FIRST DIVISION

PHILIPPINE TRANSMARINE CARRIERS, INC.,

Petitioner,

John Melchor A. Laurente (John Melchor) was employed as Second Assistant

Engineer by petitioner Philippine Transmarine Carriers, Inc. for and in behalf of
its principal, Lucky Ocean Marine Corporation, after he underwent a preemployment medical examination at Physicians Diagnostic Center, petitioners
accredited clinic, and was given a clean bill of health. John Melchor signed a
twelve-month contract with a basic monthly salary of US$739.00.

- versus JOHN MELCHOR A. LAURENTE, substituted by JUAN A. LAURENTE, JR.

and NATIVIDAD A. AQUINO,
Respondents.
G. R. No. 158883
Present:
PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
Promulgated:
April 19, 2006
x--------------------------------------------------x
DECISION

On 20 June 1993, John Melchor embarked the vessel Standard Star, where he
was assigned at the engine room. After three months, he complained of dizziness
and nausea and requested for his repatriation. On 5 October 1993, he arrived in
the Philippines and immediately reported to petitioner, which referred him to a
doctor for medical treatment at its expense. John Melchor was diagnosed with
hypertension and chronic renal failure classified as disability Grade I. On 7 June
1994, he underwent kidney transplant. He was subsequently paid sickness
allowance in the amount of P78,962.15 covering the period from 6 October 1993
to 2 February 1994.
On 30 March 1995, John Melchor filed a complaint against petitioner, Pioneer
Insurance and Surety Corporation, and Lucky Ocean Marine Corporation for
payment of disability benefits on the basis of the amendment to the Philippine
Overseas Employment Administration (POEA) Standard Employment Contract
increasing the total disability benefit from US$11,000.00 to US$50,000.00
effective 1 March 1994.
Petitioner disputed John Melchors claim for disability benefit alleging that the
latter did not disclose his actual medical condition that he had hypertension and
kidney trouble during his pre-employment medical examination; that John
Melchor was on board the vessel for only a little over three months such that his
illness could not have been the result of work; and that although John Melchor
was declared totally disabled only on 20 March 1994, his illness occurred on or
before 5 October 1993 when he disembarked from the vessel, i.e., prior to the
effectivity of the new rate of disability benefits on 1 March 1994.

CHICO-NAZARIO, J.:
Labor Arbiter Pedro C. Ramos rendered a decision ordering petitioner to pay the
amount of US$50,000.00, or its peso equivalent, as disability benefit.
Assailed in this Petition for Review under Rule 45 of the Rules of Court is the
Decision[1] dated 10 January 2003 of the Court of Appeals dismissing petitioners
Special Civil Action for Certiorari under Rule 65, and the Resolution dated 30 June
2003 denying petitioners motion for reconsideration.
The factual and procedural antecedents of the case are as follows:

Petitioner appealed to the National Labor Relations Commission (NLRC), which

rendered a decision on 31 May 1999 reversing the Labor Arbiters decision and
reducing the disability benefit to US$11,000.00. However, on a motion for
reconsideration filed by respondent, the NLRC reinstated the award of the

disability benefit in the amount of US$50,000.00 in a Resolution dated 21 June

2000, which reads:
WHEREFORE, our decision dated May 31, 1999 is reconsidered. In lieu of
US$11,000.00, respondents are hereby directed to jointly and severally pay the
complainant his disability benefit of US$50,000.00.[2]

and John Melchor which provides that the terms and conditions of the Revised
Employment Contract for seafarers governing the employment of all Filipino
Seafarers approved by the POEA/DOLE on July 14, 1989 under Memorandum
Circular No. 41, series of 1989, and amending circulars relative thereto shall be
strictly and faithfully observed.[6]
The NLRC further ruled:

Petitioners motion for reconsideration thereof was denied in a Resolution dated

29 December 2000.
On 20 April 2001, petitioner filed a Special Civil Action for Certiorari under Rule
65. This was dismissed by the Court of Appeals in the assailed Decision dated 10
January 2003, and a motion for reconsideration thereof was denied by the same
court in the assailed Resolution dated 30 June 2003. The dispositive portion of
the Decision of the Court of Appeals reads:

The employment contract of the complainant was twelve (12) months (June 20,
1993 to June 1994). The illness of the complainant was discovered on May 20,
1994, a date within the twelve-month period of the employment contract and
already covered by the effectivity of the new rate of disability benefits under the
Revised Employment Contract for seafarers. The revision of the rate of disability
benefits under the amended POEA Standard Employment Contract is corrective
in nature and favorable to the seafarers. To conform with the prevailing rate,
there is a need to adjust the disability benefits awarded to the complainant.[7]

WHEREFORE, the petition is DISMISSED for lack of merit.[3]

Hence, this appeal where petitioner raises but one issue: petitioner claims that
the 1 March 1994 amendment to the POEA Standard Employment Contract,
which increased the disability benefits of seamen from US$11,000 to US$50,000,
should not apply to John Melchors claim. John Melchor, on the other hand, claims
that he should be entitled to US$60,000 instead of the US$50,000 awarded by
the NLRC and the Court of Appeals, citing Appendix 1-A of the schedule of
disability allowances in the POEA Standard Employment Contract, which entitles
those suffering from impediment Grade 1 to 120% of the maximum rate of
US$50,000.
On 30 October 2003, and during the pendency of this appeal, John Melchor died
of pulmonary congestion at 41 years of age.[4] A motion for substitution filed by
John Melchors parents, Juan A. Laurente, Jr. and Natividad A. Aquino, was granted
by this Court on 29 March 2004.[5]

Petitioner contests this ruling, asserting the inapplicability of the 31 March 1994
amendment: (a) because John Melchors cause of action, if any, arose at a time
prior to the effectivity of the amendment; and (b) because the employment
contract between John Melchor and petitioner was no longer in force when the
said amendment took effect.[8]
Petitioner asserts that John Melchors employment was deemed terminated when
he was repatriated upon his request, arriving in the Philippines on 5 October
1993. According to petitioner, the termination was in accordance with Section H
of the POEA Standard Employment Contract which states:
SECTION H. TERMINATION OF EMPLOYMENT. x x x The Master shall have the right
to discharge or sign off the seaman at any place abroad in accordance with the
terms and conditions of the contract and specifically for any of the following
reasons: (a) if the seaman x x x is continuously incapacitated for the duties for
which he was employed by reason of illness or injury.[9]

The 31 March 1994 amendment that increased the disability benefits of seamen
should apply to John Melchors claim.

This argument had been raised in the Court of Appeals, to which the latter ruled:

The NLRC ruled, and the Court of Appeals agreed, that the 31 March 1994
amendment to the POEA Standard Employment Contract increasing the disability
benefits of seamen from US$11,000 to US$50,000 should apply to John Melchors
claim. This is pursuant to Section 2 of the primary contract between petitioner

While it is true that private respondent was repatriated on October 5, 1993 upon
his request because of his complaints of dizziness and nausea, however, it was
only on May 20, 1994, after undergoing complete physical and laboratory
examinations, that he was diagnosed to have hypertension and chronic renal
failure and was declared unfit to work due to total permanent disability. In other

words, private respondent was not yet considered incapacitated for work when
he was repatriated on October 5, 1993.[10]
We rule in favor of John Melchor.
Findings of fact of administrative agencies such as the NLRC are binding when
supported by substantial evidence[11]; moreover, they become conclusive when
such findings are affirmed by an appellate court.[12] Therefore, the findings of
the NLRC, sustained by the Court of Appeals, that the illness of the complainant
was discovered only on 20 May 1994,[13] is conclusive to this Court. It was only
on 20 May 1994, after undergoing complete physical and laboratory
examinations, that John Melchor was diagnosed to have hypertension and
chronic renal failure and was declared unfit to work due to total permanent
disability. John Melchor was not yet considered incapacitated for work when he
was repatriated on 5 October 1993. Consequently, the 31 March 1994
amendment should apply to John Melchors claim.
Petitioners claim that John Melchor was terminated on 5 October 1993 goes
against the evidence available on record. In addition to the fact that the
diagnosis declaring him unfit to work came after said date, John Melchor was
also paid sickness allowance on 7 June 1994, covering the period from 6 October
1993 to 2 February 1994. This goes to show that petitioner still recognized John
Melchor as an employee even after he returned to the Philippines. Neither was
John Melchor given any notice of his termination prior to 20 May 1994, when
Philippine labor laws and jurisprudence are ripe with the mandate that notice
must be given to employees before their termination even when such
termination is for just and authorized causes.[14]
It is also an undeniable fact that, according to the primary contract between
petitioner and John Melchor, all amendments to Memorandum Circular No. 41
shall be strictly and faithfully observed. This provision was apparently inserted to
protect the rights of John Melchor, who, despite the possible amendments to the
POEA Standard Employment Contract, cannot renegotiate the primary contract
terms while he is out of the country. As it is unclear whether such amendments
can be held applicable to obligations that have already accrued but have not yet
been paid, we are compelled to choose the interpretation that would favor labor.
Therefore, even if we consider for the sake of argument that John Melchor was
terminated on 5 October 1993 as petitioner claims, this clause still makes the 31
March 1994 amendment applicable. As we held in Marcopper Mining Corporation
v. National Labor Relations Commission,[15] contracts relating to employment
should be interpreted keeping in sight the avowed policy of the State, enshrined
in our Constitution, to accord utmost protection and justice to labor.

John Melchor is entitled to 120% of the maximum rate of US$50,000.

Even earlier, in his comment to petitioners appeal with the Court of Appeals,
until presently before this Court, John Melchor has consistently pointed out that a
careful perusal of the Appendix 1-A of the schedule of disability allowances in the
POEA Standard Employment Contract would reveal that those suffering from
impediment Grade 1 are entitled to 120% of the maximum rate of US$50,000.
[16]
There is no question that the chronic renal failure of John Melchor, which
eventually caused his death, is an impediment Grade 1 under the POEA Standard
Employment Contract. Petitioner never disputed such fact. John Melchor is
therefore entitled to 120% of the US$50,000 maximum amount, or a total of
US$60,000. The terms of the POEA Standard Employment Contract on this point
is clear, and thus there is no room for interpretation.
No less than the Constitution requires the State to afford full protection to labor,
whether local or overseas.[17] Pursuant to such mandate, Executive Order No.
247[18] empowered the POEA[19] to secure the best terms and conditions of
employment of Filipino contract workers.[20] The POEA, in compliance therewith,
prescribed standard employment contracts which provide the minimum terms
and conditions of employment for Filipino contract workers. These minimum
terms and conditions are deemed read into the parties primary contracts, and as
such must be complied with in good faith.
WHEREFORE, the petition is DENIED. The Decision dated 10 January 2003 and
the Resolution dated 30 June 2003 of the Court of Appeals are hereby AFFIRMED,
with the modification that the award of disability benefit be increased to
US$60,000. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
INDUSTRIAL TIMBER G.R. No. 164518
CORPORATION, INDUSTRIAL
PLYWOOD GROUP CORPORATION,
TOMAS TANGSOC, JR., LORENZO
TANGSOC and TOMAS TAN,
Petitioners, Present:

Panganiban, C.J. (Chairman),

- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH
ABREA, SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO ACILO, VICTOR
ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO, VIRGILIO ANTONIO,
MILA ARQUITA, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUTIDA,
ALICIA AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO
BANATE, LOLITA BATAN, RAMIL BUTALON, CARMILITA CAINGLES,
VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO
CARILLO, NILA CARILLO, ALGER CORBETA, GREGORIO DABALOS,
TERESITA DABALOS, VENERANDO DALAUTA, RICARDO DANGCULOS,
MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA
DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA,
ANGELES GALUPO, PERFECTO GAMBE, VERGINITA GANGCA, RUPERTO
GORGONIO, ROMEO HERRERO, SERGIO HORO-HORO, FRANCISCO
IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG,
ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO
MADLOS,
MARCOS
MAKINANO,
REMEGIO
MAKINANO,
VICENTE
MAKINANO, REYNALDO MASUHAY, HELEN MARATAS, ELIZABETH
MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR NAVARRO,
SIMPORIANO NUEZ, JR., ELISEO ORONGAN, ARMANDO OROPA,
ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN,
BARTOLOME PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS
PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS,
FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC
RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON,
SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO
TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO
TEE, ROGELIO TAMADA, MINDA TUMAOB and ROBERTO TUTOR,
Respondents.
x ---------------------------------------------------- x
VIRGILIO ABABON, IGNACIO G.R. No. 164965
ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA,
BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO
ADVINCULA, GERTRUDES AMPARO, MILA ARQUITA, VIRGILIO ANTONIO,
PRUDENCIO ARQUITA,

ALBERT ATON, WARLITA AUDITA, ALICIA AWITAN, LEOPOLDO AYATON,

ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON,
CARMELITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE
CALLANO, ALFREDO CARILLO, NILA CARILLO, ALGIER CORBETA,
GREGORIO DABALOS, TERESITA DABALOS, VENERANDO DALAUTA,
RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO
DUMULAO, EDITHA DUMANON, ALFREDO FAELNAR, RAUL FORTUN,
MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE, VIRGINITA
GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HOR-HORO,
FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA
LAMBANG, ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR.,
ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO,
VICENTE MAKINANO, REYNALDO MAHUSAY, HELEN MARATAS, ELIZABETH
MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR NAVARRO,
SIMPORIANO NUEZ, JR., ELISEO ORONGAN, ARMANDO OROPA,
ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN,
BARTOLOME PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS
PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS,
FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC
RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON,
SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO
TABANAO, ROBERTO TABANAO,
MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO TAMADA, MINDA
TUMAOB, and ROBERTO TUTOR,
Petitioners,
- versus THE HONORABLE COURT OF APPEALS,
INDUSTRIAL TIMBER CORPORATION,
INDUSTRIAL PLYWOOD GROUP
CORPORATION, TOMAS TANGSOC,
JR., LORENZO TANGSOC and Promulgated:
TOMAS TAN,
Respondents. January 25, 2006
x ---------------------------------------------------------------------------------------- x
DECISION

YNARES-SANTIAGO, J.:
Before us are two petitions for review under Rule 45 of the Rules of Court. G.R.
No. 164518 assails the October 21, 2002 Decision[1] of the Court of Appeals, in
CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision[2] of the
National Labor Relations Commission (NLRC), as well as the July 16, 2004
Resolution[3] denying its motion for reconsideration. G.R. No. 164965 assails
only the July 16, 2004 Resolution of the Court of Appeals which denied their
partial motion for reconsideration. These cases were consolidated because they
arose out of the same facts set forth below.
Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant
located at Agusan, Pequeo, Butuan City, leased to Industrial Timber Corporation
(ITC) on August 30, 1985 for a period of five years.[4] Thereafter, ITC
commenced operation of the plywood plant and hired 387 workers.
On March 16, 1990, ITC notified the Department of Labor and Employment
(DOLE) and its workers that effective March 19, 1990 it will undergo a no plant
operation due to lack of raw materials and will resume only after it can secure
logs for milling.[5]
Meanwhile, IPGC notified ITC of the expiration of the lease contract in August
1990 and its intention not to renew the same.
On June 26, 1990, ITC notified the DOLE and its workers of the plants shutdown
due to the non-renewal of anti-pollution permit that expired in April 1990.[6] This
fact and the alleged lack of logs for milling constrained ITC to lay off all its
workers until further notice. This was followed by a final notice of closure or
cessation of business operations on August 17, 1990 with an advice for all the
workers to collect the benefits due them under the law and CBA.[7]
On October 15, 1990, IPGC took over the plywood plant after it was issued a
Wood Processing Plant Permit No. WPR-1004-081791-042,[8] which included the
anti-pollution permit, by the Department of Environment and Natural Resources
(DENR) coincidentally on the same day the ITC ceased operation of the plant.
This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for
illegal dismissal, unfair labor practice and damages. They alleged, among others,
that the cessation of ITCs operation was intended to bust the union and that both
corporations are one and the same entity being controlled by one owner.

On January 20, 1992, after requiring both parties to submit their respective
position papers, Labor Arbiter Irving A. Petilla rendered a decision which refused
to pierce the veil of corporate fiction for lack of evidence to prove that it was
used to perpetuate fraud or illegal act; upheld the validity of the closure; and
ordered ITC to pay separation pay of month for every year of service. The
dispositive portion of the decision reads:
PREMISES CONSIDERED, judgment is hereby rendered ordering respondent
Industrial Timber Corporation (ITC) to pay herein ninety-seven individual
complainants their separation pay at the rate of one-half (1/2) months pay for
every year of service, a fraction of at least six (6) months to be considered as
one whole year, reckoned until August 1990.
All other claims of complainants are hereby ordered DISMISSED for want of
merit.
SO ORDERED.[9]
Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the
decision of the Labor Arbiter and ordered the reinstatement of the employees to
their former positions, and the payment of full back wages, damages and
attorneys fees.[10]
ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on
June 24, 1993.[11] However, it was dismissed for being filed out of time having
been filed only on the date of actual receipt by the NLRC on June 29, 1993, three
days after the last day of the reglamentary period.[12] Thus, they filed a Petition
for Relief from Resolution,[13] which was treated as a second motion for
reconsideration by the NLRC and dismissed for lack of merit in a Resolution
dated September 29, 1994.[14]
From said dismissal, petitioners filed a Notice of Appeal with the Supreme Court.
[15] Subsequently, they filed a Motion for Reconsideration/Second Petition for
Relief with the NLRC.[16]
On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for
being a wrong mode of appeal from the NLRC decision.[17] On the other hand,
the NLRC granted the Second Petition for Relief and set aside all its prior decision
and resolutions. The dispositive portion of the May 24, 1995 decision reads:
WHEREFORE, the decision of this Commission dated May 10, 1993 and its
subsequent resolutions dated June 22, 1994 and September 29, 1994 are Set
Aside and Vacated. Accordingly, the appeal of complainants is Dismissed for lack

of merit and the decision of the Labor Arbiter dated January 20, 1992 is
Reinstated and hereby Affirmed.

in the paramount interest of justice, as it had done so in favor of the employees,

and ruled on the merits of the case; after all, the delay was just three days.

SO ORDERED.[18]
On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the
Supreme Court, which was docketed as G.R. No. 121977.[19] However, pursuant
to our ruling in St. Martins Funeral Home v. NLRC, we referred the petition to the
Court of Appeals for appropriate action and disposition.[20]

Ordinarily, once a judgment has become final and executory, it can no longer be
disturbed, altered or modified. However, this rule admits of exceptions in cases
of special and exceptional nature as we held in Industrial Timber Corporation v.
National Labor Relations Commission:[24]

On October 21, 2002, the Court of Appeals rendered a decision setting aside the
May 24, 1995 decision of the NLRC and reinstated its May 20, 1993 decision and
September 29, 1993 resolution, thus:
WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995 of the
National Labor Relations Commission is ANNULLED and SET ASIDE, with the
result that its decision dated May 20, 1993 and resolution dated September 29,
1994 are REINSTATED.
SO ORDERED.[21]
Both parties filed their respective motions for reconsideration which were
denied, hence, the present consolidated petitions for review based on the
following assigned errors:

It is true that after a judgment has become final and executory, it can no longer
be modified or otherwise disturbed. However, this principle admits of exceptions,
as where facts and circumstances transpire which render its execution
impossible or unjust and it therefore becomes necessary, in the interest of
justice, to direct its modification in order to harmonize the disposition with the
prevailing circumstances.
A careful scrutiny of the facts and circumstances of these consolidated cases
warrants liberality in the application of technical rules and procedure. We agree
with the NLRC that substantial justice is best served by allowing the petition for
relief despite procedural defect of filing the motion for reconsideration three
days late, for to rule otherwise, a greater injustice would be done to ITC by
ordering it to reinstate the employees to their former positions that no longer
exist due to valid and legitimate cessation of business and pay huge judgment
award.[25]

In G.R. No. 164518

THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE RULES OF
PROCEDURE WITH RESPECT TO RESPONDENTS BUT BEING RIGID IN ITS
APPLICATION AS REGARDS PETITIONERS.[22]
In G.R. No. 164965
WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
WHEN IT REFUSED TO APPLY SECTION 279 OF THE LABOR CODE AS AMENDED BY
RA 6715 TO MODIFY THE DECISION OF 20 MAY 1993 WITH RESPECT TO
BACKWAGES FOR PETITIONERS.[23]
ITC and IPGC contend that the Court of Appeals erred in reversing the May 24,
1995 decision of the NLRC since its May 20, 1993 decision had become
immutable for their failure to file motion for reconsideration within the
reglementary period. While they admit filing their motion for reconsideration out
of time due to excusable negligence of their counsels secretary, however, they
advance that the Court of Appeals should have relaxed the rules of technicality

Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise
of its appellate powers, correct, amend, or waive any error, defect or irregularity
whether in substance or in form. Further, Article 221 of the same code provides
that in any proceeding before the Commission or any of the Labor Arbiters, the
rules of evidence prevailing in courts of law or equity shall not be controlling and
it is the spirit and intention of this Code that the Commission and its members
and the Labor Arbiters shall use every and all reasonable means to ascertain the
facts in each case speedily and objectively and without regard to technicalities of
law or procedure, all in the interest of due process.[26]
Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the
NLRC that a motion for reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based on palpable or patent
errors, provided that the motion is under oath and filed within 10 calendar days
from receipt of the order, resolution or decision should not be interpreted as to
sacrifice substantial justice to technicality. It should be borne in mind that the
real purpose behind the limitation of the period is to forestall or avoid an
unreasonable delay in the administration of justice, from which the NLRC
absolved ITC and IPGC because the filing of their motion for reconsideration

three days later than the prescribed period was due to excusable negligence.
Indeed, the Court has the power to except a particular case from the operation
of the rule whenever the purposes of justice requires it because what should
guide judicial action is that a party is given the fullest opportunity to establish
the merits of his action or defense rather than for him to lose life, honor, or
property on mere technicalities.[27]
We now come to the main issues of whether Ababon, et al. were illegally
dismissed due to the closure of ITCs business; and whether they are entitled to
separation pay, backwages, and other monetary awards.
Work is a necessity that has economic significance deserving legal protection.
The social justice and protection to labor provisions in the Constitution dictate
so. On the other hand, employers are also accorded rights and privileges to
assure their self-determination and independence, and reasonable return of
capital. This mass of privileges comprises the so-called management
prerogatives. Although they may be broad and unlimited in scope, the State has
the right to determine whether an employer's privilege is exercised in a manner
that complies with the legal requirements and does not offend the protected
rights of labor. One of the rights accorded an employer is the right to close an
establishment or undertaking.[28]
The right to close the operation of an establishment or undertaking is one of the
authorized causes in terminating employment of workers, the only limitation
being that the closure must not be for the purpose of circumventing the
provisions on termination of employment embodied in the Labor Code.
Article 283 of the Labor Code provides:
ART. 283. Closure of establishment and reduction of personnel. The employer
may also terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever
is higher. In case 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 to 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.
A reading of the foregoing law shows that a partial or total closure or cessation
of operations of establishment or undertaking may either be due to serious
business losses or financial reverses or otherwise. Under the first kind, the
employer must sufficiently and convincingly prove its allegation of substantial
losses,[29] while under the second kind, the employer can lawfully close shop
anytime[30] as long as cessation of or withdrawal from business operations was
bona fide in character and not impelled by a motive to defeat or circumvent the
tenurial rights of employees,[31] and as long as he pays his employees their
termination pay in the amount corresponding to their length of service.[32] Just
as no law forces anyone to go into business, no law can compel anybody to
continue the same. It would be stretching the intent and spirit of the law if a
court interferes with management's prerogative to close or cease its business
operations just because the business is not suffering from any loss or because of
the desire to provide the workers continued employment.[33]
In sum, under Article 283 of the Labor Code, three requirements are necessary
for a valid cessation of business operations: (a) service of a written notice to the
employees and to the DOLE at least one month before the intended date thereof;
(b) the cessation of business must be bona fide in character; and (c) payment to
the employees of termination pay amounting to one month pay or at least onehalf month pay for every year of service, whichever is higher.
In these consolidated cases, we find that ITCs closure or cessation of business
was done in good faith and for valid reasons.
The records reveal that the decision to permanently close business operations
was arrived at after a suspension of operation for several months precipitated by
lack of raw materials used for milling operations, the expiration of the antipollution permit in April 1990, and the termination of the lease contract with
IPGC in August 1990 over the plywood plant at Agusan, Pequeo, Butuan City. We
quote with approval the observation of the Labor Arbiter:
As borne out from the records, respondent ITC actually underwent no plant
operation since 19 March 1990 due to lack of log supply. This fact is admitted by
complainants (Minutes of hearing, 28 October 1991). Since then several
subsequent incidents prevented respondent ITC to resume its business
operations e.g. expiration and non-renewal of the wood processing plant permit,
anti-pollution permit, and the lease contract on the plywood plant. Without the
raw materials respondent ITC has nothing to produce. Without the permits it

cannot lawfully operate the plant. And without the contract of lease respondent
ITC has no option but to cease operation and turn over the plant to the lessor.
[34] (Emphasis supplied)
Moreover, the lack of raw materials used for milling operations was affirmed in
Industrial Timber Corporation v. National Labor Relations Commission[35] as one
of the reasons for the valid closure of ITCs Butuan Logs Plant in 1989. In said
case, we upheld the management prerogative to close the plant as the only
remedy available in order to prevent imminent heavy losses on account of high
production costs, erratic supply of raw materials, depressed prices and poor
market conditions for its wood products.
In Shoppers Gain Supermarket v. National Labor Relations Commission,[36] we
held that the non-renewal of petitioner corporations lease contract and its
consequent closure and cessation of operations may be considered an event
beyond petitioners control, in the nature of a force majeure situation. As such, it
amounts to an authorized cause for termination of the private respondents.
Having established that ITCs closure of the plywood plant was done in good faith
and that it was due to causes beyond its control, the conclusion is inevitable that
said closure is valid. Consequently, Ababon, et al. could not have been illegally
dismissed to be entitled to full backwages. Thus, we find it no longer necessary
to discuss the issue regarding the computation of their backwages. However,
they are entitled to separation pay equivalent to one month pay or at least onehalf month pay for every year of service, whichever is higher.
Although the closure was done in good faith and for valid reasons, we find that
ITC did not comply with the notice requirement. While an employer is under no
obligation to conduct hearings before effecting termination of employment due
to authorized cause,[37] however, the law requires that it must notify the DOLE
and its employees at least one month before the intended date of closure.
In the case at bar, ITC notified its employees and the DOLE of the no plant
operation on March 16, 1990 due to lack of raw materials. This was followed by a
shut down notice dated June 26, 1990 due to the expiration of the anti-pollution
permit. However, this shutdown was only temporary as ITC assured its
employees that they could return to work once the renewal is acted upon by the
DENR. On August 17, 1990, the ITC sent its employees a final notice of closure or
cessation of business operations to take effect on the same day it was released.
We find that this falls short of the notice requirement for termination of
employment due to authorized cause considering that the DOLE was not
furnished and the notice should have been furnished both the employees and
the DOLE at least one month before the intended date of closure.

In Ariola v. Philex Mining Corporation,[38] we held:

In Agabon v. National Labor Relations Commission and Jaka Food Processing
Corporation v. Pacot, the Court sustained the dismissals for just cause under
Article 282 and for authorized cause under Article 283 of the Labor Code,
respectively, despite non-compliance with the statutory requirement of notice
and hearing. The grounds for the dismissals in those cases, namely, neglect of
duty and retrenchment, remained valid because the non-compliance with the
notice and hearing requirement in the Labor Code did not undermine the validity
of the grounds for the dismissals. Indeed, to invalidate a dismissal merely
because of a procedural defect creates absurdity and runs counter to public
interest. We explained in Agabon:
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized
causes but not complying with statutory due process may have far-reaching
consequences.
This would encourage frivolous suits, where even the most notorious violators of
company policy are rewarded by invoking due process. This also creates absurd
situations where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take for example a case
where the employee is caught stealing or threatens the lives of his co-employees
or has become a criminal, who has fled and cannot be found, or where serious
business losses demand that operations be ceased in less than a month.
Invalidating the dismissal would not serve public interest. It could also
discourage investments that can generate employment in the local economy.
Where the dismissal is based on an authorized cause under Article 283 of the
Labor Code but the employer failed to comply with the notice requirement, the
sanction should be stiff as the dismissal process was initiated by the employers
exercise of his management prerogative, as opposed to a dismissal based on a
just cause under Article 282 with the same procedural infirmity where the
sanction to be imposed upon the employer should be tempered as the dismissal
process was, in effect, initiated by an act imputable to the employee.[39]
In light of the factual circumstances of the cases at bar, we deem it wise and
reasonable to award P50,000.00 to each employee as nominal damages.
WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the
Court of Appeals in CA-GR. SP No. 51966, which set aside the May 24, 1995
Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITCs

motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of
the NLRC reinstating the decision of the Labor Arbiter finding the closure or
cessation of ITCs business valid, is AFFIRMED with the MODIFICATIONS that ITC is
ordered to pay separation pay equivalent to one month pay or to at least onehalf month pay for every year of service, whichever is higher, and P50,000.00 as
nominal damages to each employee.
SO ORDERED.
G.R. No. 146930

September 11, 2006

ROMMEL B. BEARNEZA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and NFD INTERNATIONAL
MANNING AGENTS, INC., respondents.
DECISION

On March 13, 1997, the petition was dismissed.4 The manning agency sought
reconsideration while petitioner filed a "motion for damages on the injunction
bond" praying for the imposition of a 12% interest per annum on the judgment
award computed from September 22, 1992 until full satisfaction of the award.
On June 16, 1997, the Court denied both the manning agency's motion for
reconsideration and petitioner's motion for damages on the injunction bond for
lack of merit.
Entry of judgment was made on March 13, 1998. The records of the case were
thereafter remanded to the NLRC for execution of judgment.
On December 18, 1997, the labor arbiter issued an alias writ of execution
ordering the satisfaction of petitioner's claims in the amounts of P1,209,000
(representing the peso equivalent of the judgment award) and
P60,450 as attorney's fees. On January 9, 1998, the sheriff submitted a return
informing the labor arbiter that the alias writ had been satisfied.

CORONA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court assails
the January 25, 2001 decision1 of the Court of Appeals in CA-G.R. SP No. 52089
which dismissed the petition for certiorari filed by petitioner Rommel B. Bearneza
for lack of merit.
This case originated from a complaint2 for permanent total disability benefits
filed by petitioner against private respondent NFD International Manning Agents,
Inc. on January 17, 1990. The Philippine Overseas Employment Administration
(POEA) dismissed the complaint for lack of merit.
On appeal, the National Labor Relations Commission (NLRC) reversed the POEA
decision on February 27, 1992.3 The manning agency moved for reconsideration
but the same was denied in a resolution dated August 31, 1992. The resolution
also granted petitioner attorney's fees equivalent to 5% of the judgment award.
On October 1, 1992, the manning agency filed a petition for certiorari before this
Court assailing the NLRC's decision and resolution. It was docketed as G.R. No.
107131.
The Court issued a temporary restraining order to enjoin the execution of the
judgment award upon posting by the manning agency of a P1 million bond.

Petitioner then filed with the labor arbiter a motion for the issuance of a second
alias writ of execution. He prayed that the manning agency be held liable also for
12% p.a. interest on the judgment award. His motion was, however, denied by
the labor arbiter.
The NLRC affirmed the decision of the labor arbiter and dismissed petitioner's
claim for the imposition of a 12% annual interest on the judgment award for
being unmeritorious.5
Aggrieved, petitioner elevated the case to the Court of Appeals by way of a
petition for certiorari. The appellate court found no merit in the petition and
dismissed it. The Court of Appeals ruled that the NLRC did not commit grave
abuse of discretion in dismissing petitioner's claim for 12% p.a. interest. Not only
had the NLRC's February 27, 1992 decision become final and executory, it had in
fact already been executed. The appellate court further noted that petitioner's
claim had already been ruled upon by this Court in G.R. No. 107131.
Hence, this petition.
The petition has no merit. No abuse of discretion may be imputed to the labor
arbiter and the NLRC.

The NLRC's February 27, 1992 decision had already become final and executory.
The sheriff's return showed that the judgment had in fact been executed.

Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, J.J., concur.

THIRD DIVISION

Moreover, no discretion could have possibly been exercised on petitioner's claim

as the matter had long been resolved and laid to rest by this Court in its June 16,
1997 resolution in G.R. No. 107131.

ACEBEDO OPTICAL AND MIGUEL ACEBEDO III,

Petitioners,

Our June 16, 1997 resolution was clear and categorical:

G.R. No. 107131 (NFD International Manning Agents, Inc. vs. National Labor
Relations Commission and Rommel Bearneza) Acting on the motion of [NFD
International Manning Agents, Inc.] for reconsideration of the decision of March
13, 1997 and considering that there is no substantial argument to warrant a
modification of this Court's decision, the Court Resolved to DENY reconsideration
with FINALITY.

- versus -

The Court further Resolved to:

G. R. No. 150171

(1) DENY for lack of merit the motion for damages on the injunction bond filed by
[Rommel Bearneza];

Present:

(2) NOTE the (1) [manning agency's] opposition to the motion for damages; and
(2) [Bearneza's] reply thereto;

NATIONAL LABOR RELATIONS COMMISSION AND MELENCIA ASEGURADO,

Respondents.

(3) GRANT the motion of [Bearneza] to remand the original records of this case
to the Labor Arbiter; and

YNARES-SANTIAGO, J.
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.

(4) NOTE WITHOUT ACTION [Bearneza's] motion for leave to file opposition to the
[manning agency's] motion for damages. (emphasis supplied)

Promulgated:

Once a judgment attains finality it becomes immutable and unalterable.6 It may

no longer be modified in any respect, even if the modification is meant to correct
what is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it or by
the highest court of the land.7

July 17, 2007

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

WHEREFORE, the petition is hereby DENIED.

CHICO-NAZARIO, J.:
The Case

DECISION

Costs against petitioner.

SO ORDERED.

For Review on Certiorari,[1] under Rule 45 of the Rules of Court, as amended, is

the Decision,[2] dated 16 May 2001, of the Court of Appeals in CA-G.R. SP No.
59471, and its Resolution dated 19 September 2001, denying the Motion for

Reconsideration of said decision. The Court of Appeals dismissed the petition for
certiorari, filed by herein petitioners Acebedo Optical (Corporation) and Miguel
Acebedo III (Acebedo) and affirmed in toto the Resolution,[3] dated 17 November
1999, of the National Labor Relations Commission (NLRC)-First Division in NLRC
NCR Case No. 00-01-00651-97, which, in turn, sustained the Decision dated 22
May 1998, of Labor Arbiter Emerson C. Tumanon directing herein petitioners to
reinstate private respondent Melencia B. Asegurado to her former or equivalent
position without loss of seniority rights, for illegally terminating the latters
employment from petitioner corporation; and ordering them to pay her full
backwages, service incentive leaves and attorneys fees.
This case stemmed from a complaint for illegal dismissal with prayer for
reinstatement and payment of full backwages and other benefits. Said grievance
was filed by herein private respondent against herein petitioners on 22 January
1997 before the National Labor Relations Commission.
The facts of the case as synthesized from the records are as follows:

DATE : September 7, 1991

--------------------------------------------------As per report of the Personnel Department on the Absences and Tardiness for the
month of August, you were found to have 1 hr. & 34 mins. late (sic).
Be informed that habitual absences/tardiness is a grave violation of company
policy.
This serves as your written warning.
[Signed]
MIGUEL R. ACEBEDO III
Operations Manager

On 16 August 1991, petitioners engaged the services of private respondent as a

packaging clerk responsible for the following tasks:
1.
Receives (sic) product from supplier and sort them out;
2.
Record incoming and outgoing deliveries to stock ledger and stock
card;
3.
Received (sic) requisition from branch retail outlets;
4.
Select products from storage and place them inside the box, label
the boxes and prepare the corresponding delivery receipts;
5.
Make physical count at regular intervals and reconciles physical
count with book records;
6. Other assignments as and when required by supervisor from time to time.[4]

The memorandum was to apprise her of her accumulated tardiness of one hour
and a half for the month of August 1991; likewise, it served as a warning to her
that habitual tardiness/absenteeism is considered a violation of company policy.
On 15 October 1992, private respondent received another memorandum[6]
essentially warning her that habitual tardiness was considered a grave violation
of Company Policy;[7] but without actually notifying her of the actual period of
her alleged tardiness. According to said memorandum, it was to serve as private
respondents first written warning as well. A copy of the communication reads:
TO : MELENCIA BUTIL

Initially, the private respondents employment status was probationary. Six

months later, or on 1 March 1992, however, she was regularized.

FROM : THE PERSONNEL DEPARTMENT

But before her employment status was made permanent, private respondent
was given a Memorandum[5] by petitioner Miguel Acebedo III, Operations
Manager of petitioner corporation, reading as follows:

SUBJECT : AS STATED

TO : MELENCIA BUTIL

---------------------------------------------------

FROM : THE OPERATIONS DEPARTMENT

Be reminded that habitual tardiness is considered a grave violation of Company

Policy and is subject to strict disciplinary action.

SUBJECT : WRITTEN WARNING on . . . . . . .

DATE : October 15, 1992

This will serve as your first written warning.

LUTZ PENAFLORIDA
Acting Head Personnel

[Signed]
THE PERSONNEL DEPARTMENT

On 28 February 1995, private respondent was served a fourth Memorandum.[10]

For having incurred twenty-one counts of tardiness for the months of
[unreadable] to December 1994, the latter was meted another suspension, this
time for seven days, or four days longer than the first. More specifically, it
provides:

On 22 April 1994, a three-day suspension from work was imposed on private

respondent on the ground of her being tardy twenty-six times within the period
of January to March 1994. The suspension notice was served on her via a
Memorandum[8] dated the same day. It was averred that private respondent
incurred twenty-six counts of tardiness within the above-specified months which
number far exceeded the maximum allowable limit per month of only four times.
[9] The third Memorandum states:

TO : MELENCIA ASEGURADO
FROM : THE PERSONNEL DEPARTMENT
SUBJECT : TARDINESS, Suspension notice of

TO : MELENCIA ASEGURADO

DATE : February 28, 1995

FROM : THE PERSONNEL DEPARTMENT

---------------------------------------------------

SUBJECT : TARDINESS, Suspension notice on

The report on tardiness for the period of [unreadable] to December 1994, (sic)
showed that you incurred lates (sic) twenty-one (21) times (3, 9, 9), the said
number exceeded the maximum limit of four times each month.

DATE : APRIL 22, 1994

--------------------------------------------------The report on tardiness for the period January to March 1994, showed that you
incurred lates (sic) twenty six (26) times (11, 7, 8) the said numbers exceeded
the maximum limit of four times each month.
It is one of the fundamental duties of any employee to follow rules and
regulations of the company, and (sic) one of the most basic is the observance of
official time. Your 201 file kept two (2) written warnings on tardiness.
This time, you are given a three (3) days suspension without pay effective May
10, 11 & 12, 1994.
Please be advised to manage your time very well to avoid future offenses.
[Signed]

Despite of (sic) previous notices and suspension, you still failed to meet the
companys policy on attendance. Since the company is implementing
[unreadable] Disciplinary Measures for this kind of infraction, you are hereby
given seven (7) days suspension which will [unreadable] effective on March 6, 9,
14, 16, 21, 23 & 27, 1995.
Please adhere to the policy [unreadable] failure to improve on this aspect will
result in severe penalties.
For your guidance.
[Signed]
LUTZ PENAFLORIDA
Personnel Manager

On 22 May 1995, private respondent filed an application for an indefinite leave

of absence. In a Memorandum[11] dated 26 May 1995, petitioner corporations
Head of Personnel denied said application, viz:

the employees failure to meet the company policy on tardiness. The

Memorandum[12] reads in full:
TO : MS. MELENCIA ASEGURADO PACKAGING CLERK

TO : MELENCIA B. ASEGURADO

FROM : THE PERSONNEL DEPARTMENT

FROM : THE PERSONNEL DEPARTMENT

SUBJECT : SUSPENSION, Notice of

SUBJECT : STATEMENT OF CHARGE

DATE : August 29, 1995

DATE : May 26, 1995.

---------------------------------------------------

---------------------------------------------------

Based on the Tardiness Report, you have accumulated a total of 17 lates for the
quarter (April June).

Be informed that the indefinite leave of absence which you have filed last May
22, 1995 is not approved, this nature of leave is not being considered in our
prescribed policy. Be reminded also that you have accumulated a total of
fourteen (14) days absence for this month alone.
Although, (sic) we understood (sic) your reason (no babysitter), we are also
concerned about the smooth flow of work in your section. Since you went on
leave, some GSD staff took turn (sic) in doing your function. Due to this situation,
I am worried that this would led (sic) to confusion, error and delay because
theres nobody who is completely in charged (sic) in monitoring their activities.
I am giving you up to the end of the month to sort out your personal problem.
Failure to go back to work on June 01, 1995 would make your extended leave of
absence unauthorized (sic). This would constitutes (sic) a valid ground for the
termination of your services.
For your guidance.
[Signed]
LUTZ PENAFLORIDA
Personnel Head
On 29 August 1995, private respondent was suspended for the third time, this
time for thirteen days. The reason given for the imposition of such penalty was

As per company policy, Head Office employees are limited only to four (4) lates
per month or a total of twelve (12) per quarter.
The said policy is being implemented to control excessive lateness and to
prevent time being wasted for non-performance.
Despite of (sic) previous warnings and/or suspension given, (March 1995) you
still failed to meet the company policy on Tardiness.
You are hereby given a (sic) 13 days suspension which will take effect on Sept. 6,
7, 11, 12, 13, 14, 18, 19, 20, 21, 25, 26 & 27, 1995.
Be advised to observe the said policy accordingly. Future offense will be treated
with more severe penalty.
For your guidance.

[Signed]
LUTZ PENAFLORIDA
Head Personnel

On 12 November 1996, private respondent did not report for work allegedly due
to the demolition of the place that her family was renting.

Please be informed that your services shall be terminated on January 15, 1997
due to gross and habitual neglect of your duty.

On 2 December 1996, private respondent again absented herself from work this
time because her child was allegedly hospitalized.

For your guidance.

Six days later, or on 8 December 1996, the Head of the Personnel Department of
petitioner corporation issued a Notice of Termination[13] against private
respondent. The memorandum reads:

[Signed]
LUTZ PENAFLORIDA
Personnel Head

TO : MELY ASEGURADO
FROM : THE PERSONNEL DEPARTMENT
SUBJECT : NOTICE OF TERMINATION

From the aforequoted memorandum, private respondents dismissal from service

was brought on by her supposed exhaustion of the allowable sick and vacation
leaves per month constituting gross and habitual neglect of your duty.[14] Notice
of the termination of her employment was received by private respondent under
protest and six days after the fact, or only on 21 January 1997.

DATE : December 08, 1996

--------------------------------------------------Despite several warnings both verbal and written accompanied with suspension,
you were found to be abusive in your lates and absences as shown by the result
of 1996 Attendance Report for the quarter Jan-Mar. 12, April-June 21, July-Sept.
43, Oct.-Nov. 17. Only four (4) lates per month or twelve (12) per quarter is
allowed. Regarding absences and leaves, you already exhausted the company
provision of 8 days sick leave plus 7.5 vacation leave and had accumulated a
total of [unreadable] days absences without pay as of December 7, 1996.
This kind of performance is below company standard. Chronic absenteeism
combined with abusive tardiness is considered as gross and habitual negligence
that constitutes a valid ground for dismissal. Be reminded that you were
suspended for 13 days (September 95) for similar infraction and were advised to
improve your performance otherwise (sic) facing the maximum penalty is
inevitable.
The management has the prerogative to [unreadable] also discipline
[unreadable] its employees who are not capable of following their fundamental
duty to obey basic rules and regulations of the company in order to protect its
interest. Several [unreadable] both verbal and written accompanied with
suspension were issued to you but you failed to live up to a higher standard of
responsibility.

The foregoing state of affairs prompted private respondent to file a case for
illegal dismissal with the NLRC the very next day.
In a Decision dated 22 May 1998, Labor Arbiter Emerson C. Tumanon rendered
judgment declaring private respondent illegally dismissed from service. The
Labor Arbiter held that petitioners failed to accord said employee due process of
law; and found that private respondents dismissal from service was anchored on
past infractions for which she had already been penalized. Accordingly, the
dispositve of the decision states, to wit:
WHEREFORE, judgment is hereby rendered declaring the dismissal of
complainant unlawful and unjustified and ordering the respondents jointly and
severally to reinstate said complainant to her former or equivalent position
without loss of seniority rights with full backwages which as of the date of this
Decision has ballooned to the amount of P79,716.00 plus other benefits such as
13th month pay in the amount of P6,643.00 and service incentive leave pay in
the amount of P2,628.00.
Respondents are also ordered to pay complainants counsel ten (10%) percent of
the total award recovered as attorneys fees pursuant to law.[15]
On appeal, in a Resolution dated 17 November 1999, public respondent NLRC
rendered a decision dismissing petitioners appeal for allegedly being filed out of
time long after the assailed decision of the Labor Arbiter had supposedly become

final and executory. Accordingly, the assailed decision was affirmed in toto. The
decretal portion of the Resolution reads:

minutes for the month of August, 1991, and yet, the Private Respondent was
promoted and made a permanent employee on March 1, 1992.

WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for

lack of merit. The appealed decision dated May 22, 1998 is hereby AFFIRMED.
[16]

[A]fter her one (1) hour and thirty four (34) minute tardiness in September 1991,
nothing on record reveals that she had been tardy for the year 1992. The
Memorandum reminding the Private Respondent about her tardiness did not
establish that Private Respondent again incurred any tardiness. It is noted that
Private Respondent was not tardy in the year 1993. Although she was tardy
during the period from January to March 1994, however, she was ordered
suspended on May 10 to 12, 1994. Thereafter, Private Respondent did not report
late for the rest of the year as the next Memorandum of the Petitioner
Corporation was issued on February 28, 1995, informing Private Respondent of
her suspension on March 6, 9, 14, 16, 21, 23 and 27, 1995.

Petitioners filed a Motion for Reconsideration[17] which public respondent NLRC

denied in its Resolution dated 17 April 2000.
Undaunted, herein petitioners went to the Court of Appeals via a Petition for
Certiorari under Rule 65 of the Rules of Court, as amended, ascribing grave
abuse of discretion to the National Labor Relations Commission for ordering the
payment of backwages, damages and attorneys fees to an employee who had
been dismissed for just cause.
On 16 May 2001, the Court of Appeals promulgated its Decision dismissing the
petition, the dispositive of which states that:
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED due course and is
hereby DISMISSED.[18]
In essence, the Court of Appeals held that herein petitioners failed to marshal
the obligatory quantum of evidence needed to substantiate a finding of
legitimacy or validity in the termination of employment of private respondent,
the reason for which was supposedly her repeated defiance of company policy.
According to the appellate court, petitioners failure to adduce in evidence a copy
of the contravened company policy was fatal to their cause. Absent proof of
evidence of such document embodying the flouted rule, the appellate court,
along with the labor arbiter and the NLRC, was unable to make a categorical
finding on the issue of whether or not the private respondents accumulated
absences and/or tardiness were, indeed, in violation of petitioner companys rules
and regulations. Further, as to the allegation of chronic absenteeism and/or
tardiness for the period of 1991 to 1995, the appellate court likewise held that
the non-presentation of the Daily Time Records (DTRs) for said period was a
grave error. It held that the numerous memoranda issued to private respondent
were mere self-serving evidence and made the following observations
Petitioners stance is even incongruent with the evidence on record. Thus, the
Private Respondent was employed, (sic) on a probationary basis or status x x x
[she] incurred tardiness in the accumulated time of one (1) hour and thirty (30)

Based on the Memorandum of the Petitioners, the Private Respondent was tardy
for seventeen (17) times for the quarter from April to June, 1995. However, the
Memorandum of the Petitioners did not indicate the dates and precise times
when the Private Respondent was tardy. Without the Daily Time Records of the
Respondent during the period envisaged in the Memoranda of the Petitioners, it
cannot be ascertained whether Private Respondents tardiness was habitual and
incorrigible.[19]
Anent the finding by the NLRC that herein petitioners appeal was filed out of
time, the Court of Appeals clarified that Sec. 224 of the Labor Code requires that
both party and counsel must be served their respective copies of the decision of
the Labor Arbiter. In the instant case, herein petitioners received a copy of the
Labor Arbiters decision only on 5 March 1999. They then filed an appeal, 15
March 1999. Therefore, it cannot be said that their recourse to the NLRC was
filed out of time.
In fine, the Court of Appeals ruled that the appeal, having been filed with the
NLRC within the reglementary period, dismissal of the employee was too severe
a penalty and, thus, unwarranted. Such conclusion was based on the finding that
even on the assumption that Private Respondent incurred tardiness and/or
absences in the course of her employment, she had been duly penalized
therefor.[20]
Hence, petitioners, through the instant Petition for Review on Certiorari under
Rule 45 of the Rules of Court, as amended, seek recourse to this Court and raise
the following issues:[21]
I.

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED

PALPABLE AND REVERSIBLE ERROR OF LAW WHEN IT DECLARED RESPONDENT
TO HAVE BEEN ILLEGALLY DISMISSED DESPITE OVERWHELMING EVIDENCE
SHOWING THAT SHE INCURRED EXCESSIVE TARDINESS AND ABSENTEEISM IN
VIOLATION OF THE COMPANYS RULES AND REGULATIONS WHICH WARRANTED
HER TERMINATION FROM WORK; [and]

Appeals, they are binding and conclusive upon the Supreme Court and will not
normally be disturbed.[27]

II.

Bearing in mind the facts of the case, petitioners assert that private respondents
numerous tardiness and/or absenteeism is tantamount to gross habitual neglect
of duty amounting to gross negligence; thus, a valid ground for dismissal of an
employee.

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED

PALPABLE AND REVERSIBLE ERROR OF LAW WHEN IT ORDERED RESPONDENT
REINSTATED TO HER FORMER POSITION OR TO REINSTATE HER TO HER FOREMER
OR EQUIVALENT POSITION WITH FULL BACKWAGES PLUS OTHER BENEFITS[,]
SUCH AS 13TH MONTH PAY AND SERVICE INCENTIVE LEAVE PAY.

Nevertheless, we have reviewed the records of the case at bar and find no
reversible error committed by the Court of Appeals concerning the merits of the
present petition.

We find the instant petition to be without merit.

The Labor Code, specifically Article 277(b), guarantees the right of an employee
to security of tenure. It provides that

At the outset, it is pertinent to note that the first issue raised by petitioners
inquires into the factual findings of the Court of Appeals. They are fundamentally
assailing the appellate courts finding that whatever evidence is on record, it is
insufficient to establish that company policies were contravened by private
respondent. In effect, petitioners would have us sift through the data on record
and pass upon whether or not there is sufficient basis to hold private respondent
accountable for continually disobeying the established company policy
respecting tardiness and absenteeism allegedly amounting to gross and habitual
negligence. This clearly involves a factual inquiry, the determination of which is
the statutory function of the NLRC.[22]
Elementary is the principle that this Court is not a trier of facts; only errors of law
are generally reviewed in petitions for review on certiorari criticizing decisions of
the Court of Appeals. Questions of fact are not entertained.[23] And in labor
cases, this doctrine applies with greater force.[24] Factual questions are for labor
tribunals to resolve.
Judicial Review of labor cases does not go beyond the evaluation of the
sufficiency of the evidence upon which its labor officials findings rest.[25] As
such, the findings of facts and conclusion of the NLRC are generally accorded not
only great weight and respect but even clothed with finality and deemed binding
on this Court as long as they are supported by substantial evidence.[26] This
Court finds no basis for deviating from said doctrine without any clear showing
that the findings of the Labor Arbiter, as affirmed by the NLRC, are bereft of
substantiation. Particularly when passed upon and upheld by the Court of

ART. 277. MISCELLANEOUS PROVISIONS. x x x

(b) Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause
and without prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is sought to be
terminated a written notice containing a statement of the causes for termination
and shall afford the latter ample opportunity to be heard and to defend himself
with the assistance of his representative if he so desires in accordance with
company rules and regulations x x x.
From the foregoing, it is quite clear that the dismissal of private respondent may
be upheld only if shown to have been made for a just or authorized cause and
attended with due process.
Corollary to the preceding legal policy is the equally basic principle of labor law,
that, it is the employer who has the burden of proving that the dismissal is for
just cause, and failure to do so would necessarily mean that the dismissal was
unjustified; and, therefore, illegal.
In the present petition, the labor arbiter evaluated the evidence presented by
herein parties and concluded that private respondent Asegurado was not
afforded the due process guaranteed by law and jurisprudence. Moreover, the
alluded incidences of absenteeism and tardiness which constituted the charge of

habitual neglect of duty amounting to gross negligence were past infractions

that have already been penalized.
On appeal, the NLRC affirmed the finding of illegal dismissal.
In agreement with the assailed decisions, the Court of Appeals, heedful of the
legal principle that it is the employer which has the onus probandi to prove that
private respondents dismissal was based on valid ground, ruled that the
Commission committed no grave abuse of discretion when it affirmed the finding
by the labor arbiter that the evidence on record was insufficient to sustain the
legality of private respondent Asegurados dismissal from service; therefore, the
appellate court dismissed the petition for certiorari filed by petitioners.
As earlier stated, we find no basis for deviating from the oft-espoused legal tenet
that findings of facts and conclusion of the labor arbiter are generally accorded
not only great weight and respect but even clothed with finality and deemed
binding on this Court as long as they are supported by substantial evidence,
without any clear showing that such findings of fact, as affirmed by the NLRC,
are bereft of substantiation. More so, when passed upon and upheld by the Court
of Appeals, they are binding and conclusive upon us and will not normally be
disturbed;[28] accordingly, the finding that the alleged absences and incidences
of tardiness of private respondent are but past infractions for which petitioners
had already imposed several sanctions and for which private respondent had
been duly penalized. And being past infractions, they cannot be taken
collectively as a justification for the dismissal from service of the employee.[29]
But even assuming for the sake of argument that the past infractions could still
validly be the subject of future punishment, still there is no basis for petitioners
claim that private respondents supposed habitual absenteeism and tardiness is a
form of gross and habitual neglect of duty. Under Article 282(b) of the Labor
Code, gross and habitual neglect of duty by the employee of his duties is a just
cause for the termination of the latters employment. To warrant removal from
service, however, the negligence should not merely be gross but also habitual.
[30] In this case, assuming the absences and tardiness of private respondent
Asegurado to be habitual, can they also be categorized as gross?
Gross negligence implies a want or absence of or failure to exercise even slight
care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them.[31]
Though there may have been times when private respondents absences were
undertaken without the necessary approved leave applications, nevertheless,
she would send word for when these would occur. Moreover, quite telling is the

fact that nowhere in the memoranda sent to private respondent was there any
mention of a complaint relating to the quality of her work. As the present case
does not show the presence of one of the two requisites to make the finding of
negligence a just cause for dismissal. At the most, private respondent should
have been further suspended from service for taking for granted that her leave
would be approved by the personnel department of petitioner corporation. The
penalty of dismissal is too harsh, considering that private respondent had been
with the company for five years and, apparently, the management had no
complaint as regards the formers quality of work.
Herein, to our mind, petitioners have not sufficiently shown that private
respondent had willfully disobeyed the company rules and regulations respecting
absences and tardiness. The cause for the termination of private respondents
employment was not simply habitual tardiness and/or absenteeism. Petitioners
have alleged time and again that the basis upon which the dismissal of private
respondent was anchored was breach or violation of company policy. It was their
contention that private respondents habitual tardiness and/or absences were in
violation of petitioner companys rules and regulations. Ironically, though
petitioners referred to their company policies, they never presented a copy of
these in evidence except in their Motion for Reconsideration too late in the day.
Being the basis of the charge against private respondent, it is without doubt the
best evidence available to substantiate the allegations. The purpose of the rule
requiring the production of the best evidence is the prevention of fraud, because
if a party is in possession of such evidence and withholds it, and seeks to
substitute inferior evidence in its place (or none at all save for mere allegation),
the presumption naturally arises that the better evidence is withheld for
fraudulent purposes which its production would expose and defeat.[32]
By failing to prove the existence of the company rules in due time, i.e., nonpresentation of an authenticated copy, unarguably the best evidence, casts
skepticism on the factual basis of the charge of violation thereof; arguably,
therefore, it cannot be said that the assailed conduct can be considered gross
neglect of duty.
It is indeed true that administrative agencies, like the NLRC, are not bound by
the technical rules of procedure and evidence in the adjudication of cases.[33]
However, this procedural liberty must not be interpreted to mean an unfettered
license to put forth assertions without at least presenting tangible proof to back
them up. Otherwise, such assertions would just be allegations, and allegations
are not evidence.[34] What is involved here transcends mere procedural
technicality and concerns the more paramount principles and requirements of
due process, which may not be sacrificed at the altar of expediency. Upon this

principle, the failure to present a copy of the supposed Company Policy to prove
the allegation of their existence must be seen and taken for what they are
inadmissible hearsay. Mere allegation or assertion, by any stretch of reasoning,
cannot be considered substantial evidence of their existence and of the
subsequent violation complained of.
From the preceding discussion, the dearth of reliable evidence on record
constitutes serious doubt as to the factual basis of the charge of violation of
company policy filed against private respondent. This doubt shall be resolved in
her favor in line with the policy under the Labor Code to afford protection to
labor and construe doubts in favor of labor.[35] The consistent rule is that if
doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be titled in favor of the latter. The employer
must affirmatively show rationally adequate evidence that the dismissal was for
a justifiable cause.[36] Having failed to satisfy this burden of proof, we find that
petitioners dismissed private respondent without just cause. Consequently, the
termination of her employment was illegal.
To finish, as a final nail to the coffin that is the petitioners recourse to this Court,
we find that private respondent was not accorded due process by petitioners
prior to being dismissed from service. Despite the fact that private respondent
was repeatedly warned through the numerous memoranda sent to her for
coming in late or not reporting at all to the office, she was never asked to defend
her position, much less voice an objection to the charges leveled at her.
Law and jurisprudence require an employer to furnish the employee two written
notices before termination of his employment may be ordered. The first notice
must inform him of the particular acts or omissions for which his dismissal is
sought; the second, of the employers decision to dismiss the employee after he
has been given the opportunity to be heard and defend himself.[37] With regard
to private respondent, prior to the Notice of Termination, no occasion was given
to her to explain her side on why she should not be terminated. There is no
evidence that there was an exchange of communication between petitioners and
private respondent regarding the latters supposed infractions. Lest it be
forgotten, every opportunity and assistance must be accorded to the employee
by the management to enable him to prepare adequately for his defense,
including legal representation.[38] No chance whatsoever was given to private
respondent in this case. She was simply served her termination notice without
being heard in her defense.

In retrospection, if, indeed, private respondent was a delinquent and an errant

employee, why did petitioners put up with such behavior for no less than five
years?
WHEREFORE, premises considered, the instant petition is hereby DENIED. The
assailed Decision dated 16 May 2001, and Resolution dated 19 September 2001,
both of the Court of Appeals in CA-G.R. SP No. 59471, are AFFIRMED. Costs
against petitioners Acebedo Optical, Inc. and Miguel Acebedo III.
SO ORDERED.
G.R. Nos. 75700-01
LOPEZ SUGAR
vs.
FEDERATION
ASSOCIATION
COMMISSION,

August 30, 1990

CORPORATION, petitioner,
OF
FREE
WORKERS,
PHILIPPINE
LABOR
UNION
(PLUA-NACUSIP) and NATIONAL LABOR RELATIONS
respondents.

Sicangco, Diaz, Ortiz and Lapak for petitioner.

Reynaldo J. Gulmatico for private respondents.

FELICIANO, J.:
In this Petition, petitioner Lopez Sugar Corporation seeks reversal of the Decision
dated 2 July 1986 of public respondent National labor Relations Commission
("NLRC") which affirmed the decision of the Labor Arbiter dated 30 September
1983. The Labor Arbiter (a) had denied petitioner's application to retrench some
of its employees and (b) had ordered the reinstatement of twenty-seven (27)
employees and to pay them full backwages from the time of termination until
actual reinstatement.
Petitioner, allegedly to prevent losses due to major economic problems, and
exercising its privilege under Article XI, Section 2 of its 1975-1977 Collective
Bargaining Agreement ("CBA") entered into between petitioner and private
respondent Philippine Labor Union Association ("PLUA-NACUSIP"), caused the
retrenchment and retirement of a number of its employees.

Thus, on 3 January 1980, petitioner filed with the Bacolod District Office of the
then Ministry of Labor and Employment ("MOLE") a combined report on
retirement and application for clearance to retrench, dated 28 December 1979, 1
affecting eighty six (86) of its employees. This was docketed as NLRC Case Ne.
A-217-80. Of these eighty-six (86) employees, fifty-nine (59) were retired
effective 1 January 1980 and twenty-eight (27) were to be retrenched effective
16 January 1980 "in order to prevent losses."
Also, on 3 January 1980, private respondent Federation of Free Workers ("FFW"),
as the certified bargaining agent of the rank-and-file employees of petitioner,
filed with the Bacolod District Office of the MOLE a complaint dated 27
December 1979 for unfair labor practices and recovery of union dues docketed
as NLRC Case No. A-198-80. In said complainant, FFW claimed that the
terminations undertaken by petitioner were violative of the security of tenure of
its members and were intended to "bust" the union and hence constituted an
unfair labor practice. FFW claimed that after the termination of the services of its
members, petitioner advised 110 casuals to report to its personnel office. FFW
further argued that to justify retrenchment, serious business reverses must be
"actual, real and amply supported by sufficient and convincing evidence." FFW
prayed for reinstatement of its members who had been retired or retrenched.
Petitioner denied having hired casuals to replace those it had retired or
retrenched. It explained that the announcement calling for 110 workers to report
to its personnel office was only for the purpose of organizing a pool of extra
workers which could be tapped whenever there were temporary vacancies by
reason of leaves of absence of regular workers.
On 22 January 1980, another report on retirement affecting an additional twentyfive (25) employees effective 1 February 1980 was filed by petitioner. 2
On 3 March 1980, petitioner filed its Position Paper in NLRC Case No. A-217-80
contending that certain economic factors jeopardizing its very existence
rendered the dismissals necessary. Petitioner explained:
As a business firm, the Applicant must earn [a] fair return of (sic) its investment.
Its income is generated from the sales of the Central's shares of sugar and
molasses production. It has however no control of the selling price of both
products. It is of common knowledge that for the past years the price of sugar
has been very low. In order to survive, the Applicant has effected several forms
of cost reduction. Now that there is hope in the price of sugar the applicant is
again faced with two major economic problems, i.e., the stoppage of its railway
operation and the spiralling cost of production.

The Applicant was forced to stop its railway operation because the owners of the
land upon which the Applicant's railway lines traverse are no longer willing to
allow the Applicant to make further use of portions of their lands. . . .
The other economic problem that confronted the Applicant is the rising cost of
labor, materials, supplies, equipment, etc. These two major economic problems
the rising cost of production and the stoppage of its railway facilities, put
together pose a very serious threat against the economic survival of the
Applicant. In view of this, the Applicant was constrained to touch on the last
phase of its cost reduction program which is the reduction of its workforce.
xxx

xxx

xxx

The Applicant as a business proposition must be allowed to earn income in order

to survive. This is the essence of private enterprise. Being plagued with two
major economic problems, the applicant is not expected to remain immobile. It
has to react accordingly. As many other business firms have resorted to
reduction of force in view of the present economic crisis obtaining here and
abroad, the applicant was likewise compelled to do the same as a last alternative
remedy for survival. 3
In a decision dated 30 September 1983, 4 the Labor Arbiter denied petitioner's
application for clearance to retrench its employees on the ground that for
retrenchment to be valid, the employer's losses must be serious, actual and real
and must be amply supported by sufficient and convincing evidence. The
application to retire was also denied on the ground that petitioner's prerogative
to so retire its employees was granted by the 1975-77 collective bargaining
agreement which agreement had long ago expired. Petitioner was, therefore,
ordered to reinstate twenty-seven retired or retrenched employees represented
by private respondent Philippine Labor Union Association ("PLUA") and FFW and
to pay them full backwages from the time of termination until actual
reinstatement.
Both dissatisfied with the Labor Arbiter's decision, petitioner and respondent
FFW appealed the case to public respondent NLRC. On appeal, the NLRC, finding
no justifiable reason for disturbing the decision of the Labor Arbiter, affirmed
that decision on 2 July 1986. 5
Hence, this Petition for certiorari making the following arguments:

1.
That portions of the decision of public respondent NLRC dated July 2, 1986
affirming the decision of Labor Arbiter Ethelwoldo Ovejera dated September 30,
1983 are contrary to law and jurisprudence;

equivalent to one (1) month pay or at least one half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis supplied)

2.
That said decision subject of this petition are in some respects not
supported by evidence and self-contradictory;

In ts ordinary connotation, he phrase "to revent losses" means hat retrenchment

or termination of the services of some employees is authorized to be undertaken
by the employer sometime before the losses anticipated are actually sustained
or realized. It is not, in other words, the intention of the lawmaker to compel the
employer to stay his hand and keep all his employees until sometime after
losses shall have in fact materialized ; 7 if such an intent were expressly written
into the law, that law may well be vulnerable to constitutional attack as taking
property from one man to give to another. This is simple enough.

3.
That said decision subject of this petition were rendered with grave abuse
of discretion and in excess of jurisdiction;
4.
That the dismissals at bar are valid and based on justifiable
grounds. 6
Petitioner contends that the NLRC acted with grave abuse of discretion in
denying its combined report on retirement and application for clearance to
retrench. Petitioner argues that under the law, it has the right to reduce its
workforce if made necessary by economic factors which would endanger its
existence, and that for retrenchment to be valid, it is not necessary that losses
be actually sustained. The existence of valid grounds to anticipate or expect
losses would be sufficient justification to enable the employer to take the
necessary actions to prevent any threat to its survival.
Upon the other hand the Solicitor General argued that the Decision rendered by
the Labor Arbiter and affirmed by the NLRC is supported by substantial evidence
on record; that, therefore, no grave abuse of discretion was committed by public
respondent NLRC when it rendered that Decision.
Article 283 of the Labor Code provides:
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 cricumventing the provisions of this Title,
by serving a written notice on the workers and the Ministry of Labor and
Employer at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to a se pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case 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

At the other end of the spectrum, it seems equally clear that not every asserted
possibility of loss is sufficient legal warrant for reduction of personnel. In the
nature of things, the possibility of incurring losses is constantly present, in
greater or lesser degree, in the carrying on of business operations, since some,
indeed many, of the factors which impact upon the profitability or viability of
such operations may be substantially outside the control of the employer. Thus,
the difficult question is determination of when, or under what circumstances, the
employer becomes legally privileged to retrench and reduce the number of his
employees.
We consider it may be useful to sketch the general standards in terms of which
the acts of petitioner employer must be appraised. Firstly, the losses expected
should be substantial and not merely de minimis in extent. If the loss
purportedly sought to be forestalled by retrenchment is clearly shown to be
insubstantial and inconsequential in character, the bona fide nature of the
retrenchment would appear to be seriously in question. Secondly, the substantial
loss apprehended must be reasonably imminent, as such imminence can be
perceived objectively and in good faith by the employer. There should, in other
words, be a certain degree of urgency for the retrenchment, which is after all a
drastic recourse with serious consequences for the livelihood of the employees
retired or otherwise laid-off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably necessary and likely to effectively
prevent the expected losses. The employer should have taken other measures
prior or parallel to retrenchment to forestall losses, i.e., cut other costs than
labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or
so-called "golden parachutes", can scarcely claim to be retrenching in good faith
to avoid losses. To impart operational meaning to the constitutional policy of
providing "full protection" to labor, the employer's prerogative to bring down

labor costs by retrenching must be exercised essentially as a measure of last

resort, after less drastic means e.g., reduction of both management and rankand-file bonuses and salaries, going on reduced time, improving manufacturing
efficiencies, trimming of marketing and advertising costs, etc. have been tried
and found wanting.
Lastly, but certainly not the least important, alleged if already realized, and the
expected imminent losses sought to be forestalled, must be proved by sufficient
and convincing evidence. The reason for requiring this quantum of proof is
readily apparent: any less exacting standard of proof would render too easy the
abuse of this ground for termination of services of employees. In Garcia v.
National Labor Relations Commissions, 8 the Court said:
. . . But it is essentially required that the alleged losses in business operations
must be prove[n] (National Federation of Labor Unions [NAFLU] vs. Ople, 143
SCRA 124 [1986]). Otherwise, said ground for termination would be susceptible
to abuse by scheming employers who might be merely feigning business losses
or reverses in their business ventures in order to ease out employees. (Emphasis
supplied) 9
Whether or not an employer would imminently suffer serious or substantial
losses for economic reasons is essentially a question of fact for the Labor Arbiter
and the NLRC to determine. In the instant case, the Labor Arbiter found no
sufficient and convincing evidence to sustain petitioner's essential contention
that it was acting in order to prevent substantial and serious losses. The Labor
Arbiter said:
There is no question that an employer may reduce its work force to prevent
losses, however, these losses must be serious, actual and real. In the instant
case, even assuming arguendo that applicant company was, in fact, surrounded
by the major economic problems stated earlier, the question may be asked
will it suffer serious losses as a result of the said economic problems? We find
the answer to be negative. We have scanned the records but failed to find
evidence submitted to show that applicant company would suffer serious
business losses or reverses as a consequence of the alleged major economic
problems. In fact, applicant company asseverated that these problems only
threatens its survival, hence, it had to reduce its work force. Another thing, while
applicant company was retrenching its regular employees, it also hired the
services of casuals. This militated its claim to reduce its work force to set up cost
reduction. It must be stated that settled is the rule that serious business losses
or reverses must be actual, real and amply supported by sufficient and
convincing evidence. 10 (Emphasis supplied)

We are in principle bound by such findings in accordance with well-established

jurisprudence that the factual findings of labor administrative officials, if
supported by substantial evidence, are entitled not only to great respect but
even to finality, 11 unless, indeed, petitioner is able to show that the Labor
Arbiter and the NLRC simply and arbitrarily disregarded evidence before them or
had misapprehended evidence of such a nature as to compel a contrary
conclusion if properly appreciated.
The submissions made by petitioner in this respect are basically that from the
crop year 1975-1976 to the crop year 1980-981, the amount of cane deliveries
made to petitioner Central was declining and that the degree of utilization of the
mill's capacity and the sugar recovery from the cane actually processed, were
similarly declining. 12 Petitioner also argued that the competition among the
existing sugar mills for the limited supply of sugar cane was lively and that such
competition resulted in petitioner having to close approximately thirty-eight
(38) of its railroad lines by the end of 1979. 13 According to the petitioner, the
cost of producing one (1) picul of sugar during the same period (i.e., from crop
year 1976-1977 to crop year 1979-1980) increased from P69.97 to P93.11.
The principal difficulty with petitioner's case as above presented was that no
proof of actual declining gross and net revenues was submitted. No audited
financial statements showing the financial condition of petitioner corporation
during the above mentioned crop years were submitted. Since financial
statements audited by independent external auditors constitute the normal
method of proof of the profit and loss performance of a company, it is not easy
to understand why petitioner should have failed to submit such financial
statements.
Moreover, while petitioner made passing reference to cost reduction measures it
had allegedly undertaken, it was, once more, a fairly conspicuous failure to
specify the cost-reduction measures actually undertaken in good faith before
resorting to retrenchment. Upon the other hand, it appears from the record that
petitioner, after reducing its work force, advised 110 casual workers to register
with the company personnel officer as extra workers. Petitioner, as earlier noted,
argued that it did not actually hire casual workers but that it merely organize(d]
a pool of "extra workers" from which workers could be drawn whenever
vacancies occurred by reason of regular workers going on leave of absence. Both
the Labor Arbiter and the NLRC did not accord much credit to petitioner's
explanation but petitioner has not shown that the Labor Arbiter and the NLRC
were merely being arbitrary and capricious in their evaluation. We note also that

petitioner did not claim that the retrenched and retired employees were brought
into the "pool of extra workers" rather than new casual workers.
Petitioner next contends that the NLRC committed grave abuse of discretion in
affirming the ruling of the Labor Arbiter that the retirements effected by
petitioner were na valid since the basis therefor, i.e. Article XI Section 2 of the
1975-1977 CBA, had by then already expired and was thus no longer enforceable
or operative. 14 Article XI, 2 of the CBA provides:
2.
Section 2. Any employee may apply for after having rendered the of at
least eighteen (18) year of service to the COMPANY. The COMPANY, as a right ,
may retire any employee who has rendered twenty (20) years of service, or has
reached the age of sixty (60) years. Employees who are physically incapacitated
to continue to work in the COMPANY upon certification of the COMPANY
Physician, shall be entitled to a separation pay equivalent to the retirement
benefits herein provided for that may have accrued. The heirs or surviving
legally married spouse of the deceased employee shall be granted by the
COMPANY the amount equivalent to the accrued retirement benefit of the
deceased employee at the time of his death." 15 (Emphasis supplied)
Petitioner argues that the CBA was "extended" not merely by implication, but by
reciprocal acts in the sense that even after the CBA had expired, petitioner
continued to give, and the workers continued to receive, the benefits and
exercise the prerogatives provided therein. Under these circumstances,
petitioner urges, the employees are estopped from denying the extended
effectivity of the CBA.
The Solicitor General, as well as private respondents, argue basically that
petitioner's right to retire its employees was coterminous with the life of the
CBA.
On this point, we must find for petitioner. Although the CBA expired on 31
December 1977, it continued to have legal effects as between the parties until a
new CBA had been negotiated and entered into. This proposition finds legal
support in Article 253 of the Labor Code, which provides:
Article 253 Duty to bargain collectively when there exists a collective
bargaining agreement. When there is a collective bargaining agreement, the
duty to bargain collectively shall also mean that neither party shall terminate nor
modify such agreement during its lifetime. However, either party can serve a
written notice to terminate or modify the agreement at least sixty (60) days prior
to its expiration date. It shall be the duty of both parties to keep the status quo

and to continue in full force and effect the terms and conditions of the existing
agreement during the 60-day period and/or until a new agreement is reached by
the parties. (Emphasis supplied)
Accordingly, in the instant case, despite the lapse of the formal effectivity of the
CBA by virtue of its own provisions, the law considered the same as continuing in
force and effect until a new CBA shall have been validly executed. Hence,
petitioner acted within legal bounds when it decided to retire several employees
in accordance with the CBA. That the employees themselves similarly acted in
accordance with the CBA is plain from the record. Even after the expiration of the
CBA, petitioner's employees continued to receive the benefits and enjoy the
privileges granted therein. They continued to avail of vacation and sick leaves as
computed in accordance with Articles VII and VIII of the CBA. They also continued
to avail of medical and dental aid under Article IX, death aid and bereavement
leave under Articles X and XIV, insurance coverage under Article XVI and housing
allowance under Article XVIII. Seventeen (17) employees even availed of Section
XI (dealing with retirement) when they voluntarily retired between 1 January
1978 and 31 December 1980 and received retirement pay computed on the
basis of Section 3 of the same article. If the workers chose to avail of the CBA
despite its expiration, equity if not the law-dictates that the employer should
likewise be able to invoke the CBA.
The fact that several workers signed quitclaims will not by itself bar them from
joining in the complaint. Quitclaims executed by laborers are commonly frowned
upon as contrary to public policy and ineffective to bar claims for the full
measure of the worker's legal rights. In AFP Mutual Benefit Association, Inc. v.
AFP-MBAI-EU, 16 the Court held:
In labor jurisprudence, it is well establish that quitclaims and/or complete
releases executed by the employees do not estop them from pursuing their
claims arising from the unfair labor practice of the employer. The basic reason
for this is that such quitclaimants and/or complete releases are against public
policy and, therefore, null and void. The acceptance of termination pay does not
divest a laborer of the right to prosecute his employer for unfair labor practice
acts. (Cario vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 183; Philippine
Sugar Institute vs. CIR, L-13475, September 29, 1960, 109 Phil. 452; Mercury
Drug Co. vs. CIR, L-23357, April 30, 1974, 56 SCRA 694, 704)
In the Cario case, supra, the Supreme Court, speaking thru Justice Sanchez,
said:

Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing The
employer drove the employee to the wall. The latter must have to get hold of
money. Because, out of job, he had to face the harsh necessities of life. He thus
found himself in no position to resist money proffered. His, then, is a case of
adherence, not of choice. One thing sure, however, is that petitioners did not
relent their claim. They pressed it. They are deemed not to have waived any of
their rights. Renuntiatio non praesumitur (Emphasis supplied)

NACHURA, J.:

We conclude that because the attempted retrenchment on the part of the

petitioner was legally ineffective, all retrenched employees should be reinstated
and backwages paid them corresponding to a period of three (3) years without
qualification or deduction, in accordance with the three-year rule laid down in a
long line of cases. 17 In the case of employees who had received payments for
which they had executed quitclaims, the amount of such payments shall be
deducted from the backwages due to them. Where reinstatement is no longer
possible because the positions they had previously filled are no longer in
existence, petitioner shall pay backwages plus, in lieu of reinstatement,
separation pay in the amount of one-month's pay for every year of service
including the three (3) year-period of putative service for which backwages will
be paid. Upon the other hand, we find valid the retirement of those employees
who were retired by petitioner pursuant to the applicable provisions of the CBA.

Petitioner Universal Robina Sugar Milling Corporation (URSUMCO) is a domestic

corporation engaged in the sugar milling business and petitioner Renato Cabati4
is URSUMCO's manager.

WHEREFORE, the Petition for Certiorari is partially GRANTED due course and the
Decision dated 2 July 1986 of the public respondent NLRC is hereby MODIFIED to
the extent that it had affirmed that portion of the Decision of the Labor Arbiter
dated 30 September 1983 ordering the reinstatement judgment of employees
who had been retired by petitioner under the applicable provisions of the CBA.
Except as so modified, the Decision of the NLRC is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 156644

July 28, 2008

UNIVERSAL ROBINA SUGAR MILLING CORPORATION (URSUMCO) and/or

RENATO CABATI, as Manager, Petitioners,
vs.
AGRIPINO CABALLEDA and ALEJANDRO CADALIN, Respondents.
DECISION

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA)
Decision2 dated September 11, 2002 which modified the Decision3 of the
National Labor Relations Commission (NLRC) dated January 27, 2000.
The Facts

Respondent Agripino Caballeda (Agripino) worked as welder for URSUMCO from

March 1989 until June 23, 1997 with a salary of P124.00 per day, while
respondent Alejandro Cadalin (Alejandro) worked for URSUMCO as crane
operator from 1976 up to June 15, 1997 with a salary of P209.30 per day.
On April 24, 1991, John Gokongwei, Jr., President of URSUMCO, issued a
Memorandum5 establishing the company policy on "Compulsory Retirement"
(Memorandum) of its employees. The memorandum provides:
All employees corporate-wide who attain 60 years of age on or before April 30,
1991 shall be considered retired on May 31, 1991.
Henceforth, any employee shall be considered retired 30 days after he attains
age 60.
Personnel department shall prepare the retirement notices to be co-signed and
served by respective Department managers to employees concerned. The
notices must be served as least 30 days before the designated retirement date.
Reports of retiring/retired employees shall be submitted by the Personnel
Department every end of the month to the President, copy furnished the Senior
Vice-Presidents.
Employees who are retiring on May 11, 1991 shall continue reporting to work up
to the middle of May. Thereafter, they may make use of their remaining vacation
leave credits. Similarly, employees considered retired 30 days after attainment
of age 60 shall continue reporting for work during the first hall of the 30-day
period, then make use of available VL credits.

Vacation and sick leave credits remaining unused by the employees designated
retirement date shall be converted into cash (VL at 100%, SL at 50% or per CBA)
and be included with the Final Accountability/Retirement Benefits. Accountability
clearance shall be per SOP.
Engaging the services of any retiree after his retirement must first be cleared
with the President or the Senior Vice-President concerned especially the terms
and condition of such engagement. Retirees can be re-engaged only under a
Retainer or Consultancy arrangement and only for a limited period of time.
Subsequently, on December 9, 1992, Republic Act (RA) No. 76416 was enacted
into law, and it took effect on January 7, 1993,7 amending Article 287 of the
Labor Code, to read:
Art. 287. Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement
benefits as he may have earned under existing laws and any collective
bargaining agreement and other agreements: Provided, however, That an
employee's retirement benefits under any collective bargaining and other
agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age
of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years
in the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.

Violation of this provision is hereby declared unlawful and subject to the penal
provisions provided under Article 288 of this Code.
On April 29, 1993, URSUMCO and the National Federation of Labor (NFL), a
legitimate labor organization and the recognized sole and exclusive bargaining
representative of all the monthly and daily paid employees of URSUMCO, of
which Alejandro was a member, entered into a Collective Bargaining Agreement
(CBA).8 Article XV of the said CBA particularly provided that the retirement
benefits of the members of the collective bargaining unit shall be in accordance
with law.9
Agripino and Alejandro (respondents), having reached the age of 60, were
allegedly forced to retire by URSUMCO. Agripino averred that URSUMCO illegally
dismissed him from employment on June 24, 1997 when he was forced to retire
upon reaching the age of sixty (60) years old. Upon the termination of his
employment, he accepted his separation pay and applied for retirement benefits
with the Social Security System (SSS). Earlier, on April 15, 1997, Alejandro
turned 60 years old. On May 28, 1997, he filed his application for retirement with
URSUMCO, attaching his birth and baptismal certificates. On July 23, 1997, he
accepted his retirement benefits and executed a quitclaim in favor of URSUMCO.
Thereafter, on August 6, 1997, Agripino filed a Complaint10 for illegal dismissal,
damages and attorneys fees before the Labor Arbiter (LA) of Dumaguete City.
He alleged that his compulsory retirement was in violation of the provisions of
Republic Act (R.A.) 7641 and, was in effect, a form of illegal dismissal.
On August 26, 1997, Alejandro likewise filed a Complaint11 for illegal dismissal,
underpayment of retirement benefits, damages and attorneys fees before the
LA, alleging that he was given only 15 days per year of service by way of
retirement benefits and further assails that his compulsory

Unless the parties provide for broader inclusions, the term one-half (1/2) month
salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay
and the cash equivalent of not more than five (5) days of service incentive
leaves.

retirement was discriminatory considering that there were other workers over
sixty (60) years of age who were allowed to continuously report for work.

xxxx

On September 30, 1998, the LA rendered a Decision,12 the dispositive portion of

which reads:

Retail, service and agricultural establishments or operations employing not more

than (10) employees or workers are exempted from the coverage of this
provision.

The LA's Ruling

WHEREFORE, premises considered, judgment is hereby rendered declaring the

respondent guilty of illegal dismissal and thus ordered to pay complainants:

Agripino Caballeda and Alejandro Cadalin their respective backwages from: June
23, 1997 and from June 15, 1997 up to the promulgation of this Decision. Also,
the respondent is hereby ordered to reinstate the complainants to their former or
equivalent positions without loss of seniority rights and privileges appurtenant
thereto.
The computation of complainants awards is shown below and forms as integral
part of this Decision.

illegal dismissal. Respondents are hereby ordered to pay complainants their

retirement benefits computed as follows:
1.
Alejandro Cadalin:
Jan. 13/88 to June 15/97 = 9 years, 5 months & 3 days
a) P209.58/day x 15 days =
P3,143.70
b) 1/12 of 13th Month Pay =
523.95
c) 5 days SILP =
1,047.90

1.
AGRIPINO CABALLEDA
June 23, 1997 Sept. 30, 1998
= 1 year and 3 months
= 15 months
= P124.00 x 26 days x 15 months . . . .P48,360.00
2.
ALEJANDRO CADALIN
June 15, 1997 Sept. 30, 1998
= 1 year and 3 months
= 15 months
= P209.00 x 26 x 15 months . . . . .
P 81,627.00
TOTAL . . . . . . . . . . .
P129,987.00
A ten percent (10%) attorneys fees is also adjudicated from the aggregate
award.
All other claims are Dismissed for lack of merit.

P4,715.55
P4,715.55/year of service x 9 years = P42,439.95
Less:Retirement proceeds received (p. 107, records) 28,293.30
Retirement differential of Alejandro Cadalin = P 14,146.65

SO ORDERED.

SO ORDERED.13

The NLRC's Ruling

Respondents filed their Motion for Reconsideration14 which the NLRC denied in
its Resolution15 dated May 22, 2000, on the ground that it was the respondents
who voluntarily applied for retirement upon reaching the age of 60 pursuant to
the CBA and established company policy.

Petitioners appealed to the NLRC. On January 27, 2000, the NLRC held that
Alejandro voluntarily retired because he freely submitted his application for
retirement together with his birth and baptismal certificates. Moreover, he had
his clearance processed and he received the amount of P33,476.77 as
retirement benefit. Nevertheless, the NLRC found that since Alejandro's
retirement benefit was based merely on fifteen (15) days salary for every year of
service, such benefit should be recomputed to conform to the provisions of Art.
287 of the Labor Code as amended. With respect to Agripino, the NLRC held that
URSUMCO's claim that Agripino was a mere casual employee was obviously
designed to avoid paying Agripino his retirement benefit. Thus, the NLRC ruled:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby
SET ASIDE and VACATED and a new one entered DISMISSING the complaint for

2.
Agripino Caballeda:
March 1989 to June 23/97 = 8 years, 3 months & 3 days
a) 124.00/day x 15 days =
1,860.00
b) 1/12 of 13th Month Pay =
310.00
c) 5 days SILP =
620.00
P2,790.00
P2,790.00/year of service x 8 years =
Retirement benefits of Agripino Caballeda P 22,320.00

Aggrieved, respondents went to the CA via a Petition for Certiorari. 16

The CA's Ruling
The CA declared that URSUMCO illegally dismissed the respondents since the
Memorandum unilaterally imposed upon the respondents compulsory retirement
at the age of 60. The CA found that there is no existing CBA or employment
contract between the parties that provides for early compulsory retirement.
Hence, the CA held:

It is beyond doubt that [petitioner] violated the rights of the [respondents]

[insofar] as the latter were not given the prerogative to choose for themselves to
retire early or wait for the compulsory retirement age which is sixty[-five] (65)
years. "If the intention to retire is not clearly established or if the retirement is
involuntary, it is to be treated as discharge" (San Miguel Corporation vs. National
Labor Relations Commission, 293 SCRA 13, 21[,] citing the case of De Leon vs.
NLRC, 100 SCRA 691 [1980]). Corollary, such involuntary retirement on the part
of [respondents] was in effect an illegal dismissal.17
However, the CA held that the NLRC properly computed the retirement benefits
of the respondents. Thus:
WHEREFORE, premises considered, the assailed Decision dated January 27, 2000
of the National Labor Relations Commission, Fourth Division, Cebu City is hereby
AMENDED as follows:
1. The respondents are hereby ordered to pay the petitioners their retirement
benefits computed as follows:
(1)
Alejandro Cadalin
Jan. 13/88 to June 15/97 = 9 years, 5 months & 3 days
a.) P209.58/days x 15 days =
3,143.70
b.) 1/12 of 13th Month Pay =
523.95
c.) 5 days SILP = 1,047.90
P4,715.55
P4,715.55/year of service x 9 years = P42,439.95
Less: Retirement proceeds received (p. 107, records) 28,293.30
Retirement differential of Alejandro Cadalin P14,146.65
(2)
Agripino Caballeda
March 1989 to June 23/97 = 8 years, 3 months & 3 days
a.) P124.00/day x 15 days =
1,860.00
b.) 1/12 of 13th Month Pay
310.00
c.) 5 days SILP
620.00
P2,790.00
P2,790/year of service x 8 years
Retirement benefits of Agripino Caballeda P22,320.00
2. The respondents are further ordered to pay the petitioners their
backwages computed from June 1997 up to 2002.
SO ORDERED.18

On October 7, 2002, petitioners filed a Motion for Reconsideration19 which the

CA denied in its Resolution20 dated January 8, 2003 for lack of merit.
Hence, this Petition raising the following issues:
I. WHETHER OR NOT THE RESPONDENTS AGRIPINO CABALLEDA AND ALEJANDRO
CADALIN VOLUNTARILY RETIRED FROM THE SERVICE.
II WHETHER OR NOT THE NEW RETIREMENT LAW CAN BE GIVEN RETROACTIVE
EFFECT UNDER PAIN OF VI[O]LATING THE NON-IMPAIRMENT CLAUSE ENSHRINED
IN THE BILL OF RIGHTS OF THE PHILIPPINE CONSTITUTION.
III. WHETHER OR NOT CABALLEDA IS A SEASONAL WORKER IN THE SUGAR
INDUSTRY, AND NOT A CASUAL WORKER AS ERRONEOUSLY TERMED BY THE
COURT OF APPEALS.
IV. WHETHER OR NOT THE FINDING OF THE COURT OF APPEALS THAT THE
RESPONDENTS ARE ENTITLED TO RETIREMENT DIFFERENTIAL IS CONTRARY TO
LAW AND JURISPRUDENCE.21
Petitioners submit that there is a need to review the records and evidence in this
case since the factual findings of the LA and the CA are in conflict with those of
the NLRC; that petitioners stand by the factual findings of the NLRC that
Alejandro voluntarily retired from the service and as proof, he executed a valid
quitclaim in favor of petitioners; that R.A. 7641 cannot be given retroactive effect
since there is an existing CBA that covers the retirement benefits of the
employees; that the Memorandum was no longer being implemented at the time
of respondents' retirement since R.A. 7641 was already in effect at the time,
thus, the CA erred when it ruled that respondents were forced to retire pursuant
to said Memorandum; that the CBA entered into by URSUMCO and the NFL of
which Alejandro is a member, is proof that URSUMCO stopped implementing the
Memorandum and that, assuming the said Memorandum was still implemented
despite the advent of R.A. 7641 and the CBA, retirement notices should have
been served to the respondents as directed by the Memorandum or, at most, a
collective action should have been taken against URSUMCO by NFL. With respect
to Agripino, petitioners claim that he is merely a seasonal or project worker and
not a casual worker since the sugar milling business is seasonal in nature; that
as such, Agripino was not forced to retire, rather the termination of his
employment was essentially based on the fact that the period stated in his
contract with URSUMCO had already lapsed; and that assuming Agripino is not a
project employee, his retirement pay should be reduced proportionately by the

number of months per year that his services were not engaged by URSUMCO
since the milling season covers only six months within a year.22
On the other hand, respondents aver that petitioners plea for this Court to
review the facts and pieces of evidence presented below is contrary to the rule
that the issues in cases brought before this Court via a petition for review under
Rule 45 are limited only to questions of law; that respondents were forced to
retire at the age of 60 by virtue of the Memorandum which the employees did
not ratify or freely agree upon, hence, respondents' dismissal from work was
without valid cause and due process, amounting to illegal dismissal; that the
Memorandum which unilaterally directed the compulsory retirement of
employees reaching the age of 60 is contrary to the security of tenure
guaranteed in the Constitution, Art. 287 of the Labor Code as amended by R.A.
7641, pertinent Labor and Civil Code provisions, public policy and good customs;
and that the respondents were merely compelled to sign the prepared retirement
forms and comply with the other retirement requirements because they were no
longer given any work assignment and they could only receive their retirement
benefits if they sever their employment relations with URSUMCO and comply
with the latter's directives. Respondents submit that they were given no option
but to follow URSUMCO's orders regarding their retirement, hence, the same was
not voluntary.23
Based on the foregoing, this Court is called upon to resolve three ultimate issues,
as follows:
1. Whether R.A.7641 can be given retroactive effect;
2. Whether Agripino is a seasonal or project employee; and
3. Whether respondents were illegally terminated on account of compulsory
retirement or the same voluntarily retired.
The Court's Ruling
The Petition lacks merit.

devised by, an agreement with, or a voluntary grant from, an employer can

respond, in part at least, to the financial well-being of workers during their
twilight years soon following their life of labor. There should be little doubt about
the fact that the law can apply to labor contracts still existing at the time the
statute has taken effect, and that its benefits can be reckoned not only from the
date of the law's enactment but retroactively to the time said employment
contracts have started.
This doctrine has been repeatedly upheld and clarified in several cases.25
Pursuant thereto, this Court imposed two (2) essential requisites in order that
R.A. 7641 may be given retroactive effect: (1) the claimant for retirement
benefits was still in the employ of the employer at the time the statute took
effect; and (2) the claimant had complied with the requirements for eligibility for
such retirement benefits under the statute.
It is evident from the records that when respondents were compulsorily retired
from the service, R.A. 7641 was already in full force and effect. The petitioners
failed to prove that the respondents did not comply with the requirements for
eligibility under the law for such retirement benefits. In sum, the aforementioned
requisites were adequately satisfied, thus, warranting the retroactive application
of R.A. 7641 in this case.
Second. It is a well-established rule that a petition for review on certiorari under
Rule 45 of the Rules of Court should raise only questions of law, subject to
certain exceptions.26 Whether or not Agripino was a seasonal/project employee
or a regular employee is a question of fact.27 As such, this Court is not at liberty
to review the said factual issue because our jurisdiction is generally limited to
reviewing errors of law that the CA may have committed. Time and again, we
have held that this Court is not a trier of facts, and it is not for us to re-examine
and re-evaluate the probative value of evidence presented before the LA, the
NLRC and the CA, which formed the basis of the assailed decision. Indeed, when
their findings are in absolute agreement, the same are accorded not only respect
but even finality as long as they are amply supported by substantial evidence.28

First. The issue of the retroactive effect of R.A. 7641 on prior existing
employment contracts has long been settled. In Enriquez Security Services, Inc.
v. Cabotaje,24 we held:

In this case, it is noteworthy that the LA, the NLRC and the CA are one in ruling
that Agripino was not a casual employee much less a seasonal or project
employee. In their findings, Agripino was considered a regular employee of
URSUMCO. Consequently, such uniform finding of the LA, the NLRC, and the CA
binds this Court. We find no cogent reason to depart from this ruling.

