existing CBA.
On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in
an industry considered vital to the economy and any work disruption thereat will adversely affect not
only its operation but also that of the other business relying on its services, certified the labor dispute
for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended.
Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties have
submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14th, 15th
and 16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were directed to
submit their respective position papers and evidence in support thereof after which submission, they
agreed to have the case considered submitted for decision.
4

In its position paper,
5
the Eastern Telecoms Employees Union (ETEU) claimed that Eastern
Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out 14th
month bonus during the month of April, and 15th and 16th month bonuses every December of each
year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any net
profits. ETEU posited that by reason of its long and regular concession, the payment of these
monetary benefits had ripened into a company practice which could no longer be unilaterally
withdrawn by ETPI. ETEU added that this long-standing company practice had been expressly
confirmed in the Side Agreements of the 1998-2001 and 2001-2004 Collective Bargaining
Agreements (CBA)which provided for the continuous grant of these bonuses in no uncertain terms.
ETEU theorized that the grant of the subject bonuses is not only a company practice but also a
contractual obligation of ETPI to the union members.
ETEU contended that the unjustified and malicious refusal of the company to pay the subject
bonuses was a clear violation of the economic provision of the CBA and constitutes unfair labor
practice (ULP). According to ETEU, such refusal was nothing but a ploy to spite the union for
bringing the matter of delay in the payment of the subject bonuses to the National Conciliation and
Mediation Board (NCMB). It prayed for the award of moral and exemplary damages as well as
attorneys fees for the unfair labor practice allegedly committed by the company.
On the other hand, ETPI in its position paper,
6
questioned the authority of the NLRC to take
cognizance of the case contending that it had no jurisdiction over the issue which merely involved
the interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it
maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and
14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject
bonuses were not part of the legally demandable wage and the grant thereof to its employees was
an act of pure gratuity and generosity on its part, involving the exercise of management prerogative
and always dependent on the financial performance and realization of profits. It posited that it
resorted to the discontinuance of payment of the bonuses due to the unabated huge losses that the
company had continuously experienced. It claimed that it had been suffering serious business losses
since 2000 and to require the company to pay the subject bonuses during its dire financial straits
would in effect penalize it for its past generosity. It alleged that the non-payment of the subject
bonuses was neither flagrant nor malicious and, hence, would not amount to unfair labor practice.
Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere
affirmation that the distribution of bonuses was discretionary to the company, premised and
conditioned on the success of the business and availability of cash. It submitted that said bonus
provision partook of the nature of a "one-time" grant which the employees may demand only during
the year when the Side Agreement was executed and was never intended to cover the entire term of
the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to
its employees, the drastic decline in its financial condition had already legally released it therefrom
pursuant to Article 1267 of the Civil Code.
On April 28, 2005, the NLRC issued its Resolution dismissing ETEUs complaint and held that ETPI
could not be forced to pay the union members the 14th, 15th and 16th month bonuses for the year
2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these additional
benefits was basically a management prerogative, being an act of generosity and munificence on the
part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI
may not be obliged to pay these extra compensations in view of the substantial decline in its
financial condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating
that no sufficient and substantial evidence was adduced to attribute malice to the company for its
refusal to pay the subject bonuses. The dispositive portion of the resolution reads:
WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of merit.
SO ORDERED.
7

Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its
Resolution dated August 31, 2005.
Aggrieved, ETEU filed a petition for certiorari
8
before the CA ascribing grave abuse of discretion on
the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were
part of the union members wages, salaries or compensations. In addition, ETEU asserted that the
NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give
said bonuses to the union members.
In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and
2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees
without qualification or condition. It also found that the grant of said bonuses has already ripened
into a company practice and their denial would amount to diminution of the employees benefits. It
held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision
would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the
contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC
finding that the allegation of ULP was devoid of merit. The dispositive portion of the questioned
decision reads:
WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the
National Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE.
Respondent Eastern Telecommunications Philippines, Inc. is ordered to pay the members of
petitioner their 14th, 15th and 16th month bonuses for the year 2003 and 14th month

for the year
2004. The complaint for unfair labor practice against said respondent is DISMISSED.
SO ORDERED.
9