RA 7641 is undoubtedly a social legislation. The law has been enacted as a labor
protection measure and as a curative statute that absent a retirement plan

Third. Retirement is the result of a bilateral act of the parties, a voluntary

agreement between the employer and the employee whereby the latter, after

reaching a certain age, agrees to sever his or her employment with the
former.29 The age of retirement is primarily determined by the existing
agreement between the employer and the employees. However, in the absence
of such agreement, the retirement age shall be fixed by law. Under Art. 287 of
the Labor Code as amended, the legally mandated age for compulsory
retirement is 65 years, while the set minimum age for optional retirement is 60
years.301avvphi1
In this case, it may be stressed that the CBA does not per se specifically provide
for the compulsory retirement age nor does it provide for an optional retirement
plan. It merely provides that the retirement benefits accorded to an employee
shall be in accordance with law. Thus, we must apply Art. 287 of the Labor Code
which provides for two types of retirement: (a) compulsory and (b) optional. The
first takes place at age 65, while the second is primarily determined by the
collective bargaining agreement or other employment contract or employer's
retirement plan. In the absence of any provision on optional retirement in a
collective bargaining agreement, other employment contract, or employer's
retirement plan, an employee may optionally retire upon reaching the age of 60
years or more, but not beyond 65 years, provided he has served at least five
years in the establishment concerned. That prerogative is exclusively lodged in
the employee.31
Indubitably, the voluntariness of the respondents' retirement is the meat of the
instant controversy. Petitioners postulate that respondents voluntarily retired
particularly when Alejandro filed his application for retirement, submitted all the
documentary requirements, accepted the retirement benefits and executed a
quitclaim in favor of URSUMCO. Respondents claim otherwise, contending that
they were merely forced to comply as they were no longer given any work
assignment and considering
that the severance of their employment with URSUMCO is a condition precedent
for them to receive their retirement benefits.

The reason is laid down in Lopez Sugar Corporation v. Federation of Free

Workers:34
The reason is plain. Employer and employee, obviously, do not stand on the
same footing. The employer drove the employee to the wall. The latter must
have to get hold of money. Because, out of the job, he had to face harsh
necessities of life. He thus found himself in no position to resist money proferred.
His, then, is a case of adherence, not of choice. One thing sure, however, is that
petitioners did not relent their claim. They pressed it. They are deemed not to
have waived any of their rights. Renuntiatio non praesumitur.
In exceptional cases, the Court has accepted the validity of quitclaims executed
by employees if the employer is able to prove the following requisites: (1) the
employee executes a deed of quitclaim voluntarily; (2) there is no fraud or deceit
on the part of any of the parties; (3) the consideration of the quitclaim is credible
and reasonable; and (4) the contract is not contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right
recognized by law.35 In this case, petitioners failed to establish all the foregoing
requisites.
To be precise, only Alejandro was able to claim a partial amount of his retirement
benefit. Thus, it is clear from the decisions of the LA, NLRC and CA that
petitioners are still liable to pay Alejandro the differential on his retirement
benefits. On the other hand, Agripino was actually and totally deprived of his
retirement benefit.
Moreover, the petitioners, not the respondents, have the burden of proving that
the quitclaim was voluntarily entered into.36 In previous cases, we have
considered, among others, the educational attainment of the employees
concerned in upholding the validity of the quitclaims which
they have executed in favor of their employers.37 However, in Becton Dickinson
Phils., Inc. v. National Labor Relations Commission,38 we held:

We rule in favor of respondents.

Generally, the law looks with disfavor on quitclaims and releases by employees
who have been inveigled or pressured into signing them by unscrupulous
employers seeking to evade their legal responsibilities and frustrate just claims
of employees.32 They are frowned upon as contrary to public policy. A quitclaim
is ineffective in barring recovery of the full measure of a worker's rights, and the
acceptance of benefits therefrom does not amount to estoppel.33

There is no nexus between intelligence, or even the position which the employee
held in the company when it concerns the pressure which the employer may
exert upon the free will of the employee who is asked to sign a release and
quitclaim. A lowly employee or a sales manager, as in the present case, who is
confronted with the same dilemma of whether signing a release and quitclaim
and accept what the company offers them, or refusing to sign and walk out
without receiving anything, may do succumb to the same pressure, being very
well aware that it is going to take quite a while before he can recover whatever

he is entitled to, because it is only after a protracted legal battle starting from
the labor arbiter level, all the way to this Court, can he receive anything at all.
The Court understands that such a risk of not receiving anything whatsoever,
coupled with the probability of not immediately getting any gainful employment
or means of livelihood in the meantime, constitutes enough pressure upon
anyone who is asked to sign a release and quitclaim in exchange of some
amount of money which may be way below what he may be entitled to based on
company practice and policy or by law.
It is worth mentioning that the respondents are rank-and-file employees. They
are simple folks who rely on their work for the daily sustenance of their
respective families. Absent any convincing proof of voluntariness in the
submission of the documentary requirements and in the execution of the
quitclaim, we cannot simply assume that respondents were not subjected to the
very same pressure mentioned in Becton. Furthermore, the fact that respondents
filed a complaint for illegal dismissal against petitioners completely negates their
claim that respondents voluntarily retired. To note, respondents vigorously
pursued this case against petitioners, all the way up to this Court. Without doubt,
this is a manifestation that respondents had no intention of relinquishing their
employment, wholly incompatible to petitioners' assertion that respondents
voluntarily retired.39
We find no reversible error and, thus, sustain the ruling of the CA that
respondents did not voluntarily retire but were rather forced to retire,
tantamount to illegal dismissal.
WHEREFORE, the instant Petition is DENIED. The Decision dated September 11,
2002 and the Resolution dated January 8, 2003 of the Court of Appeals in CAG.R. SP No. 59552 are hereby AFFIRMED. Costs against the petitioners.

Before the Court are these consolidated identical petitions for review on
certiorari to reverse and set aside the same issuances of the Court of Appeals
(CA) in CA-G.R. SP No. 74424, to wit:
a) Decision1 dated May 16, 2003, affirming an earlier decision of the National
Labor Relations Commission [NLRC] which dismissed petitioners appeal thereto
from an adverse decision of the Labor Arbiter on account of petitioners failure to
comply with NLRC Resolution No. 01-02 amending NLRC Rules of Procedure and
for being devoid of merit; and
b) Resolution2 dated September 5, 2003, denying petitioners motion for
reconsideration.
Petitioner Becton Dickinson Philippines, Inc. (Becton, Phils., for brevity), is a
domestic corporation engaged in the business of importation, warehousing,
exportation, manufacture, assembly, sale at wholesale, and promotion of health
care products needed by hospitals, doctors, laboratories, and pharmaceutical
companies. The company is a wholly-owned subsidiary of Becton Dickinson
Worldwide, Inc., U.S.A. based in New Jersey, United States of America (U.S.A.)
and with operations in the Asia Pacific Region under the charge of Becton
Dickinson Asia Pacific (Becton, Asia, for short), which is based in Singapore. On
the other hand, petitioner Wilfredo Joaquin (Joaquin, hereafter), was formerly the
Country Manager of Becton, Phils. when herein private respondent Reinerio Z.
Esmaquel filed On October 24, 2001 before the Labor Arbiter of the National
Capital Region (South Sector) a single complaint for "Illegal dismissal and
underpayment of separation and retirement benefits with actual, moral and
exemplary damages and attorneys fees and payment of backwages from time of
termination until final judgment",3 therein naming both petitioners as
respondents.

SO ORDERED.
G.R. Nos. 159969 & 160116 November 15, 2005
BECTON DICKINSON PHILS., INC. and WILFREDO JOAQUIN, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER EDGARDO M.
MADRIAGA and REINERIO Z. ESMAQUEL, Respondents.
DECISION
GARCIA, J.:

In a Decision dated March 26, 2002,4 Labor Arbiter Edgardo M. Madriaga found
Becton, Phils. and Joaquin to have acted jointly and in concert in terminating
Esmaquels employment and declared the latters dismissal illegal, but held
Becton, Phils. solely liable for payment of backwages, separation pay and
retirement benefit differential, moral and exemplary damages and attorneys
fees.
This notwithstanding, Joaquin nevertheless joined Becton, Phils. in assailing the
Labor Arbiters decision by way of appeal5 to the National Labor Relations
Commission (NLRC).

Upon dismissal of their appeal by the NLRC per Decision dated August 8, 20026
and the denial of their motion for reconsideration per Resolution dated
September 30, 2002,7 Becton, Phils. and Joaquin jointly filed with the Court of
Appeals a petition for certiorari with application for temporary restraining order
and/or preliminary injunction8 under Rule 65 of the Rules of Court, which petition
was eventually dismissed by the appellate court per Decision dated May 16,
2003. Petitioners Becton, Phils. and Joaquin jointly filed a motion for
reconsideration.9 On September 12, 2003, petitioners, through counsel, received
a copy of the appellate courts Resolution dated September 5, 2003, denying
their motion for reconsideration.
Presently, however, Joaquin is no longer the Country Manager of Becton, Phils.
and he already resides in the U.S.A. once again. In view of the need to have his
verification on his petition and certification against non-forum shopping
notarized and authenticated with the Philippine Consulate in the U.S.A.,
petitioner Joaquin separately filed via registered mail on September 29, 2003 a
Motion for Extension of Time to File a Petition for Review dated September 27,
2003,10 praying for an extension of 15 days or until October 11, 2003, within
which to file his petition for review on certiorari, the original copy of which
motion the Court actually received on October 7, 2001 and his petition thereafter
docketed as G.R. No. 159969.
Also, on September 29, 2003 (the Monday after the 15-day reglementary period
which fell on a Saturday) petitioner Becton, Phils. separately filed via registered
mail its own petition for review which, upon actual receipt by this Court on
October 16, 2003, was docketed as G.R. No. 160116.
As earlier stated, both petitions assail and seek the annulment of the same
decision and resolution of the Court of Appeals (CA) in CA-G.R. SP No. 74424.
On January 26, 2004, the Court resolved to consolidate11 the two (2) petitions
upon petitioners motion12 therefor. Considering the arguments raised in the two
petitions, respondents comment, and petitioners reply, the Court resolved to
give due course thereto. And, with the filing of the parties respective
memoranda, the case is now ripe for final determination.
The facts as culled from the voluminous records before us, are as follows:
In 1989, Becton, Phils. had two (2) main divisions, namely: (a) the Medical
Division; and (b) the Diagnostics Division. Jesus Fargas headed the Medical
Division, while the position of head of the Diagnostics Division was vacant. Also
vacant was the position of Country Manager of Becton, Phils.

On September 12, 1989, private respondent Reinerio Z. Esmaquel started his

stint with Becton, Phils. as Director of Sales and Marketing of the Diagnostics
Division. He held this position until March 1998.
As Sales and Marketing Director of the companys Diagnostics Division,
respondent reported to Becton, Asias Vice President of Diagnostics Sector. He
was in charge of the overall supervision of twenty-three (23) employees working
under the sales and marketing organization. He was responsible for the
attainment of sales and profit targets as well as the long term growth and
development of the diagnostic business of Becton, Phils. He reviewed and
approved the companys country marketing plans and budget before submission
to Becton, Asia. He oversaw the implementation of marketing plans through the
sales and marketing managers. He represented the company in the meeting of
the Southeast Asia Steering Committee and Asia Pacific Supply Chain
Management Committee of the different affiliates of Becton Dickinson
Worldwide, Inc. in the Asia-Pacific Region.
For his commendable performance as Sales and Marketing Director, respondent
received numerous citations and awards, the most notable of which was the
Presidents Club Award which he received in 1993 with the distinction that he
was the only recipient of this award in Bectons Asia Pacific Region.
In March, 1998, Jesus Fargas was promoted to the position of Country Manager
for Becton, Phils. Respondent, on the other hand, was appointed Business
Director thereof, reporting, this time, to the Country Manager instead of the Vice
President of Diagnostics Sector of Becton, Asia. Respondent was responsible for
sales and marketing of Infectious Disease Diagnostic, Immunocytometry System,
and Instrument Service for the Asia Pacific Region. He held this position up to
December, 1999.
As Business Director, respondent exceeded the sales target given him by the
Becton, Phils. for fiscal year 1999 and for which the Company gave his team free
trip incentive to Europe. In 1999, respondent also received a Business Excellence
Award from Becton, Phils.
In January, 2000, Becton, Phils. reorganized under the concept of "Go To Market."
For purposes of selling its products, Becton, Phils. had organized two (2)
divisions, namely, the Sales Division and the Marketing Division, and designated
respondent as the Director of Sales. As such, respondent was responsible for the
whole sales force for all products of the company. The Marketing Division, on the
other hand, was placed under the Office of the Country Manager and the same

was in charge of the preparation of marketing plans, including advertising and

promotional programs and in booking orders/sales to distributors of Becton,
Phils.

=
Monthly Salary

Under the foregoing reorganization, the Sales Division was responsible for inmarket sales or the sale of all the products of the company to the distributors.
The distributors who buy the products at wholesale, in turn, are the ones selling
the products to the end users. The company is, however, generally responsible
for the sale promotions of the companys products to the end users.
Consistent with his work performance, respondent achieved the sales target
assigned to him, for which reason, Becton, Phils. awarded his team free trip to
the U.S.A.

X
13/12
In addition thereto, the nine (9) terminated employees were also paid retirement
benefits under the companys Retirement Plan, computed as follows:
RETIREMENT BENEFITS

Eventually, respondent was also appointed one of the members of the Becton
Dickinson (BD) Philippines Leadership Team, a group within Becton, Phils., which
was responsible for the formulation of policies and rules of the company.

In November, 2000, pursuant to its established policies and guidelines for

terminating employees, Becton, Phils. retrenched nine (9) employees, giving
them separation benefits in accordance with such guidelines. Its very own
Country Manager, Jesus Fargas, was among those whose services were
terminated. Accordingly, each of them received separation benefits computed as
follows:

Monthly Salary

1.5
X
No. of Years of Service

SEPARATION PAY
=
Adjusted Monthly Salary
x
3

Thereafter, each of the nine (9) terminated employees executed separate

Release and Quitclaim.
After Country Manager Jesus Fargas left the company, respondent was
considered for said position. Pending the appointment of a Country Manager,
Becton, Asia created a "Self-Managed Team" to run the day-to-day operations of
the company. The "Self-Managed Team" was composed of seven (7) members
consisting of four (4) Filipinos and three (3) foreigners. Respondent was named
one of the four (4) Filipino members of the said team.

X
No. of Years of Service

On May 16, 2001, Becton, Asia announced the appointment of petitioner

Wilfredo Joaquin, a former Filipino citizen who later acquired American
citizenship, as the new Country Manager of Becton, Phils.

where,
Adjusted Monthly Salary

Being a stranger to the companys operations, as well as to the customers of

Becton, Phils., Joaquin sought respondents assistance to address serious

problems of the company, and to orient him in the mechanics of the companys
sales and marketing efforts in the Philippines.
Then, on that fateful day of July 10, 2001 or barely two (2) months from Joaquins
assumption of his position as Country Manager, Becton, Phils. served upon
respondent a notice of termination13 of employment effective August 10, 2001,
on the ground that his position has been declared redundant. In full, the notice
reads:

Zenaida del Mundo (Sgd.)

Becton, Phils. offered to pay separation benefits to respondent computed as
follows:
SEPARATION
PAY

July 10, 2001

=
To : R. Z. Esmaquel
Monthly Salary
From : Z. L. del Mundo
x
Dear Rene
1.38
For the past weeks, the BD Philippines Leadership Team has been discussing the
roles of each function within the BD Philippines Organisation.

With the move toward building strong and empowered teams and organizations
due to business exigencies, the time has come to review the role and services
being provided by each team member.

No. of Years of Service

It is unfortunate that your position has been made redundant due to this
restructuring. We therefore regret to advise you of your termination on the
ground of redundancy effective August 10, 2001. Please return all company
properties on or before July 16, 2001.

RETIREMENT BENEFITS

plus retirement pay computed as follows:

=
Monthly Salary

We are determined to do our best to assist you by providing the necessary

support. Please refer to the attachment for the details of your payout. We also
wish to remind you that if you have any stock options, kindly exercise them
within 90 days of your termination date from the company.
We thank you for your service to the company. Do let us know if you have any
other concerns as we are most willing to assist in any way that we can.

x
.75
x
No. of Years of Service

Yours sincerely,
Becton Dickinson Philippines, Inc.
By:

Respondent objected to his termination because, as member of the BD

Philippines Leadership Team, he was not aware of any meeting or discussion of
the team about the roles of his position in the organization. The roles of his
position/function in the company have never been placed in the agenda for

meeting of the BD Philippines Leadership Team. Respondent asked Joaquin why

his position was declared redundant but Joaquin could not give him any plausible
reason except that the redundancy of his position was due to restructuring of the
company organization.

WHEREFORE, judgment is hereby rendered:

1. The dismissal of complainant is declared illegal;
2. Respondent company is ordered to pay complainant Esmaquel:

Respondent asked Joaquin if he had taken into consideration in declaring

redundant his position, the guidelines/rules for termination of employment as
directed by Becton, Asias President, namely: (a) to retain the best employee; (b)
consider the performance of the employee for the last three (3) years; and (c)
refrain from taking decision based on individual salary. Joaquin failed to answer
this question.
Respondent further protested when he was informed that the separation benefits
to be paid to him was way below those received by the nine (9) employees
previously terminated. He demanded an equal treatment from the company,
considering that he rendered exemplary service thereto and that he is being
terminated involuntarily.

a) Backwages of P197,525.00 per month reckoned from August 11, 2001 until
actually paid;
b) Separation pay differential of P4,148,024.76 with legal interest from date of
judgment until actually fully paid;
c) Retirement benefit differential of P1,765,873.50 with legal interest from date
of this judgment until actually paid;
d) Moral damages of P300,000.00.
e) Exemplary damages of P300,000.00.

This notwithstanding, he was terminated and required to sign a Release and

Quitclaim,14 otherwise, his separation pay and retirement benefits will be
withheld. Respondent found no other alternative but to give in, and reluctantly
signed the document.

f) Attorneys fees in an amount equivalent to 10% of the total of all the foregoing
amounts.
SO ORDERED.

On September 19, 2001, respondent, through counsel, sent Becton, Phils. a

letter15 protesting his termination from service and/or illegal dismissal and
demanded full payment of his separation pay and retirement benefits.
In its letter dated September 26, 2001,16 counsel of Becton, Phils. rejected
respondents claim, explaining that he had been given his full separation pay
and retirement benefits (net of outstanding retirement loan and 50% share in the
car loan) in addition to which, he was also given a laptop computer, a Nokia
8850 cellular phone, free of charge, and that he had already signed a Release
and Quitclaim.
Aggrieved, respondent filed on October 24, 2001 a complaint against Becton,
Phils. and Wilfredo Joaquin with the Arbitration Branch of the NLRC for illegal
dismissal, underpayment of separation pay and retirement benefits, actual,
moral, and exemplary damages, and attorneys fees.
On March 26, 2002, Labor Arbiter Edgardo M. Madriaga rendered a decision,
dispositively reading as follows:

Therefrom, petitioners Becton, Phils. and Joaquin jointly appealed to the NLRC
which, in a decision dated August 8, 2002,17 affirmed that of the Labor Arbiter,
to wit:
WHEREFORE, for failure to comply with the NLRC Resolution 01-02 amending the
NLRC Rules of Procedure, and for being devoid of merit, the appeal is hereby
dismissed.
SO ORDERED.
With their motion for reconsideration having been denied by the NLRC in its
Resolution of September 30, 2002,18 petitioners Becton, Phils. and Joaquin
jointly went to the Court of Appeals (CA) via a petition for certiorari under Rule
65 of the Rules of Court, whereat their recourse was docketed as CA-G.R. SP No.
74434.

As stated at the threshold hereof, the Court of Appeals, in a Decision dated May
16, 2003, dismissed petitioners recourse thereto and affirmed the assailed NLRC
decision and resolution, thus:
WHEREFORE, in the light of the foregoing, the petition for certiorari is DISMISSED
and the assailed Decision and Resolution of the public respondent NLRC are
AFFIRMED.
The Urgent Motion (for Issuance of Preliminary Injunction) being merely adjunct
to the main suit, the same must pro tanto be DENIED.
SO ORDERED.
Their motion for reconsideration having been denied by the appellate court in its
Resolution dated September 5, 2003, Becton, Phils. and Joaquin, this time
separately, filed with this Court their respective petitions for review on certiorari
under Rule 45 of the Rules of Court. Eventually, the two petitions were
consolidated per this Courts minute Resolution19 of 26 January 2004.
As we see it, the consolidated petitions raise two main issues: procedural and
substantive.
The procedural issue: whether or not the Court of Appeals erred in not finding
grave abuse of discretion on the part of the NLRC when the latter dismissed
petitioners appeal from the Labor Arbiters decision for petitioners failure to
comply with NLRC Resolution 01-02 (Series of 2002) due to lack of a certification
of non-forum shopping.
The substantive issue: whether or not the Court of Appeals erred in not finding
grave abuse of discretion on the part of the NLRC when the latter dismissed the
same appeal on the additional ground of "being devoid of merit".
We DENY.
The Court shall first address the procedural issue.
NLRC Resolution No. 01-02 (Series of 2002), amending the NLRC Rules of
Procedure, provides:
SECTION 4. REQUISITIES FOR PERFECTION OF APPEAL. a) The Appeal shall be
filed within the reglementary period as provided in Section 1 of this Rule; shall be
verified by appellant himself in accordance with Section 4, Rule 7 of the Rules of

Court, with proof of payment of the required appeal fee and the posting of a cash
or surety bond as provided in Section 6 of this Rule; shall be accompanied by
memorandum of appeal in three (3) legibly typewritten copies which shall state
the grounds relied upon and the arguments in support thereof, the relief prayed
for, and a statement of the date when the appellant received the appealed
decision, resolution or order and a certification of non-forum shopping with proof
of service on the other party of such appeal. A mere notice of appeal without
complying with the other requisites aforestated shall not stop the running of the
period for perfecting an appeal. (Emphasis supplied).
The NLRC dismissed petitioners appeal from the Labor Arbiters decision for
violation of the foregoing rule due to lack of a certification of non-forum
shopping. The Court of Appeals rejected petitioners plea for the liberal
application of the rules in their case, where admittedly, petitioners filed their
certification of non-forum shopping twenty-one (21) days late. Partly says the
appellate court in its assailed decision of May 16, 2003:
The certificate of non-forum shopping as provided [in the aforequoted provision
of NLRC Resolution No. 01-02] is mandatory and should accompany pleadings
filed before the NLRC. Its language is very clear and needs no further
interpretation, to wit: xxx.
xxx xxx xxx
The perfection of an appeal in the manner and within the period prescribed by
law is not only mandatory but jurisdictional upon the court a quo, and the failure
to perfect that appeal renders its judgment final and executory. A fundamental
precept is that the reglementary periods under the Rules are to be strictly
observed for being considered indispensable interdictions against needless
delays and an orderly discharge of judicial business. The strict compliance with
such periods has more than once been held to be imperative, particularly and
most significantly in respect to perfection of appeals. The finality of a judgment
becomes a fact upon the lapse of the reglementary period to appeal if no appeal
is perfected, and the court loses all jurisdiction over the case, and it becomes
the ministerial duty of the court concerned to order execution of the judgment.
After the judgment has become final and executory, vested rights are acquired
by the winning party. Just as the losing party has the right to file an appeal within
the prescribed period, so also the winning party has the correlative right to enjoy
the finality of the resolution of the case.
The failure of the petitioners to comply with the aforementioned NLRC Resolution
is fatal to their cause for their non-compliance with the requirement relative to

the filing of certificate of non-forum shopping did not toll the running of the
period for perfecting their appeal. Perfection of appeal on time is mandatory and
jurisdictional. Failure to do so makes the March 26, 2002 Decision of the Labor
Arbiter final and executory. (Words in bracket added).
In this recourse, petitioners put emphasis on the supposed basis to justify their
assertion of liberal application of the rules, namely, to avoid miscarriage of
substantial justice, allegedly on account of NLRCs total disregard of the
evidence material to or decisive of the controversy. On this score, petitioners
presently fault the Court of Appeals for not finding grave abuse of discretion on
the part of the Commission.
It is relevant to note that petitioners are aware of the fact that compliance with
the requisites for perfecting an appeal is the general rule, and non-compliance
therewith is the exception. Petitioners, however, insist that their case falls within
the exception.
In resolving this issue, it may well be stressed that the right to appeal is not a
natural right nor is it part of due process, for it is merely a statutory privilege
that must be exercised in the manner and according to procedures laid down by
law.20 Petitioners cannot insist, as there is no duty on the part of the court or the
NLRC for that matter, to take cognizance of an appeal which has not been
perfected in accordance with the rules of procedure laid down therefor. It is only
in the exercise of courts sound judicial discretion and in the interest of
substantial justice, that this Court may suspend the rules should it find cogent
reasons for doing so.
Crucial to the resolution of the procedural issue of whether or not the Court
should now suspend the rules is the resolution of the next issue which pertains
to the substantive aspect of the case. Should there be grave abuse of discretion
on the part of the appellate court in resolving the factual and legal issues raised
before it as regards the alleged illegal dismissal of herein respondent, then the
Court shall have a cogent reason to suspend the rules.
This brings us to the substantive aspect of the case.
The Court will first focus on petitioners basic submission that respondent was
validly and legally terminated as Sales Manager on the ground of redundancy,
and finally on their contention that respondents claim is barred by the Release
and Quitclaim signed by him.

On the matter of redundancy, the Labor Arbiter ruled, and both the NLRC and the
Court of Appeals unanimously agreed therewith, that:
The record supports the finding that the Company and Joaquin disregarded
totally the Companys guidelines in declaring [respondents] position redundant.
The principal reason why [respondents] position was declared redundant is the
fact that he was the highest paid employee with a monthly salary of
P197,525.00. The Companys main purpose in terminating [respondent] was to
cut down expenses and it did so by dismissing him in one fell swoop,
camouflaging its malice by using the ground of redundancy. Thus was violated
the Company rule that the decision to terminate must not be based on salary.
The Company certainly could not find fault with [respondents] performance. In
1999 his work performance was "outstanding". In 2000 his work performance
was "very good". For the FY 2000, [respondent] achieved 104% sales
performance. Hence, there were violations of the Company rules to retain the
best employee; to consider the performance of the employee for the last three
years; protect the best people; and remove those who least contribute.
There is no clear proof that [respondents] services are in excess of the
Companys reasonable demands and requirements; and that there is no other
alternative available to the Company except to dismiss [respondent]. The
superfluity of [respondents] position has not been established. There has been
no previous overhiring of employees. On the contrary, the Company had already
terminated nine (9) employees. There is no proof of decreased volume of
business. Indeed, [respondent] had overshot the sales target he achieved
104% sales performance. Neither is there proof that the Company had dropped a
product line or service.
The Company does have standards or criteria in choosing who to dismiss, but it
violated them. On the other hand, it had hewed closely to these standards when
it terminated the nine (9) other employees.
The records supports the finding that the Company treated [respondent] in a
way different from its treatment of aforesaid nine (9) employees not only in the
matter of termination but also in the matter of separation pay and retirement
benefits.21 (Emphasis and words in bracket ours)
As may be noted from the foregoing excerpt from the Labor Arbiters decision,
the substantive issue of validity of respondents termination of employment on
the alleged ground of redundancy is basically factual in nature. Theres no
question that Rule 45 of the Rules of Court provides that only questions of law

may be raised in a petition for review on certiorari, the reason being that this
Court is not a trier of facts. It is not for this Court to reexamine and reevaluate
the evidence on record.
As held by this Court in the very recent case of Dusit Hotel Nikko vs. National
Union of Workers in Hotel:22
the factual findings of the NLRC, as affirmed by the CA, are accorded high
respect and finality unless the factual findings and conclusions of the Labor
Arbiter clash with those of the NLRC and the CA, in which case, the Court will
have to review the records and the arguments of the parties to resolve the
factual issues and render substantial justice to the parties.
In Alfaro vs. Court of Appeals,23 the Court, per Justice Artemio V. Panganiban,
applied the same ruling, and further explained the reasons therefor, to wit:
The Supreme Court is not a trier of facts, and this doctrine applies with greater
force in labor cases. Factual questions are for the labor tribunals to resolve. In
this case, the factual issues have already been determined by the labor arbiter
and the National Labor Relations Commission. Their findings were affirmed by
the CA. Judicial review by this Court does not extend to a reevaluation of the
sufficiency of the evidence upon which the proper labor tribunal has based its
determination.
Indeed, factual findings of labor officials who are deemed to have acquired
expertise in matters within their respective jurisdictions are generally accorded
not only respect, but even finality, and are binding on the Supreme Court. Verily,
their conclusions are accorded great weight upon appeal, especially when
supported by substantial evidence. Consequently, the Supreme Court is not
duty-bound to delve into the accuracy of their factual findings, in the absence of
a clear showing that the same were arbitrary and bereft of any rational basis.
It bears stressing herein that the factual findings of the Labor Arbiter were, upon
review, affirmed in toto by the NLRC, and thereafter, by the Court of Appeals. A
heavy burden, as it were, rests upon petitioners to convince the Court that it
should take exception from such a settled rule.
Considering petitioners vehement plea for the suspension of the rules pertaining
to the perfection of appeal despite the contrary practice thereto, the Court
painstakingly reviewed the records of the case together with the parties
pleadings. Unfortunately, even after thoroughly going over petitioners
pleadings, the Court finds no cogent reason to take exception from this

governing rule. Since the factual findings of the Labor Arbiter are supported by
substantial evidence, the Court upholds the factual conclusion that redundancy
was not duly established by evidence. Besides, this conclusion conforms with
jurisprudence on the matter.
Redundancy is one of the authorized causes of dismissal, which, in the leading
case of Wiltshire File Co., Inc. vs. NLRC,24 this Court had occasion to explain the
nature of, in the following manner:
x x x redundancy in an employers personnel force necessarily or even ordinarily
refers to duplication of work. That no other person was holding the same position
that private respondent held prior to the termination of his services, does not
show that his position had not become redundant. Indeed, in any well organized
business enterprise, it would be surprising to find duplication of work and two (2)
or more people doing the work of one person. We believe that redundancy, for
purposes of the Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number of factors,
such as overhiring of workers, decrease in volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken
by the enterprise. (Emphasis supplied.)
Respondent duly questioned the validity of using the ground of redundancy as
basis for his forced separation from the company. On the other hand, however,
aside from their plain allegation that respondents "position has been made
redundant due to restructuring"25, and that "the Company was constrained to
terminate the services of complainant as a consequence of organizational
changes which were necessitated by a decrease in the volume of sales of the
Company,"26 petitioners utterly failed to establish by substantial evidence that
indeed, respondents position in the company became redundant due to
concrete and real factors recognized by law and relevant jurisprudence.
Evidently cognizant of such neglect, petitioners attempted to correct the
situation by now attaching a photocopy of the Report of Independent Auditors
Punongbayan & Araullo dated October 10, 2001 as Annex "C"27 to their petition
before this Court to substantiate their allegations before the Labor Arbiter.
Unfortunately, this Court is not a trier of facts and evidence not presented during
the trial cannot be considered at all.
Besides, although the Court is mindful, and thus held in Dole Philippines, Inc. vs.
NLRC,28 that the characterization of an employees services as no longer
necessary or sustainable, and therefore, properly terminable, is an exercise of

business judgment on the part of the employer, and that the wisdom or
soundness of such characterization or decision is not subject to discretionary
review, provided of course that violation of law or arbitrary or malicious action is
not shown, the Court in the above-cited case of Dusit Hotel Nikko nevertheless
emphasized that:
like other rights, there are limits thereto. The managerial prerogative to
transfer personnel must be exercised without grave abuse of discretion, bearing
in mind the basic elements of justice and fair play. Having the right should not be
confused with the manner in which that right is exercised. Thus, it cannot be
used as a subterfuge by the employer to rid himself of an undesirable worker.
(Emphasis ours.)
Along the same vein is this Courts ruling in Metrolab Industries, Inc. vs. RoldanConfesor,29 to wit:
the exercise of management prerogatives was never considered boundless.
Thus, in Cruz vs. Medina (177 SCRA 565 [1989]), it was held that managements
prerogative must be without abuse of discretion

Indeed, it smacks of incredulity to believe that a topnotch employee who has

contributed much to the growth of the company and for which the latter even
reciprocated him with honors and awards, suddenly in a span of less than two (2)
months from the time a new company Country Manager assumed post, would
wake up one morning with a notice that his position is already superfluous and
therefore he is no longer needed.
Petitioners also contend that respondent already signed a Release and Quitclaim
which forthwith bars any further claims against the company. The Labor Arbiter,
however, ruled that:
[Respondent] is not on equal footing with the Company; he was in a precarious
financial position; he needed the money, to be given to him by the Company; so
he signed, otherwise his family would starve. [Respondents] signing of the
Release and Quitclaim as a condition for payment to him of the separation pay
and "Goodwill" does not bar him from seeking the full measure of his right or to
demand benefits to which he is legally entitled or to question the legality of his
dismissal. (Words in bracket ours).
The rule on the matter is as follows:

All these point to the conclusion that the exercise of managerial prerogatives is
not unlimited. It is circumscribed by limitations found in law, a collective
bargaining agreement, or the general principles of fair play and justice
(University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]) (Emphasis ours).
We agree with respondent that when Becton, Asia laid down guidelines for
terminating employees and petitioner Becton, Phils. applied these in previously
laying off nine (9) of its employees, Becton, Phils. committed grave abuse of
discretion in not applying the same criteria in respondents case. There is reason
and basis for the State, through the NLRC in this case, to intervene and
reexamine the validity of petitioner companys exercise of its managerial
prerogatives in declaring a certain position redundant insofar as in so doing, the
rights of respondent to said position is jeopardized.
Moreover, even after a thorough review of the records of this case, the Court
finds no valid and acceptable explanation for the unequal treatment by
petitioner Becton, Phils. in the manner of termination of the nine (9) employees
and that of respondent, and therefore agrees with the Labor Arbiter that such
discriminatory act is abhorrent to the basic principles of social justice and
protection of labor, akin to a violation of the equal protection clause enshrined in
the Constitution.

The validity of quitclaims executed by laborers has long been recognized in this
jurisdiction. In Periquet vs. National Labor Relations Commission (186 SCRA 724
[1990]), this Court ruled that not all waivers and quitclaims are invalid as against
public policy. If the agreement was voluntarily entered into and represents a
reasonable settlement of the claims of the employee, it is binding on the parties
and may not later be disowned simply because of a change of mind. Such
legitimate waivers resulting from voluntary settlements of laborers claims
should be treated and upheld as the law between the parties (Labor Congress of
the Philippines vs. NLRC, 292 SCRA 469, 477 [1998]). However, when as in this
case, the voluntariness of the execution of the quitclaim or release is put into
issue, then the claim of employee may still be given due course (Talla vs.
National Labor Relations Commission, 175 SCRA 479, 480-481 [1989]). The law
looks with disfavor upon quitclaims and releases by employees pressured into
signing the same by unscrupulous employers minded to evade legal
responsibilities (Labor Congress, supra.). (Emphasis ours.)30
The factual and legal bases of the Labor Arbiters ruling on the supposed Release
and Quitclaim are well established. We cannot subscribe to petitioners
reasoning that the foregoing ruling on the validity and binding effect of releases
and quitclaims apply only to rank-and-file workers, and find no application to
respondent in this case, who happens to be a highly intelligent man who once

held the top sales position at petitioner company. There is no nexus between
intelligence, or even the position which the employee held in the company when
it concerns the pressure which the employer may exert upon the free will of the
employee who is asked to sign a release and quitclaim. A lowly employee or a
sales manager, as in the present case, who is confronted with the same dilemma
of whether signing a release and quitclaim and accept what the company offers
them, or refusing to sign and walk out without receiving anything, may do
succumb to the same pressure, being very well aware that it is going to take
quite a while before he can recover whatever he is entitled to, because it is only
after a protracted legal battle starting from the labor arbiter level, all the way to
this Court, can he receive anything at all. The Court understands that such a risk
of not receiving anything whatsoever, coupled with the probability of not
immediately getting any gainful employment or means of livelihood in the
meantime, constitutes enough pressure upon anyone who is asked to sign a
release and quitclaim in exchange of some amount of money which may be way
below what he may be entitled to based on company practice and policy or by
law.

WHEREFORE, the instant petitions are DENIED and the assailed Decision and
Resolution of the Court of Appeals AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 178083

July 22, 2008

FLIGHT
ATTENDANTS
AND
STEWARDS
ASSOCIATION
OF
THE
PHILIPPINES (FASAP), Petitioner,
vs.
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and COURT OF APPEALS,
Respondents.
DECISION
YNARES-SANTIAGO, J.:

It may likewise be noted that what respondent received when he signed the
Release and Quitclaim was less than half of what he is entitled to under the
circumstances, as correctly computed by the Labor Arbiter in his March 26, 2002
decision. This is another reason why the Court cannot rely upon such Release
and Quitclaim to validly bar respondent from thereafter claiming additional
benefits from petitioner Becton, Phils.
Finding no merit in the substantive aspect of the present petitions, the Court has
no legal basis to rule in favor of liberal application of procedural rules in this case
by suspending the same and allowing due course to petitioners appeal before
the NLRC despite violation of NLRC Resolution No. 01-02 (Series of 2002) for lack
of a certification of non-forum shopping.
All told, the Court finds no reversible error with the assailed decision and
resolution of the Court of Appeals. As it is, no grave abuse of discretion may be
imputed by said court upon the NLRC, which merely abides by its own rules of
procedure.
Worse, even if the aforesaid procedural and technical infirmities were to be
ignored, the Court finds no cogent reason to depart from, much more nullify and
set aside, the challenged decision and resolution of the Court of Appeals
because definitely, no grave abuse of discretion could be imputed to the NLRC in
affirming the decision of the Labor Arbiter on its merits.

This petition for review on certiorari assails the Decision1 of the Court of Appeals
(CA) dated August 23, 2006 in CA-G.R. SP No. 87956 which affirmed the National
Labor Relations Commissions (NLRC) decision setting aside the Labor Arbiters
findings of illegal retrenchment and ordering the reinstatement of the retrenched
Philippine Airlines, Inc. (PAL) employee-members of petitioner Flight Attendants
and Stewards Association of the Philippines (FASAP), with payment of
backwages, moral and exemplary damages, and attorneys fees. Also assailed is
the May 29, 2007 Resolution2 denying the motion for reconsideration.
Petitioner FASAP is the duly certified collective bargaining representative of PAL
flight attendants and stewards, or collectively known as PAL cabin crew
personnel. Respondent PAL is a domestic corporation organized and existing
under the laws of the Republic of the Philippines, operating as a common carrier
transporting passengers and cargo through aircraft.
On June 15, 1998, PAL retrenched 5,000 of its employees, including more than
1,400 of its cabin crew personnel, to take effect on July 15, 1998. PAL adopted
the retrenchment scheme allegedly to cut costs and mitigate huge financial
losses as a result of a downturn in the airline industry brought about by the
Asian financial crisis. During said period, PAL claims to have incurred P90 billion
in liabilities, while its assets stood at P85 billion.3

In implementing the retrenchment scheme, PAL adopted its so-called "Plan 14"
whereby PALs fleet of aircraft would be reduced from 54 to 14, thus requiring
the services of only 654 cabin crew personnel.4 PAL admits that the
retrenchment is wholly premised upon such reduction in fleet,5 and to "the strike
staged by PAL pilots since this action also translated into a reduction of flights."6
PAL claims that the scheme resulted in "savings x x x amounting to
approximately P24 million per month savings that would greatly alleviate PALs
financial crisis."7
Prior to the full implementation of the assailed retrenchment program, FASAP
and PAL conducted a series of consultations and meetings and explored all
possibilities of cushioning the impact of the impending reduction in cabin crew
personnel. However, the parties failed to agree on how the scheme would be
implemented. Thus PAL unilaterally resolved to utilize the criteria set forth in
Section 112 of the PAL-FASAP Collective Bargaining Agreement8 (CBA) in
retrenching cabin crew personnel: that is, that retrenchment shall be based on
the individual employees efficiency rating and seniority.
PAL determined the cabin crew personnel efficiency ratings through an
evaluation of the individual cabin crew members overall performance for the
year 1997 alone.9 Their respective performance during previous years, i.e., the
whole duration of service with PAL of each cabin crew personnel, was not
considered. The factors taken into account on whether the cabin crew member
would be retrenched, demoted or retained were: 1) the existence of excess sick
leaves; 2) the crew members being physically overweight; 3) seniority; and 4)
previous suspensions or warnings imposed.10
While consultations between FASAP and PAL were ongoing, the latter began
implementing its retrenchment program by initially terminating the services of
140 probationary cabin attendants only to rehire them in April 1998. Moreover,
their employment was made permanent and regular.11
On July 15, 1998, however, PAL carried out the retrenchment of its more than
1,400 cabin crew personnel.
Meanwhile, in June 1998, PAL was placed under corporate rehabilitation and a
rehabilitation plan was approved per Securities and Exchange Commission (SEC)
Order dated June 23, 1998 in SEC Case No. 06-98-6004.12
On September 4, 1998, PAL, through its Chairman and Chief Executive Officer
(CEO) Lucio Tan, made an offer to transfer shares of stock to its employees and
three seats in its Board of Directors, on the condition that all the existing

Collective Bargaining Agreements (CBAs) with its employees would be

suspended for 10 years, but it was rejected by the employees. On September 17,
1998, PAL informed its employees that it was shutting down its operations
effective September 23, 1998,13 despite the previous approval on June 23, 1998
of its rehabilitation plan.
On September 23, 1998, PAL ceased its operations and sent notices of
termination to its employees. Two days later, PAL employees, through the
Philippine Airlines Employees Association (PALEA) board, sought the intervention
of then President Joseph E. Estrada. PALEA offered a 10-year moratorium on
strikes and similar actions and a waiver of some of the economic benefits in the
existing CBA. Lucio Tan, however, rejected this counter-offer.14
On September 27, 1998, the PALEA board again wrote the President proposing
the following terms and conditions, subject to ratification by the general
membership:
1. Each PAL employee shall be granted 60,000 shares of stock with a par value of
P5.00, from Mr. Lucio Tans shareholdings, with three (3) seats in the PAL Board
and an additional seat from government shares as indicated by His Excellency;
2. Likewise, PALEA shall, as far as practicable, be granted adequate
representation in committees or bodies which deal with matters affecting terms
and conditions of employment;
3. To enhance and strengthen labor-management relations, the existing LaborManagement Coordinating Council shall be reorganized and revitalized, with
adequate representation from both PAL management and PALEA;
4. To assure investors and creditors of industrial peace, PALEA agrees, subject to
the ratification by the general membership, (to) the suspension of the PAL-PALEA
CBA for a period of ten (10) years, provided the following safeguards are in
place:
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of
the regular rank-and-file ground employees of the Company;
b. The union shop/maintenance of membership provision under the PAL-PALEA
CBA shall be respected.
c. No salary deduction, with full medical benefits.

5. PAL shall grant the benefits under the 26 July 1998 Memorandum of
Agreement forged by and between PAL and PALEA, to those employees who may
opt to retire or be separated from the company.
6. PALEA members who have been retrenched but have not received separation
benefits shall be granted priority in the hiring/rehiring of employees.
7. In the absence of applicable Company rule or regulation, the provisions of the
Labor Code shall apply.15
In a referendum conducted on October 2, 1998, PAL employees ratified the
above proposal. On October 7, 1998, PAL resumed domestic operations and,
soon after, international flights as well.16
Meanwhile, in November 1998, or five months after the June 15, 1998 mass
dismissal of its cabin crew personnel, PAL began recalling to service those it had
previously retrenched. Thus, in November 199817 and up to March 1999,18
several of those retrenched were called back to service. To date, PAL claims to
have recalled 820 of the retrenched cabin crew personnel.19 FASAP, however,
claims that only 80 were recalled as of January 2001.20
In December 1998, PAL submitted a "stand-alone" rehabilitation plan to the SEC
by which it undertook a recovery on its own while keeping its options open for
the entry of a strategic partner in the future. Accordingly, it submitted an
amended rehabilitation plan to the SEC with a proposed revised business and
financial restructuring plan, which required the infusion of US$200 million in new
equity into the airline.
On May 17, 1999, the SEC approved the proposed "Amended and Restated
Rehabilitation Plan" of PAL and appointed a permanent rehabilitation receiver for
the latter.21
On June 7, 1999, the SEC issued an Order confirming its approval of the
"Amended and Restated Rehabilitation Plan" of PAL. In said order, the cash
infusion of US$200 million made by Lucio Tan on June 4, 1999 was
acknowledged.22
On October 4, 2007, PAL officially exited receivership; thus, our ruling in
Philippine Air Lines v. Kurangking23 no longer applies.
On June 22, 1998, FASAP filed a Complaint24 against PAL and Patria T. Chiong25
(Chiong) for unfair labor practice, illegal retrenchment with claims for

reinstatement and payment of salaries, allowances and backwages of affected

FASAP members, actual, moral and exemplary damages with a prayer to enjoin
the retrenchment program then being implemented. Instead of a position paper,
respondents filed a Motion to Dismiss and/or Consolidation with NCMB Case No.
NS 12-514-97 pending with the Office of the Secretary of the Department of
Labor and Employment and/or Suspension and Referral of Claims to the interim
rehabilitation proceedings (motion to dismiss).26
On July 6, 1998, FASAP filed its Comment to respondents motion to dismiss. On
July 23, 1998, the Labor Arbiter issued an Order27 denying respondents motion
to dismiss; granting a writ of preliminary injunction against PALs implementation
of its retrenchment program with respect to FASAP members; setting aside the
respective notices of retrenchment addressed to the cabin crew; directing
respondents to restore the said retrenched cabin crew to their positions and
PALs payroll until final determination of the case; and directing respondents to
file their position paper.
Respondents appealed to the NLRC which reversed the decision of the Labor
Arbiter. The NLRC directed the lifting of the writ of injunction and to vacate the
directive setting aside the notices of retrenchment and reinstating the dismissed
cabin crew to their respective positions and in the PAL payroll.28
FASAP filed its Position Paper29 on September 28, 1999. On November 8, 1999,
respondents filed their Position Paper30 with counterclaims against FASAP, to
which FASAP filed its Reply.31 Thereafter, the parties were directed to file their
respective Memoranda.32
Meanwhile, instead of being dismissed in accordance with the Kurangking case,
the FASAP case (NLRC-NCR Case No. 06-05100-98) was consolidated with the
following cases:
1. Ramon and Marian Joy Camahort v. PAL, et al. (NLRC-NCR Case No. 00-0705854-98);
2. Erlinda Arevalo and Chonas Santos v. PAL, et al. (NLRC-NCR Case No. 00-0709793-98); and
3. Victor Lanza v. PAL, et al. (NLRC-NCR Case No.00-04-04254-99).
On July 21, 2000, Labor Arbiter Jovencio Ll. Mayor rendered a Decision,33 the
dispositive portion of which reads, as follows:

WHEREFORE, premises considered, this Office renders judgment declaring that

Philippine Airlines, Inc., illegally retrenched One Thousand Four Hundred (1,400)
cabin attendants including flight pursers for effecting the retrenchment program
in a despotic and whimsical manner. Philippine Airlines, Inc. is likewise hereby
ordered to:
1. Reinstate the cabin attendants retrenched and/or demoted to their previous
positions;
2. Pay the concerned cabin attendants their full backwages from the time they
were illegally dismissed/retrenched up to their actual reinstatements;
3. Pay moral and exemplary damages in the amount of Five Hundred Thousand
Pesos (P500,000.00); and
4. Ten (10%) per cent of the total monetary award as and by way of attorneys
fees.
SO ORDERED.34
Respondents appealed to the NLRC. Meanwhile, FASAP moved for the
implementation of the reinstatement aspect of the Labor Arbiters decision.
Despite respondents opposition, the Labor Arbiter issued a writ of execution
with respect to the reinstatement directive in his decision. Respondents moved
to quash the writ, but the Labor Arbiter denied the same. Again, respondents
took issue with the NLRC.
Meanwhile, on May 31, 2004, the NLRC issued its Decision35 in the appeal with
respect to the Labor Arbiters July 21, 2000 decision. The dispositive portion
thereof reads:
WHEREFORE, premises considered, the Decision dated July 21, 2000 is hereby
SET ASIDE and a new one entered DISMISSING the consolidated cases for lack of
merit.
With respect to complainant Ms. Begonia Blanco, her demotion is hereby
declared illegal and respondent PAL is ordered to pay her salary differential
covering the period from the time she was downgraded in July 1998 up to the
time she resigned in October 1999.

Respondent PAL is likewise ordered to pay the separation benefits to those

complainants who have not received their separation pay and to pay the balance
to those who have received partial separation pay.
The Order of the Labor Arbiter dated April 6, 2000 is also SET ASIDE and the Writ
of Execution dated November 13, 2000 is hereby quashed.
Annexes "A" and "B" are considered part of this Decision.
SO ORDERED.36
FASAP moved for reconsideration but it was denied; hence it filed an appeal to
the Court of Appeals which was denied in the herein assailed Decision.
FASAPs motion for reconsideration was likewise denied; hence, the instant
petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY
CONTRARY TO LAW AND/OR APPLICABLE JURISPRUDENCE WHEN IT DENIED
FASAPS PETITION FOR CERTIORARI UNDER RULE 65 AND EFFECTIVELY
VALIDATED THE RETRENCHMENT EXERCISED BY RESPONDENT PAL WHICH WAS
INITIALLY DECLARED AS ILLEGAL BY THE LABOR ARBITER A QUO SINCE:
FIRST, the record shows that PAL failed or neglected to adopt less drastic costcutting measures before resorting to retrenchment. No less than the Supreme
Court held that resort to less drastic cost-cutting measures is an indispensable
requirement for a valid retrenchment x x x.
SECOND, PAL arbitrarily and capriciously singled out the year 1997 as a
reference in its alleged assessment of employee efficiency. With this, it totally
disregarded the employees performance during the years prior to 1997. This
resulted in the unreasonable and unfair retrenchment or demotion of several
flight pursers and attendants who showed impeccable service records during the
years prior to 1997.
THIRD, seniority was totally disregarded in the selection of employees to be
retrenched, which is a clear and willful violation of the CBA.
FOURTH, PAL maliciously represented in the proceedings below that it could only
operate on a fleet of fourteen (14) planes in order to justify the retrenchment
scheme. Yet, the evidence on record revealed that PAL operated a fleet of twenty
two (22) planes. In fact, after having illegally retrenched the unfortunate flight

attendants and pursers, PAL rehired those who were capriciously dismissed and
even hired from the outside just to fulfill their manning requirements.
FIFTH, PAL did not use any fair and reasonable criteria in effecting retrenchment.
If there really was any, the same was applied arbitrarily, if not discriminatorily.
FINALLY, and perhaps the worst transgression of FASAPs rights, PAL used
retrenchment to veil its union-busting motives and struck at the heart of FASAP
when it retrenched seven (7) of its twelve (12) officers and demoted three (3)
others.37 (Emphasis supplied)
These issues boil down to the question of whether PALs retrenchment scheme
was justified.
It is a settled rule that in the exercise of the Supreme Courts power of review,
the Court is not a trier of facts and does not normally undertake the reexamination of the evidence presented by the contending parties during trial.
However, there are several exceptions to this rule38 such as when the factual
findings of the Labor Arbiter differ from those of the NLRC, as in the instant case,
which opens the door to a review by this Court.39
Under the Labor Code, retrenchment or reduction of employees is authorized as
follows:
ART. 283. Closure of establishment and reduction of personnel. - The employer
may also terminate the employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to
the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year of service, whichever
is higher. In case 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 law recognizes the right of every business entity to reduce its work force if
the same is made necessary by compelling economic factors which would
endanger its existence or stability.40 Where appropriate and where conditions
are in accord with law and jurisprudence, the Court has authorized valid
reductions in the work force to forestall business losses, the hemorrhaging of
capital, or even to recognize an obvious reduction in the volume of business
which has rendered certain employees redundant.41
Nevertheless, while it is true that the exercise of this right is a prerogative of
management, there must be faithful compliance with substantive and procedural
requirements of the law and jurisprudence, for retrenchment strikes at the very
heart of the workers employment, the lifeblood upon which he and his family
owe their survival. Retrenchment is only a measure of last resort, when other
less drastic means have been tried and found to be inadequate.42
The burden clearly falls upon the employer to prove economic or business losses
with sufficient supporting evidence. Its failure to prove these reverses or losses
necessarily means that the employees dismissal was not justified.43 Any claim
of actual or potential business losses must satisfy certain established standards,
all of which must concur, before any reduction of personnel becomes legal.44
These are:
(1) That retrenchment is reasonably necessary and likely to prevent business
losses which, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and to the
Department of Labor and Employment at least one month prior to the intended
date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent
to one (1) month pay or at least one-half () month pay for every year of
service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good
faith for the advancement of its interest and not to defeat or circumvent the
employees right to security of tenure; and,
(5) That the employer used fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained among the employees, such as

status, efficiency, seniority, physical fitness, age, and financial hardship for
certain workers.45
In view of the facts and the issues raised, the resolution of the instant petition
hinges on a determination of the existence of the first, fourth and the fifth
elements set forth above, as well as compliance therewith by PAL, taking to mind
that the burden of proof in retrenchment cases lies with the employer in showing
valid cause for dismissal;46 that legitimate business reasons exist to justify
retrenchment.47
FIRST ELEMENT: That retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or if only expected, are reasonably
imminent as perceived objectively and in good faith by the employer.
The employers prerogative to layoff employees is subject to certain limitations.
In Lopez Sugar Corporation v. Federation of Free Workers,48 we held that:
Firstly, the losses expected should be substantial and not merely de minimis in
extent. If the loss purportedly sought to be forestalled by retrenchment is clearly
shown to be insubstantial and inconsequential in character, the bona fide nature
of the retrenchment would appear to be seriously in question. Secondly, the
substantial loss apprehended must be reasonably imminent, as such imminence
can be perceived objectively and in good faith by the employer. There should, in
other words, be a certain degree of urgency for the retrenchment, which is after
all a drastic recourse with serious consequences for the livelihood of the
employees retired or otherwise laid-off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably necessary and likely to effectively
prevent the expected losses. The employer should have taken other measures
prior or parallel to retrenchment to forestall losses, i.e., cut other costs than
labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or
so-called "golden parachutes," can scarcely claim to be retrenching in good faith
to avoid losses. To impart operational meaning to the constitutional policy of
providing "full protection" to labor, the employers prerogative to bring down
labor costs by retrenching must be exercised essentially as a measure of last
resort, after less drastic means - e.g., reduction of both management and rankand-file bonuses and salaries, going on reduced time, improving manufacturing
efficiencies, trimming of marketing and advertising costs, etc. - have been tried
and found wanting.

Lastly, but certainly not the least important, alleged losses if already realized,
and the expected imminent losses sought to be forestalled, must be proved by
sufficient and convincing evidence.
The law speaks of serious business losses or financial reverses. Sliding incomes
or decreasing gross revenues are not necessarily losses, much less serious
business losses within the meaning of the law. The fact that an employer may
have sustained a net loss, such loss, per se, absent any other evidence on its
impact on the business, nor on expected losses that would have been incurred
had operations been continued, may not amount to serious business losses
mentioned in the law. The employer must show that its losses increased through
a period of time and that the condition of the company will not likely improve in
the near future,49 or that it expected no abatement of its losses in the coming
years.50 Put simply, not every loss incurred or expected to be incurred by a
company will justify retrenchment.51
The employer must also exhaust all other means to avoid further losses without
retrenching its employees.52 Retrenchment is a means of last resort; it is
justified only when all other less drastic means have been tried and found
insufficient.53 Even assuming that the employer has actually incurred losses by
reason of the Asian economic crisis, the retrenchment is not completely justified
if there is no showing that the retrenchment was the last recourse resorted to.54
Where the only less drastic measure that the employer undertook was the
rotation work scheme, or the three-day-work-per-employee-per-week schedule,
and it did not endeavor at other measures, such as cost reduction, lesser
investment on raw materials, adjustment of the work routine to avoid scheduled
power failure, reduction of the bonuses and salaries of both management and
rank-and-file, improvement of manufacturing efficiency, and trimming of
marketing and advertising costs, the claim that retrenchment was done in good
faith to avoid losses is belied.55
Alleged losses if already realized, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and convincing evidence. The reason
for requiring this is readily apparent: any less exacting standard of proof would
render too easy the abuse of this ground for termination of services of
employees; scheming employers might be merely feigning business losses or
reverses in order to ease out employees.56
In establishing a unilateral claim of actual or potential losses, financial
statements audited by independent external auditors constitute the normal
method of proof of profit and loss performance of a company.57 The condition of
business losses justifying retrenchment is normally shown by audited financial

documents like yearly balance sheets and profit and loss statements as well as
annual income tax returns. Financial statements must be prepared and signed by
independent auditors; otherwise, they may be assailed as self-serving.58 A
Statement of Profit and Loss submitted to prove alleged losses, without the
accompanying signature of a certified public accountant or audited by an
independent auditor, is nothing but a self-serving document which ought to be
treated as a mere scrap of paper devoid of any probative value.59
The audited financial statements should be presented before the Labor Arbiter
who is in the position to evaluate evidence. They may not be submitted
belatedly with the Court of Appeals, because the admission of evidence is
outside the sphere of the appellate courts certiorari jurisdiction. Neither can this
Court admit in evidence audited financial statements, or make a ruling on the
question of whether the employer incurred substantial losses justifying
retrenchment on the basis thereof, as this Court is not a trier of facts.60 Even so,
this Court may not be compelled to accept the contents of said documents
blindly and without thinking.61
The requirement of evidentiary substantiation dictates that not even the affidavit
of the Assistant to the General Manager is admissible to prove losses, as the
same is self-serving.62 Thus, in Central Azucarera de la Carlota v. National Labor
Relations Commission,63 the Court ruled that the mere citation by the employer
of the economic setback suffered by the sugar industry as a whole cannot, in the
absence of adequate, credible and persuasive evidence, justify its retrenchment
program,64 thus:
A litany of woes, from a labor strike way back in 1982 to the various crises
endured by the sugar industry, droughts, the 1983 assassination of former
Senator Benigno Aquino, Jr., high crop loan interests, spiraling prices of fertilizers
and spare parts, the depression of sugar prices in the world market, cutback in
the U.S. sugar quota, abandonment of productive areas because of the
insurgency problem and the absence of fair and consistent government policies
may have contributed to the unprecedented decline in sugar production in the
country, but there is no solid evidence that they translated into specific and
substantial losses that would necessitate retrenchment. Just exactly what
negative effects were borne by petitioner as a result, petitioner failed to
underscore.65
In Anino v. National Labor Relations Commission,66 the Court also held that the
employers claim that retrenchment was undertaken as a measure of selfpreservation to prevent losses brought about by the continuing decline of nickel
prices and export volume in the mining industry, as well as its allegation that the

reduction of excise taxes on mining from 5% to 1% on a graduated basis as

provided under Republic Act No. 7729 was a clear recognition by the government
of the industrys worsening economic difficulties was a bare claim in the
absence of evidence of actual losses in its business operations.67
In the instant case, PAL failed to substantiate its claim of actual and imminent
substantial losses which would justify the retrenchment of more than 1,400 of its
cabin crew personnel. Although the Philippine economy was gravely affected by
the Asian financial crisis, however, it cannot be assumed that it has likewise
brought PAL to the brink of bankruptcy. Likewise, the fact that PAL underwent
corporate rehabilitation does not automatically justify the retrenchment of its
cabin crew personnel.
Records show that PAL was not even aware of its actual financial position when it
implemented its retrenchment program. It initially decided to cut its fleet size to
only 14 ("Plan 14") and based on said plan, it retrenched more than 1,400 of its
cabin crew personnel. Later on, however, it abandoned its "Plan 14" and decided
to retain 22 units of aircraft ("Plan 22"). Unfortunately, it has retrenched more
than what was necessary. PAL admits that:
[U]pon reconsideration and with some optimistic prospects for operations, the
Company (PAL) decided not to implement "Plan 14" and instead implemented
"Plan 22," which would involve a fleet of 22 planes. Since "Plan 14" was
abandoned, the Company deemed it appropriate to recall back into employment
employees it had previously retrenched. Thus, some of the employees who were
initially laid off were recalled back to duty, the basis of which was passing the
1997 efficiency rating to meet the Companys operational requirements.68
PAL decided to adopt "Plan 14" on June 12, 1998. Three days after, or on June 15,
1998, it sent notices of retrenchment to its cabin crew personnel to take effect
on July 15, 1998. However, after allegedly realizing that it was going to retain 22
of its aircraft instead of 14, and after more than 1,400 of its cabin crew have
been fired during the period from November 30, 1998 to December 15, 1998, it
suddenly recalled to duty 202 of the retrenched cabin crew personnel.69
This only proves that PAL was not aware of the true state of its finances at the
time it implemented the assailed massive retrenchment scheme. It embarked on
the mass dismissal without first undertaking a well-considered study on the
proposed retrenchment scheme. This view is underscored by the fact that
previously, PAL terminated the services of 140 probationary cabin attendants,
but rehired them almost immediately and even converted their employment into

permanent and regular, even as a massive retrenchment was already looming in

the horizon.
To prove that PAL was financially distressed, it could have submitted its audited
financial statements but it failed to present the same with the Labor Arbiter.
Instead, it narrated a litany of woes without offering any evidence to show that
they translated into specific and substantial losses that would necessitate
retrenchment, thus:
1. It is a matter of public knowledge that PAL had been suffering severe financial
losses that reached its most critical condition in 1998 when its liabilities
amounted to about P90,642,933,919.00, while its assets amounted to only about
P85,109,075,351.00. The precarious situation prompted PAL to adopt costcutting measures to prevent it from becoming totally bankrupt, including the
reduction of its flight fleet from 56 to 14 aircrafts and the retrenchment of
unneeded employees.
xxxx
26. To save its business, PAL had every right to undergo a retrenchment program
immediately. PAL did not need, by law, to justify or explain to FASAP the reasons
for the retrenchment before it could implement it. Proof of actual financial losses
incurred by the company is not a condition sine qua non for retrenchment.70
This bare and unilateral claim does not suffice. The Labor Arbiters finding that
PAL "amply satisfied the rules imposed by law and jurisprudence that sustain
retrenchment," is without basis, absent the presentation of documentary
evidence to that effect. In Saballa v. National Labor Relations Commission,71 we
ruled that where the decision of the Labor Arbiter did not indicate the specific
bases for such crucial finding that the employer was suffering business reverses,
the same was arbitrary. We ratiocinated therein that since the employer insisted
that its critical financial condition was the central and pivotal reason for its
retrenchment, there was no reason why it should have neglected or refused to
submit its audited financial statements.
PALs assertion that its finances were gravely compromised as a result of the
1997 Asian financial crisis and the pilots strike lacks basis due to the nonpresentation of its audited financial statements to prove actual or imminent
losses. Also, the fact that PAL was placed under receivership did not excuse it
from submitting to the labor authorities copies of its audited financial statements
to prove the urgency, necessity and extent, of its retrenchment program. PAL
should have presented its audited financial statements for the years

immediately preceding and during which the retrenchment was carried out. Law
and jurisprudence require that alleged losses or expected imminent losses must
be proved by sufficient and convincing evidence.
Likewise, PAL has not shown to the Courts satisfaction that the pilots strike had
gravely affected its operations. It offered no proof to show the correlation
between the pilots strike and its alleged financial difficulties. In Guerrero v.
National Labor Relations Commission,72 the Court held that where the employer
failed to prove its claim with competent evidence that the employees strike
paralyzed its operations and resulted in the withdrawal of its clients orders, the
retrenchment of its employees must be declared illegal.73
Moreover, as the Court ruled in the case of EMCO Plywood Corporation,74 it must
be shown that the employer resorted to other means but these proved to be
insufficient or inadequate, such as cost reduction, lesser investment on raw
materials, adjustment of the work routine to avoid scheduled power failure,
reduction of the bonuses and salaries of both management and rank-and-file,
improvement of manufacturing efficiency, and trimming of marketing and
advertising costs. In the instant case, there is no proof that PAL engaged in costcutting measures other than a mere reduction in its fleet of aircraft and the
retrenchment of 5,000 of its personnel.
The only manifestation of PALs attempt at exhausting other possible measures
besides retrenchment was when it conducted negotiations and consultations
with FASAP which, however, ended nowhere. None of the plans and suggestions
taken up during the meetings was implemented. On the other hand, PALs
September 4, 1998 offer of shares of stock to its employees was adopted
belatedly, or only after its more than 1,400 cabin crew personnel were
retrenched. Besides, this offer can hardly be considered to be borne of good
faith, considering that it was premised on the condition that, if accepted, all
existing CBAs between PAL and its employees would have to be suspended for
10 years. When the offer was rejected by the employees, PAL ceased its
operations on September 23, 1998. It only resumed business when the CBA
suspension clause was ratified by the employees in a referendum subsequently
conducted.75 Moreover, this stock distribution scheme does not do away with
PALs expenditures or liabilities, since it has for its sole consideration the
commitment to suspend CBAs with its employees for 10 years. It did not improve
the financial standing of PAL, nor did it result in corporate savings, vis--vis the
financial difficulties it was suffering at the time.
Also, the claim that PAL saved P24 million monthly due to the implementation of
the retrenchment program does not prove anything; it has not been shown to

what extent or degree such savings benefited PAL, vis--vis its total expenditures
or its overall financial position. Likewise, its claim that its liabilities reached P90
billion, while its assets amounted to P85 billion only or a debt to asset ratio of
more than 1:1 may not readily be believed, considering that it did not submit
its audited financial statements. All these allegations are self-serving evidence.
Interestingly, PAL submitted its audited financial statements only when the case
was the subject of certiorari proceedings in the Court of Appeals by attaching in
its Comment76 a copy of its consolidated audited financial statements for the
years 2002, 2003 and 2004.77 However, these are not the financial statements
that would have shown PALs alleged precarious position at the time it
implemented the massive retrenchment scheme in 1998. PAL should have
submitted its financial statements for the years 1997 up to 1999; and not for the
years 2002 up to 2004 because these financial statements cover a period
markedly distant to the years in question, which make them irrelevant and
unacceptable.
Neither could PAL claim to suffer from imminent or resultant losses had it not
implemented the retrenchment scheme in 1998. It could not have proved that
retrenchment was necessary to prevent further losses, because immediately
thereafter or in February 199978 PAL was on the road to recovery; this is the
airlines bare admission in its Comment to the instant petition.79 During that
period, it was recalling to duty cabin crew it had previously retrenched. In March
2000, PAL declared a net income of P44.2 million. In March 2001, it reported a
profit of P419 million. In March 2003, it again registered a net income of P295
million.80 All these facts are anathema to a finding of financial difficulties.
Finally, what further belied PALs allegation that it was suffering from substantial
actual and imminent losses was the fact that in December 1998, PAL submitted
a "stand-alone" rehabilitation plan to the SEC, and on June 4, 1999, or less than
a year after the retrenchment, the amount of US$200 million was invested
directly into PAL by way of additional capital infusion for its operations.81 These
facts betray PALs claim that it was in dire financial straits. By submitting a
"stand-alone" rehabilitation plan, PAL acknowledged that it could undertake
recovery on its own and that it possessed enough resources to weather the
financial storm, if any.
Thus said, it was grave error for the Labor Arbiter, the NLRC and the Court of
Appeals, to have simply assumed that PAL was in grievous financial state,
without requiring the latter to substantiate such claim. It bears stressing that in
retrenchment cases, the presentation of proof of financial difficulties through the

required documents, preferably audited financial statements prepared by

independent auditors, may not summarily be done away with.
That FASAP admitted and took for granted the existence of PALs financial woes
cannot excuse the latter from proving to the Courts satisfaction that indeed it
was bleeding financially. It was the airlines obligation to prove that it was in
such financial distress; that it was necessary to implement an appropriate
retrenchment scheme; that it had to undergo a retrenchment program in
proportion to or commensurate with the extent of its financial distress; and that,
it was carrying out the scheme in good faith and without undermining the
security of tenure of its employees. The Court is mindful that the
characterization of an employees services as no longer necessary or
sustainable, and therefore, properly terminable, is an exercise of business
judgment on the part of the employer, and that the wisdom or soundness of such
characterization or decision is not subject to discretionary review, provided of
course that violation of law or arbitrary or malicious action is not shown.82
The foregoing principle holds true with respect to PALs claim in its Comment
that the only issue is the manner by which its retrenchment scheme was carried
out because the validity of the scheme has been settled in its favor.83
Respondents might have confused the right to retrench with its actual
retrenchment program, treating them as one and the same. The first, no doubt,
is a valid prerogative of management; it is a right that exists for all employers.
As to the second, it is always subject to scrutiny in regard to faithful compliance
with substantive and procedural requirements which the law and jurisprudence
have laid down. The right of an employer to dismiss an employee differs from
and should not be confused with the manner in which such right is exercised.84
FOURTH ELEMENT: That the employer exercises its prerogative to retrench
employees in good faith for the advancement of its interest and not to defeat or
circumvent the employees right to security of tenure.
Concededly, retrenchment to prevent losses is an authorized cause for
terminating employment and the decision whether to resort to such move or not
is a management prerogative. However, the right of an employer to dismiss an
employee differs from and should not be confused with the manner in which
such right is exercised. It must not be oppressive and abusive since it affects
one's person and property.85
In Indino v. National Labor Relations Commission,86 the Court held that it is
almost an inflexible rule that employers who contemplate terminating the
services of their workers cannot be so arbitrary and ruthless as to find flimsy

excuses for their decisions. This must be so considering that the dismissal of an
employee from work involves not only the loss of his position but more
important, his means of livelihood. Applying this caveat, it is therefore
incumbent for the employer, before putting into effect any retrenchment process
on its work force, to show by convincing evidence that it was being wrecked by
serious financial problems. Simply declaring its state of insolvency or its
impending doom will not be sufficient. To do so would render the security of
tenure of workers and employees illusory. Any employer desirous of ridding itself
of its employees could then easily do so without need to adduce proof in support
of its action. We can not countenance this. Security of tenure is a right
guaranteed to employees and workers by the Constitution and should not be
denied on the basis of mere speculation.
On the requirement that the prerogative to retrench must be exercised in good
faith, we have ruled that the hiring of new employees and subsequent rehiring of
"retrenched" employees constitute bad faith;87 that the failure of the employer
to resort to other less drastic measures than retrenchment seriously belies its
claim that retrenchment was done in good faith to avoid losses;88 and that the
demonstrated arbitrariness in the selection of which of its employees to retrench
is further proof of the illegality of the employers retrenchment program, not to
mention its bad faith.89
When PAL implemented Plan 22, instead of Plan 14, which was what it had
originally made known to its employees, it could not be said that it acted in a
manner compatible with good faith. It offered no satisfactory explanation why it
abandoned Plan 14; instead, it justified its actions of subsequently recalling to
duty retrenched employees by making it appear that it was a show of good faith;
that it was due to its good corporate nature that the decision to consider
recalling employees was made. The truth, however, is that it was unfair for PAL
to have made such a move; it was capricious and arbitrary, considering that
several thousand employees who had long been working for PAL had lost their
jobs, only to be recalled but assigned to lower positions (i.e., demoted), and,
worse, some as new hires, without due regard for their long years of service with
the airline.

In sum, we find that PAL had implemented its retrenchment program in an

arbitrary manner and with evident bad faith, which prejudiced the tenurial rights
of the cabin crew personnel.
Moreover, the managements September 4, 1998 offer to transfer PAL shares of
stock in the name of its employees in exchange for the latters commitment to
suspend all existing CBAs for 10 years; the closure of its operations when the
offer was rejected; and the resumption of its business after the employees
relented; all indicate that PAL had not acted in earnest in regard to relations with
its employees at the time.
FIFTH ELEMENT:
ascertaining who
employees, such
financial hardship

That the employer used fair and reasonable criteria in

would be dismissed and who would be retained among the
as status, efficiency, seniority, physical fitness, age, and
for certain workers.

In selecting employees to be dismissed, fair and reasonable criteria must be

used, such as but not limited to: (a) less preferred status (e.g., temporary
employee), (b) efficiency and (c) seniority.90
In Villena v. National Labor Relations Commission,91 the Court considered
seniority an important aspect for the validity of a retrenchment program. In
Philippine Tuberculosis Society, Inc. v. National Labor Union,92 the Court held
that the implementation of a retrenchment scheme without taking seniority into
account rendered the retrenchment invalid, even as against factors such as
dependability, adaptability, trainability, job performance, discipline, and attitude
towards work.
In the implementation of its retrenchment scheme, PAL evaluated the cabin crew
personnels performance during the year preceding the retrenchment (1997),
based on the following set of criteria or rating variables found in the Performance
Evaluation Form of the cabin crew personnels Grooming and Appearance
Handbook:
A. INFLIGHT PROFICIENCY EVALUATION 30%

The irregularity of PALs implementation of Plan 14 becomes more apparent

when it rehired 140 probationary cabin attendants whose services it had
previously terminated, and yet proceeded to terminate the services of its
permanent cabin crew personnel.

B. JOB PERFORMANCE 35%

Special Award +5
Commendations +2

 Appreciation +1

2. Number of employees retrenched due to excess sick leaves -- 299

Disciplinary Actions Reminder (-3), Warning/Admonition & Reprimands (-5),

Suspension (-20), Passenger Complaints (-30), Appearance (-10)

3. Number of employees who were retrenched due to excess sick leave and
other reasons -- 61

C. ATTENDANCE 35%

4. Number of employees who were retrenched due to other reasons -- 107

Perfect Attendance +2

5. Number of employees who were demoted -- 552

Missed Assignment -30

Total -- 1,473.94

Sick Leaves in excess of allotment and other leaves in excess of allotment -20

Prominent from the above data is the retrenchment of cabin crew personnel due
to "other reasons" which, however, are not specifically stated and shown to be
for a valid cause. This is not allowed because it has no basis in fact and in law.

Tardiness -10 93
The appellate court held that there was no need for PAL to consult with FASAP
regarding standards or criteria that the airline would utilize in the
implementation of the retrenchment program; and that the criteria actually used
which was unilaterally formulated by PAL using its Performance Evaluation Form
in its Grooming and Appearance Handbook was reasonable and fair. Indeed, PAL
was not obligated to consult FASAP regarding the standards it would use in
evaluating the performance of the each cabin crew. However, we do not agree
with the findings of the appellate court that the criteria utilized by PAL in the
actual retrenchment were reasonable and fair.
This Court has repeatedly enjoined employers to adopt and observe fair and
reasonable standards to effect retrenchment. This is of paramount importance
because an employers retrenchment program could be easily justified
considering the subjective nature of this requirement. The adoption and
implementation of unfair and unreasonable criteria could not easily be detected
especially in the retrenchment of large numbers of employees, and in this
aspect, abuse is a very distinct and real possibility. This is where labor tribunals
should exercise more diligence; this aspect is where they should concentrate
when placed in a position of having to judge an employers retrenchment
program.
Indeed, the NLRC made a detailed listing of the retrenchment scheme based on
the ICCD Masterank and Seniority 1997 Ratings. It found the following:
1. Number of employees retrenched due to inverse seniority rule and other
reasons -- 454

Moreover, in assessing the overall performance of each cabin crew personnel,

PAL only considered the year 1997. This makes the evaluation of each cabin
attendants efficiency rating capricious and prejudicial to PAL employees covered
by it. By discarding the cabin crew personnels previous years of service and
taking into consideration only one years worth of job performance for
evaluation, PAL virtually did away with the concept of seniority, loyalty and past
efficiency, and treated all cabin attendants as if they were on equal footing, with
no one more senior than the other.
In sum, PALs retrenchment program is illegal because it was based on wrongful
premise (Plan 14, which in reality turned out to be Plan 22, resulting in
retrenchment of more cabin attendants than was necessary) and in a set of
criteria or rating variables that is unfair and unreasonable when implemented. It
failed to take into account each cabin attendants respective service record,
thereby disregarding seniority and loyalty in the evaluation of overall employee
performance.
Anent the claim of unfair labor practices committed against petitioner, we find
the same to be without basis. Article 261 of the Labor Code provides that
violations of a CBA, except those which are gross in character, shall no longer be
treated as unfair labor practice and shall be resolved as grievances under the
parties CBA. Moreover, "gross violations of CBA" under the same Article referred
to flagrant and/or malicious refusal to comply with the economic provisions of
such agreement, which is not the issue in the instant case.1avvphi1
Also, we fail to see any specific instance of union busting, oppression or
harassment and similar acts of FASAPs officers. The fact that majority of FASAPs

officers were either retrenched or demoted does not prove restraint or coercion
in their right to organize. Instead, we see a simple retrenchment scheme gone
wrong for failure to abide by the stringent rules prescribed by law, and a failure
to discharge the employers burden of proof in such cases.
Quitclaims executed as a result of PALs illegal retrenchment program are
likewise annulled and set aside because they were not voluntarily entered into
by the retrenched employees; their consent was obtained by fraud or mistake, as
volition was clouded by a retrenchment program that was, at its inception, made
without basis. The law looks with disfavor upon quitclaims and releases by
employees pressured into signing by unscrupulous employers minded to evade
legal responsibilities. As a rule, deeds of release or quitclaim cannot bar
employees from demanding benefits to which they are legally entitled or from
contesting the legality of their dismissal. The acceptance of those benefits would
not amount to estoppel. The amounts already received by the retrenched
employees as consideration for signing the quitclaims should, however, be
deducted from their respective monetary awards.95
In Trendline Employees Association-Southern Philippines Federation of Labor v.
NLRC,96 we held that where the employer led its employees to believe that the
employer was suffering losses and as a result thereof accept retrenchment by
executing quitclaims and waivers, there was evident bad faith on the part of the
employer justifying the setting aside of the quitclaims and waivers executed.
As to PALs recall and rehire process (of retrenched cabin crew employees), the
same is likewise defective. Considering the illegality of the retrenchment, it
follows that the subsequent recall and rehire process is likewise invalid and
without effect.
A corporate officer is not personally liable for the money claims of discharged
corporate employees unless he acted with evident malice and bad faith in
terminating their employment.97 We do not see how respondent Patria Chiong
may be held personally liable together with PAL, it appearing that she was
merely acting in accordance with what her duties required under the
circumstances. Being an Assistant Vice President for Cabin Services of PAL, she
takes direct orders from superiors, or those who are charged with the
formulation of the policies to be implemented.
With respect to moral damages, we have time and again held that as a general
rule, a corporation cannot suffer nor be entitled to moral damages. A
corporation, being an artificial person and having existence only in legal
contemplation, has no feelings, no emotions, no senses; therefore, it cannot

experience physical suffering and mental anguish. Mental suffering can be

experienced only by one having a nervous system and it flows from real ills,
sorrows, and griefs of life all of which cannot be suffered by an artificial,
juridical person.98 The Labor Arbiters award of moral damages was therefore
improper.
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court
of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the
Decision of the NLRC setting aside the Labor Arbiters findings of illegal
retrenchment and its Resolution of May 29, 2007 denying the motion for
reconsideration, are REVERSED and SET ASIDE and a new one is rendered:
1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;
2. ORDERING Philippine Air Lines, Inc. to reinstate the cabin crew personnel who
were covered by the retrenchment and demotion scheme of June 15, 1998 made
effective on July 15, 1998, without loss of seniority rights and other privileges,
and to pay them full backwages, inclusive of allowances and other monetary
benefits computed from the time of their separation up to the time of their
actual reinstatement, provided that with respect to those who had received their
respective separation pay, the amounts of payments shall be deducted from
their backwages. Where reinstatement is no longer feasible because the
positions previously held no longer exist, respondent Corporation shall pay
backwages plus, in lieu of reinstatement, separation pay equal to one (1) month
pay for every year of service;
3. ORDERING Philippine Airlines, Inc. to pay attorneys fees equivalent to ten
percent (10%) of the total monetary award.
Costs against respondent PAL.
SO ORDERED.
G.R. No. 175366

August 11, 2008

J-PHIL MARINE, INC. and/or JESUS CANDAVA and NORMAN SHIPPING

SERVICES, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and WARLITO E. DUMALAOG,
respondents.
DECISION

CARPIO MORALES, J.:

Warlito E. Dumalaog (respondent), who served as cook aboard vessels plying
overseas, filed on March 4, 2002 before the National Labor Relations Commission
(NLRC) a pro-forma complaint1 against petitioners manning agency J-Phil
Marine, Inc. (J-Phil), its then president Jesus Candava, and its foreign principal
Norman Shipping Services for unpaid money claims, moral and exemplary
damages, and attorneys fees.
Respondent thereafter filed two amended pro forma complaints2 praying for the
award of overtime pay, vacation leave pay, sick leave pay, and disability/medical
benefits, he having, by his claim, contracted enlargement of the heart and
severe thyroid enlargement in the discharge of his duties as cook which
rendered him disabled.

On July 2, 2007, respondents counsel filed before this Court a Comment and
Opposition (to Petitioners Manifestation of May 7, 2007)14 interposing no
objection to the dismissal of the petition but objecting to "the absolution" of
petitioners from paying respondent the total amount of Fifty Thousand US Dollars
(US$50,000.00) or approximately P2,300,000.00, the amount awarded by the
NLRC, he adding that:
There being already a payment of P450,000.00, and invoking the doctrine of
parens patriae, we pray then [to] this Honorable Supreme Court that the said
amount be deducted from the [NLRC] judgment award of US$50,000.00, or
approximately P2,300,000.00, and petitioners be furthermore ordered to pay in
favor of herein respondent [the] remaining balance thereof.
x x x x15 (Emphasis in the original; underscoring supplied)

Respondents total claim against petitioners was P864,343.30 plus P117,557.60

representing interest and P195,928.66 representing attorneys fees.3

Respondents counsel also filed before this Court, purportedly on behalf of

respondent, a Comment16 on the present petition.

By Decision4 of August 29, 2003, Labor Arbiter Fe Superiaso-Cellan dismissed

respondents complaint for lack of merit.

The parties having forged a compromise agreement as respondent in fact has

executed a Quitclaim and Release, the Court dismisses the petition.

On appeal,5 the NLRC, by Decision of September 27, 2004, reversed the Labor
Arbiters decision and awarded US$50,000.00 disability benefit to respondent. It
dismissed respondents other claims, however, for lack of basis or jurisdiction.6
Petitioners Motion for Reconsideration7 having been denied by the NLRC,8 they
filed a petition for certiorari9 before the Court of Appeals.

Article 227 of the Labor Code provides:

By Resolution10 of September 22, 2005, the Court of Appeals dismissed

petitioners petition for, inter alia, failure to attach to the petition all material
documents, and for defective verification and certification. Petitioners Motion for
Reconsideration of the appellate courts Resolution was denied;11 hence, they
filed the present Petition for Review on Certiorari.
During the pendency of the case before this Court, respondent, against the
advice of his counsel, entered into a compromise agreement with petitioners. He
thereupon signed a Quitclaim and Release subscribed and sworn to before the
Labor Arbiter.12
On May 8, 2007, petitioners filed before this Court a Manifestation13 dated May
7, 2007 informing that, inter alia, they and respondent had forged an amicable
settlement.

Any compromise settlement, including those involving labor standard laws,

voluntarily agreed upon by the parties with the assistance of the Department of
Labor, shall be final and binding upon the parties. The National Labor Relations
Commission or any court shall not assume jurisdiction over issues involved
therein except in case of non-compliance thereof or if there is prima facie
evidence that the settlement was obtained through fraud, misrepresentation, or
coercion. (Emphasis and underscoring supplied)
In Olaybar v. NLRC,17 the Court, recognizing the conclusiveness of compromise
settlements as a means to end labor disputes, held that Article 2037 of the Civil
Code, which provides that "[a] compromise has upon the parties the effect and
authority of res judicata," applies suppletorily to labor cases even if the
compromise is not judicially approved.18
That respondent was not assisted by his counsel when he entered into the
compromise does not render it null and void. Eurotech Hair Systems, Inc. v. Go19
so enlightens:

A compromise agreement is valid as long as the consideration is reasonable and

the employee signed the waiver voluntarily, with a full understanding of what he
was entering into. All that is required for the compromise to be deemed
voluntarily entered into is personal and specific individual consent. Thus,
contrary to respondents contention, the employees counsel need not be
present at the time of the signing of the compromise agreement.20
(Underscoring supplied)
It bears noting that, as reflected earlier, the Quitclaim and Waiver was
subscribed and sworn to before the Labor Arbiter.
Respondents counsel nevertheless argues that "[t]he amount of Four Hundred
Fifty Thousand Pesos (P450,000.00) given to respondent on April 4, 2007, as full
and final settlement of judgment award, is unconscionably low, and un[C]hristian, to say the least."21 Only respondent, however, can impugn the
consideration of the compromise as being unconscionable.
The relation of attorney and client is in many respects one of agency, and the
general rules of agency apply to such relation.22 The acts of an agent are
deemed the acts of the principal only if the agent acts within the scope of his
authority.23 The circumstances of this case indicate that respondents counsel is
acting beyond the scope of his authority in questioning the compromise
agreement.
That a client has undoubtedly the right to compromise a suit without the
intervention of his lawyer24 cannot be gainsaid, the only qualification being that
if such compromise is entered into with the intent of defrauding the lawyer of the
fees justly due him, the compromise must be subject to the said fees.25 In the
case at bar, there is no showing that respondent intended to defraud his counsel
of his fees. In fact, the Quitclaim and Release, the execution of which was
witnessed by petitioner J-Phils president Eulalio C. Candava and one Antonio C.
Casim, notes that the 20% attorneys fees would be "paid 12 April 2007
P90,000."
WHEREFORE, the petition is, in light of all the foregoing discussion, DISMISSED.
Let a copy of this Decision be furnished respondent, Warlito E. Dumalaog, at his
given address at No. 5-B Illinois Street, Cubao, Quezon City.
SO ORDERED.
G.R. No. 148021

December 6, 2006

SIME DARBY EMPLOYEES ASSOCIATION, OSCAR E. PACIS, RAMON C.