ISSUES
Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly
committed by the CA, to wit:
I.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED
AND SET ASIDE THE R E S O L U T I O NS OF THE NLRC DISREGARDING THE WELL
SETTLED RULE THAT A WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION.
II.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT
DISREGARDED THE RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES
ARE ACCORDED FINALITY IF THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE
CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED ON
SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS.
III.
IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER
THAT THE BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS
NOT DEPENDENT ON THE REALIZATION OF PROFITS.
IV.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT
DISREGARDED THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS
SUFFERING FROM TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN
COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE FINANCIAL
DISTRESS OF EASTERN COMMUNICATIONS.
V.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED
AT THE CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN
COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED INTO A COMPANY
PRACTICE.
10

A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that
this case revolves around the following core issues:
1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for the
year 2003 and 14th month bonus for the year 2004 to the members of respondent union; and
2. Whether or not the CA erred in not dismissing outright ETEUs petition for certiorari.
ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the
year 2003 and 14th month bonus for the year 2004 contending that they are not part of the
demandable wage or salary and that their grant is conditional based on successful business
performance and the availability of company profits from which to source the same. To thwart
ETEUs monetary claims, it insists that the distribution of the subject bonuses falls well within the
companys prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold
the grant thereof especially since it is currently plagued with economic difficulties and financial
losses. It alleges that the companys fiscal situation greatly declined due to tremendous and
extraordinary losses it sustained beginning the year 2000. It claims that it cannot be compelled to act
liberally and confer upon its employees additional benefits over and above those mandated by law
when it cannot afford to do so. It posits that so long as the giving of bonuses will result in the
financial ruin of an already distressed company, the employer cannot be forced to grant the same.
ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice
arguing that it has always been a contingent one dependent on the realization of profits and, hence,
the workers are not entitled to bonuses if the company does not make profits for a given year. It
asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a
vested property right to a perennial payment of the bonuses. It opines that the bonus provision in the
Side Agreement allows the giving of benefits only at the time of its execution. For this reason, it
cannot be said that the grant has ripened into a company practice. In addition, it argues that even if
such traditional company practice exists, the CA should have applied Article 1267 of the Civil Code
which releases the obligor from the performance of an obligation when it has become so difficult to
fulfill the same.
It is the petitioners stance that the CA should have dismissed outright the respondent unions
petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but,
instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were
based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that
the CA court should have refrained from tackling issues of fact and, instead, limited itself on issues
of jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.
The Courts Ruling
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not
normally embark on a re-examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the CA are conclusive and binding on the
Court. The rule, however, admits of several exceptions, one of which is when the findings of the
appellate court are contrary to those of the trial court or the lower administrative body, as the case
may be.
11
Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds
Itself obliged to resolve it.
The pivotal question determinative of this controversy is whether the members of ETEU are entitled
to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for
year 2004.
After an assiduous assessment of the record, the Court finds no merit in the petition.
From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has
no right to demand as a matter of right.
12
The grant of a bonus is basically a management
prerogative which cannot be forced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the employees basic salaries or
wages.
13