REYES, FRANCISCO R. REY, ROLITO C. MARTIREZ, RAUL E. BARDE,
HELINO A. TIAMSON, JOSE G. AQUINO, ESTANILO M. SAMSON,
CELESTINO A. SANTOS, REYNALDO MENDOZA, RAMON A. CIPRIANO, R.
CAJAYON, EMMANUEL M. PALIS, JOSELITO DE PAZ, ARNOLD J. DE
GUZMAN, BENJAMIN C. DELA PAZ, JR., FERDINAND R. SACLUTI,
LAMBERTO S. LOPEZ, JR., GAVINO T. REFUERZO, ORLANDO B. PATENIA,
EDWIN H. GULAPA, RUBEN G. CRUZ, REYNALDO E. ATANACIO, CONRADO
D. FRANCISCO, JR., CRESENCIO Q. TABADAY, ERNESTO A. IGNACIO,
ISAGANI A. RAMOS, DENNIS V. CABUSLAY, SAMUEL G. MAMARADLO,
ALANO R. VENTURA, JR., ANGELINO B. HERMONO, MIGUEL K. LUNA,
CELEDONIO B. FRONDA, PATRICIO P. ARANTE III, ARSENIO D. CRUZ,
LEOCADIO M. CANDELARIA, ARNALDO R. AUREADA, DANILO F. SAN
DIEGO, ALEXANDER G. CUEVAS, ROLANDO G. SANTOS, ISABELO V.
ANDRES, JR., ARTURO M. LORENZO, JERRY F. SANTIAGO, ARMAND G.
MARIANO, REYNALDO YBANEZ, ROSUARDO S. CONDEZ, DINDO CRUZ
LAUREANO, ROY A. DE GUZMAN, FICOMEDES P. CALUGAY, RANDOLPH P.
RAAGAS, PEDRO A. MAGNO, BENJAMIN P. DELLOMAS, ENRIQUE B.
TAMAYO, FERNANDO C. LOPEZ, ROMAN P. NABONG, JULIETO P. DIZON,
ROMEO E. SANTOS, PABLO P. CABRERA, JR., NELSON D. ANGELES,
RICARDO P. CANLAS, REY L. DE GUZMAN, TANGLAW E. DELA PAZ,
LUDIVICO C. LACUNA, ALEXANDER D. PUA, JUANITO L. SANTOS,
EDGARDO B. VERZOSA, HILARIO S. MALINAG, ANDRES C. SANTIAGO,
DANILO S. MENDOZA, JOSE J. CASTILLO, EDUARDO F. CAYABYAB,
EDGARDO C. FLORENCIO, LARRY DELA CRUZ, RODOLFO B. MARIANO,
VIRGILIO C. VERGARA, JESUS B. BERNAS, FELICIANO R. PERALTA,
HANNIE C. REJUSO, RODELIO L. SATOS, JUAN MATA, EDGARDO A. JOSEF,
REYNALDO V. SIMON, JUANITO T. GINEZ, DONARDO C. EVANGELISTA,
JUAN ESTAQUIO, RAMON C. MANUEL, EFREN D. GONZALES, DOMINADOR
S. HERNANDEZ, MARIO C. DIAZ, JAIME DAVID, REMEGIO T. GAJAYON,
JORDAN ALBA V. JIMENEZ, LUCIO I. CAPCO, FRANCISCO FRANCISCO,
ALFREDO E. ESTEL, REYNALDO P. MENDOZA, JOEL G. DIZON, ADOLFO J.
SANTOS, ROBERTO C. PECSON, JOSE B. GARCIA, GEORGE A. NAGMA,
DOMINGO S. CUEVAS, JR., RAMON A. CIPRIANO, ROBERTO A.
BUENCONSEJO, VICTOR H. VIZMONTE, EDWARD L. GARCIA, RODRIGO S.
MAGBALOT, EMELITO R. DELA PAZ, CARLOS O. RIEGO, REYNALDO
MAGALLON, BENJAMIN C. GERON, RODRIGO C. LABRO, EDUARDO N.
PAPA, CENON J. CUMAL, EDDIE P. ESPINASE, REYNALDO S. DIAMANTE,
RODELIO C. DERPO, VIRGILIO A. SICAT, FELIX G. MARIANO, ARTURO R.
APOSTOL, BONIFACIO V. POLICINA, EDIZER R. ALCAIDE, ROLANDO G.
SANTOS, MELCHOR A. SAN PASCUAL, ROLANDO FRONDA, SALVADOR B.

COPINO, JR., VILLAMOR VELASCO, ARTURO CASILANG, MACARIO S.

BERSOLA, LESLIE CASTOR, RAFAEL V. ALANO, ROMEO DE ASIS, RAMILO
R. DELA PAZ, JOVENTINO C. OLBIS, RODOLFO M. CERES, ARMANDO C.
LLENADO, EDUARDO A. SALVADOR, APOLINARIO F. GAYO, ARNOLD Z.
MAXIMO, FLORANTE R. PADIERNOS, DANILO M. EUSEBIO, NOEL D.
JEGIRA, NESTOR J. QUIMSON, ANTONIO VILLAMOR, BENITO D. ARIOLA,
JOSE D. MALLARI, BRAULIO S. TOLENTINO, JUANITO D. BUNGAY, ARNIEL
R. DOMINGO, JESUS V. ESCOTO, MIGUEL L. LIBAO, RODOLFO G.
NAYCALO, JR., GREGORIO E. UMARAN. ROMULO J. VILLARAZA,
APOLINARIO S. VILLENA, ROLANDO R. LOPEZ, ERNESTO VALEROS,
ESTELITO E. DE GUZMAN, ROLANDO F. ADUNA, RONNIE S. MANUEL,
MAXIMO B. GRAFIL, TEODORO V. HENSON, ABELARDO P. TORRES,
RENATO C. MEDINA, ELDER M. CASIS, LOPE L. MAY, ARMANDO R. LATI,
RICARDO C. CASTILLO, ARCADIO C. DELA CRUZ, BAYANI S. DE GUZMAN,
BUENAVENTURA D. VILLALON, ESTELITO B. MARQUEZ, JR., DOMINGO L.
CECILIO, NOEL A. NEPOMUCENO, GAMIE S. VILLANUEVA, HILARION B.
GUTOMAN, NORBERTO H. MURILLO, EFREN I. JACINTO, CEZAR DE JESUS,
EDGARDO B. CORONADO, FERNANDO P. DELA CRUZ, CESAR D. AGUIRRE,
ELMER S. LITUANIA, RAINIER M. TIAMZON, MARIO M. TIMOTEO,
ARMANDO SIGUENZA, AURELIO A. GRIT, ALEJANDRO LIBAO, RONALDO A.
BAUTISTA, SERAFINO B. SANTOS, JR., MARIO M. DONEZA, JR., ROMULO
F. REVILLA, FERNANDO B. FAUSTO, ROMEO A. IGNACIO, MARIO C.
TAYOAN, REYNALDO P. ESGUERRA, MANUEL A. DE GUZMAN, ROBERTO F.
VICENTE, HONORIO B. LIGONES, REYNALDO V. FELIPE, CONSTANTINO F.
TALAN, FLORENCIO S. ANDRES, MARIO S. ENRIQUEZ, RICARDO M.
JOCSON, JR., GIL L. LACSINA, HERNANI C. LINGA, ELMER L. SANTOS,
ROBERTO A. BAYLOSIS, ROBERT G. CHRISTENSEN, CESAR APOSTOL,
ROBERTO T. CRUZ, CLEMENTE TAGABI, GIL; BARION, NOEL SEGISMUNDO,
ROSAURO D. TOPACIO, ET AL., petitioners,
vs.
NATIONAL
LABOR
RELATIONS COMMISSION, (THIRD
DIVISION),
COMMISSIONERS IRENEO B. BERNARDO, LOURDES C. JAVIER, and TITO F.
GENILO, SIME DARBY PILIPINAS, INC., SEAN T. OKELLY, RICARDO J.
ROMULO, VICENTE PATERNO, LUIS LORENZO, RICARDO ANONAS, ELSIE
MAGLAYA, EMMANUEL TAMAYO, RAUL PANLASIGUI, MARTIN S. BERRY,
NIK MOHAMED BIN NIK YHAKOB, MOHAMED JAFAR BIN ABDUL and
TUNKU TAN SRIDATO SERI AHMAD BIN TUNKU YAHAYA, SD RETREAD
SYSTEMS, INC., ET AL., respondents.
DECISION

TINGA, J.:
For the Courts adjudication is a petition for review under Rule 45, seeking to set
aside the Decision of the Court of Appeals in CA-G.R. SP No. 54424, which
affirmed the 30 April 1999 Resolution of the National Labor Relations
Commission (NLRC) in NLRC NCR-CNS. 00-09-06571-95, 00-11-07577-95, 00-0100284-96, CA No. 017268-98.1
The facts of the case, as culled from the findings of the Court of appeals follow.
Sometime in October 1995, Sime Darby Employees Association (the Union)
submitted its proposal to Sime Darby Pilipinas, Inc. (the Company) for the
remaining two (2) years of their then existing Collective Bargaining Agreement
(CBA). The company gave its counter-proposal, but the parties failed to reach a
mutual settlement. Thus, in a letter to the union president, the company
declared a deadlock in the negotiations. Subsequently, the company sought the
intervention of the Department of Labor and Employment (DOLE) by filing a
Notice of CBA Deadlock and Request for Preventive Mediation.2 Such action did
not sit well with the union, which objected to the deadlock. It also filed its
opposition to the Assumption of Jurisdiction/Certification to Arbitration.
The company filed a Notice of Lockout on 21 June 1995, on the ground of
deadlock in the collective bargaining negotiations, docketed as NCMB-NCR-NL06-013-95, and sent a Notice of Lock Out Vote3 dated 24 July 1995 to the
National Conciliation and Mediation Board (NCMB). On the other hand, the union
conducted its strike vote referendum on 23 June 1995, and filed its Strike Vote
Result Report 4to NCMB also on 24 July 1995, and docketed as NCMB-NCR-NSCase No. 06-265-95.
On 06 August 1995, the company declared and implemented a lockout against
all the hourly employees of its tire factory on the ground of sabotage5 and work
slowdown. On September 1995, the Union filed a complaint for illegal lockout
before the DOLE-NLRC, docketed as NLRC NCR Case No. 00-09-06517-95.
Meanwhile, on 19 October 1995, the stockholders of the company approved the
sale of the companys tire manufacturing assets and business operation. The
company issued a memorandum dated 20 October 1995 informing all its
employees of the plan to sell the tire manufacturing assets and operations.
Consequently, on 27 October 1995, the company filed with the DOLE a Closure
and Sale of Tire Manufacturing Operation.

On 15 November 1995, the company individually served notices of termination

to all the employees, including the individual petitioners.6
On account of the lockout, the employees were barred from entering company
premises, and were only allowed to enter to get their personal belongings and
their earned benefits on 21-22 November 1995. During said dates, the
employees likewise received their separation pay equivalent to 150% of the base
rate for every year of credited service; they also signed and executed individual
quitclaims and releases. On 24 November 1995, the company filed with the
DOLE a Notice of Termination of Employees dated 17 November 1995, covering
all its employees in the tire manufacturing and support operations effective 15
December 1995.7
In November 1995, petitioners filed a complaint for Illegal Dismissal before the
DOLE, docketed as NLRC NCR Case No. 00-11-07577-95.8 In January of the
following year, petitioners filed a complaint for Unfair Labor Practice (ULP),
docketed as NLRC-NCR Case No. 00-01-00284-96. The cases for illegal dismissal,
illegal lockout and unfair labor practice were then consolidated and eventually
assigned to Labor Arbiter Enrico Portillo.
On 24 April 1996, the company sold its tire manufacturing plant and facilities to
Goodyear Philippines, Inc. (Goodyear) under a Memorandum of Agreement of
even date.
On 20 August 1996, the company and its officers filed a motion to conduct ocular
inspection of the tire factory premises to establish that it was sold to Goodyear.9
The motion was opposed by the union.

On 26 October 1998, the Union, without filing the memorandum as ordered by

the labor arbiter, filed an Appeal Memorandum with a petition for injunction
and/or a temporary restraining order before the NLRC.
On 29 October 1998, the labor arbiter rendered his Decision in the consolidated
cases, dismissing for lack of merit petitioners complaints against the company
for illegal lockout, illegal dismissal and unfair labor practice. The labor arbiter
found the lockout valid and legal, and justified by the incidents of continued
work slowdown, mass absences, and consistent low production output, high rate
of waste and scrap tires and machine breakdown. Likewise, the consequent
mass termination of all the employees was declared to be a valid and authorized
termination of employment due to closure of the establishment, the company
having complied with the requirements laid down by Article 283 of the Labor
Code, i.e., written notice of termination to the employees concerned, a report to
the DOLE, and payment of the prescribed separation pay. He added that the
companys decision to sell all of its assets was a valid and legitimate exercise of
its management prerogative. Anent the claim of unfair labor practice, the labor
arbiter found no evidence to substantiate the same, and that the records merely
showed that the closure of and eventual cessation from business was justified by
the circumstances in order to protect the companys investments and assets.
Furthermore, the labor arbiter ruled that the quitclaims and receipts signed by
petitioners were voluntarily signed, indicating that the settlement reached by
petitioners and the company was just and reasonable. Finally, the labor arbiter
declared that the motions for ocular inspection and return of separation pay field
by the company are rendered moot and academic in view of said Decision.13
The labor arbiter thus adjudicated:

On 14 July 1998, the company filed a motion for the return of the separation pay
received by the complainants, pending the resolution of the case.
On 25 August 1998, Labor Arbiter Enrico Angelo C. Portillo issued an Order,10
the dispositive portion of which reads:
WHEREFORE, premises considered, the respondents instant motion11 shall be
treated in the resolution of the above-caption cases on the merits. In lieu of the
continuation of the trial, the parties are hereby given the opportunity to submit
their respective memorandum within ten (10) days from receipt hereof, and
thereafter the instant cases shall be deemed submitted for resolution without
further notice.
SO ORDERED.12

WHEREFORE, foregoing premises considered, the consolidated complaints for

illegal lockout, illegal dismissal and unfair labor practice are hereby DISMISSED
for lack of merit. The complaint against respondent SD Retread System, is
likewise ordered dismissed for failure of the complainants to sufficiently establish
and substantiate their claim that the latter and respondent Sime Darby are one
and the same company, and for lack of employer-employee relationship.
SO ORDERED.14
Petitioners appealed the labor arbiters Decision to the NLRC on 01 December
1998.15 Said appeal, however, was dismissed on 30 April 1999 for lack of
merit.16 The NLRC affirmed en toto the labor arbiters Decision. In addition, it
ruled that that the labor arbiter could not have lost jurisdiction over the case

when petitioners appealed his 25 August 1998 Order since the Order was
interlocutory in nature and cannot be appealed separately. Thus, the labor
arbiter still had jurisdiction over the consolidated complaints when he issued his
Decision. Petitioners prayer for damages and attorneys fees was also struck
down by the NLRC, holding that petitioners are not entitled thereto considering
that it was not shown that the dismissal was done in a wanton and oppressive
manner.17 Petitioners motion for reconsideration was also denied, prompting
them to file a petition for certiorari with the Court of Appeals, claiming grave
abuse of discretion on the part of the NLRC.
The Court of Appeals denied the petition for lack of merit and affirmed the
Decision of the NLRC.18 The appellate court declared that the labor arbiters was
not divested of its jurisdiction over the consolidated cases when petitioners filed
their appeal memorandum on 26 October 1998 since the Order dated 25 August
1998 which they sought to appeal is interlocutory in nature. Thus, the labor
arbiters Decision. Thus, the labor arbiters Decision has the force and effect of a
valid judgment.19 Finding that said Decision was supported by substantial
evidence, the appellate court affirmed the dismissal of the complaints against
SD Retread System for failure of the petitioners to substantiate the claim of the
existence
of
employer-employee
relationship.20
Petitioners
sought
reconsideration of the Court of Appeals Decision, but their motion was denied
for lack of merit.21
In the instant petition, petitioners reiterate that they were denied due process
when they were dismissed right on the day they were handed down their
termination letters, without the benefit of the thirty (30)-day notice as required
by law, and invoke the Courts ruling in Serrano v. NLRC22 They deny having
executed quitclaims in favor of the company. Furthermore, petitioners insist that
the labor arbiter had lost jurisdictional competence to issue his 29 October 1998
Decision since they have already perfected their appeal on 26 October 1998,
making said Decision void ab initio. They likewise claim that the labor arbiter
erred when it failed to consider as admitted the matters contained in their
Request for Admission after respondents failed to file a sworn answer thereto.
Finally, they allege that the decisions of the Court of Appeals and the NLRC
lacked evidentiary support.
On the other hand, the company asserts that it complied with the 30-day notice
requirement under Art. 283 of the Labor Code when it notified the employees on
15 November 1995 that their termination was to take effect on 15 December
1995. In any case, the alleged violation of the thirty (30) day notice requirement
was never raised in the proceedings below, except in petitioners supplemental
motion for reconsideration of the Court of Appeals Decision. This being the case,

the issue of failure to abide by the 30-day notice rule can no longer be raised for
the first time on appeal.23 The company points out that the ruling in Serrano24
does not apply to this case since Serrano involved the retrenchment of only one
employee, Ruben Serrano, from an establishment which remained and continued
in business, while in the present scenario, the companys business operation
ceased for good, and the employees were furnished individual termination
notices thirty (30) days before the actual date of separation.25
The company maintains that the 25 August 1995 Order, being in the nature of an
interlocutory order, is unappealable hence, the labor arbiter retained its
jurisdiction over the cases even after the Order was "appealed" to the NLRC. It
maintains that the decisions of the labor arbiter and the NLRC and the Court of
Appeals are supported by substantial evidence. Furthermore, it insists on the
legality of the lockout and termination of employment, and denies having
committed an unfair labor practice.26
For its part, respondent SD Retread Systems, Inc. argues that it has a separate
and distinct entity from Sime Darby Pilipinas, Inc., and hence, denies the
existence of an employer-employee relationship with petitioners.27
The petition is bereft of merit.
Despite petitioners attempt to phrase its issues to show apparent questions of
law, it is obvious that the petition raises mostly factual issues, which are not
proper in a petition for review. Rule 45 of the Rules of Court limits the function of
the Court to the review or revision of errors of law and not to a second analysis
of the evidence. The Court observes that petitioners come to this Court with the
same arguments it presented in the proceedings below, which have been
competently discussed and disposed of by the appellate court and the labor
tribunals.
However, the petition presents two (2) questions of law which need to be
addressed, to wit: (i) the alleged loss of jurisdictional competence on the part of
the labor arbiter to issue his Decision after petitioners appealed his 25 August
1995 Order, and (ii) that petitioners Request for Admission should have been
granted and the evidence included therein should have been admitted since
respondents reply/objection thereto were not made under oath.28
The 25 August 1998 Order of the labor arbiter partakes the nature of an
interlocutory order, or one which refers to something between the
commencement and end of the suit which decides some point or matter but it is
not the final decision of the whole controversy.29 An interlocutory order is not

appealable until after the rendition of the judgment on the merits for a contrary
rule would delay the administration of justice and unduly burden the courts.30
The 25 August 1998 Order merely terminated formal trial of the consolidated
cases, declared that the motion for inspection will be dealt with in the resolution
of the case, and ordered the submission of the parties respective memoranda
after which the case shall be submitted for resolution. It did not put an end to
the issues of illegal lockout, ULP, and illegal dismissal.
Being interlocutory in nature, the 25 August 1998 Order could not have been
validly appealed such that it would divest the labor arbiter of his jurisdiction over
the consolidated cases. This being the case, the labor arbiter still had jurisdiction
when he rendered his Decision.
Even if petitioners filed a special civil action for certiorari, which would have
been the proper remedy, the same would still fail. The Court finds that the labor
arbiter did not commit any grave abuse of discretion when he issued the 25
August 1998 Order. For one, the holding of an adversarial trial is discretionary on
the labor arbiter and the parties cannot demand it as a matter of right.31
Section 4, Rule V of the New Rules of Procedure of the NLRC32 grants a labor
arbiter wide latitude to determine, after the submission by the parties of their
position papers/memoranda, whether there is need for a formal trial or
hearing.33 As this court has so often held, a formal type or trial-type hearing is
not at all times and in all instances essential to due process the requirements of
which are satisfied where the parties are afforded fair and reasonable
opportunity to explain their side of controversy.34 In one case, this Court held
that a party has no vested right to a formal hearing simply and merely because
the labor arbiter granted its motion and set the case for hearing.35
Related to the issue of jurisdiction is the allegation that the decisions of the
Court of Appeals, the NLRC and the labor arbiter are without evidentiary support
since the respondent was not able to present a single evidence due to the 25
August 1998 Order of the labor arbiter terminating the trial of the cases and
requiring submission of the parties memoranda, and ordaining at the end of the
memorandum period the submission of the cases for decision.
Petitioners argument that had the labor arbiter allowed respondents to present
their evidence during the formal trial, the Decision would have been different,
cannot be sustained. As previously stated, the labor arbiter enjoys wide
discretion in determining whether there is a need for a formal hearing in a given
case, and he or she may use all reasonable means to ascertain the facts of each
case without regard to technicalities. With or without a formal hearing, the labor
arbiter may still adequately decide the case since he can resolve the issues on

the basis of the pleadings and other documentary evidence previously

submitted. When the parties submitted their position papers and other pertinent
pleadings to the labor arbiter, it is understood/given/deemed that they have
included therein all the pieces of evidence needed to establish their respective
cases. The rationale for this rule is explained by the Court in one case, thus:
(P)etitioner believes that had there been a formal hearing, the arbiters alleged
mistaken reliance on some of the documentary evidence submitted by parties
would have been cured and remedied by them, presumably through the
presentation of controverting evidence. Evidently, this postulate is not in
consonance with the need for speedy disposition of labor cases, for the parties
may then willfully withhold their evidence and disclose the same only during the
formal hearing, thus creating surprises which could merely complicate the issues
and prolong the trial. There is a dire need to lessen technicalities in the process
of settling labor disputes."36
Elementary is the principle that this court is not a trier of facts. Judicial review of
labor cases does not go beyond the evaluation of the sufficiency of the evidence
upon which its labor officials findings rest.37 As such, the findings of facts and
conclusion of the NLRC are generally accorded not only great weight and respect
but even clothed with finality and deemed binding on this Court as long as they
are supported by substantial evidence. In the instant case, the Court finds that
the labor arbiters decision, which was affirmed by both the NLRC and the Court
of Appeals cite as basis thereof the evidence presented by both the petitioners
and respondents in their pleadings. It is no longer the Courts function to assess
and evaluate all over again the evidence, testimonial and documentary, adduced
by the parties to an appeal, particularly where the findings of both the labor
arbiter, the NLRC and the appellate court trial court on the matter coincide, as in
this case at bar.38
The submission that petitioners Request for Admission should have been
deemed admitted in their favor after respondents had failed to file a sworn reply
or objection thereto cannot be sustained.
A request for admission is a remedy provided by Rule 26 of the Rules of Court,
which allows a party to file and serve upon any other party a written request for
the admission of : (i) the genuineness of any material and relevant document
described in and exhibited with the request; or (ii) the truth of any material and
relevant matter of fact set forth in the request. Said request must be answered
under oath within the period indicated in the request, otherwise the matters of
which admission were requested should be deemed admitted. Petitioners claim
that respondents, instead of filing an answer under oath, filed an unsworn

reply/objection thereto. Thus, the admissions should be deemed admitted in

their favor.
Petitioners Request for Admission does not fall under Rule 26 of the Rules of
Court. A review of said Request for Admission shows that it contained matters
which are precisely the issues in the consolidated cases, and/or irrelevant
matters; for example, the reasons behind the lockout, the companys motive in
the CBA negotiations, lack of notice of dismissal, the validity of the release and
quitclaim, etc.39 Rule 26 as a mode of discovery contemplates of interrogatories
that would clarify and tend to shed light on the truth or falsity of the allegations
in a pleading. That is its primary function. It does not refer to a mere reiteration
of what has already been alleged in the pleadings.40

be upheld. While the procedural infirmity cannot be cured, it should not

invalidate the dismissal. However, the employer should be held liable for noncompliance with the procedural requirements of due process.44 But in any case,
the issue of illegal dismissal had already been resolved by the NLRC and the
Court of Appeals, which both found that the company had an authorized cause
and had complied with the requirements of due process when it dismissed
petitioners.
WHEREFORE, the petition is DENIED and the Decision dated 31 July 2000 in CAG.R. SP No. 54424 is AFFIRMED.
SO ORDERED.
G.R. No. 164893

Otherwise stated, petitioner's request constitutes "an utter redundancy and a

useless, pointless process which the respondent should not be subjected to." The
rule on admission as a mode of discovery is intended "to expedite trial and to
relieve parties of the costs of proving facts which will not be disputed on trial and
the truth of which can be ascertained by reasonable inquiry." Thus, if the request
for admission only serves to delay the proceedings by abetting redundancy in
the pleadings, the intended purpose for the rule will certainly be defeated.41
More importantly, well-settled is the rule that hearings and resolutions of labor
disputes are not governed by the strict and technical rules of evidence and
procedure observed in the regular courts of law. Technical rules of procedure are
not applicable in labor cases, but may apply only by analogy or in a suppletory
character, for instance, when there is a need to attain substantial justice and an
expeditious, practical and convenient solution to a labor problem.42 In view of
the nature of the matters requested for admission by the petitioners, their
request for admission would have only served to delay the proceedings.

March 1, 2007

CONSTANCIA DULDULAO, Petitioner,

vs.
THE COURT OF APPEALS, and BAGUIO
Respondents.

COLLEGES

FOUNDATION,

DECISION
TINGA, J.:
For the Courts adjudication is a petition for review under Rule 45, seeking to set
aside the Decision1 of the Court of Appeals in CA-G.R. SP No. 58291, which
affirmed the 30 September 1999 Decision2 of the National Labor Relations
Commission (NLRC) in NLRC CASE RAB-CAR-02-0076-97, NLRC NCR CA NO.
018861-99.
The facts of the case, as culled from the records, follow.

One final note.

Petitioners claim that the alleged failure of the company to notify them of their
termination renders their dismissal illegal, and thus they should be reinstated
and paid with full backwages or given separation pay, following the Courts
ruling in Serrano v. Court of Appeals. The argument does not hold. The ruling in
Serrano has
already been superseded by the case of Agabon v. National Labor Relation
Commission.43 The Agabon enunciates the new doctrine that if the dismissal is
for just cause but statutory due process was not observed, the dismissal should

Petitioner Constancia P. Duldulao was hired by respondent Baguio Colleges

Foundation (BCF) as secretary/clerk-typist and assigned to the College of Law
sometime in June of 1987. In August 1996, a certain law student filed a
complaint against petitioner for alleged irregularities in the performance of her
work. Petitioner was told to submit her answer to the complaint and given
several extensions within which to do so. However, despite the extensions, she
failed to submit her answer.
On 1 October 1996, Dean Honorato V. Aquino of the College of Law informed
respondents President, Atty. Edilberto B. Tenefrancia, of petitioners failure to file

her answer and recommended the assignment of petitioner outside the College
of Law, not only because of such failure to answer but also her having admitted
fraternizing with students of the College. On the same day, respondents Vice
President for Administration, Leonardo S. dela Cruz, issued a Department Order3
which reads:
October 1, 1996
DEPARTMENT ORDER
To: Mrs. Constancia Duldulao
Re: Transfer of assignment
------------------------------------------------------------------------------1. Effective tomorrow 2 October 1996[,] you shall report at the office of the
Principals of the High School and Elementary Departments;
2. You shall render regular duty in those offices until further notice.
3. Please be guided accordingly.
On 3 October 1996, petitioner moved for reconsideration of the Department
Order and requested another five (5)-day extension within which to file her
answer. Dean Aquino informed petitioner that he could no longer act on her
motion for reconsideration and motion for extension since the matter had
already been elevated to respondents Executive Board due to the delay in the
submission of her answer. Petitioner eventually filed her answer on 7 October
1996.
Petitioner filed a case with the BCF Grievance Committee, citing her
"unceremonious, capricious, whimsical and arbitrary reassignment from her
position as Secretary of the College of Law to the Elementary/High School
Departments," but the case was transferred to the Administrative Investigating
Committee because petitioner is not a member of the union. On 21 January
1997, the Committee found the Department Order appropriate since it was
intended to prevent the controversy between petitioner and the complaining
student from adversely affecting a harmonious relationship within the College of
Law among all its constituents. It recommended that petitioner start reporting to
her new assignment.4 The recommendation was approved and adopted by
President Tenefrancia on 7 February 1997.5

In the interim, upon the request of several students from the College of Law,
respondent constituted a Fact-Finding Committee to investigate the allegations
concerning the administrative matters and policies in the College. On 26 May
1997, the Fact Finding Committee Report6 was submitted to the Dean. It
contained, among others, a pronouncement that while petitioner was not guilty
of the specific charges against her, "the implementation by the college secretary
of the policies of the college, while oftentimes carrying the imprimatur of the
Dean and of the Faculty, had alienated some students due to the lack of
circumspection which, when coupled with ingrained perceptions, result in failure
of communication."7
The Department Order notwithstanding, petitioner did not report for work and
instead took a vacation leave and several other leave of absences from October
1996 to January 1997. Finally, on 17 February 1997, petitioner filed a complaint
for constructive dismissal with prayer for moral and exemplary damages and
attorneys fees before the NLRC Regional Arbitration Branch-Cordillera
Administrative Region (NLRC RAB-CAR). She claimed that she was arbitrarily
directed to report for work in a location far from her original place of assignment
on account of which she would be incurring additional expenses in
transportation. In addition, she stated that aside from being tainted with
procedural lapses in violation of her right to due process, the transfer also
amounted to her demotion in rank.
On 29 December 1998, Executive Labor Arbiter Jesselito B. Latoja ruled in favor
of petitioner, ordering her reinstatement to her former position and awarding her
moral and exemplary damages, as well as attorneys fees.8
On appeal, the NLRC reversed the Executive Labor Arbiters decision, sustained
petitioners transfer, and dismissed the complaint for illegal dismissal for lack of
merit.9 In the Decision, the Commission gave weight to the argument that
petitioner was neither demoted nor dismissed, as her salary, benefits and other
privileges remained the same despite her reassignment. Neither was there any
violation of due process since petitioner was granted an initial period and several
extensions within which to file her answer to the complaint against her. Even as
petitioner continued to display a hostile attitude in work by refusing to report at
her new assignment under the guise of leave of absences, respondent did not
impose any disciplinary action, the Commission added.
The Court of Appeals, in turn, upheld the decision of the NLRC. The appellate
court ruled that petitioner was not constructively dismissed, finding that
petitioner was unable to point to any evidence that her reassignment was

prompted by the malevolence or ill-will of respondent. Besides, respondent did

not intend petitioners transfer to be a disciplinary sanction against her but
merely a temporary measure to prevent controversy within the College of Law.10
In the instant petition, petitioner reiterates her posture that her transfer was a
case of constructive dismissal, tainted with bad faith and intended as
punishment for an erring employee, whereupon she claims entitlement to
backwages, benefits and moral damages.
On the other hand, respondent asserts that petitioners temporary transfer from
the Office of the Dean of the College of Law to the Office of the Principals of the
High School and Elementary Departments was premised on certain
considerations, namely: (i) the polarization of the students as a result of the
controversy between petitioner and the complaining student; (ii) petitioners
failure to file her answer to the complaint against her; and (iii) petitioners
having expressly admitted her fraternization with some students.11 Respondent
justifies its reassignment of petitioner as a legitimate exercise of its
management prerogative.12
Essentially, the issue in this case is whether petitioners transfer as
secretary/clerk-typist from the College of Law to the High School and Elementary
Departments amounts to constructive dismissal.
The petition deserves rejection.
It is a well-settled rule that findings of fact of quasi-judicial agencies, like the
NLRC, are accorded not only respect but at times even finality if such findings
are supported by substantial evidence.13 This is especially so in this case, where
the findings of the NLRC were affirmed by the Court of Appeals. The findings of
fact made therein can only be set aside upon showing of grave abuse of
discretion, fraud or error of law, none of which has been shown in this case.
There is constructive dismissal if an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on the part of the employee that
it would foreclose any choice by him except to forego his continued
employment.14 It exists where there is cessation of work because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank and a diminution in pay."15 The factual milieu in
this case is different. Thus, the NLRC and the Court of Appeals both ruled that
the treatment accorded petitioner does not constitute constructive dismissal.

At the onset, it must be stressed that petitioner has no vested right to the
position of secretary/clerk-typist of the College of Law that may operate to
deprive respondent of its prerogative to change or transfer her assignment to
another department where she will be most useful in its
judgment. After all, petitioner was employed by respondent which is the BCF
system itself, not the College of Law only, which is but a component part of the
system. Thus, to respondent belongs the prerogative to reassign petitioner to
any of its departments as it sees fit, provided that such reassignment is made in
good faith.
We have long recognized the prerogative of management to transfer an
employee from one office to another within the same business establishment, as
the exigency of the business may require, provided that the transfer does not
result in a demotion in rank or a diminution in salary, benefits and other
privileges of the employee; or is not unreasonable, inconvenient or prejudicial to
the latter; or is not used as a subterfuge by the employer to rid himself of an
undesirable worker.16 In the case of Philippine Japan Active Carbon Corp. v.
NLRC,17 the Court ruled:
It is the employers prerogative, based on its assessment and perception of its
employees qualifications, aptitudes, and competence, to move them around in
the various areas of its business operations in order to ascertain where they will
function with maximum benefit to the company. An employees right to security
of tenure does not give him such a vested right in his position as would deprive
the company of its prerogative to change his assignment or transfer him where
he will be most useful. When his transfer is not unreasonable, nor inconvenient,
nor prejudicial to him, and it does not involve a demotion in rank or a diminution
of his salaries, benefits, and other privileges, the employee may not complain
that it amounts to a constructive dismissal.18
The Court does not see how petitioners transfer from the College of Law to the
Office of the Principals of the Elementary and High School Departments can be
described as unreasonable, inconvenient, or prejudicial to her. In her complaint,
petitioner alleged that by reason of the transfer, she would incur additional
transportation expenses, be constrained to engage the services of a househelp,
and suffer a demotion in rank and status. As explained by respondent, the
difference in traveling distance is not so large as to cause great inconvenience to
petitioner as in fact, by merely changing the route to take, the distance from
petitioners house to the College of Law and that from her house to her new
assignment will almost be the same.19

Neither is the transfer equivalent to a demotion in rank and status. Petitioner

was a secretary/clerk-typist of the College of Law. As such secretary/clerk-typist,
she would only have to perform the same duties in the Office of the Principals of
the High School and Elementary Departments.
Petitioner argues that she was denied her right to due process when she was
transferred to another department even before she was able to file her answer.
Reassignments made by management pending investigation of irregularities
allegedly committed by an employee fall within the ambit of management
prerogative.20 The transfer, while
incidental to the pending charges against petitioner, was not meant to be a
penalty, but rather a preventive measure to avoid further damage to the College
of Law. It was not designed to be the culmination of the then on-going
administrative case against petitioner. Hence, the order of transfer prior to the
submission of her answer cannot be deemed a violation of her right to due
process.
This Court has, in several instances, upheld reassignments/transfers pending
investigations of the irregularities allegedly committed by employees, the
rationale being that the purpose of reassignments is no different from that of
preventive suspension which management could validly impose as a measure of
protection of the companys property pending investigation of any malfeasance
or misfeasance committed by the employee.21
The BCF system that is respondent is more than a business venture; it is, first
and foremost, an educational institution, engaged in the noble task of teaching
and preparing our youth for the career paths they intend to take. In the same
way that an ordinary business cannot afford to put at risk its resources while
there is a pending complaint or investigation against a possible erring employee,
respondent could not afford to have a discordant studentry, and a college
tainted with controversy. Surely, the harmony and integrity of its faculty, staff
and students are as important as, if not more important than, any of the
properties of respondent.
Petitioner cannot claim constructive dismissal simply because her transfer to
another department was against her wishes and, in her view, amounts to a
demotion. "Certainly, the Court cannot accept the proposition that when an
employee opposes his employers decision to transfer him to another work place,
there being no bad faith or underhanded motives on the part of either party, it is
the employees wishes that should be made to prevail."22 Mere incidental
inconvenience is not enough to warrant a claim of constructive dismissal.23

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.
G.R. No. 171764

June 8, 2007

ALBERT O. TINIO, petitioner,

vs.
COURT OF APPEALS, SMART COMMUNICATIONS, INC., ALEX O. CAEG and
ANASTACIO MARTIREZ, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari seeks to annul and set aside the Decision
and Resolution of the Court of Appeals dated October 25, 20051 and March 2,
2006,2 respectively, in CA-G.R. SP No. 90677 which reversed and set aside the
Decision of the National Labor Relations Commission (NLRC) dated July 30,
2004,3 and its Resolution dated April 20, 2005,4 for having been issued with
grave abuse of discretion amounting to lack or excess of jurisdiction. The
appellate court reinstated the Decision of the Labor Arbiter dated December 9,
20035 which dismissed petitioners complaint for lack of merit.
On December 1, 2002, Smart Communications, Inc. (SMART) employed petitioner
Albert O. Tinio as its General Manager for Visayas/Mindanao (VISMIN) Sales and
Operations based in Cebu.6
On May 14, 2003, private respondent Alex O. Caeg, Group Head, Sales and
Distribution of SMART, under the supervision of co-respondent Anastacio
Martirez, informed petitioner of his new assignment as Sales Manager for
Corporate Sales in SMARTs Head Office in Makati City, effective June 1, 2003.
However, petitioner deferred action on his assignment until he had been
apprised of the duties and responsibilities of his new position and the terms and
conditions of his relocation. In a memorandum dated May 26, 2003, Caeg
informed petitioner that his transfer was for the greater business interest of the
company; that petitioner is expected to meet at least 80% of his sales and
collection targets; and that financial assistance shall be provided for his physical
transfer to Manila.

On June 2, 2003, petitioner reported to SMARTs Head Office in Makati and

discussed with Ann Margaret V. Santiago, HRD Group Head, his job description,
functions, responsibilities, salary and benefits, as well as options for
relocation/transfer of his family to Manila. The Department Head for Corporate
Business Group, VIP Accounts Management and Marketing PR, Julie C. Carceller,
likewise explained to him details of his new assignment such as job description,
scope of the position, objectives and goals of the department, key
responsibilities as well as targets and expectations of SMART from the Corporate
Business Group. The next day, June 3, 2003, petitioner and Caeg met to discuss
further details of petitioners new position.7
Thereafter, petitioner did not report for work. He instead filed a complaint for
constructive dismissal with claims for moral and exemplary damages and
attorneys fees against SMART and private respondents Caeg and Martirez. On
June 16, 2003, Caeg required petitioner to explain his continuing refusal to
transfer to his new assignment, but instead of giving an explanation, petitioner
referred Caeg to his complaint for constructive dismissal.8 Private respondents
also scheduled a hearing on June 23, 2003 but petitioner failed to attend. Thus,
private respondents terminated petitioners employment effective June 25, 2003
for insubordination.9
On December 9, 2003, the Labor Arbiter rendered judgment finding that
petitioner was not constructively or illegally dismissed; hence, the complaint was
ordered dismissed. But the Labor Arbiter awarded financial assistance to
petitioner in the amount of P235,400.00.10
On appeal, the NLRC reversed the Labor Arbiters decision and declared that
petitioner was illegally dismissed, awarded him full backwages, including the
corresponding 13th month pay, moral and exemplary damages, as well as
attorneys fees. Private respondents motion for reconsideration was denied.11
On a petition for certiorari under Rule 65 to the Court of Appeals, private
respondents alleged that the NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction in ruling that: (1) the transfer of Tinio
resulted in a demotion in rank; (2) the transfer was not a valid exercise of
management prerogative; (3) SMART did not comply with the procedural
requirements of due process, and Tinios termination was made with malice and
in bad faith; and (4) Tinio is entitled to reinstatement and full backwages.12
On October 25, 2005, the Court of Appeals reversed and set aside the Decision
of the NLRC and reinstated the Decision of the Labor Arbiter dismissing the

complaint for lack of merit.13 Petitioners motion for reconsideration was denied;
hence, this appeal.14
The twin issues for resolution are: (1) whether private respondents act of
transferring petitioner to its Head Office in Makati was a valid exercise of
management prerogative; and (2) whether petitioner was constructively
dismissed.
This Court has consistently recognized and upheld the prerogative of
management to transfer an employee from one office to another within the
business establishment, provided there is no demotion in rank or a diminution of
salary, benefits and other privileges.15 As a rule, the Court will not interfere with
an employers prerogative to regulate all aspects of employment which include
among others, work assignment, working methods and place and manner of
work. Labor laws discourage interference with an employers judgment in the
conduct of his business.16
The doctrine is well-settled that it is the employers prerogative, based on its
assessment and perception of its employees qualifications, aptitudes and
competence, to move them around in the various areas of its business
operations in order to ascertain where they will function with maximum benefit
to the company.17 This is a privilege inherent in the employers right to control
and manage his enterprise effectively. The freedom of management to conduct
its business operations to achieve its purpose cannot be denied.18
An employees right to security of tenure does not give him a vested right to his
position as would deprive the company of its prerogative to change his
assignment or transfer him where he will be most useful. When his transfer is not
unreasonable, or inconvenient, or prejudicial to him, and it does not involve a
demotion in rank or a diminution of his salaries, benefits and other privileges,
the employee may not complain that it amounts to a constructive dismissal.19
But, like other rights, there are limits thereto. The managerial prerogative to
transfer personnel must be exercised without grave abuse of discretion, bearing
in mind the basic elements of justice and fair play. Having the right should not be
confused with the manner in which the right is exercised. Thus, it cannot be used
as a subterfuge by the employer to rid himself of an undesirable worker. The
employer must be able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in
rank or a diminution of his salaries, privileges, and other benefits. Should the
employer fail to overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been defined as a quitting

because continued employment is rendered impossible, unreasonable or

unlikely; as an offer involving a demotion in rank and diminution of pay. Likewise,
constructive dismissal exists when an act of clear discrimination, insensibility or
disdain by an employer has become so unbearable to the employee leaving him
with no option but to forego his continued employment.20
A transfer is a "movement from one position to another which is of equivalent
rank, level or salary, without break in service." Promotion, on the other hand, is
the "advancement from one position to another with an increase in duties and
responsibilities as authorized by law, and usually accompanied by an increase in
salary."21 Conversely, demotion involves a situation where an employee is
relegated to a subordinate or less important position constituting a reduction to
a lower grade or rank, with a corresponding decrease in duties and
responsibilities, and usually accompanied by a decrease in salary.
The burden of proof in constructive dismissal cases is on the employer to
establish that the transfer of an employee is for valid and legitimate grounds,
i.e., that the transfer is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of salaries,
privileges and other benefits.
Hence, it may be gleaned from the foregoing discourse that a transfer is deemed
to be constructive dismissal when three conditions concur: first, when the
transfer is unreasonable, inconvenient or prejudicial to the employee; second,
when the transfer involves a demotion in rank or diminution of salaries, benefits
and other privileges; and third, when the employer performs a clear act of
discrimination, insensibility, or disdain towards the employee, which forecloses
any choice by the latter except to forego his continued employment.
In the instant case, the transfer from Cebu to Makati was not unreasonable,
inconvenient or prejudicial to the petitioner considering that it was a transfer
from the provincial office to the main office of SMART. The position would entail
greater responsibilities because it would involve corporate accounts of top
establishments in Makati which are significantly greater in value than the
individual accounts in Visayas and Mindanao. In terms of career advancement,
the transfer was even beneficial and advantageous since he was being assigned
the corporate accounts of the choice clients of SMART. Moreover, the transfer
was not economically inconvenient because all expenses relative thereto were to
be borne by SMART.
Also, the transfer from Cebu to Makati does not represent a demotion in rank or
diminution of salaries, benefits and other privileges. It was a lateral transfer with

the same salaries, benefits and privileges. The title of Corporate Sales Manager,
as correctly pointed out by the appellate court, is not derogatory to the
petitioner considering that he will still receive the same benefits and salary he
received as Senior Manager.22 The position is deemed in the level of Senior
Manager considering that the skills and competencies required involve handling
the accounts of top corporate clients of the company, representing some of the
largest corporations in the Philippines.
Mere title or position held by an employee in a company does not determine
whether a transfer constitutes a demotion. Rather, it is the totality of the
following circumstances, to wit: economic significance of the work, the duties
and responsibilities conferred, as well as the same rank and salary of the
employee, among others, that establishes whether a transfer is a demotion.
We find that petitioner was not demoted since his transfer from Cebu to Makati
was being implemented due to a valid corporate reorganization to streamline
management operations. The act of management in reorganizing as well as
transferring its employees to achieve its stated objectives is a legitimate
exercise of their management prerogatives, barring any showing of bad faith
which is absent in the instant case. Despite the change of petitioners title from
"Senior Manager" to "Corporate Sales Manager," he still enjoyed the same rank
and salary. Although Cebu operations of SMART constitute a large individual
client base representing both Visayas and Mindanao, the Makati operations deal
with higher corporate or business sales due to the larger concentration of top
Philippine and multinational corporations. In other words, petitioner will be
managing the select client base that produces the bulk of the corporate sales
income of SMART. We ruled in Philippine Wireless Inc. v. National Labor Relations
Commission23 that there is no demotion where there is no reduction in position,
rank or salary as a result of the transfer.24
Moreover, private respondents did not act with discrimination, insensibility, or
disdain towards petitioner, which foreclosed any choice by the latter except to
forego his continued employment. SMART, through its representatives,
attempted to address petitioners grievances by meeting with the latter on
several occasions thus addressing this internal problem utilizing the proper
corporate channels. Several meetings were held between petitioner and private
respondents with a view to clarifying the details of petitioners new assignment,
such as job description, relation to corporate structure, functions,
responsibilities, salary and benefits. Meetings were on-going when petitioner
opted to file a complaint for constructive dismissal.