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the
wage or salary or compensation of the employee.
14
Particularly instructive is the ruling of the Court
in Metro Transit Organization, Inc. v. National Labor Relations Commission,
15
where it was written:
Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its
payment. If it is additional compensation which the employer promised and agreed to give without
any conditions imposed for its payment, such as success of business or greater production or
output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but
only to some employees and only when their labor becomes more efficient or more productive, it is
only an inducement for efficiency, a prize therefore, not a part of the wage.
The consequential question that needs to be settled, therefore, is whether the subject bonuses are
demandable or not. Stated differently, can these bonuses be considered part of the wage, salary or
compensation making them enforceable obligations?
The Court believes so.
In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for
the grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement,
16
as well as
in the 2001-2004 CBA Side Agreement,
17
which was signed on September 3, 2001. The provision,
which was similarly worded, states:
Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay)
are granted.
A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th
month bonuses without qualification. The wording of the provision does not allow any other
interpretation. There were no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by
the company. Terse and clear, the said provision does not state that the subject bonuses shall be
made to depend on the ETPIs financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no profits, no bonuses are to
be given to the employees. In fine, the payment of these bonuses was not related to the profitability
of business operations.
The records are also bereft of any showing that the ETPI made it clear before or during the
execution of the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI
and ETEU intended that the subject bonuses would be dependent on the company earnings, such
intention should have been expressly declared in the Side Agreements or the bonus provision
should have been deleted altogether. In the absence of any proof that ETPIs consent was vitiated
by fraud, mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it
had full knowledge of the contents thereof and that it was aware of its commitment under the
contract. Verily, by virtue of its incorporation in the CBA Side Agreements, the grant of 14th, 15th
and 16th month bonuses has become more than just an act of generosity on the part of ETPI but a
contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI
to the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its
argument that the giving of the subject bonuses is a management prerogative.
From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its
undertaking. It is manifestly clear that although it incurred business losses of P 149,068,063.00 in
the year 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year.
Notwithstanding such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on
September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no uncertain
terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002 in the amounts
of P 348,783,013.00 and P 315,474,444.00, respectively. Still and all, this did not deter it from
honoring the bonus provision in the Side Agreement as it continued to give the subject bonuses to
each of the union members in 2001 and 2002 despite its alleged precarious financial condition.
Parenthetically, it must be emphasized that ETPI even agreed to the payment of the 14th, 15th and
16th month bonuses for 2003 although it opted to defer the actual grant in April 2004. All given,
business losses could not be cited as grounds for ETPI to repudiate its obligation under the 2001-
2004 CBA Side Agreement.
The Court finds no merit in ETPIs contention that the bonus provision confirms the grant of the
subject bonuses only on a single instance because if this is so, the parties should have included
such limitation in the agreement. Nowhere in the Side Agreement does it say that the subject
bonuses shall be conferred once during the year the Side Agreement was signed. The Court quotes
with approval the observation of the CA in this regard:
ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA
entitles the union members to the subject bonuses, it is merely in the nature of a "one-time" grant
and not intended to cover the entire term of the CBA. The contention is untenable. The bonus
provision in question is exactly the same as that contained in the Side Agreement of the 1998-2001
CBA and there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of
those years. Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the
2001-2004 CBA is only a "one-time" grant.
18

ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU
members under the Side Agreements, its current financial difficulties should have released it from
the obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:
Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation
of the parties, the obligor may also be released therefrom, in whole or in part.
The Court is not persuaded.
The parties to the contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity
demands assistance for the debtor.
19
In the case at bench, the Court determines that ETPIs claimed
depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side
Agreement.
ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-
2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business
losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said
that the difficulty in complying with its obligation under the Side Agreement was "manifestly beyond
the contemplation of the parties." Besides, as held in Central Bank of the Philippines v. Court of
Appeals,
20
mere pecuniary inability to fulfill an engagement does not discharge a contractual
obligation. Contracts, once perfected, are binding between the contracting parties. Obligations
arising therefrom have the force of law and should be complied with in good faith. ETPI cannot
renege from the obligation it has freely assumed when it signed the 2001-2004 CBA Side
Agreement.
Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give
the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an
established company practice such that it has virtually become part of the employees salary or
wage. A bonus may be granted on equitable consideration when the giving of such bonus has been
the companys long and regular practice. InPhilippine Appliance Corporation v. Court of Appeals,
21
it
was pronounced:
To be considered a "regular practice," however, the giving of the bonus should have been done over
a long period of time, and must be shown to have been consistent and deliberate. The test or
rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.
The records show that ETPI, aside from complying with the regular 13th month bonus, has been
further giving its employees 14th month bonus every April as well as 15th and 16th month bonuses
every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits
or not. The considerable length of time ETPI has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such
act was not required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the
employees.1wphi 1
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article
100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.
The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-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.
22

Interestingly, ETPI never presented countervailing evidence to refute ETEUs claim that the
company has been continuously paying bonuses since 1975 up to 2002 regardless of its financial
state. Its failure to controvert the allegation, when it had the opportunity and resources to do so,
works in favor of ETEU. Time and again, it has been held that should doubts exist between the
evidence presented by the employer and the employee, the scales of justice must be tilted in favor of
the latter.
23

WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its
December 12, 2008 Resolution are AFFIRMED.
SO ORDERE.
JOSE CATRAL MENDOZA
Associate Justice