We agree with the Court of Appeals ruling that private respondent SMART
exercised its management prerogative in transferring petitioner from Cebu to
Makati as the person in charge of the post-paid sales accounts. SMART
management has the prerogative to transfer or re-assign its employees to a
position where they can contribute significantly to the company objectives in line
with its corporate reorganization. Petitioners argument that the transfer was
hastily arrived at, considering that he was being ordered to transfer within 15
days from notice and that the Makati head office personnel were unaware
thereof is untenable. Moreover, petitioner knew of the management prerogative
to re-assign its employees as expressly stipulated in petitioners employment
contract.

award of financial assistance in the amount of P235,400 given by the Labor

Arbiter and affirmed by the appellate court must be deleted for lack of basis.

No evidence was presented to substantiate petitioners claim that the transfer

was punitive or that private respondents were in bad faith. The failure of private
respondent Caeg to directly address the supposed "punitive" nature of the
transfer cannot establish bad faith, without independent evidence to prove this
allegation.

G.R. No. 159730

We held in Abbott Laboratories (Phils.), Inc. v. National Labor Relations

Commission,25 that an employee has no valid reason to disobey the order of
transfer given by management, especially if he has tacitly given his consent
thereto when he acceded to the companys policy of hiring sales staff who are
willing to be assigned anywhere in the Philippines which is demanded by the
employers business.26
By the very nature of their employment, sales executives are expected to travel.
They should anticipate re-assignment according to the demands of the
employers business. Companies which rely heavily on sales such as private
respondent SMART are expected to assign their employees to areas where
markets may be expanded or places where their sales could be improved. The
right to transfer or reassign an employee is thus a reasonable exercise of
management prerogatives and is recognized as an employers exclusive right in
running its company.27
In the instant case, petitioner premised his deliberate and unjustified refusal to
return to work on the belief that he had been constructively dismissed, despite
attempts by SMART to accommodate his demands. Petitioners deliberate and
unjustified refusal to resume his employment, a form of neglect of duty, despite
attempts by the company to hear out his grievances, constitutes abandonment.
Petitioners failure to report for work, or absence without valid or justifiable
reason, coupled with a clear intention to sever employer-employee relationship,
leads us to no other conclusion than that he abandoned his work. As such, the

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of
Appeals dated October 25, 2005 and March 2, 2006, respectively, in CA-G.R. SP
No. 90677, dismissing the complaint for constructive dismissal against private
respondents Smart Communications, Inc., Alex O. Caeg and Anastacio Martirez
are AFFIRMED with the MODIFICATION that the award of financial assistance be
DELETED for lack of basis. No pronouncement as to costs.
SO ORDERED.
February 11, 2008

NORKIS TRADING CO., INC. and/or MANUEL GASPAR E. ALBOS, JR.,

petitioner,
vs.
MELVIN GNILO, respondent.**
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision1 dated June 20, 2003 and the
Resolution2 dated August 25, 2003 of the Court of Appeals (CA) in CA G.R. SP No.
72568.
Melvin R. Gnilo (respondent) was initially hired by Norkis Trading Co., Inc.
(petitioner Norkis) as Norkis Installment Collector (NIC) in April 1988. Manuel
Gaspar E. Albos, Jr. (petitioner Albos) is the Senior Vice-President of petitioner
Norkis. Respondent held various positions in the company until he was appointed
as Credit and Collection Manager of Magna Financial Services Group, Inc.-Legaspi
Branch, petitioner Norkiss sister company, in charge of the areas of Albay and
Catanduanes with travel and transportation allowances and a service car.
A special audit team was conducted in respondent's office in Legaspi, Albay from
March 13 to April 5, 2000 when it was found out that respondent forwarded the
monthly collection reports of the NICs under his supervision without checking the
veracity of the same. It appeared that the monthly collection highlights for the
months of April to September 1999 submitted by respondent to the top
management were all overstated particularly the account handled by NIC Dennis

Cadag, who made it appear that the collection efficiency was higher than it
actually was; and that the top management was misled into believing that
respondents area of responsibility obtained a favorable collection efficiency.
Respondent was then charged by petitioners' Inquiry Assistance Panel (Panel)
with negligence of basic duties and responsibilities resulting in loss of trust and
confidence and laxity in directing and supervising his own subordinates. During
the investigation, respondent admitted that he was negligent for failing to
regularly check the report of each NIC under his supervision; that he only
checked at random the NIC's monthly collection highlight reports; and that as a
leader, he is responsible for the actions of his subordinates. He however denied
being lax in supervising his subordinates, as he imposed discipline on them if the
need arose.
On May 30, 2000, petitioner Norkis through its Human Resource Manager issued
a memorandum3 placing respondent under 15 days suspension without pay,
travel and transportation allowance, effective upon receipt thereof. Respondent
filed a letter protesting his suspension and seeking a review of the penalty
imposed.
Another memorandum4 dated June 30, 2000 was issued to respondent requiring
him to report on July 5, 2000 to the head office of petitioner Norkis in
Mandaluyong City for a re-training or a possible new assignment without
prejudice to his request for a reconsideration or an appeal of his suspension. He
was then assigned to the Marketing Division directly reporting to petitioner
Albos.
In a letter5 dated July 27, 2000, respondent requested petitioner Albos that he
be assigned as Sales Engineer or to any position commensurate with his
qualifications. However, on July 28, 2000, respondent was formally appointed as
Marketing Assistant to petitioner Albos, which position respondent subsequently
assumed.
However, on October 4, 2000, respondent filed with the Labor Arbiter (LA) a
complaint for illegal suspension, constructive dismissal, non-payment of
allowance, vacation/sick leave, damages and attorney's fees against petitioners.
On March 30, 2001, the LA rendered his decision6 dismissing the complaint for
lack of merit.
The LA found that the position of Credit and Collection Manager held by
respondent involved a high degree of responsibility requiring trust and

confidence; that his failure to observe the required procedure in the preparation
of reports, which resulted in the overstated collection reports continuously for
more than six months, was sufficient to breach the trust and confidence of
petitioners and was a valid ground for termination; that instead of terminating
him, petitioners merely imposed a 15-day suspension which was not illegal; and
that petitioners exercised their inherent prerogative as an employer when they
appointed respondent as a Marketing Assistant.
Respondent appealed the LA decision to the National Labor Relations
Commission (NLRC). In a Resolution7 dated January 29, 2002, the NLRC reversed
the LA, the dispositive portion of which reads:
WHEREFORE, premises considered, complainant's appeal is partly GRANTED. The
Labor Arbiter's decision in the above-entitled case is REVERSED. It is hereby
declared that complainant was constructively dismissed from his employment.
Respondent Norkis Trading Co., Inc is ordered to pay complainant the amount of
P411,796.00 as backwages and separation pay, plus ten percent (10%) thereof
as attorney's fees.8
In so ruling, the NLRC found that the 15-day suspension cannot be considered
harsh and unconscionable as petitioners validly exercised their management
prerogative to impose discipline on an erring employee for negligence by
submitting unreliable and inaccurate reports for six consecutive months to the
top management who used the reports in their planning and decision-making
activities, and thus caused damage or injury one way or another to petitioners. It
however held that the transfer of respondent from the position of Credit and
Collection Manager to Marketing Assistant resulted in his demotion in rank from
Manager to a mere rank and file employee, which was tantamount to
constructive dismissal and therefore illegal.
The NLRC ruled that respondent was constructively dismissed and therefore he
was entitled to reinstatement and payment of full backwages from the time he
quit working on October 19, 2000 due to his demotion up to the time of his
actual reinstatement. However, it found that the parties' relationship was already
strained on account of this case; thus, it ordered the payment of respondents
separation pay equivalent to his one-month salary for every year of service. It
upheld the LA's dismissal of respondent's prayer for damages for failure to
submit substantial evidence to support the same, but awarded attorney's fees.
Petitioners filed their Motion for Reconsideration while respondent filed his
Motion for Reconsideration/Clarification.

On June 24, 2002, the NLRC issued another Resolution,9 the dispositive portion
of which reads:

jurisdiction, this Court may look into the records of the case to re-examine the
questioned findings.

WHEREFORE, premises considered, respondents' [petitioners] motion for

reconsideration is DENIED for lack of merit while complainant's [respondent]
motion for reconsideration is GRANTED. This Commission's January 29, 2002
Resolution in the above-entitled case is hereby AFFIRMED with the
MODIFICATION that respondent Norkis Trading Company, Inc. is ordered to pay
complainant the adjusted amount of P444,739.38 as backwages, separation pay,
13th month pay and refund of provident fund contribution.10

Petitioners claim that they were merely exercising their inherent prerogative as
an employer when they appointed respondent as Marketing Assistant to the
Senior Vice-President for Marketing; that respondent's performance evaluations
during the previous years showed that he was weak in the financial aspect of
operation, but was good in marketing; thus, he would function with utmost
efficiency and maximum benefit to the company in the Marketing Department;
and that he had accepted his appointment unconditionally.

In granting respondent's motion for reconsideration, the NLRC found that

petitioners admitted in their Rejoinder that they had not paid respondent his
13th-month pay and that respondent had yet to make a written request for the
refund of his provident fund contribution; thus, respondent was entitled thereto
and the provident fund contribution must also be returned to him.

Petitioners submit that the positions of Credit and Collection Manager and
Marketing Assistant are co-equal and of the same level of authority; that the
scope of work of a Marketing Assistant is wider, since he has access to
confidential informations and has the chance to communicate directly with
higher officers of the company; that his area of responsibility as Credit and
Collection Manager was limited to branches located in Legaspi City and Virac,
Catanduanes; whereas as Marketing Assistant, he is responsible for analyzing
and coordinating all marketing information relevant to the company's
motorcycles from all over Luzon, and his reports are necessary for the planning
and decision-making activities of petitioners' top management; and that there is
no demotion, since respondent's position is more encompassing and vital to the
company and he is receiving the same salary.

Petitioners filed a petition for certiorari with the CA. Subsequently, they also filed
a Motion for the Issuance of a Temporary Restraining Order or a Writ of
Preliminary Injunction, as respondent had filed a Motion for the Issuance of a Writ
of Execution with the NLRC.
On June 20, 2003, the CA rendered its assailed Decision denying the petition and
affirming the NLRC Resolutions.
On August 25, 2003, the CA denied petitioners Motion for Reconsideration.
Hence, herein petition wherein petitioners assigned the following errors
committed by the CA:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE
ERRONEOUS FINDINGS OF THE NLRC DESPITE THE FACT THAT THE NLRC
OVERLOOKED, MISAPPRECIATED OR MISAPPLIED SOME FACTS THAT WOULD
HAVE AFFECTED THE RESULT OF THE CASE.
THE HONORABLE COURT OF APPEALS ACTED CONTRARY TO LAW AND
JURISPRUDENCE WHEN IT HELD THAT PRIVATE RESPONDENT WAS
CONSTRUCTIVELY DISMISSED. 11
Petitioners contend that factual findings of quasi-judicial agencies, while
generally accorded finality, may be reviewed by this Court when the findings of
the NLRC and the LA are contradictory; that in the exercise of its equity

Petitioners also contend that they should not be adjudged to pay attorney's fees
as they did not act in bad faith.
In his Comment, respondent states that it is not the function of this Court to
analyze and weigh all over again the evidence already considered in the
proceedings below, as its jurisdiction is limited to reviewing errors of law; that
the CA had not only passed upon the legal/factual issues and arguments
presented by the parties but had waded into the records and found out that the
findings of the NLRC were supported by substantial evidence. He informs this
Court that he was able to enforce the writ of execution issued by the NLRC and
subsequently secured the release of the monetary award on November 14, 2003.
The parties thereafter filed their respective memoranda.
The issue for resolution is whether respondent's transfer from the position of
Credit and Collection Manager to that of a Marketing Assistant amounts to a
constructive dismissal. This is a factual matter. Rule 45 of the Rules of Court
provides that only questions of law may be raised in a petition for review on

certiorari. The raison d'etre is that the Court is not a trier of facts. It is not to reexamine and re-evaluate the evidence on record. The general rule is that the
factual findings of the NLRC, as affirmed by the CA, are accorded high respect
and finality unless the factual findings and conclusions of the LA clash with those
of the NLRC and the CA, as it appears in this case. Thus we have to review the
records and the arguments of the parties to resolve the factual issues and render
substantial justice to the parties.12
Well-settled is the rule that it is the prerogative of the employer to transfer and
reassign employees for valid reasons and according to the requirement of its
business.13 An owner of a business enterprise is given considerable leeway in
managing his business. Our law recognizes certain rights, collectively called
management prerogative as inherent in the management of business
enterprises. We have consistently recognized and upheld the prerogative of
management to transfer an employee from one office to another within the
business establishment, provided that there is no demotion in rank or diminution
of his salary, benefits and other privileges14 and the action is not motivated by
discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause.15 This privilege is inherent in the right of
employers to control and manage their enterprises effectively.16
The right of employees to security of tenure does not give them vested rights to
their positions to the extent of depriving management of its prerogative to
change their assignments or to transfer them. Managerial prerogatives, however,
are subject to limitations provided by law, collective bargaining agreements, and
general principles of fair play and justice.17
The employer bears the burden of showing that the transfer is not unreasonable,
inconvenient or prejudicial to the employee; and does not involve a demotion in
rank or a diminution of his salaries, privileges and other benefits.18 Should the
employer fail to overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal.19
Constructive dismissal is defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank
or a diminution of pay.20 Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an employer becomes unbearable
to the employee, leaving him with no option but to forego his continued
employment.21
A transfer is defined as a "movement from one position to another which is of
equivalent rank, level or salary, without break in service."22 Promotion, on the

other hand, is the "advancement from one position to another with an increase
in duties and responsibilities as authorized by law, and usually accompanied by
an increase in salary."23 Conversely, demotion involves a situation in which an
employee is relegated to a subordinate or less important position constituting a
reduction to a lower grade or rank, with a corresponding decrease in duties and
responsibilities, and usually accompanied by a decrease in salary.24
In this case, while the transfer of respondent from Credit and Collection Manager
to Marketing Assistant did not result in the reduction of his salary, there was a
reduction in his duties and responsibilities which amounted to a demotion
tantamount to a constructive dismissal as correctly held by the NLRC and the CA.
A comparison in the nature of work of these two positions shows a great
difference. As Credit and Collection Manager, respondent was clothed with all the
duties and responsibilities of a managerial employee. He could devise and
implement action plans to meet his objectives and exercise independent
judgment in resolving problem accounts. He had power and control over NICs,
Branch Control Officers (BCOs) and Cashiers under his supervision, and he
provided them training in the performance of their respective works. Further, he
had the authority to ensure reserves in the NICs, BCOs and Cashiers in case of
expansion, reassignment and/or termination. There is no doubt that said position
of Credit and Collection Manager entails great duties and responsibilities and
involves discretionary powers. In fact, even in petitioners pleadings, they
repeatedly stated that the position involved a high degree of responsibility
requiring trust and confidence as it relates closely to the financial interest of the
company.
On the other hand, the work of a Marketing Assistant is clerical in nature, which
does not involve the exercise of any discretion. Such job entails mere data
gathering on vital marketing informations relevant to petitioners' motorcycles
and making reports to his direct supervisor. He is a mere staff member in the
office of the Senior Vice-President for Marketing. While petitioners claim that the
position of a Marketing Assistant covers a wide area as compared with the
position of Credit and Collection Manager, the latter is reposed with managerial
duties in overseeing petitioners business in his assigned area, unlike the former
in which he merely collates raw data. These two positions are not of the same
level of authority.
There is constructive dismissal when an employee's functions, which were
originally supervisory in nature, were reduced; and such reduction is not
grounded on valid grounds such as genuine business necessity.25

We quote with approval the findings of the CA on the matter of respondent's

demotion in his functions, thus:
x x x Studying minutely the proof proffered by both sides, our considered ruling
is that there is more than the requisite quantum of evidence in support of the
NLRC's conclusion that indeed, private respondent was constructively dismissed.
This is evident, not only from the much reduced powers and prerogatives of the
private respondent when his position was changed from Credit and Collection
Manager to Marketing Assistant to the Senior Vice President; the variance in the
duties between the two, as may be gleaned from the definition of functions
made of record, in this case, are glaring and indubitable. As Credit and Collection
Manager, private respondent had the authority to "devise and implement action
plans x x x, manage and control the security and safety of collections and
repossessed units x x x, effectively supervise, teach and train BCO and cashiers
x x x, discipline NIC's, BCO's and cashiers, x x x," among others. In other words,
he was part of management, or was at the supervisory level, to say the least. On
the other hand, as Marketing Assistant to the Senior Vice President, private
respondent was stripped of all management and oversize wherewithal, and
became an appendage of his immediate supervisor, confined to such mundane
functions as to "analyze monthly LTO data x x x, coordinate with Sales Engineers
x x x, and make quarterly reports x x x," give inputs on such dreary information
such as prices of rice and copra, tobacco and gasoline, sources of people's
income, peace and order situation, prepare brochures, etc., which are humdrum
clerical tasks requiring little or no discretion. Worse, he lost all the people under
him, and had no staff, and was relegated to a "mere rank and file employee who
had no one under his supervision and whose duties were merely routinary and
clerical in nature which did not require the use of independent judgment."26
Moreover, petitioners failed to refute respondents claim that as Credit and
Collection Manager, he was provided with a service car which was no longer
available to him as Marketing Assistant; thus, such was a reduction in his benefit.
There is also constructive dismissal when an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of
the employee as to foreclose any choice on his part except to resign from such
employment.27 As aptly observed by the CA, to wit:
While we may allow petitioners the leeway of disciplining its employees, which is
why we uphold the finding of the NLRC that the fifteen-day suspension of private
respondent was legal and proper, We cannot countenance the barbaric
treatment suffered by the latter in the hands of his bosses. Undisputed it is that
not only was private respondent made to look like an idiot when he was not

given work in his new assignment, but that he was humiliated and debased
when petitioner Albos, in a very uncouth manner, hurled expletives at the
private respondent, calling him bobo, gago and screaming putang ina mo in front
of him, at the same time "crumpling (his) report" and throwing it into his face.
Such undignified and boorish deeds perpetrated against private respondent
directly caused him to forthwith leave the employ of petitioner corporation,
which he served loyally for some twelve (12) years. 28
Respondents demotion in the nature of his functions coupled with petitioner
Alboss act of insensibility no doubt amounts to his constructive dismissal.
Anent petitioners' claim that respondent unconditionally accepted his formal
appointment as Marketing Assistant on August 3, 2000, we note that in a letter
dated July 27, 2000 addressed to petitioner Albos when he learned that he would
be assigned as a Marketing Assistant, respondent had expressed reservations on
such assignment and asked that he instead be assigned as Sales Engineer or to
any position commensurate to his qualifications. Respondent could not be
faulted for accepting the position of a Marketing Assistant, since he did so and
stayed put in order to compare and evaluate his position. However, he
experienced not only a demotion in his duties and responsibilities, an undignified
treatment by his immediate superior, which prompted him to file this case.
Petitioners argue that it is patently inimical to their interest if respondent would
be maintained in the position of Credit and Collection Manager, as he was
negligent in the performance of his duties as such; that the 1999 incident was
not the first time that respondent forwarded to top management overstated
collection reports, since three of the NICs under respondent's supervision
committed similar misrepresentations in 1997; and that it has been held that the
mere existence of a basis for believing that the supervisor or other personnel
occupying positions of responsibility has breached the trust and confidence
reposed in him by his employer is a sufficient ground for dismissal.
While petitioners have the prerogative to transfer respondent to another
position, such transfer should be done without diminution of rank and benefits
which has been shown to be present in respondent's case. He could have been
transferred to a job of managerial position and not to that of a Marketing
Assistant. Moreover, petitioners failed to substantiate their claim that respondent
was weak in the financial aspect of operation, but he was good in marketing, as
the performance evaluation report relied upon by petitioners would not suffice.
On the other hand, the evaluation report dated March 10, 1997 stated that
respondent's track records in sales and collection showed his potential for
advancement and could be the basis for his promotion to Marketing Manager.

We note that the alleged overstated collection reports of three NICs under
respondent's supervision submitted in 1997, were already mentioned in the IAP
report of the 1999 incident for which respondent was meted the penalty of 15day suspension without salary, travel and transportation allowance; thus, the
same could no longer be used to justify his transfer. Moreover, respondent's
demotion, which was a punitive action, was, in effect, a second penalty for the
same negligent act of respondent.
Finally, we find no error committed by the NLRC in awarding attorney's fees. In
San Miguel Corporation v. Aballa,29 we held that in actions for recovery of wages
or where an employee was forced to litigate and thus incur expenses to protect
his rights and interests, a maximum of 10% of the total monetary award by way
of attorney's fees is justifiable under Article 111 of the Labor Code,30 Section 8,
Rule VIII, Book III of its Implementing Rules;31 and paragraph 7, Article 2208 of
the Civil Code.32 The award of attorney's fees is proper and there need not be
any showing that the employer acted maliciously or in bad faith when it withheld
the wages. There need only be a showing that the lawful wages were not paid
accordingly.33
WHEREFORE, the petition is DENIED. The Decision dated June 20, 2003 and the
Resolution dated August 25, 2003 of the Court of Appeals are AFFIRMED.

Before the Court is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the Decision1 of the Court of Appeals (CA) dated December 18,
2001 in CA-G.R. SP No. 59976, which affirmed the Decision of the National Labor
Relations Commission (NLRC) dated March 22, 2000 in NLRC NCR CA No.
018120-99; and the Resolution of the CA dated April 10, 2002, denying
petitioners' motion for reconsideration.2
The facts of the case, as found by the CA, are as follows:
In April 1996, Rusel was employed as GP/AB seaman by manning agency, PCL
Shipping Philippines, Inc. (PCL Shipping) for and in behalf of its foreign principal,
U-Ming Marine Transport Corporation (U-Ming Marine). Rusel thereby joined the
vessel MV Cemtex General (MV Cemtex) for the contract period of twelve (12)
months with a basic monthly salary of US$400.00, living allowance of
US$140.00, fixed overtime rate of US$120.00 per month, vacation leave with
pay of US$40.00 per month and special allowance of US$175.00.
On July 16, 1996, while Rusel was cleaning the vessel's kitchen, he slipped, and
as a consequence thereof, he suffered a broken and/or sprained ankle on his left
foot. A request for medical examination was flatly denied by the captain of the
vessel. On August 13, 1996, feeling an unbearable pain in his ankle, Rusel
jumped off the vessel using a life jacket and swam to shore. He was brought to a
hospital where he was confined for eight (8) days.

Costs against petitioners.

On August 22, 1996, a vessel's agent fetched Rusel from the hospital and was
required to board a plane bound for the Philippines.

SO ORDERED.
G.R. No. 153031

December 14, 2006

PCL SHIPPING PHILIPPINES, INC. and U-MING MARINE TRANSPORT

CORPORATION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and STEVE RUSEL,
respondents.

On September 26, 1996, Rusel filed a complaint for illegal dismissal, nonpayment of wages, overtime pay, claim for medical benefits, sick leave pay and
damages against PCL Shipping and U-Ming Marine before the arbitration branch
of the NLRC. In their answer, the latter alleged that Rusel deserted his
employment by jumping off the vessel.
On July 21, 1998, the labor arbiter rendered his decision, the dispositive portion
of which reads as follows:

DECISION

Wherefore, above premises duly considered we find the respondent liable for
unjust repatriation of the complainant.

AUSTRIA-MARTINEZ, J.:

Accordingly, the following award is hereby adjudged against the respondent:

1. The amount of $2,625.00 or its peso equivalent at the time of payment

representing three (3) months salary of the complainant due to his illegal
dismissal.

Hence, the instant petition with the following assignment of errors:

I. The Court of Appeals erred in ruling that private respondent was illegally
dismissed from employment.

2. The amount of $1,600.00 or its peso equivalent, representing sick wage

benefits.

xxxx

3. The amount of $550.00 or its peso equivalent, representing living allowance,

overtime pay and special allowance for two (2) months.

II. Likewise, the Court of Appeals erred in not upholding petitioners' right to preterminate private respondent's employment.

4. The amount of $641.66 or its peso equivalent, representing unpaid wages

from August 11 to 22, 1996.

xxxx

5. Attorney's fees equivalent to 10% of the total monetary award.

The rest of the claims are dismissed for lack of merit.
SO ORDERED.3
Aggrieved by the Decision of the Labor Arbiter, herein petitioners appealed to
the NLRC. In its Decision dated March 22, 2000, the NLRC affirmed the findings of
the Labor Arbiter but modified the appealed Decision, disposing as follows:
WHEREFORE, premises considered, the assailed decision is as it is hereby
ordered MODIFIED in that the amount representing three months salary of the
complainant due to his illegal dismissal is reduced to US$1,620.00. Further the
award of sick wage benefit is deleted.
All other dispositions are AFFIRMED.
SO ORDERED.4
Petitioners filed a Motion for Reconsideration but the NLRC denied the same in its
Decision of May 3, 2000.5
Petitioners filed a petition for certiorari with the CA.6 In its Decision dated
December 18, 2001, the CA dismissed the petition and affirmed the NLRC
Decision.7
Petitioners filed a Motion for Reconsideration but it was denied by the CA in its
Resolution dated April 10, 2002.8

III. The private respondent is not entitled to other money claims, particularly as
to the award of attorney's fees.9
As to their first assigned error, petitioners contend that the CA erred in affirming
the findings of the NLRC that Rusel's act of jumping ship does not establish any
intent on his part to abandon his job and never return. Petitioners argue that
Rusel's very act of jumping from the vessel and swimming to shore is evidence
of highest degree that he has no intention of returning to his job. Petitioners
further contend that if Rusel was indeed suffering from unbearable and
unmitigated pain, it is unlikely that he is able to swim two (2) nautical miles,
which is the distance between their ship and the shore, considering that he
needed to use his limbs in swimming. Petitioners further assert that it is error on
the part of the CA to disregard the entries contained in the logbook and in the
Marine Note Protest evidencing Rusels' offense of desertion because while these
pieces of evidence were belatedly presented, the settled rule is that additional
evidence may be admitted on appeal in labor cases. Petitioners also contend
that Rusel's act of desertion is a grave and serious offense and considering the
nature and situs of employment as well as the nationality of the employer, the
twin requirements of notice and hearing before an employee can be validly
terminated may be dispensed with.
As to their second assigned error, petitioners contend that assuming, for the
sake of argument, that Rusel is not guilty of desertion, they invoked the
alternative defense that the termination of his employment was validly made
pursuant to petitioners' right to exercise their prerogative to pre-terminate such
employment in accordance with Section 19(C) of the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board OceanGoing Vessels, which provision was incorporated in Rusel's Contract of
Employment with petitioners. Petitioners assert that despite the fact that this
issue was raised before the CA, the appellate court failed to resolve the same.

The Court finds the petition without merit.

Anent the last assigned error, petitioners argue that it is error on the part of the
CA to affirm the award of living allowance, overtime pay, vacation pay and
special allowance for two months because Rusel failed to submit substantial
evidence to prove that he is entitled to these awards. Petitioners further argue
that these money claims, particularly the claim for living allowance, should not
be granted because they partake of the nature of earned benefits for services
rendered by a seafarer. Petitioners also contend that the balance of Rusel's
wages from August 11-22, 1996 should be applied for the payment of the costs
of his repatriation, considering that under Section 19(E) of the Standard Terms
and Conditions Governing the Employment of Filipino Seafarers On-Board OceanGoing Vessels, when a seafarer is discharged for any just cause, the employer
shall have the right to recover the costs of his replacement and repatriation from
the seafarer's wages and other earnings. Lastly, petitioners argue that the award
of attorney's fees should be deleted because there is nothing in the decision of
the Labor Arbiter or the NLRC which states the reason why attorney's fees are
being awarded.
In his Comment, private respondent contends that petitioners are raising issues
of fact which have already been resolved by the Labor Arbiter, NLRC and the CA.
Private respondent argues that, aside from the fact that the issues raised were
already decided by three tribunals against petitioners' favor, it is a settled rule
that only questions of law may be raised in a petition for review on certiorari
under Rule 45 of the Rules of Court. While there are exceptions to this rule,
private respondent contends that the instant case does not fall under any of
these exceptions. Private respondent asserts that petitioners failed to
substantiate their claim that the former is guilty of desertion. Private respondent
further contends that the right to due process is available to local and overseas
workers alike, pursuant to the provisions of the Constitution on labor and equal
protection as well as the declared policy contained in the Labor Code. Private
respondent argues that petitioners' act of invoking the provisions of Section
19(C) of the POEA Contract as an alternative defense is misplaced and is
inconsistent with their primary defense that private respondent was dismissed
on the ground of desertion. As to the award of attorney's fees, private
respondent contends that since petitioners' act compelled the former to incur
expenses to protect his interest and enforce his lawful claims, and because
petitioners acted in gross and evident bad faith in refusing to satisfy private
respondent's lawful claims, it is only proper that attorney's fees be awarded in
favor of the latter. Anent the other monetary awards, private respondent argues
that these awards are all premised on the findings of the Labor Arbiter, NLRC and
the CA that private respondent's dismissal was improper and illegal.

Anent the first assigned error, it is a settled rule that under Rule 45 of the Rules
of Court, only questions of law may be raised in this Court.10 Judicial review by
this Court does not extend to a re-evaluation of the sufficiency of the evidence
upon which the proper labor tribunal has based its determination.11 Firm is the
doctrine that this Court is not a trier of facts, and this applies with greater force
in labor cases.12 Factual issues may be considered and resolved only when the
findings of facts and conclusions of law of the Labor Arbiter are inconsistent with
those of the NLRC and the CA.13 The reason for this is that the quasi-judicial
agencies, like the Arbitration Board and the NLRC, have acquired a unique
expertise because their jurisdiction are confined to specific matters.14 In the
present case, the question of whether private respondent is guilty of desertion is
factual. The Labor Arbiter, NLRC and the CA are unanimous in their findings that
private respondent is not guilty of desertion and that he has been illegally
terminated from his employment. After a review of the records of the instant
case, this Court finds no cogent reason to depart from the findings of these
tribunals.
Petitioners assert that the entries in the logbook of MV Cemtex General15 and in
the Marine Note Protest16 which they submitted to the NLRC confirm the fact
that private respondent abandoned the vessel in which he was assigned.
However, the genuineness of the Marine Note Protest as well as the entries in
the logbook are put in doubt because aside from the fact that they were
presented only during petitioners' Motion for Reconsideration filed with the
NLRC, both the Marine Note Protest and the entry in the logbook which were
prepared by the officers of the vessel were neither notarized nor authenticated
by the proper authorities. Moreover, a reading of these entries simply shows that
private respondent was presumed to have deserted his post on the sole basis
that he was found missing while the MV Cemtex General was anchored at the
port of Takehara, Japan. Hence, without any corroborative evidence, these
documents cannot be used as bases for concluding that private respondent was
guilty of desertion.
Petitioners also question the findings and conclusion of the Labor Arbiter and the
NLRC that what caused private respondent in jumping overboard was the
unmitigated pain he was suffering which was compounded by the inattention of
the vessel's captain to provide him with the necessary treatment inspite of the
fact that the ship was moored for about two weeks at the anchorage of Takehara,
Japan; and, that private respondent's act was a desperate move to protect
himself and to seek relief for his physical suffering. Petitioners contend that the
findings and conclusions of the Labor Arbiter and the NLRC which were affirmed

by the CA are based on conjecture because there is no evidence to prove that, at

the time he jumped ship, private respondent was really suffering from an ankle
injury.
It is true that no substantial evidence was presented to prove that the cause of
private respondent's confinement in a hospital in Takehara, Japan was his ankle
injury. The Court may not rely on the letter marked as Annex "B" and attached to
private respondent's Position Paper because it was unsigned and it was not
established who executed the same.17 However, the result of the x-ray
examination conducted by the LLN Medical Services, Inc. on August 26, 1996,
right after private respondent was repatriated to the Philippines, clearly showed
that there is a soft-tissue swelling around his ankle joint.18 This evidence is
consistent with private respondent's claim that he was then suffering from an
ankle injury which caused him to jump off the ship.
As to petitioners' contention that private respondent could not have traversed
the distance between the ship and the shore if he was indeed suffering from
unbearable pain by reason of his ankle injury, suffice it to say that private
respondent is an able-bodied seaman and that with the full use of both his arms
and the help of a life jacket, was able to reach the shore.
As correctly defined by petitioners, desertion, in maritime law is:
The act by which a seaman deserts and abandons a ship or vessel, in which he
had engaged to perform a voyage, before the expiration of his time, and without
leave. By desertion, in maritime law, is meant, not a mere unauthorized absence
from the ship, without leave, but an unauthorized absence from the ship with an
intention not to return to her service; or as it is often expressed, animo non
revertendi, that is, with an intention to desert.19 (emphasis supplied)
Hence, for a seaman to be considered as guilty of desertion, it is essential that
there be evidence to prove that if he leaves the ship or vessel in which he had
engaged to perform a voyage, he has the clear intention of abandoning his duty
and of not returning to the ship or vessel. In the present case, however,
petitioners failed to present clear and convincing proof to show that when
private respondent jumped ship, he no longer had the intention of returning. The
fact alone that he jumped off the ship where he was stationed, swam to shore
and sought medical assistance for the injury he sustained is not a sufficient basis
for petitioners to conclude that he had the intention of deserting his post. Settled
is the rule that in termination cases, the burden of proof rests upon the employer
to show that the dismissal is for a just and valid cause.20 The case of the
employer must stand or fall on its own merits and not on the weakness of the

employee's defense.21 In the present case, since petitioners failed to discharge

their burden of proving that private respondent is guilty of desertion, the Court
finds no reason to depart from the conclusion of the Labor Arbiter, NLRC and the
CA that private respondent's dismissal is illegal.
In their second assigned error, petitioners cite Section 19(C) of POEA
Memorandum Circular No. 055-9622 known as the Revised Standard
Employment Terms and Conditions Governing the Employment of Filipino
Seafarers On Board Ocean-Going Vessels as their alternative basis in terminating
the employment of private respondent. Said Section provides as follows:
Section 19. REPATRIATION
xxxx
C. If the vessel arrives at a convenient port within a period of three months
before the expiration of his contract, the master/ employer may repatriate the
seafarer from such port provided that the seafarer shall be paid all his earned
wages. In addition, the seafarer shall also be paid his leave pay for the entire
contract period plus a termination pay equivalent to one (1) month of his basic
pay, provided, however, that this mode of termination may only be exercised by
the master/employer if the original contract period of the seafarer is at least ten
(10) months; provided, further, that the conditions for this mode of termination
shall not apply to dismissal for cause.
The Court is not persuaded. POEA Memorandum Circular No. 055-96 took effect
on January 1, 1997 while the contract of employment entered into by and
between private respondent and petitioners was executed on April 10, 1996.
Hence, it is wrong for petitioners to cite this particular Memorandum because at
the time of petitioners' and private respondent's execution of their contract of
employment Memorandum Circular No. 055-96 was not yet effective.
What was in effect at the time private respondent's Contract of Employment was
executed was POEA Memorandum Circular No. 41, Series of 1989. It is clearly
provided under the second paragraph of private respondent's Contract of
Employment that the terms and conditions provided under Memorandum
Circular No. 41, Series of 1989 shall be strictly and faithfully observed. Hence, it
is Memorandum Circular No. 41, Series of 1989 which governs private
respondent's contract of employment.

Section H (6), Part I of Memorandum Circular No. 41, which has almost identical
provisions with Section 19 (C) of Memorandum Circular No. 055-96, provides as
follows:
SECTION H. TERMINATION OF EMPLOYMENT
xxxx
6. If the vessel arrives at a convenient port within a period of three (3) months
before the expiration of the Contract, the master/employer may repatriate the
seaman from such port provided that the seaman shall be paid all his earned
wages. In addition, the seaman shall also be paid his leave pay for the entire
contract period plus a termination pay equivalent to one (1) month of his basic
pay, provided, however, that this mode of termination may only be exercised by
the master/employer if the original contact period of the seaman is at least ten
(10) months; provided, further, that the conditions for this mode of termination
shall not apply to dismissal for cause.
The Court agrees with private respondent's contention that petitioners'
arguments are misplaced. Petitioners may not use the above-quoted provision as
basis for terminating private respondent's employment because it is incongruent
with their primary defense that the latter's dismissal from employment was for
cause. Petitioners may not claim that they ended private respondent's services
because he is guilty of desertion and at the same time argue that they exercised
their option to prematurely terminate his employment, even without cause,
simply because they have the right to do so under their contract. These grounds
for termination are inconsistent with each other such that the use of one
necessarily negates resort to the other. Besides, it appears from the records that
petitioners' alternative defense was pleaded merely as an afterthought because
it was only in their appeal with the NLRC that they raised this defense. The only
defense raised by petitioners in their Answer with Counterclaim filed with the
office of the Labor Arbiter is that private respondent was dismissed from
employment by reason of desertion.23 Under the Rules of Court,24 which is
applicable in a suppletory character in labor cases before the Labor Arbiter or
the NLRC pursuant to Section 3, Rule I of the New Rules of Procedure of the
NLRC25, defenses which are not raised either in a motion to dismiss or in the
answer are deemed waived.26
Granting, for the sake of argument, that petitioners may use Section H (6), Part I
of Memorandum Circular No. 41 or Section 19(C) of Memorandum Circular No.
055-96 as basis for terminating private respondent's employment, it is clear that
one of the conditions before any of these provisions becomes applicable is when

the vessel arrives at a convenient port within a period of three (3) months before
the expiration of the contract of employment. In the present case, private
respondent's contract was executed on April 10, 1996 for a duration of twelve
months. He was deployed aboard MV Cemtex General on June 25, 1996 and
repatriated to the Philippines on August 22, 1996. Hence, it is clear that
petitioners did not meet this condition because private respondent's termination
was not within a period of three months before the expiration of his contract of
employment.
Moreover, the Court finds nothing in the records to show that petitioners
complied with the other conditions enumerated therein, such as the payment of
all of private respondent's earned wages together with his leave pay for the
entire contract period as well as termination pay equivalent to his one month
salary.
Petitioners admit that they did not inform private respondent in writing of the
charges against him and that they failed to conduct a formal investigation to
give him opportunity to air his side. However, petitioners contend that the twin
requirements of notice and hearing applies strictly only when the employment is
within the Philippines and that these need not be strictly observed in cases of
international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the Labor
Code which afford protection to labor apply to Filipino employees whether
working within the Philippines or abroad. Moreover, the principle of lex loci
contractus (the law of the place where the contract is made) governs in this
jurisdiction.27 In the present case, it is not disputed that the Contract of
Employment entered into by and between petitioners and private respondent
was executed here in the Philippines with the approval of the Philippine Overseas
Employment Administration (POEA). Hence, the Labor Code together with its
implementing rules and regulations and other laws affecting labor apply in this
case.28 Accordingly, as to the requirement of notice and hearing in the case of a
seafarer, the Court has already ruled in a number of cases that before a seaman
can be dismissed and discharged from the vessel, it is required that he be given
a written notice regarding the charges against him and that he be afforded a
formal investigation where he could defend himself personally or through a
representative.29 Hence, the employer should strictly comply with the twin
requirements of notice and hearing without regard to the nature and situs of
employment or the nationality of the employer. Petitioners failed to comply with
these twin requirements.

Petitioners also contend that the wages of private respondent from August 1122, 1996 were applied to the costs of his repatriation. Petitioners argue that the
off-setting of the costs of his repatriation against his wages for the
aforementioned period is allowed under the provisions of Section 19(E) of
Memorandum Circular No. 055-96 which provides that when the seafarer is
discharged for any just cause, the employer shall have the right to recover the
costs of his replacement and repatriation from the seafarer's wages and other
earnings.

The Court finds no basis in the NLRC's act of including private respondent's living
allowance as part of the three months salary to which he is entitled under
Section 10 of Republic Act (RA) No. 8042, otherwise known as the "Migrant
Workers and Overseas Filipinos Act of 1995." The pertinent provisions of the said
Act provides:
Sec. 10. Money Claims
xxxx

The Court does not agree. Section 19(E) of Memorandum Circular No. 055-96 has
its counterpart provision under Section H (2), Part II of Memorandum Circular No.
41, to wit:
SECTION H. REPATRIATION

In case of termination of overseas employment without just, valid or authorized

cause as defined by law or contract, the worker shall be entitled to the full
reimbursement of his placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term, whichever is less.

xxxx
xxxx
2. When the seaman is discharged for disciplinary reasons, the employer shall
have the right to recover the costs of maintenance and repatriation from the
seaman's balance of wages and other earnings.
xxxx
It is clear under the above-quoted provision that the employer shall have the
right to recover the cost of repatriation from the seaman's wages and other
earnings only if the concerned seaman is validly discharged for disciplinary
measures. In the present case, since petitioners failed to prove that private
respondent was validly terminated from employment on the ground of desertion,
it only follows that they do not have the right to deduct the costs of private
respondent's repatriation from his wages and other earnings.
Lastly, the Court is not persuaded by petitioners' contention that the private
respondent is not entitled to his money claims representing his living allowance,
overtime pay, vacation pay and special allowance as well as attorney's fees
because he failed to present any proof to show that he is entitled to these
awards.
However, the Court finds that the monetary award representing private
respondent's three months salary as well as the award representing his living
allowance, overtime pay, vacation pay and special allowance should be
modified.

It is clear from the above-quoted provision that what is included in the

computation of the amount due to the overseas worker are only his salaries.
Allowances are excluded. In the present case, since private respondent received
a basic monthly salary of US$400.00, he is, therefore, entitled to receive a sum
of US$1200.00, representing three months of said salary.
As to the awards of living allowance, overtime pay, vacation pay and special
allowance, it is clearly provided under private respondent's Contract of
Employment that he is entitled to these benefits as follows: living allowance of
US$140.00/month; vacation leave with pay equivalent to US$40.00/month;
overtime
rate
of
US$120.00/month;
and,
special
allowance
of
US$175.00/month.30
With respect, however, to the award of overtime pay, the correct criterion in
determining whether or not sailors are entitled to overtime pay is not whether
they were on board and can not leave ship beyond the regular eight working
hours a day, but whether they actually rendered service in excess of said
number of hours.31 In the present case, the Court finds that private respondent
is not entitled to overtime pay because he failed to present any evidence to
prove that he rendered service in excess of the regular eight working hours a
day.
On the basis of the foregoing, the remaining benefits to which the private
respondent is entitled is the living allowance of US$140.00/month, which was

removed in the computation of private respondent's salary, special allowance of

US$175.00/month and vacation leave with pay amounting to US$40.00/month.
Since private respondent rendered service for two months these benefits should
be doubled, giving a total of US$710.00.
As to the award of attorney's fees, this Court ruled in Reyes v. Court of
Appeals,32 as follows:
x x x [T]here are two commonly accepted concepts of attorney's fees, the socalled ordinary and extraordinary. In its ordinary concept, an attorney's fee is the
reasonable compensation paid to a lawyer by his client for the legal services he
has rendered to the latter. The basis of this compensation is the fact of his
employment by and his agreement with the client. In its extraordinary concept,
attorney's fees are deemed indemnity for damages ordered by the court to be
paid by the losing party in a litigation. The instances where these may be
awarded are those enumerated in Article 2208 of the Civil Code, specifically par.
7 thereof which pertains to actions for recovery of wages, and is payable not to
the lawyer but to the client, unless they have agreed that the award shall pertain
to the lawyer as additional compensation or as part thereof. The extraordinary
concept of attorney's fees is the one contemplated in Article 111 of the Labor
Code, which provides:

contracts shall be construed in favor of the safety and decent living for the
laborer."33 (Emphasis supplied)
In the present case, it is true that the Labor Arbiter and the NLRC failed to state
the reasons why attorney's fees are being awarded. However, it is clear that
private respondent was illegally terminated from his employment and that his
wages and other benefits were withheld from him without any valid and legal
basis. As a consequence, he is compelled to file an action for the recovery of his
lawful wages and other benefits and, in the process, incurred expenses. On these
bases, the Court finds that he is entitled to attorney's fees.
WHEREFORE, the petition is PARTLY GRANTED. The Court of Appeals' Decision
dated December 18, 2001 and Resolution dated April 10, 2002 are AFFIRMED
with MODIFICATION to the effect that the award of US$1620.00 representing
private respondent's three months salary is reduced to US$1200.00. The award
of US$550.00 representing private respondent's living allowance, overtime pay,
vacation pay and special allowance for two months is deleted and in lieu thereof,
an award of US$710.00 is granted representing private respondent's living
allowance, special allowance and vacation leave with pay for the same period.
No costs.

Art. 111. Attorney's fees. (a) In cases of unlawful withholding of wages, the
culpable party may be assessed attorney's fees equivalent to ten percent of the
amount of wages recovered x x x

SO ORDERED.

The afore-quoted Article 111 is an exception to the declared policy of strict

construction in the awarding of attorney's fees. Although an express finding of
facts and law is still necessary to prove the merit of the award, there need not
be any showing that the employer acted maliciously or in bad faith when it
withheld the wages. There need only be a showing that the lawful wages were
not paid accordingly, as in this case.

ANGELINA FRANCISCO, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.

G.R. No. 170087 August 31, 2006

DECISION
In carrying out and interpreting the Labor Code's provisions and its implementing
regulations, the employee's welfare should be the primordial and paramount
consideration. This kind of interpretation gives meaning and substance to the
liberal and compassionate spirit of the law as provided in Article 4 of the Labor
Code which states that "[a]ll doubts in the implementation and interpretation of
the provisions of [the Labor] Code including its implementing rules and
regulations, shall be resolved in favor of labor", and Article 1702 of the Civil
Code which provides that "[i]n case of doubt, all labor legislation and all labor

YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
annul and set aside the Decision and Resolution of the Court of Appeals dated
October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner
Angelina Francisco. The appellate court reversed and set aside the Decision of
the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC

NCR CA No. 032766-02 which affirmed with modification the decision of the
Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01,
finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.
She was designated as Accountant and Corporate Secretary and was assigned to
handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction
permits and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with
the corporate documents; neither did she attend any board meeting nor required
to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was
prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired
Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was
assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government
agencies, especially with the Bureau of Internal Revenue (BIR), Social Security
System (SSS) and in the city government of Makati; and to administer all other
matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing
allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
Petitioner alleged that she was required to sign a prepared resolution for her
replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all
employees of Kasei Corporation and announced that nothing had changed and
that petitioner was still connected with Kasei Corporation as Technical Assistant
to Seiji Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of P22,500.00 as
of September 2001. Petitioner was not paid her mid-year bonus allegedly
because the company was not earning well. On October 2001, petitioner did not

receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of
the officers but she was informed that she is no longer connected with the
company. 11
Since she was no longer paid her salary, petitioner did not report for work and
filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its
technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own
discretion without control and supervision of Kasei Corporation. Petitioner had no
daily time record and she came to the office any time she wanted. The company
never interfered with her work except that from time to time, the management
would ask her opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services were
engaged through a Board Resolution designating her as technical consultant.
The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one of the companys employees.
12
Petitioners designation as technical consultant depended solely upon the will of
management. As such, her consultancy may be terminated any time considering
that her services were only temporary in nature and dependent on the needs of
the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding
tax which included petitioner. SSS records were also submitted showing that
petitioners latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;

2. declaring complainants dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without
loss of seniority rights and jointly and severally pay complainant her money
claims in accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00

1) Respondents are directed to pay complainant separation pay computed at one

month per year of service in addition to full backwages from October 2001 to
July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in
profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award
only;

(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00

4) The awards representing salary differentials, housing allowance, mid year

bonus and 13th month pay are AFFIRMED.

c. Housing Allowance (01/2001 07/2002) 57,000.00

SO ORDERED. 15

d. Midyear Bonus 2001 27,500.00

On appeal, the Court of Appeals reversed the NLRC decision, thus:

e. 13th Month Pay 27,500.00

Corp. from 1996-2001 361,175.00

WHEREFORE, the instant petition is hereby GRANTED. The decision of the

National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED
and SET ASIDE and a new one is hereby rendered dismissing the complaint filed
by private respondent against Kasei Corporation, et al. for constructive
dismissal.

g. Moral and exemplary damages 100,000.00

SO ORDERED. 16

h. 10% Attorneys fees 87,076.50

The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.

f. 10% share in the profits of Kasei

P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would accrue up to
actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor
Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as
follows:

The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent
Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor
Relations Commission on one hand, and the Court of Appeals on the other, there
is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been
no uniform test to determine the existence of an employer-employee relation.
Generally, courts have relied on the so-called right of control test where the
person for whom the services are performed reserves a right to control not only

the end to be achieved but also the means to be used in reaching such end. In
addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls,
can help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. There are
instances when, aside from the employers power to control the employee with
respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1)
the putative employers power to control the employee with respect to the
means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would
take into consideration the totality of circumstances surrounding the true nature
of the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the
various positions and responsibilities given to the worker over the period of the
latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and
Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there
is an employer-employee relationship when the person for whom the services
are performed reserves the right to control not only the end achieved but also
the manner and means used to achieve that end.

the extent to which the services performed are an integral part of the employers
business; (2) the extent of the workers investment in equipment and facilities;
(3) the nature and degree of control exercised by the employer; (4) the workers
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the
employer; and (7) the degree of dependency of the worker upon the employer
for his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of
business. 24 In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal Labor
Standards Act is dependency. 25 By analogy, the benchmark of economic reality
in analyzing possible employment relationships for purposes of the Labor Code
ought to be the economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of
Seiji Kamura, the corporations Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer,
Technical Consultant, Acting Manager and Corporate Secretary, with
substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business permits and
other licenses over an indefinite period of engagement.

In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing

economic conditions prevailing between the parties, in addition to the standard
of right-of-control like the inclusion of the employee in the payrolls, to give a
clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of
the worker.

Under the broader economic reality test, the petitioner can likewise be said to be
an employee of respondent corporation because she had served the company
for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from August 1, 1999 to December
18, 2000. 26 When petitioner was designated General Manager, respondent
corporation made a report to the SSS signed by Irene Ballesteros. Petitioners
membership in the SSS as manifested by a copy of the SSS specimen signature
card which was signed by the President of Kasei Corporation and the inclusion of
her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation.
27

Thus, the determination of the relationship between employer and employee

depends upon the circumstances of the whole economic activity, 22 such as: (1)

It is therefore apparent that petitioner is economically dependent on respondent

corporation for her continued employment in the latters line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a

business establishment, an identification card is provided not only as a security
measure but mainly to identify the holder thereof as a bona fide employee of the
firm that issues it. Together with the cash vouchers covering petitioners salaries
for the months stated therein, these matters constitute substantial evidence
adequate to support a conclusion that petitioner was an employee of private
respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its
workers with the SSS is proof that the latter were the formers employees. The
coverage of Social Security Law is predicated on the existence of an employeremployee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of petitioners
job was as Kamuras direct assistant with the duty of acting as Liaison Officer in
representing the company to secure construction permits, license to operate and
other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any
document for the corporation, although once in a while she was required to sign
prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself
from the records of the case. 31 Regardless of this fact, we are convinced that
the allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one,
courts do not generally look with favor on any retraction or recanted testimony,
for it could have been secured by considerations other than to tell the truth and
would make solemn trials a mockery and place the investigation of the truth at
the mercy of unscrupulous witnesses. 32 A recantation does not necessarily
cancel an earlier declaration, but like any other testimony the same is subject to
the test of credibility and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was selected and engaged by
the company for compensation, and is economically dependent upon respondent

for her continued employment in that line of business. Her main job function
involved accounting and tax services rendered to respondent corporation on a
regular basis over an indefinite period of engagement. Respondent corporation
hired and engaged petitioner for compensation, with the power to dismiss her for
cause. More importantly, respondent corporation had the power to control
petitioner with the means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary
by P2,500 a month from January to September 2001. This amounts to an illegal
termination of employment, where the petitioner is entitled to full backwages.
Since the position of petitioner as accountant is one of trust and confidence, and
under the principle of strained relations, petitioner is further entitled to
separation pay, in lieu of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to constructive
dismissal. Constructive dismissal is an involuntary resignation resulting in
cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in
pay; or when a clear discrimination, insensibility or disdain by an employer
becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. FlorendoFlores, 36 we ruled that where an employee ceases to work due to a demotion of
rank or a diminution of pay, an unreasonable situation arises which creates an
adverse working environment rendering it impossible for such employee to
continue working for her employer. Hence, her severance from the company was
not of her own making and therefore amounted to an illegal termination of
employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case,
attempt to carefully balance the fragile relationship between employees and
employers, we are mindful of the fact that the policy of the law is to apply the
Labor Code to a greater number of employees. This would enable employees to
avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare
and reaffirming it as a primary social economic force in furtherance of social
justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court
of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R.
SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is
REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation

of petitioner Angelina Franciscos full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay
representing one-half month pay for every year of service, where a fraction of at
least six months shall be considered as one whole year.
SO ORDERED.
G.R. No. 159887

April 12, 2006

BERNARDO REMIGIO, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, C.F. SHARP CREW MGT., INC.
& NEW COMMODORE CRUISE LINE, INC.,1 Respondents.
DECISION
PUNO, J.:
Before us is a petition for review on certiorari seeking the reversal of the
decision2 and resolution3 of the Court of Appeals (CA) in CA-G.R. No. 67782
which affirmed the March 22, 2001 Resolution4 of the National Labor Relations
Commission (NLRC), awarding sickness allowance of US$3,400.00 to petitioner
but denying his claim for disability benefits.
The facts are undisputed.
On November 27, 1997, petitioner Bernardo Remigio entered into a Contract of
Employment5 with respondent C.F. Sharp Crew Management, Inc. (respondent
agency), for and in behalf of its foreign principal, co-respondent New
Commodore Cruise Line, Ltd. (respondent principal). The contract provided that
the terms and conditions of the standard employment contract governing the
employment of all seafarers, approved per Department of Labor and
Employment's Department Order No. 33 and the Philippine Overseas
Employment Administration's Memorandum Circular No. 55, both Series of 1996
(1996 POEA SEC), were to be strictly and faithfully observed.6 Under the
contract, petitioner was to work as Musician II on board SS "Enchanted Isle," a
vessel owned and operated by respondent principal, for ten (10) months, at a
basic monthly salary of US$857.00, overtime rate of US$257.00 per month and
vacation leave with pay of three (3) days per month.
After petitioner passed the pre-employment medical examination, he joined the
vessel and started performing his job as a drummer in December 1997. On

March 16, 1998, while the vessel was docked at the port of Cancun, Mexico,
petitioner went ashore to attend to some personal matters. While walking,
petitioner suddenly felt severe chest pain and shortness of breath. He returned
to the vessel and experienced another such episode on the same evening. When
his chest pain recurred the following day, he went to the vessel's infirmary where
he again suffered from chest pain. Petitioner was brought and confined for seven
(7) days at the Grand Cayman Island Hospital. His pain worsened upon physical
exertion but improved with rest. Thus, he was instructed to refrain from
performing any kind of physical activity and to have a complete bed rest. He
rejoined the vessel on March 24, 1998.
Upon the vessel's arrival at the port of New Orleans, Louisiana, U.S.A., petitioner
was brought to the West Jefferson Medical Center for a more thorough check-up
and evaluation. Dr. S. Kedia's "impression" was that petitioner's chest pains were
"probable secondary to severe coronary artery disease."7 Dr. Armengol Porta
conducted a physical examination on petitioner, including a coronary
angiogram,8 and found that he had several blockages in his coronary arteries. A
triple coronary artery bypass was performed on petitioner on April 2, 1998 by a
Dr. Everson.
On April 8, 1998, petitioner was transferred to the Marine Medical Unit for
observation. After twelve (12) days of confinement, petitioner's cardiologist
found him "not fit for sea duty" and recommended for him to be "[r]epatriated to
home port for follow up with a cardiologist."9 He was repatriated to Manila on
April 23, 1998.
In a letter dated April 27, 1998, Henry P. Desiderio, the manager of the Crewing
Administration and Business Development Department of respondent agency,
referred petitioner to the American Outpatient Clinic for medical check-up.10
On May 13, 1998, petitioner, through counsel, sent a formal communication11 to
respondent agency demanding payment of unpaid wages, sickness allowance
and permanent total disability benefits. The demand, however, was refused.
In a letter dated June 25, 1998 addressed to the manager of respondent agency,
Jose Enrique P. Desiderio, the company-designated physician, Dr. Leticia C.
Abesamis, of the American Outpatient Clinic wrote, viz:
Mr. B. Remigio who had Coronary Bypass (6x) abroad last April 2, 1998 has
completed his cardiac rehabilitation here at the Phil. Heart Center. Stress done
on June 23, 1998 shows functional capacity at 8 METS.

Lately he has been complaining of epigastric discomfort probably from Ecotrin.

He has been on ulcer regimen.
He may go back to sea duty as piano player or guitar player after 8-10 more
months.
He was unfit from April 27, 1998 to June 25, 1998.12 (emphases supplied)
On November 12, 1998, petitioner filed the instant complaint13 for (a) recovery
of permanent total disability benefits amounting to US$60,000.00; (b) actual and
compensatory damages for loss of earning capacity in the amount of
US$154,260.00; and (c) moral and exemplary damages and attorney's fees.14
Private respondents made an offer to settle the case at US$30,000.00 as
evidenced by fax letters, to which petitioner made a counter-proposal of
US$40,000.00.15 No agreement was reached as the parties proceeded to submit
their respective position papers and supporting evidence.
In support of his claims, petitioner submitted copies of: a) his Contract of
Employment with private respondents; b) communication of respondent principal
to respondent agency informing the latter about petitioner's "heart attack,"
repatriation and replacement; c) History and Physical Report of petitioner and
Procedure Report of his cardiac catheterization; d) receipts from a drugstore and
the Philippine Heart Center; e) 2D Echocardiogram-Color Doppler Report; f) filled
up form of the Exercise Testing and Cardiac Rehabilitation Laboratory of the
Philippine Heart Center showing the results of the tests done on petitioner; and
g) the Discharge Summary of the Marine Medical Unit.16 On the other hand,
private respondents submitted copies of: a) the Contract of Employment; b)
referral letter dated April 27, 1998 of respondent agency to the American
Outpatient Clinic; c) demand letter dated May 13, 1998 of petitioner's counsel;
and d) medical report of Dr. Leticia C. Abesamis of the American Outpatient
Clinic addressed to the manager of respondent agency.17
On September 15, 1999, Labor Arbiter Manuel R. Caday rendered his decision,18
the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondents jointly and severally to pay complainant, his sickness allowance in
the amount of US$3,400.00.
All other claims are hereby dismissed for lack of merit.
SO ORDERED.19

In ruling that petitioner is not entitled to disability benefits, Labor Arbiter Caday
noted that the Schedule of Disability or Impediment for Injuries Suffered and
Diseases or Illness Contracted under Section 30 of the 1996 POEA SEC does not
provide for the payment of compensation benefits in cases of cardiac
catheterization or heart bypass. Even assuming that it was included, he held that
no medical report was presented to show that petitioner's disability was total
and permanent as to be classified under Grade 1 of the said schedule of
disability. Nonetheless, petitioner's claim for sickness allowance was granted as
there was no showing that private respondents paid petitioner's basic wages
after his repatriation, as provided under Section 20, B(3) of the 1996 POEA SEC.
Petitioner was awarded US$3,400.00 as sickness allowance, computed on the
basis of his monthly wage of US$850.00 multiplied by four (4) months.
On appeal by petitioner, the NLRC affirmed the decision of the Labor Arbiter in
toto.20 Petitioner filed a motion for reconsideration of the NLRC's resolution, to
no avail. Accordingly, he filed a petition for certiorari with prayer for the issuance
of a writ of preliminary injunction and/or temporary restraining order with the
CA.21 On March 31, 2003, the CA dismissed the petition.22
The CA likewise did not find substantial evidence to prove that the heart ailment
incurred by petitioner during the term of his employment resulted to his
disability, i.e., rendered him incapable of further seeking employment as a
musician or to follow a substantially gainful occupation. It noted that petitioner's
medical records abroad never mentioned that his heart ailment resulted to a
disability. Petitioner's reliance on Dr. Abesamis's letter dated June 25, 1998 that
he (petitioner) was "unfit from April 27, 1998 to June 25, 1998" was found as
insufficient to prove that petitioner's earning capacity was either lost or
diminished. The statement that petitioner "may go back to sea duty as piano
player or guitar player after 8-10 more months" was likewise found as
insufficient to prove that petitioner was actually "sidelined" or that it was
impossible for him to work and earn as a musician during the 8-10 months that
he was not on board the vessel. Finally, it considered that heart ailment is not
included among the compensable sicknesses and injuries under the 1996 POEA
SEC.
Petitioner's motion for reconsideration with the CA was denied.23 Hence, this
petition in which petitioner prays that he be awarded US$60,000.00 as
permanent total disability benefits, US$3,428.00 as sickness allowance,
attorney's fees and costs of suit. He assigns as lone error, the following:

THE DECISION OF THE HONORABLE COURT OF APPEALS DISMISSING

PETITIONER'S PETITION FOR CERTIORARI AND AFFIRMING IN TOTO THE
HONORABLE PUBLIC RESPONDENT AND DENYING PETITIONER'S MOTION FOR
RECONSIDERATION IS CONTRARY TO LAW.24

Sec. 20. Compensation and Benefits

xxx
B. Compensation and Benefits for Injury or Illness

The main issue is whether petitioner is entitled to permanent total disability

benefits.
At the outset, private respondents' contention that the instant petition must be
dismissed outright for being grounded on a question of fact must be rejected.
The issue of whether petitioner is entitled to permanent total disability benefits
is a question of law as it calls for the correct application of the law and
jurisprudence on disability benefits to the established facts on record.25 It raises
the following sub-issues, to wit:
1. Whether heart ailment suffered during the term of the contract is
compensable under the 1996 POEA SEC even if there is no proof of workconnection; and
2. Whether the concept of permanent total disability under the Labor Code
applies to the case of a seafarer's claim for disability benefits under the 1996
POEA SEC.

The liabilities of the employer when the seafarer suffers injury or illness during
the term of his contract are as follows:
xxx
5. In case of permanent total or partial disability of the seafarer during the term
of employment caused by either injury or illness[,] the seafarer shall be
compensated in accordance with the schedule of benefits enumerated in Section
30 of [t]his Contract. Computation of his benefits arising from an illness or
disease shall be governed by the rates and the rules of compensation applicable
at the time the illness or disease was contracted.
Sec. 30. SCHEDULE OF DISABILITY OR IMPEDIMENT FOR INJURIES SUFFERED AND
DISEASES OR ILLNESS CONTRACTED
xxx

First. In ruling that petitioner is not entitled to permanent total disability benefits,
the Labor Arbiter and the CA considered that "cardiac catheterization," "heart
bypass," or "heart ailment" is not found in the Schedule of Disability or
Impediment for Injuries Suffered and Diseases or Illness Contracted under
Section 30 of the 1996 POEA SEC. Petitioner contends that the schedule of
disability under Section 30 of the 1996 POEA SEC is not exclusive. Heart ailment,
though not listed in the schedule, is compensable. Private respondents, on the
other hand, concede that while petitioner's illness is not listed under the 1996
POEA SEC, "this does not mean that the same is not compensable."26 However,
since "heart ailment" is not listed under Section 30 of the 1996 POEA SEC, it is
not an "occupational disease." It was therefore incumbent upon petitioner to
prove by substantial evidence that his illness was work-related. Having failed to
do so, he is not entitled to disability benefits.

CHEST-TRUNK-SPINE

We find merit in petitioner's argument.

5. Moderate rigidity or two thirds (2/3) loss of motion or lifting power of the trunk
- Gr. 8

Petitioner bases his claim for disability benefits under Section 20 in relation to
Sections 30 and 30-A of the 1996 POEA SEC, viz:

1. Fracture of four (4) or more ribs resulting to severe limitation of chest

expansion - Gr. 6
2. Fracture of four (4) or more ribs with intercostal neuralgia resulting in
moderate limitation of chest expansion - Gr. 9
3. Slight limitation of chest expansion due to simple rib functional without
myositis or intercostal neuralgia - Gr. 12
4. Fracture of the dorsal or lumber spines resulting to severe or total rigidity of
the trunk or total loss of lifting power of heavy objects - Gr. 6

6. Slight rigidity or one third (1/3) loss of motion or lifting power of the trunk - Gr.
11

7. Injury to the spinal cord as to make walking impossible without the aid of a
pair of crutches - Gr. 4
8. Injury to the spinal cord as to make walking impossible even with the aid of a
pair of crutches - Gr. 1
9. Injury to the spinal cord resulting to incontinence of urine and feces - Gr. 1
xxx
NOTE: Any item in the schedule classified under Grade 1 shall be considered or
shall constitute total and permanent disability.
Sec. 30-A. SCHEDULE OF DISABILITY ALLOWANCES
Impediment Grade Impediment
1
Maximum Rate x 120.00%
2
Maximum Rate x 88.81%
3
Maximum Rate x 78.36%
4
Maximum Rate x 68.66%
5
Maximum Rate x 58.96%
6
Maximum Rate x 50.00%
7
Maximum Rate x 41.80%
8
Maximum Rate x 33.59%
9
Maximum Rate x 26.12%
10
Maximum Rate x 20.15%
11
Maximum Rate x 14.93%
12
Maximum Rate x 10.45%
13
Maximum Rate x 6.72%
14
Maximum Rate x 3.74%
Maximum Rate:
US$50,000
To be paid in Philippine Currency equivalent at the exchange rate prevailing
during the time of payment. (emphases supplied)
"Disability" is generally defined as "loss or impairment of a physical or mental
function resulting from injury or sickness."27 Clearly, "disability" is not
synonymous with "sickness" or "illness," the former being a potential effect of
the latter. The schedule in Sec. 30 of the POEA SEC is a Schedule of Disability or
Impediment for Injuries Suffered and Diseases or Illness Contracted. It is not a
list of compensable sicknesses. Unlike the 2000 POEA SEC,28 nowhere in the
1996 POEA SEC is there a list of "Occupational Diseases."

The unqualified phrase "during the term" in Section 20(B) of the 1996 POEA SEC
covers all injury or illness occurring in the lifetime of the contract. The injury or
illness need not be shown to be work-related. In Sealanes Marine Services, Inc. v.
NLRC, 29 we categorically held:
The argument of petitioners that since cancer of the pancreas is not an
occupational disease it was incumbent upon Capt. Arante to prove that his
working conditions increased the risk of contracting the same, is not meritorious.
It must be noted that his claims arose from the stipulations of the standard
format contract entered into between him and SEACORP which, per Circular No.
2, Series of 198430 of respondent POEA was required to be adopted and used by
all parties to the employment of any Filipino seamen (sic) on board any oceangoing vessel. His claims are not rooted from the provisions of the New Labor
Code as amended. Significantly, under the contract, compensability of the death
or illness of seam[e]n need not be dependent upon whether it is work connected
or not. Therefore, proof that the working conditions increased the risk of
contracting a disease or illness, is not required to entitle a seaman who dies
during the term thereof by reason of such disease or illness, of the benefits
stipulated thereunder which are, under Section C(2) of the same Circular No. 2,
separate and distinct from, and in addition to whatever benefits which the
seaman is entitled to under Philippine laws. (emphasis supplied)
This principle was reiterated in the recent case of Seagull Shipmanagement and
Transport, Inc. v. NLRC.31
While indeed, the Labor Code's provisions on disability benefits under the
Employees' Compensation Commission (ECC) require the element of workrelation for an illness to be compensable, the 1996 POEA SEC giving a more
liberal provision in favor of the seafarer must apply. As a rule, stipulations in an
employment contract not contrary to statutes, public policy, public order or
morals have the force of law between the contracting parties.32 In controversies
between a laborer and his master, doubts reasonably arising from the evidence,
or in the interpretation of agreements and writing should be resolved in the
formers favor.33 The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, in consonance with the
avowed policy of the State to give maximum aid and protection of labor.34
Second. Is the Labor Code's concept of permanent total disability applicable to
the case at bar? Petitioner claims to have suffered from permanent total
disability as defined under Article 192(c)(1) of the Labor Code, viz:

Art. 192 (c) The following disabilities shall be deemed total and permanent:
(1) Temporary total disability lasting continuously for more than one hundred
twenty days, except as otherwise provided in the Rules; x x x
Petitioner likewise cites Vicente v. ECC35 and Abaya, Jr. v. ECC,36 both of which
were decided applying the Labor Code provisions on disability benefits. Private
respondents, on the other hand, contend that petitioner erred in applying the
definition of "permanent total disability" under the Labor Code and cases
decided under the ECC as the instant case involves a contractual claim under
the 1996 POEA SEC.
Again, we rule for petitioner.
The standard employment contract for seafarers was formulated by the POEA
pursuant to its mandate under E.O. No. 247 to "secure the best terms and
conditions of employment of Filipino contract workers and ensure compliance
therewith" and to "promote and protect the well-being of Filipino workers
overseas."37 Section 29 of the 1996 POEA SEC itself provides that "[a]ll rights
and obligations of the parties to [the] Contract, including the annexes thereof,
shall be governed by the laws of the Republic of the Philippines, international
conventions, treaties and covenants where the Philippines is a signatory." Even
without this provision, a contract of labor is so impressed with public interest
that the New Civil Code expressly subjects it to "the special laws on labor unions,
collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects."38 lawphil.net
Thus, the Court has applied the Labor Code concept of permanent total disability
to the case of seafarers. In Philippine Transmarine Carriers v. NLRC,39 seaman
Carlos Nietes was found to be suffering from congestive heart failure and
cardiomyopathy and was declared as unfit to work by the company-accredited
physician. The Court affirmed the award of disability benefits to the seaman,
citing ECC v. Sanico,40 GSIS v. CA,41 and Bejerano v. ECC42 that "disability
should not be understood more on its medical significance but on the loss of
earning capacity. Permanent total disability means disablement of an employee
to earn wages in the same kind of work, or work of similar nature that [he] was
trained for or accustomed to perform, or any kind of work which a person of [his]
mentality and attainment could do. It does not mean absolute helplessness." It
likewise cited Bejerano v. ECC,43 that in a disability compensation, it is not the
injury which is compensated, but rather it is the incapacity to work resulting in
the impairment of one's earning capacity.

The same principles were cited in the more recent case of Crystal Shipping, Inc.
v. Natividad.44 In addition, the Court cited GSIS v. Cadiz45 and Ijares v. CA46
that "permanent disability is the inability of a worker to perform his job for more
than 120 days, regardless of whether or not he loses the use of any part of his
body."
Finally. Applying the Labor Code concept of permanent total disability to the facts
on record, is petitioner entitled to permanent total disability benefit?
Petitioner contends that the certification of the company-designated physician
that he may go back to sea duty as a piano or guitar player after 8-10 months
even if his job was a drummer proves that he suffered from permanent total
disability and thus entitled to permanent total disability benefits of
US$60,000.00 under the 1996 POEA SEC. Private respondents, on the other
hand, contend that: 1) petitioner did not present any proof that he suffered from
permanent total disability, i.e., that his earning power is now reduced and that
he is incapable of performing remunerative employment; 2) petitioner did not
present any medical certificate showing that he suffered any disability; 3) on the
contrary, the company-designated physician attested that petitioner could return
to further sea duty; 4) even if he could not go back to sea duty, this does not
mean that his earning capacity is impaired since as a musician, he may still
perform on land; and 5) having admitted that he was a heavy smoker, petitioner
is disqualified under Section 20(d) of the 1996 POEA SEC from recovering
compensation for any incapacity or disability he suffered.
There are three kinds of disability benefits under the Labor Code, as amended by
P.D. No. 626: (1) temporary total disability, (2) permanent total disability, and (3)
permanent partial disability. Section 2, Rule VII of the Implementing Rules of
Book V of the Labor Code differentiates the disabilities as follows:
Sec. 2. Disability.-- (a) A total disability is temporary if as a result of the injury or
sickness the employee is unable to perform any gainful occupation for a
continuous period not exceeding 120 days, except as otherwise provided for in
Rule X of these Rules.
(b) A disability is total and permanent if as a result of the injury or sickness the
employee is unable to perform any gainful occupation for a continuous period
exceeding 120 days, except as otherwise provided for in Rule X47 of these Rules.
(c) A disability is partial and permanent if as a result of the injury or sickness the
employee suffers a permanent partial loss of the use of any part of his body.
(emphasis supplied)

In Vicente v. ECC:48
x x x the test of whether or not an employee suffers from permanent total
disability is a showing of the capacity of the employee to continue performing
his work notwithstanding the disability he incurred. Thus, if by reason of the
injury or sickness he sustained, the employee is unable to perform his customary
job for more than 120 days and he does not come within the coverage of Rule X
of the Amended Rules on Employees Compensability (which, in more detailed
manner, describes what constitutes temporary total disability), then the said
employee undoubtedly suffers from permanent total disability regardless of
whether or not he loses the use of any part of his body. (emphases supplied)
A total disability does not require that the employee be absolutely disabled, or
totally paralyzed. What is necessary is that the injury must be such that the
employee cannot pursue her usual work and earn therefrom.49 On the other
hand, a total disability is considered permanent if it lasts continuously for more
than 120 days.50 Thus, in the very recent case of Crystal Shipping, Inc. v.
Natividad,51 we held:
Permanent disability is inability of a worker to perform his job for more than 120
days, regardless of whether or not he loses the use of any part of his body.52 x x
x
Total disability, on the other hand, means the disablement of an employee to
earn wages in the same kind of work of similar nature that he was trained for, or
accustomed to perform, or any kind of work which a person of his mentality and
attainments could do.53 It does not mean absolute helplessness. In disability
compensation, it is not the injury which is compensated, but rather it is the
incapacity to work resulting in the impairment of one's earning capacity.54
Applying the foregoing standards, we find that petitioner suffered from
permanent total disability.
It is undisputed that petitioner started to suffer chest pains on March 16, 1998
and was repatriated on April 23, 1998 after having been found as "not fit for
duty." The medical report dated June 25, 1998 of the company-designated
physician, Dr. Abesamis, establishes the following facts, viz: a) petitioner
underwent a coronary bypass on April 2, 1998; b) petitioner was "unfit" from
April 27, 1998 (date of referral) to June 25, 1998 (date of medical report); c)
petitioner may not return to sea duty within 8-10 months after June 25, 1998;

and d) petitioner may return to sea duty as a piano or guitar player after 8-10
months from June 25, 1998.
These facts clearly prove that petitioner was unfit to work as drummer for at
least 11-13 months -- from the onset of his ailment on March 16, 1998 to 8-10
months after June 25, 1998. This, by itself, already constitutes permanent total
disability. What is more, private respondents were well aware that petitioner was
working for them as a drummer, as proven by the communication of respondent
principal to respondent agency referring to petitioner as "drummer with our
enchanted isle quartet."55 Thus, the certification that petitioner may go back
specifically as a piano or guitar player means that the likelihood of petitioner
returning to his usual work as a drummer was practically nil. From this, it is
pristine clear that petitioner's disability is total and permanent.
Private respondents' contention that it was not shown that it was impossible for
petitioner to play the drums during the 8-10 months that he was on land is
specious. To our minds, petitioner's unfitness to work attached to the nature of
his job rather than to its place of performance. Indeed, playing drums per se
requires physical exertion, speed and endurance. It demands the performance of
hitting strokes and repetitive movements that petitioner, having undergone a
triple coronary bypass, has become incapacitated to do.
The possibility that petitioner could work as a drummer at sea again does not
negate the claim for permanent total disability benefits. In the same case of
Crystal Shipping, Inc., we held:
Petitioners tried to contest the above findings [of permanent total disability] by
showing that respondent was able to work again as a chief mate in March 2001.
(citation omitted) Nonetheless, this information does not alter the fact that as a
result of his illness, respondent was unable to work as a chief mate for almost
three years. The law does not require that the illness should be incurable. What
is important is that he was unable to perform his customary work for more than
120 days which constitutes permanent total disability.56 (emphasis supplied)
That the company-designated physician did not specify that petitioner suffered
from any disability should not prejudice petitioner's claim for disability benefits.
In the first place, it is well to note that it was respondent agency which referred
petitioner to the American Outpatient Clinic giving only the specific instruction
that the designated physician indicate in the medical report "the estimated
treatment period and the exam conducted."57 Moreover, what is important is
that the facts stated in the medical report clearly constitute permanent total
disability as defined by law. It is well-settled that strict rules of evidence are not

applicable in claims for compensation and disability benefits.58 Disability should

not be understood more on its medical significance but on the loss of earning
capacity.59 As in the case of Crystal Shipping, Inc.,60 an award of permanent
total disability benefits in the petition at bar would be germane to the purpose of
the benefit, which is to help the employee in making ends meet at the time
when he is unable to work.
We do not agree that petitioner's admission that he was a heavy smoker is
enough ground to disqualify him from entitlement to disability compensation
under Section 20(D) of the 1996 POEA SEC, viz:1avvphil.net
Section 20.D. No compensation shall be payable in respect of any injury,
incapacity, disability or death of the seafarer resulting from his willful or criminal
act, provided however, that the employer can prove that such injury, incapacity,
disability or death is directly attributable to the seafarer.
We have held that a worker brings with him possible infirmities in the course of
his employment and while the employer is not the insurer of the health of the
employees, he takes them as he finds them and assumes the risk of liability.61

sickness allowance due petitioner on the basis of the correct monthly rate of
US$857.00, he should be awarded US$3,428.00 as sickness allowance.
Under Article 2208 of the New Civil Code, attorney's fees can be recovered in
actions for the recovery of wages of laborers and actions for indemnity under
employer's liability laws. Attorney's fees is also recoverable when the
defendant's act or omission has compelled the plaintiff to incur expenses to
protect his interest. Such conditions being present in the case at bar, we find
that an award of attorney's fees is warranted.
IN VIEW WHEREOF, the decision and resolution of the Court of Appeals in CA-G.R.
No. 67782 dated March 31, 2003 and August 14, 2003, respectively, are
REVERSED and SET ASIDE. Private respondents are held jointly and severally
liable to pay petitioner: a) permanent total disability benefits of US$60,000.00 at
its peso equivalent at the time of actual payment; b) sickness allowance of
US$3,428.00 at its peso equivalent at the time of actual payment; and c)
attorney's fees of ten percent (10%) of the total monetary award at its peso
equivalent at the time of actual payment. Costs against private respondents.
SO ORDERED.

In the case at bar, it is noteworthy that petitioner's habit of smoking was not a
consideration when private respondents hired petitioner. It was likewise not
shown that petitioner suffered from any form of ailment prior to the heart
ailment he suffered during the course of his employment with private
respondents. While smoking may contribute to the development of a heart
ailment, heart ailment may be caused by other factors such as working and
living under stressful conditions. Thus, private respondents' peremptory
presumption, that petitioner's habit of smoking heavily was the willful act which
caused his illness and resulting disability, without more, cannot suffice to bar
petitioner's claim for disability benefits. Ruling otherwise would run contrary to
the constitutional mandate to extend full protection to labor.

G.R. No. 154798 October 20, 2005

CRYSTAL SHIPPING, INC., and/or A/S STEIN LINE BERGEN, Petitioners,
vs.
DEO P. NATIVIDAD, Respondent.
DECISION
QUISUMBING, J.:

Having suffered from permanent total disability, petitioner is entitled to

US$60,000.00 which is the amount due for permanent total disability under
Section 30-A of the 1996 POEA SEC.

For review on certiorari are the Resolutions1 dated July 2, 2002 and August 15,
2002 of the Court of Appeals in CA-G.R. SP No. 71293 which denied petitioners
motion for extension of time to file a petition for certiorari and their motion for
reconsideration, respectively.

As to the claim for sickness allowance, petitioner prays that private respondents
be held jointly and severally liable to pay him US$3,428.00, as opposed to the
award of the Labor Arbiter, as affirmed by the NLRC and the CA, of only
US$3,400.00. We find this claim warranted by the undisputed fact on record that
petitioner's basic salary is US$857.00 per month.62 Multiplying the 120-day

Petitioner A/S Stein Line Bergen, through its local manning agent, petitioner
Crystal Shipping, Inc., employed respondent Deo P. Natividad as Chief Mate of
M/V Steinfighter for a period of ten months.2 Within the contract period,
respondent complained of coughing and hoarseness and was brought to shore
for examination. He was diagnosed with "swelling neck and lymphatic glands

right side in neck", declared unfit for duty, and advised to see an ear-nose-throat
specialist.3 He was repatriated to Manila on August 18, 1998.
Shortly after his arrival, respondent was referred to ClinicoMed Inc., the
company-designated clinic, for check-up and later thoroughly examined at the
Manila Doctors Hospital. He was diagnosed with "papillary carcinoma, metastatic
to lymphoid tissue consistent with thyroid primary" and "reactive hyperplasis,
lymph node". On September 11, 1998, he underwent a total thyroidectomy with
radial neck dissection. After the operation, respondent developed chest
complications and pleural effusion, and had to undergo a thoracenthesis
operation. On the basis of all these, his attending physician diagnosed him
permanently disabled with a grade 9 impediment, with grade 1 as the most
serious.4

were binding, as stipulated in the Philippine Overseas Employment Agency

(POEA) Standard Employment Contract.8 However, upon respondents motion for
reconsideration, citing jurisprudence that findings of company-designated
doctors are self-serving, the NLRC affirmed the ruling of the RAB with respect
only to the award of disability benefits.
Petitioners seasonably filed a motion for extension of time to file their petition for
certiorari with the Court of Appeals. On July 2, 2002, the appellate court denied
the motion on the ground that pressure of work is not a compelling reason for
the grant of an extension.
In view of the foregoing, petitioners motion for extension is DENIED and the
instant case is DISMISSED.

A second opinion by Marine Medical Services and Metropolitan Hospital

attending physician, Dr. Robert D. Lim, likewise concurred that respondent was
disabled with a grade 9 impediment.5 Under the care of Dr. Lim, respondent
underwent various treatments, one of which was the radioactive iodine therapy
at the Philippine General Hospital. While his treatment with Dr. Lim was ongoing,
respondent sought the opinion of Dr. Efren R. Vicaldo, who opined that he was
totally and permanently disabled for labor with a grade 1 impediment.6 On
February 22, 1999, respondent underwent a whole body scan which revealed no
trace of radio iodine on his body to indicate metastasis or residual thyroid tissue.
The attending physician, Dr. Wilson D. Lim, confirmed the earlier assessments of
disability with a grade 9 impediment.7

SO ORDERED.9

All expenses incurred in respondents examination and treatments were

shouldered by the petitioners. Respondent was also paid the allowable illness
allowances, commensurate to a grade 9 impediment.

II. WHEN IT MERELY NOTED PETITIONERS PETITION FOR CERTIORARI UNDER

RULE 65 WITHOUT PERUSING THE ALLEGATIONS THEREIN AND THE ARGUMENTS
IN SUPPORT THEREOF WHICH, UNDER THE CIRCUMSTANCES, IS CLEARLY
INIQUITOUS AND UNJUST.12

On June 25, 1999, petitioners offered US$13,060 as disability benefits which

respondent rejected. Respondent claimed that he deserves to be paid US$60,000
for a grade 1 impediment. Failing to reach an agreement, respondent filed, with
the Regional Arbitration Branch (RAB), a complaint for disability benefits, illness
allowance, damages and attorneys fees.
The Labor Arbiter ruled for respondent and ordered petitioners to pay
respondent US$60,000 as disability benefits, P100,000 as moral damages, and
ten percent of the total monetary award as attorneys fees.
On appeal, the National Labor Relations Commission (NLRC) initially reversed the
ruling of the RAB on the ground that findings of the company-designated doctors

Prior to the receipt of the appellate courts denial, petitioners filed the petition. It
was noted without action in view of the July 2, 2002 Resolution.10 Subsequently,
petitioners moved for reconsideration of the resolution, but it was denied.11
Hence, this appeal by certiorari ascribing error to the Court of Appeals,
I. WHEN IT DENIED PETITIONERS MOTION FOR EXTENSION OF TIME TO FILE
THEIR PETITION FOR CERTIORARI UNDER RULE 65, FAILING TO GIVE DUE
CONSIDERATION TO THE ALLEGATIONS OF PETITIONERS THEREIN;

Here, we are asked to resolve the procedural issue of whether the Court of
Appeals erred when it denied petitioners motion for extension of time to file a
petition; and the substantive issue of the proper disability benefits that
respondent is entitled to.
Anent the procedural issue, petitioners contend that the appellate court
erroneously applied the ruling in Velasco v. Ortiz,13 because the factual
circumstances therein were different from the present case. In Velasco, the
parties sought for the admission of their appeal that was filed beyond the
reglementary period. In the present case, however, petitioners filed their motion
for extension of time within the reglementary period. They maintain that they

have a valid and compelling reason in asking the appellate court for extension.
Moreover, petitioners posit that technical rules of procedure should give way to
substantive justice.
On the other hand, respondent argues that there should be more than a mere
claim of "extreme pressure of work" to justify an extension of time to file a
petition for certiorari. He calls attention to the fact that petitioners never moved
for the reconsideration of the NLRC decision, which is a prerequisite for the filing
of a petition for certiorari. Likewise, respondent counters petitioners plea for
liberality by indicating their failure to file a motion for reconsideration of the
NLRC decision.
Jurisprudence abounds on the subject that a motion for reconsideration is a
prerequisite for the filing of a special civil action for certiorari.14 A literal
interpretation of this prerequisite would require a motion for reconsideration of
the NLRC decision, which granted a previous motion for reconsideration and
reversed a prior decision. After all, the second decision is considered as entirely
new.
We cannot fault the appellate court for faithfully complying with the rules of
procedure which it has been mandated to observe.15 Save for the most
persuasive of reasons, strict compliance is enjoined to facilitate the orderly
administration of justice.16
Indeed, on several occasions, we relaxed the rigid application of the rules of
procedure to afford the parties opportunity to fully ventilate the merits of their
cases. This is in line with the time-honored principle that cases should be
decided only after giving all parties the chance to argue their causes and
defenses. Technicality and procedural imperfection should thus not serve as
basis of decisions.17
The reason for requiring a motion for reconsideration is to make sure that
administrative remedies have been exhausted before a case is appealed to a
higher court. It allows the adjudicator a second opportunity to review the case,
to grapple with the issues therein, and to decide anew a question previously
raised.18 It is presumed that an administrative agency, if afforded an
opportunity to pass upon a matter, will decide the same correctly, or correct any
previous error committed in its forum.19
With the first motion for reconsideration which the NLRC granted, there is no
need for the parties to file another motion for reconsideration before bringing up
the matter to the Court of Appeals. The NLRC was already given the opportunity

to pass upon and correct its mistakes. Moreover, it would be absurd to ask the
NLRC to keep on reversing itself.
Considering that property rights of both parties are involved here, we will give
due course to the instant petition. Remanding the case to the court a quo will
only frustrate speedy justice and, in any event, would be a futile exercise, as in
all probability the case would end up with this Court. 20 Thus, we shall bring the
present controversy to rest by deciding on the appropriate disability benefits
that respondent is entitled to.
On the substantive issue, petitioners assert that the NLRC erred when it said that
findings of company-designated doctors are self-serving. They point out that
there were three doctors who came up with the same findings. They argue that
these findings were more credible than the findings of respondents doctor. In
addition, petitioners claim that the award of a grade 1 impediment/disability
benefit was wrong considering that respondent subsequently gained
employment as chief mate of another vessel.
In resolving the merits of the case, we find pertinent Section 30 of the POEA
Memorandum Circular No. 55, Series of 1996,21 which provides the schedule of
disability or impediment for injuries suffered and illness contracted. The
particular illness of the respondent is not within those enumerated. But, the
same provision supplies us with the guideline that any item in the schedule
classified under grade 1 constitutes total and permanent disability.
Permanent disability is the inability of a worker to perform his job for more than
120 days, regardless of whether or not he loses the use of any part of his
body.22 As gleaned from the records, respondent was unable to work from
August 18, 1998 to February 22, 1999, at the least, or more than 120 days, due
to his medical treatment. This clearly shows that his disability was permanent.
Total disability, on the other hand, means the disablement of an employee to
earn wages in the same kind of work of similar nature that he was trained for, or
accustomed to perform, or any kind of work which a person of his mentality and
attainments could do.23 It does not mean absolute helplessness. In disability
compensation, it is not the injury which is compensated, but rather it is the
incapacity to work resulting in the impairment of ones earning capacity.24
Although the company-designated doctors and respondents physician differ in
their assessments of the degree of respondents disability, both found that
respondent was unfit for sea-duty due to respondents need for regular medical

check-ups and treatment which would not be available if he were at sea. There is
no question in our mind that respondents disability was total.
Petitioners tried to contest the above findings by showing that respondent was
able to work again as a chief mate in March 2001.25 Nonetheless, this
information does not alter the fact that as a result of his illness, respondent was
unable to work as a chief mate for almost three years. It is of no consequence
that respondent was cured after a couple of years. The law does not require that
the illness should be incurable. What is important is that he was unable to
perform his customary work for more than 120 days which constitutes
permanent total disability.26 An award of a total and permanent disability benefit
would be germane to the purpose of the benefit, which is to help the employee
in making ends meet at the time when he is unable to work.
WHEREFORE, the petition is DENIED for lack of merit. The Resolutions dated July
2, 2002 and August 15, 2002 of the Court of Appeals in CA-G.R. SP No. 71293, as
well as the Resolution dated April 9, 2002 of the National Labor Relations
Commission in NLRC NCR CA No. 23333-2000 are AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 148130

June 16, 2006

PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL

SHIPPING (BAHAMAS) CO., LTD.) and TRANS-GLOBAL MARITIME AGENCY,
INC., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO,
Respondents.

On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso")

through Trans-Global Maritime Agency, Inc. ("Trans-Global") hired Florello W.
Tanchico ("Tanchico") as First Assistant Engineer. In 1981, Tanchico became Chief
Engineer. On 13 October 1992, Tanchico returned to the Philippines for a twomonth vacation after completing his eight-month deployment.
On 8 December 1992, Tanchico underwent the required standard medical
examination prior to boarding the vessel. The medical examination revealed that
Tanchico was suffering from "Ischemic Heart Disease, Hypertensive CardioMuscular Disease and Diabetes Mellitus." Tanchico took medications for two
months and a subsequent stress test showed a negative result. However, Esso
no longer deployed Tanchico. Instead, Esso offered to pay him benefits under the
Career Employment Incentive Plan. Tanchico accepted the offer.
On 26 April 1993, Tanchico filed a complaint against Esso, Trans-Global and
Malayan Insurance Co., Inc. ("Malayan") before the Philippine Overseas
Employment Administration (POEA) for illegal dismissal with claims for
backwages, separation pay, disability and medical benefits and 13th month pay.
In view of the enactment of Republic Act No. 8042 ("RA 8042")4 transferring to
the National Labor Relations Commission (NLRC) the jurisdiction over money
claims of overseas workers, the case was indorsed to the Arbitration Branch of
the National Capital Region. In a Decision5 dated 16 October 1996, Labor Arbiter
Jose G. De Vera ("Labor Arbiter De Vera") dismissed the complaint for lack of
merit. Tanchico appealed to the NLRC.
The Ruling of the NLRC
In its Resolution6 of 3 September 1998, the NLRC affirmed the Decision of Labor
Arbiter De Vera. Tanchico filed a motion for reconsideration. In a Resolution7
promulgated on 29 March 1999, the NLRC reconsidered its 3 September 1998
Resolution, as follows:

DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 25 January 2001 Decision2
and 7 May 2001 Resolution3 of the Court of Appeals in CA-G.R. SP No. 54756.
The Antecedent Facts

On the claim of illegal dismissal, the same is unavailing as complainant had been
declared as one with partial permanent disability. Thus, he should be entitled to
disability benefit of 18 days for every year of credited service of fourteen (14)
years less the amount he already received under the Companys Disability Plan.
On the claim of 13th month pay, the respondent Agency not falling under the
enumerated exempted employers under P.D. 851 and in the absence of any
proof that respondent is already paying its employees a 13th month pay or more

in a calendar year, perforce, respondent agency should pay complainant his

monthly pay computed at [sic] the actual month [sic] worked, which is 8 months.

SO ORDERED.12
Petitioners went to this Court for relief on the following grounds:

Since complainant was forced to litigate his case, he is hereby awarded 10% of
the total award as attorneys fees.
SO ORDERED.8
Esso and Trans-Global moved for the reconsideration of the 29 March 1999
Resolution.9 In its 27 July 1999 Resolution,10 the NLRC denied their motion.
Esso, now using the name Petroleum Shipping Limited ("Petroleum Shipping"),
and Trans-Global (collectively referred to as "petitioners") filed a petition for
certiorari before the Court of Appeals assailing the 29 March 1999 and 27 July
1999 Resolutions of the NLRC.

I. The Court of Appeals decided a question of substance not in accord with law,
applicable decision of this Court and International Maritime Law when it ruled
that private respondent, a seafarer, was a regular employee;
II. The Court of Appeals decided a question of substance not in accord with law
when it held that the private respondent was entitled to greater disability benefit
than he was [sic];
III. The Court of Appeals decided a question of substance not heretofore
determined by this Court when it ruled that private respondent was entitled to
13th month pay although it was not provided for in the contract of employment
between petitioners and private respondent; and

The Ruling of the Court of Appeals

In its Decision promulgated on 25 January 2001, the Court of Appeals affirmed in
toto the 29 March 1999 Resolution of the NLRC.

IV. The Court of Appeals decided a question of substance not in accord with law
when it awarded private respondent attorneys fees despite the Labor Arbiters
and the public respondents, albeit initially, dismissal of the complaint.13

The Court of Appeals ruled that Tanchico was a regular employee of Petroleum
Shipping. The Court of Appeals held that petitioners are not exempt from the
coverage of Presidential Decree No. 851, as amended ("PD 851")11 which
mandates the payment of 13th month pay to all employees. The Court of
Appeals further ruled that Tanchico is entitled to disability benefits based on his
14 years of tenure with petitioners. The Court of Appeals stated that the
employer-employee relationship subsisted even during the period of Tanchicos
vacation. The Court of Appeals noted that petitioners were aware of Tanchicos
medical history yet they still deployed him for 14 years. Finally, the Court of
Appeals sustained the award of attorneys fees.

The Issues

Petitioners moved for the reconsideration of the Decision. In its 7 May 2001
Resolution, the Court of Appeals modified its Decision by deducting Tanchicos
vacation from his length of service. Thus:

The petition is partly meritorious.

WHEREFORE, our decision is hereby MODIFIED. The petitioners are ordered to

pay to the private respondent the following: (1) disability wages equivalent to 18
days per year multiplied by 10 years less any amount already received under the
companys disability plan; prorated 13th month pay corresponding to eight (8)
months of actual work; and attorneys fee equivalent to 10% of the total award.

The issue on whether seafarers are regular employees is already a settled

matter.

The issues are as follows:

1. Whether Tanchico is a regular employee of petitioners; and
2. Whether Tanchico is entitled to 13th month pay, disability benefits and
attorneys fees.
The Ruling of This Court

Seafarers are Contractual Employees

In Ravago v. Esso Eastern Marine, Ltd.,14 the Court traced its ruling in a number
of cases that seafarers are contractual, not regular, employees. Thus, in Brent
School, Inc. v. Zamora,15 the Court cited overseas employment contract as an

example of contracts where the concept of regular employment does not apply,
whatever the nature of the engagement and despite the provisions of Article 280
of the Labor Code. In Coyoca v. NLRC,16 the Court held that the agency is liable
for payment of a seamans medical and disability benefits in the event that the
principal fails or refuses to pay the benefits or wages due the seaman although
the seaman may not be a regular employee of the agency.
The Court squarely passed upon the issue in Millares v. NLRC17 where one of the
issues raised was whether seafarers are regular or contractual employees whose
employment are terminated everytime their contracts of employment expire.
The Court explained:
[I]t is clear that seafarers are considered contractual employees. They can not
be considered as regular employees under Article 280 of the Labor Code. Their
employment is governed by the contracts they sign everytime they are rehired
and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under
the exception of Article 280 whose employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the
duration of the season. We need not depart from the rulings of the Court in the
two aforementioned cases which indeed constitute stare decisis with respect to
the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they
have rendered services which are usually necessary and desirable to the
business of their employer, and that they have rendered more than twenty (20)
years of service. While this may be true, the Brent case has, however, held that
there are certain forms of employment which also require the performance of
usual and desirable functions and which exceed one year but do not necessarily
attain regular employment status under Article 280. Overseas workers including
seafarers fall under this type of employment which are governed by the mutual
agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are
governed by the Rules and Regulations of the POEA. The Standard Employment
Contract governing the employment of All Filipino Seamen on Board OceanGoing Vessels of the POEA, particularly in Part I, Sec. C specifically provides that
the contract of seamen shall be for a fixed period. And in no case should the
contract of seamen be longer than 12 months. It reads:

Section C. Duration of Contract

The period of employment shall be for a fixed period but in no case to exceed 12
months and shall be stated in the Crew Contract. Any extension of the Contract
period shall be subject to the mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that employment of
seafarers are for a fixed period only. Constrained by the nature of their
employment which is quite peculiar and unique in itself, it is for the mutual
interest of both the seafarer and the employer why the employment status must
be contractual only or for a certain period of time. Seafarers spend most of their
time at sea and understandably, they can not stay for a long and an indefinite
period of time at sea. Limited access to shore society during the employment will
have an adverse impact on the seafarer. The national, cultural and lingual
diversity among the crew during the COE is a reality that necessitates the
limitation of its period.
Petitioners make much of the fact that they have been continually re-hired or
their contracts renewed before the contracts expired (which has admittedly been
going on for twenty (20) years). By such circumstance they claim to have
acquired regular status with all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous rehiring was dictated by practical considerations that experienced crew members
are more preferred. Petitioners were only given priority or preference because of
their experience and qualifications but this does not detract the fact that herein
petitioners are contractual employees. They can not be considered regular
employees. x x x18
The Court reiterated the Millares ruling in Gu-Miro v. Adorable19 where it held
that a radio officer on board a vessel cannot be considered as a regular
employee notwithstanding that the work he performs is necessary and desirable
in the business of the company.
Thus, in the present case, the Court of Appeals erred in ruling that Tanchico was
a regular employee of Petroleum Shipping.
On 13th Month Pay
The Court of Appeals premised its grant of 13th month pay on its ruling that
Tanchico was a regular employee. The Court of Appeals also ruled that

petitioners are not exempt from the coverage of PD 851 which requires all
employers to pay their employees a 13th month pay.

On Disability Benefits

We do not agree with the Court of Appeals. Again, Tanchico was a contractual,
not a regular, employee. Further, PD 851 does not apply to seafarers. The
WHEREAS clauses of PD 851 provides:

Petitioners allege that Tanchicos Contract ended on 13 October 1992 when he

returned to Manila. They allege that the vacation period is not part of the period
of employment.

WHEREAS, it is necessary to further protect the level of real wages from ravages
of world-wide inflation;

We cannot accept petitioners contention.

The duration of the Contract was for eight months. The Contract also provides:

WHEREAS, there has been no increase in the legal minimum wage rates since
1970;
WHEREAS, the Christmas season is an opportune time for society to show its
concern for the plight of the working masses so they may properly celebrate
Christmas and New Year.
PD 851 contemplates the situation of land-based workers, and not of seafarers
who generally earn more than domestic land-based workers.
Tanchicos employment is governed by his Contract of Enlistment ("Contract").20
The Contract has been approved by the POEA in accordance with Title I, Book
One of the Labor Code and the POEA Rules Governing Employment.21 The
coverage of the Contract includes Compensation, Overtime, Sundays and
Holidays, Vacations, Living Allowance, Sickness, Injury and Death, Transportation
and Travel Expense, Subsistence and Living Quarters. It does not provide for the
payment of 13th month pay. The Contract of Employment,22 which is the
standard employment contract of the POEA, likewise does not provide for the
payment of 13th month pay.

Article V
VACATIONS
Vacation days shall be earned at the rate of seven and one-half days (7.5) days
for each thirty (30) days of continuous service, calculated from date of departure
from Manila and until date of return to Manila. Vacation begins on the day
following arrival in Manila.
Every effort will be made to grant earned vacations promptly after eight (8)
months of service; however, the COMPANY shall have the right to advance or
delay vacations to coincide with vessel repairs, for operational reasons or due to
personal requirements. SEAFARER shall receive vacation compensation for each
thirty (30) days of continuous service in accordance with the rates listed in
Addendum No. 1, Column (12), to be paid in Manila. Amounts shall be pro-rated
according to the ranks/ratings and period of time in which the SEAFARER served.
For period of less than thirty (30) days service, vacations and compensation shall
be reduced proportionately.

In Coyoca v. NLRC which involves a claim for separation pay, this Court held:

Time off for illness, injury, vacation, leave of absence or stand-by shall not be
considered service under the provisions of this Article.

Furthermore, petitioners contract did not provide for separation benefits. In this
connection, it is important to note that neither does POEA standard employment
contract for Filipino seamen provide for such benefits.

It is the COMPANYs intention that each SEAFARER enjoy his full vacation period.
Because of urgent fleet needs, however, it occasionally may be necessary to
recall a SEAFARER early from vacation.24

As a Filipino seaman, petitioner is governed by the Rules and Regulations

Governing Overseas Employment and the said Rules do not provide for
separation or termination pay. x x x23

Since Tanchico received compensation during his vacation, the Contract did not
terminate on the day he returned to Manila. The Contract remained in force
during Tanchicos vacation period.

Hence, in the absence of any provision in his Contract governing the payment of
13th month pay, Tanchico is not entitled to the benefit.

However, the Court of Appeals erred when it ruled that Tanchico is entitled to
disability benefits of 18 days for every year of service. The Court of Appeals

ruled that Tanchicos employment was continuous and that his tenure with
petitioners was for 14 years. Again, the Court of Appeals assumed that Tanchico
was a regular employee. The Court of Appeals failed to consider that Tanchicos
employment terminated with the end of each contract.
The Contract provides:
Article VIII
SICKNESS-INJURY/DEATH
A. The COMPANY shall provide, during the period of the Contract, Insurance
coverage for the SEAFARER against loss of life, permanent disability, temporary
disability, injury, occupational illness, hospital and medical expense in such
amounts as the COMPANY shall determine but not lower than what the COMPANY
would have to pay under the Philippine Overseas Employment Administrations
requirements or the vessels flag state requirements (whichever is higher).
B. If SEAFARER is removed from a vessel for medical treatment he shall be
entitled to receive a disability benefit equal to his monthly wage rate (or pro-rata
thereof) from date of disembarkation until date of rejoining his vessel,
assignment to another vessel or until date of repatriation to Manila if still
disabled. Medical, surgical, hospital, or clinical treatment shall be recommended
by a doctor approved by the COMPANY and SEAFARER must follow all medical
advices. SEAFARER will not be entitled to disability benefit payments for
disability resulting from his own misconduct, negligence, unlawful acts,
altercations, vice, etc.
C. After disembarkation from a vessel, the SEAFARER is entitled to one hundred
percent (100%) of his wages until he is declared fit or the degree of permanent
disability has been assessed by the COMPANYs physician for a maximum period
of 120 days commencing on date of such disembarkation. Upon the expiration of
such 120 days and if the SEAFARER is still disabled, the SEAFARER shall be paid
his wages equivalent to 18 days for every year of credited service.
In special instances and at the discretion of the COMPANY, the maximum number
of days of COMPANY benefits may be extended beyond 120 days for a SEAFARER
with over 80 months credited COMPANY service, or in such other case as may be
determined by the COMPANY.
Upon expiration of COMPANY benefits and if still disabled, the following amounts
shall be paid up to maximum of 365 days, inclusive of the period of the above
benefits.

All Ranks ................................................ US $10 per day

D. If disability should occur while SEAFARER is on vacation, he must, within 3
days from date thereof, notify the COMPANYs Agent in the Philippines in order
that the latter shall be able to certify as to his condition. Certification of disability
required for payment of any disability benefits must be approved by a doctor
appointed by the COMPANY and SEAFARER must be disabled seven (7) days or
more to be eligible to benefits and sick leave status, COMPANY benefits shall be
limited to a maximum of 18 days.
Benefits under the COMPANY Disability Plan shall be made only to the extent and
in such amounts as are equal to the differential between any payments which
may be due SEAFARER under COMPANYs obligation as set forth in the 1st
paragraph of this Article VIII and 90 percent of SEAFARERs last wage rate.
E. In case of death at sea or at a foreign port, the tradition of the sea and
requirements of the laws of such foreign port will be observed. If practical, every
effort will be made on the part of the COMPANY to return the remains of a
deceased SEAFARER to Manila at COMPANY expense.
F. The SEAFARER acknowledges that even without signed receipts, any wage
payments made to him for a period during which he is entitled to benefits under
any law by reason of death, temporary or permanent disability, shall be deemed
an advance payment of compensation benefits due to him under such law, but
only to the extent of benefits due for the period of disability during which wages
are paid.
Wages, as set forth in Addendum No. 1, Column (1), shall be the basis for any
calculation of benefits due SEAFARER under this Article VIII.25 (Emphasis
supplied)
Indications that Tanchico was suffering from ischemia were detected on 8
December 1992 during Tanchicos vacation period. Thus, petitioners paid him
disability benefits for 18 days in accordance with the Contract. Tanchico cannot
claim that he only acquired the illness during his last deployment since the
Medical Report26 he submitted to the NLRC showed that he has been
hypertensive since 1983 and diabetic since 1987. In the absence of concrete
proof that Tanchico acquired his disability during
his last deployment and not during his vacation, he is only entitled to disability
benefits for 18 days.

Petitioners claim that they already paid Tanchico his disability benefits for 18
days but he refused to sign the receipt.27 Tanchico alleged that he was only paid
under the Career Employment Incentive Plan.28 This is a factual matter which
this Court cannot resolve. This matter has to be remanded to the Labor Arbiter
for resolution.
WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE the 25 January
2001 Decision and 7 May 2001 Resolution of the Court of Appeals in CA-G.R. SP
No. 54756. We REINSTATE the 16 October 1996 Decision of Labor Arbiter Jose G.
De Vera dismissing the complaint for illegal dismissal and the claims for
backwages, separation pay and 13th month pay. We REMAND the case to the
Labor Arbiter to determine if Florello Tanchico has been paid his disability
benefits for 18 days in accordance with his Contract of Enlistment. If no payment
has been made, the Labor Arbiter is DIRECTED to determine the amount
Tanchico is entitled.
SO ORDERED.
G.R. No. 160315 November 11, 2005
LOURDES D. RIVERA, Petitioner,
vs.
WALLEM MARITIME SERVICES, INC., and WALLEM SHIPMANAGEMENT,
LTD., Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision1 of the Court of Appeals (CA) dated April 23, 2003, in CAG.R. SP No. 71807, as well as the Resolution2 dated October 8, 2003 denying the
motion for reconsideration thereof.

On January 25, 1997, Rodolfo signed a Contract of Employment3 as messman on

board the Crown Jade with a basic monthly salary of US$390.00 on a 44-hour
work week, and guaranteed monthly overtime pay of US$217 for 85 hours. As
required by the contract, Rodolfo was subjected to a pre-employment medical
examination4 where he was declared fit to work. He joined the crew of Crown
Jade on February 3, 1997 for a nine-month voyage.
Before the expiration of his contract and prior to disembarkation, Rodolfo thrice
sought medical attention for various complaints: on March 4, 1997, for swelling
on the left ankle at the port of Santa Marta;5 on August 3, 1997, for "rashes on
the right calf" at the port of Gothenburg where he was declared unfit to work and
was advised bed rest for three to five days;6 and on November 17, 1997, also at
the port of Gothenburg, for "testicular pain on right side," where he was again
advised to rest for three to four days.7 He signed off from the vessel on
November 19, 1997.
On December 5, 1997, Rodolfo claimed his leave pay and one day travel
allowance from Wallem Shipping.8
On December 24, 1997, Rodolfo, having suffered some weakness, was brought
to the University of Santo Tomas Hospital.
In a Letter9 dated January 13, 1998, Lourdes informed Wallem Shipping that her
husband was confined and was suffering from "end-stage renal disease 2nd
degree Tubulo-interstitial nephritis." She then requested for assistance in
claiming her husbands retirement pay. Accordingly, Rodolfos benefits
amounting to US$371.80 were released.10
In January 1998, Lourdes filed a grievance complaint against Wallem Shipping for
non-payment of disability benefits before the Associated Marine Officers and
Seamens Union of the Philippines-PTGWO-ITF. The parties did not reach a
settlement, and the complaint was declared a deadlock on January 28, 1998.11
Rodolfo eventually succumbed to congestive heart failure secondary to chronic
renal disease and died on April 28, 1999.12

The antecedents are as follows:

Spouses Rodolfo and Lourdes Rivera were residents of Meycauayan, Bulacan.
Rodolfo had been working as a seaman since 1989, and had been repeatedly
hired by Wallem Maritime Services, Inc. with Wallem Shipmanagement Ltd., as
principal.

On July 26, 1999, Lourdes filed a claim for death benefits, burial assistance,
moral and exemplary damages, as well as attorneys fees before the National
Labor Relations Commission (NLRC). The case was docketed as NLRC-NCR Case
No. OFW (M)99-07-1152.13

Lourdes alleged that her husband had served the respondents in separate and
successive contracts for more than eight years. He was, likewise, a messman for
many years, and often helped in cooking different styles of food. The
complainant surmised that the spicy ingredients and other food garnishes to
which her husband as a Filipino was unaccustomed to, along with his continuous
exposure to heat, humidity, smoke, fumes and physical exhaustion contributed
to the illness that caused his death. She pointed out that her husbands illness
was acknowledged by the respondents as shown in the Masters Report.14 She
insisted that the respondents did not bother to extend medical and financial
assistance to her husband, because of which the latter failed to comply with the
physicians advice to undergo several laboratory tests. The familys finances
were completely depleted and she could no longer borrow money to defray the
mounting medical hospitalization expenses, so she was forced to bring her
husband home.

Shipping could not be faulted for not extending the necessary medical
examination upon disembarkation because, in the first place, the deceased
failed to comply with what was required of him under the contract, i.e., to submit
himself to medical check-up within 72 hours upon arrival. However, this was not
a bar for Lourdes to claim death benefits due her on account of her husbands
death. Citing Wallem Maritime Services, Inc. v. National Labor Relations
Commission,17 the NLRC ruled that it is not required that employment be the
sole factor in the acceleration of the illness as to entitle the claimant to death
benefits. The dispositive portion of the decision reads:
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new
one ENTERED ordering the respondents, jointly and severally, to pay the
complainant the following:
1. Death compensation Benefits

According to Lourdes, despite her repeated pleas for the release of her
husbands compensation, the respondents refused to give any form of financial
aid. She prayed that judgment be rendered in her favor awarding death
compensation benefits of US$50,000.00 and US$7,000.00 for her minor child,
Ryan Louie; US$1,000.00 as burial assistance; P500,000.00 as moral damages;
P250,000.00 as exemplary damages; and attorneys fees equivalent to 10% of
the judgment award.15

For complainant US$50,000.00

For Ryan Rivera 7,000.00
(minor child)
2. Burial assistance 1,000.00

For their part, the respondents alleged that the complaint stated no cause of
action. They pointed out that in response to the complainants pro-forma
Complaint dated July 19, 1999, they filed a Motion for Bill of Particulars, to which
the complainant failed to respond, much less appear at the scheduled hearings
of the case. When she appeared on October 13, 1999, she manifested that the
parties be required to simultaneously file their respective position papers.
On December 11, 2000, the Labor Arbiter dismissed the complaint for "lack of
merit and want of basis." The Labor Arbiter ruled that the complainant was not
entitled to death benefits or burial expenses, considering that her husband died
more than one year after he arrived in the Philippines. The Labor Arbiter also
took note that Rodolfo was never confined or advised shore treatment during the
course of his employment, but was merely directed to rest for three to five days.
Moreover, Rodolfo failed to comply with the mandatory reporting requirement
under Section 20(B) of the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers On-Board Ocean-Going Vessels.
Lourdes appealed the matter to the NLRC, which, after due proceedings,
reversed the decision of the Labor Arbiter.16 According to the NLRC, Wallem

3. Attorneys fees equivalent

to 10% of the total monetary
awards
SO ORDERED.18
Unsatisfied, Wallem Shipping elevated the matter to the CA.
According to the appellate court, there was no basis to grant Lourdes claim for
disability benefits because her husband was "repatriated" not because he was ill
but because his contract had been completed. It stressed that Rodolfo failed to
comply with the reporting requirement under paragraph 3, Section 20(B).
Moreover, the medical certificate relied upon by the NLRC did not sufficiently
prove that Rodolfos illness was work-related.19 Thus, the CA ruled

WHEREFORE, premises considered, the Petition is hereby GRANTED. The assailed

decision and resolution of the NLRC are hereby SET ASIDE and the decision of
the Labor Arbiter is REINSTATED dismissing the complaint.

reconsideration initiated by the petitioner before the CA was filed out of time
(one day late). Consequently, the instant petition for review was, likewise, filed
out of time.

SO ORDERED.20

The respondents also claim that the validity, legality and applicability of the
POEA standard employment contract has been upheld by this Court, and under
Article 1315 of the Civil Code, the contract is the law between the parties.

The petitioner now comes before the Court on the following sole issue:
Whether the petitioner is entitled to claim the death benefits under the POEA
Contract which arose from the death of seafarer Rodolfo Rivera and what amount
of evidence is required from the petitioner to prove her entitlement thereto.21
According to the petitioner, the CA decided factual questions of substance not in
accord with the law and settled jurisprudence. She points out that her deceased
husband died of congestive heart failure with chronic renal disease as the
underlying cause. He could not have acquired the illness elsewhere since he was
diagnosed with end-stage renal disease a month after he returned to the
Philippines. The petitioner further points out that her husband had been
employed by the respondents from 1989 to 1997. She insists that there is "a
medical connection between the infirmities which the deceased seaman
previously suffered while he was on board and the very cause of his death."
While Rodolfo died after the employment contract had
already expired, the signs and symptoms of the disease which ultimately led to
his death were already present at the time he was still under the respondents
employ. The petitioner insists that it has been clearly established that her
husband died of a work-related disease.
Citing Wallem Maritime Services Inc. v. NLRC,22 the petitioner claims that, like
her husband, the seafarer therein died after the term of his employment
contract, but the Court granted the benefits being recovered notwithstanding the
argument of the employers that such death occurred after the expiration of the
contract. The petitioner further insists that she is entitled to attorneys fees
under Article 2208 of the Civil Code of the Philippines, considering that the
respondents act or omission compelled her to incur expenses to enforce her
lawful claims.
For their part, the respondents claim that the instant petition involves a pure
question of fact, outside the scope of Rule 45 of the Rules of Court. Moreover,
the findings of facts of the Labor Arbiter and the CA are supported by evidence
sufficient to justify the decision. The respondents also point out that the
petitioner received a copy of the CA Decision on May 13, 2003, and filed the
Motion for Reconsideration only on May 29, 2003; thus, the requisite motion for

The respondents also point out that the deceased seafarer died more than one
year after the termination of the employment contract. They allege that death
benefits claims will only prosper if the seafarer died during the term of the
contract. Assuming that the instant claim had been anchored on a disability or
ailment acquired during the term of the contract, the ailing seaman is still
required to report for a medical check-up within three working days from the
date of arrival, otherwise, benefits under the POEA standard employment
contract would be nullified. The respondents point out that in this case, the
deceased seaman failed to report within the said period. Thus, the respondents
pray that the instant petition for review be dismissed for utter lack of merit and
for being filed out of time.
The petitioner counters that, contrary to the respondents contentions, the Court
has the power to review findings of facts under certain exceptions. In this case, it
is very clear that the decision appealed from was based on a misapprehension of
facts and that the conclusion arrived at by the appellate court was "manifestly
mistaken and impossible." The petitioner admits that the diagnosis was made a
month after the contract ended, but insists that her husband could not have
acquired the disease in only one month. The primary consideration in this case
should be the chain of events and not the strict wordings of the contract. To
support her contention, the petitioner cites Wallem Maritime Services, Inc. v.
NLRC,23 where the Court held that the POEA standard employment contract was
designed primarily for the protection and benefit of the Filipino seamen; as such,
its provisions must be construed and applied fairly for the benefit of seamen and
their dependents.
The petition must fail.
The applicable provision in the Standard Terms and Conditions Governing the
Employment of Filipino Seafarers On-Board Ocean-Going Vessel is not Section
20(A)24 on compensation and benefits for death, but Section 20(B)3, to wit:
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS:

3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to
sickness allowance equivalent to his basic wage until he is declared fit to work or
the degree of permanent disability has been assessed by the companydesignated physician, but in no case shall this period exceed one hundred
twenty (120) days.
For this purpose, the seafarer shall submit himself to a post-employment medical
examination by a company-designated physician within three working days upon
his return except when he is physically incapacitated to do so, in which case, a
written notice to the agency within the same period is deemed as compliance.
Failure of the seafarer to comply with the mandatory reporting requirement shall
result in his forfeiture of the right to claim the above benefits.
In this case, it is not disputed that Rodolfo failed to submit himself to the
mandatory post-employment medical examination. The respondent manning
agency found out about his confinement only through the petitioner, who asked
for assistance in claiming her husbands retirement benefits. Indeed, while
compliance with the reporting requirement under the Standard Employment
Contract can be dispensed with, there must likewise be basis for the award of
death compensation. Without a post-medical examination or its equivalent to
show that the disease for which the seaman died was contracted during his
employment or that his working conditions increased the risk of contracting the
ailment, the respondents cannot be made liable for death compensation. Thus,
in the absence of substantial evidence, working conditions cannot be presumed
to have increased the risk of contracting the disease, in this case, chronic renal
failure.
In fact, in Mabuhay Shipping Services, Inc. v. NLRC,25 the Court held that the
death of a seaman even during the term of employment does not automatically
give rise to compensation. The circumstances which led to the
death as well as the provisions of the contract, and the right and obligation of
the employer and the seaman must be taken into consideration, in consonance
with the due process and equal protection clauses of the Constitution.26

December 5, 1997.28 While strict rules of evidence are not applicable in claims
for compensation and disability benefits,29 the Court cannot altogether
disregard the provisions of the Standard Employment Contract.
In German Marine Agencies, Inc. v. NLRC,30 the Court resolved the issue of
whether the physician, who makes the pronouncement as to the existence and
grade of the seafarers disability, should be POEA accredited. The Courts
discussion therein is quite instructive:
In order to claim disability benefits under the Standard Employment Contract,
it is the "company-designated" physician who must proclaim that the seaman
suffered a permanent disability, whether total or partial, due to either injury or
illness, during the term of the latters employment. There is no provision
requiring accreditation by the POEA of such physician. In fact, aside from their
own gratuitous allegations, petitioners are unable to cite a single provision in the
said contract in support of their assertions or to offer any credible evidence to
substantiate their claim. If accreditation of the company-designated physician
was contemplated by the POEA, it would have expressly provided for such a
qualification, by specifically using the term "accreditation" in the Standard
Employment Contract, to denote its intention. For instance, under the Labor
Code, it is expressly provided that physicians and hospitals providing medical
care to an injured or sick employee covered by the Social Security System or the
Government Service Insurance System must be accredited by the Employees
Compensation Commission. It is a cardinal rule in the interpretation of contracts
that if the terms of a contract are clear and leave no doubt upon the intention of
the contracting parties, the literal meaning of its stipulation shall control. There
is no ambiguity in the wording of the Standard Employment Contract the only
qualification prescribed for the physician entrusted with the task of assessing the
seamans disability is that he be "company-designated." When the language of
the contract is explicit, as in the case at bar, leaving no doubt as to the intention
of the drafters thereof, the courts may not read into it any other intention that
would contradict its plain import.31
The Court agrees with the following pronouncement of the CA in its decision:

The case of Wallem v. NLRC27 is not applicable here. In that case, the deceased
seaman was signed-off from the vessel two months from the expiration of the
employment contract and was already seriously ill when discharged from the
vessel. The Court held that the deceased seaman in that case failed to comply
with the 72-hour reporting requirement under the POEA Standard Employment
Contract since he was already physically incapacitated to do so. In this case, the
deceased was not similarly physically incapacitated. In fact, the records show
that Rodolfo himself claimed his leave pay and one-day travel allowance on

Based on the foregoing, the Court does not find any basis to grant private
respondents claim for disability benefits. Rivera was repatriated after the
completion of his contract and not because he was ill. The procedure provided
for under Paragraph 3, Section 20(B) was not also complied with. Moreover, the
Medical Certificate submitted by private respondent does not sufficiently prove
Riveras sickness was work-related. As such, the NLRC gravely abused its
discretion when it reversed the findings of the Labor Arbiter.32

IN LIGHT OF ALL THE FOREGOING, the instant petition is DENIED for lack of
merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 71807 are AFFIRMED.

Respondent was later confined at the Broward General Hospital in Fort

Lauderdale, Florida where he underwent a triple heart by-pass.

SO ORDERED.
G.R. No. 165934

While on duty or on December 5, 1997, respondent complained of chest pains

and difficulty in breathing. He was thus brought to the ships infirmary and was
thereafter brought ashore for immediate medical treatment.

April 12, 2006

UNITED PHILIPPINE LINES, INC. and/or HOLLAND AMERICA LINE, INC.,

Petitioners,
vs.
FRANCISCO D. BESERIL, Respondent.

Respondent was not able to rejoin his vessel of assignment, necessitating the
hiring of another assistant cook to replace him.6 On December 20, 1997, he was
officially discharged from duty.
As respondents condition was not yet stable for repatriation, he stayed for a
while at the Holiday Inn, Florida until he was allowed to fly back to Manila on
January 8, 1998.

DECISION
CARPIO MORALES, J.:
Assailed in the present petition are the Court of Appeals August 31, 2004
Decision1 and October 28, 2004 Resolution2 reversing the decision of the
National Labor Relations Commission (NLRC) dismissing respondents claim for
total disability benefits.
Francisco D. Beseril (respondent) was hired by petitioner United Philippine Lines,
Inc. (UPL), a Philippine manning agency, for and in behalf of its principal Holland
American Lines (HAL) in 1987. He had since then been continuously re-hired and
even became a recipient of the Holland America Line Westours Inc. 10 Years
Service Award.3
On August 28, 1997, respondent was as usual rehired by UPL for its principal HAL
as Assistant Cook for a period of 12 months and was assigned to the vessel M/S
Rotterdam VI. The Contract of Employment4 was duly verified and approved by
Philippine Overseas Employment Administration (POEA).
As part of the usual pre-employment requirements, respondent was made to
undergo physical and medical examinations. Based on the Medical Examination
Report5 dated August 26, 1997 issued by HALs designated physician Dr. Renato
P. Abaya (Dr. Abaya), respondent was found to be "fit" for work as seaman.
On October 31, 1997, respondent, in accordance with his employment contract,
boarded M/S Rotterdam VI.

Upon his arrival in Manila, respondent was referred to Clinica Manila under UPLs
account where he underwent regular cardiac rehabilitation program and physical
therapy from January 15 to May 28, 1998.7
Based on the Medical Certificate8 dated September 22, 1998 issued by Dr. Ma.
Victoria V. Tangco, Medical Consultant of Clinica Manila, respondent was
recommended to be "fit to return to work."
Sometime in November 1998, as respondent wanted to revert to his old job, he
again underwent a pre-employment medical examination with the American
Outpatient Clinic. This time, he was found to be "unfit" per Physical Examination
Report/Certificate9 issued by Dr. Leticia C. Abesamis dated November 19, 1998.
On November 27, 1998, since the pre-employment screening doctors of UPL
refused to give medical clearance to respondent, HALs hotel and restaurant
manager Diogenes Rosauro B. Jaurigue (Jaurigue), who was responsible for the
recruitment of the hotel crew, sought instructions from HAL through telex
regarding respondents case. The telex message read:
SUBJECT: ASST. COOK FRANCISCO BESERIL
REHIRING OR DECLARATION OF DISABILITY
WITH REFERENCE TO THE CREWMEMBERS ABOVE CAPTIONED WE WOULD LIKE
TO ASK FOR A FINAL DISPOSITION ON THE EVENTUAL FATE OF MR. FRANCISCO
BESERIL.

CONSIDERING THAT HE HAS UNDERGONE HEART BYPASS SURGERY AND HAS

HAD ALMOST ONE YEAR RECOVERY, THE SUBJECT DESIRES TO REVERT BACK TO
HIS FORMER JOB ON BOARD YOUR VESSELS.
although, the subject may actually perform his former duties without any
PROBLEM, OUR-PRE-EMPLOYMENT SCREENING DOCTORS DO NOT WANT TO TAKE
THE RISK IN CERTIFYING HIM FIT FOR SEA DUTY. THEY ADDED THAT SHOULD HAL
AGREE TO RE-EMPLOY THE SUBJECT, IT WILL BE AT HALS RISK.
IN VIEW OF THE FOREGOING, MAY WE KNOW WHETHER YOU ARE STILL
ENGAGING THE SUBJECT OR PUTTING HIM ON PERMANENT DISABILITY.

We trust that you find this claim in order and look forward to an early settlement
of the same.13
The letter was transmitted by fax to HAL which sent a reply by telex on the same
day, the pertinent portion of which is quoted hereunder:
IN MR. JARIGUES NOVEMBER 27 1998 CORRESPONDENCE REFERENCE NUMBER
08-98 HE WAS INQUIRING OF THE COMPANIES FINAL DECISION. IN CARTER HILLS
1/13/99 CORRESPONDENCE HE DECLARED MR. BESERIL PERMANENTLY UNFIT
NOT PERMANENTLY DISABLED. THIS DISTINCTION WOULD MEAN A PARTIAL
DISABILITY NOT PERMANENT. PLEASE DETERMINE THE PARTIAL DISABILITY
PERCENTAGE SO WE MAY FURTHER DISCUSS THE NEXT STEP.14

x x x x10 (Emphasis and underscoring supplied)

In a correspondence dated January 13, 1999, Dr. Carter Hill of HALs Medical
Department declared respondent "permanently unfit."11

On March 19, 1999, UPL sent a letter15 to respondents counsel referring

respondent for evaluation and determination of the degree of disability to its
designated physician Dr. Abaya.

UPL soon received by fax a letter12 dated February 18, 1999 from respondents
lawyer demanding compensation for total permanent disability. The pertinent
portion of the letter read, quoted verbatim:

After reviewing respondents medical records and physically examining him, Dr.
Abaya sent a letter16 dated April 6, 1999 to UPLs legal department, which was
transmitted by telex to HAL, reading:

Several months after his treatment and repatriation, Mr. Beseril was made to
believe and expect that he would be rehired but up to now he cannot be
reinstated to his former occupation. In fact, Mr. Francisco L. Beseril has already
been considered and pronounced to be totally and permanently unfit to
discharge his former sea based occupation and as a consequence thereof, the
attending physician strongly suggested/recommended that Mr. Beseril retire
permanently as a seaman.

I have examined Mr. Francisco Beseril and find him in relatively good health. I
have consulted the people who supervised his cardiac rehabilitation and they
have assured me based on their ECG and Treadmill findings that Mr. Beseril is in
good health and fit for work.

Under the POEA Standard Employment Contract and the CBA, our client is
entitled to disability pay of no less than the full amount of Sixty Thousand US
Dollars (USD60,000.00), for the total loss of his earning capacity.
Therefore, a formal demand is hereby made upon your goodselves and your
principal to pay our client in the amount of USD60,000.00 within ten (10)
calendar days from your receipt of this letter.
Should we not hear from you within the stated period, we shall commence legal
actions against you and your principal without further notice to recover the full
amount of USD60,000.00 plus moral damages, attorneys fees and costs of suit.

Mr. Beseril claims he cannot get a job because his physical examination shows
that he has had a coronary bypass and that all employment opportunities are
therefore closed to him. No employer wants to employ him with a possible
"recurrence" of his coronary problems. (Underscoring supplied)
After respondents medical records were sent to HAL, Dr. Hill sent the following
message dated April 21, 1999 to UPL through Dr. Abaya:
UPON REVIEW OF THE PACKET OF MEDICAL RECORDS YOU HAVE SENT TO US ON
THE ABOVE MENTIONED CREWMEMBER, I HAVE THE FOLLOWING COMMENTS:
HE IS FIT FOR SEA DUTY AS A COOK.
I NOTE HE HAS LOST 10 KG AND HAS A NORMAL BP AND TREADMILL ON 9/98.
PLEASE ENCOURAGE HIM TO STOP SMOKING, EXERCISE REGULARLY, AND TRY TO
REACH HIS OPTIMAL WEIGHT. ADDITIONALLY, I NOTE HIS URINE IS SPILLING

SUGAR, AND I SUSPECT A[N] ORAL HYPOGLYCEMIC IS INDICATED TO CONTROL

HIS BLOOD SUGAR LEVELS. HIS SUGARS CAN BE MONITORED AT SEA DURING
HIS NEXT CONTRACT TO ENSURE IMPROVEMENT. DONT HESITATE TO CONTACT
ME IF I CAN BE OF FURTHER ASSISTANCE.17 (Underscoring supplied)
With HALs decision that respondent was "fit for sea duty as a cook," the legal
department of UPL, by its claim, spoke to him and that after explaining the
consequences and implications of the options he had, he and his counsel agreed
that he would serve again at HALs vessels. Respondent, however, never showed
up at HALs office for re-employment.
On September 1, 1999, respondent filed a complaint18 with the NLRC against
UPL and HAL claiming disability benefits, loss of earning capacity, moral and
exemplary damages and attorneys fees.
During the March 13, 2000 hearing before a Labor Arbiter, the parties agreed to
submit the case for resolution on the basis of the pleadings.
By Decision19 dated April 28, 2000, the Labor Arbiter awarded respondent total
disability benefits in the amount of $60,000, ruling that "his disability ha[ving]
lasted [for] more than 120 days is sufficient basis to declare him permanently
disabled."
Before the NLRC to which UPL and HAL (hereafter petitioners) appealed, they
raised the following arguments:
1. There was grave abuse of discretion in awarding permanent total disability of
US$ 60,000.00 in favor of [respondent] despite the overwhelming evidence of
the findings of fitness by the company appointed physician specifically engaged
to do the said task pursuant to the POEA Standard Employment Contract.
2. It is a grave error to cite the cases of Loot vs. GSIS, 224 SCRA 59 in relation to
Aquino vs. ECC, 201 SCRA 84 in deciding this case that involves a POEA Standard
Employment Contract for Seafarers controversy.
3. The 120 days under Article 192 (c) (1) of the Labor Code should not be used
as a reckoning point to establish disability under the POEA Standard Employment
Contract.20 (Underscoring supplied)
Finding petitioners appeal meritorious, the NLRC, by Decision21 dated August
30, 2002, "MODIFIED" the Labor Arbiters decision by deleting the award of total

disability benefit and ordering petitioners to deploy respondent to one of its

foreign principals for the same position.
In granting [respondents] claim for total disability benefit, the Labor Arbiter
gave merit to a report dated 27 November 1998 sent by Dax B. Jaurigue,
respondents Hotel and Restaurant Manager for the Holland America Line
Crewing Department. In said report, Mr. Jaurigue stated that although
complainant may actually perform his former duties without any problem,
[petitioners] pre-employment screening doctors do not want to take the risk in
certifying him fit for sea duty an[d] that should [petitioner] HAL agree to employ
the subject, it will be at HALs risk. The Labor Arbiter also held that since
complainants disability lasted more than 120 days, the same is sufficient basis
to declare him permanently disabled. We do not agree. Records show that
[petitioners] company designated physician, Dr. Renato Abaya physically
examined [respondent] sometime in March 1999, several months after the report
of Mr. Jarigue was done. In this connection, said Dr. Abaya issued a report dated
6 April 1999 stating that [respondent] was in good health and fit for work. Dr.
Abaya also executed an affidavit wherein he attested that [respondent] is fit for
sea duty as a cook. It is for this reason that [petitioners] were preparing to
process [respondents] new employment contract. [Respondent] never refuted
the fact that [petitioners] offered to rehire him to his former position. He also did
not deny that he refused to accept the offer of employment made by the
[petitioners].
We have likewise taken note that the illness of [respondent] required more than
120 days of treatment and rehabilitation. [Petitioners] contend they continued to
shoulder the expenses for [respondents] treatment and rehabilitation. This was
admitted by [respondent] in his Rejoinder when he recognized the financial
assistance extended to him by [petitioners]. In this connection, the Labor Arbiter
held that since [respondents] disability lasted more than 120 days, there is
sufficient basis to declare him disabled citing Aquino vs. ECC (201 SCRA 84). We
do not agree. The 120 days period referred to in the POEA Standard Employment
Contract for Seafarers refers to the maximum liability that may be granted for
sickness allowance. It is not a measure that could determine the employees
degree of disability. Moreover, [respondents] employment is covered by the
POEA Standard Employment Contract. The POEA benefits under said contract are
separate and distinct from those benefits provided under the Employees
Compensation Commission, the SSS or GSIS. The provisions thereof should be
the law between the contracting parties.
The foregoing circumstances being considered, [respondent] was found to have
been cured or recovered from his illness as determined by the company

designated physician as he was declared fit to work for the same job he held
prior to his illness. The job was offered to complainant by respondents which is
proof that he did not lose his earning capacity.

"x x x (The) opinions of petitioners doctors to this effect should not be given
evidentiary weight as they are palpably self-serving and biased in favor of
petitioners, and certainly could not be considered independent."

Accordingly, we deem it proper to delete the award of total disability benefit.

However, [respondent] is not left holding an empty bag. In this connection,
[petitioners] are directed to deploy [respondent] within a reasonable period to
one of its foreign principal for the same position he held prior to his illness.

Under Bureau Circular No. 5, Series of 1990, issued by the Department of Health
to medical clinics and hospitals accredited to conduct medical examination of
overseas contract workers and seafarers, those with ECG findings like myocardial
ischemia, [infarction], 2nd and 3rd degree AV Block and other grave
manifestation xxx and other illnesses which render the worker unemployable
should be classified as Class D or unemployable.

WHEREFORE, the decision dated 28 April 2000 is MODIFIED. The award of total
disability benefit in the amount of US$60,000.00 is deleted. [Petitioners] are
ordered to deploy [respondent] to one of its foreign principal[s] for the same
position.22 (Emphasis and underscoring supplied)
Respondent moved to reconsider the decision of the NLRC but the same was
denied by Resolution23 dated October 30, 2002.
In his petition for certiorari24 before the Court of Appeals, respondent raised the
following issues:
[1.] WHETHER OR NOT A FIFTY THREE (53) YEAR OLD SEAFARER WHO HAD
UNDERGONE A TRIPLE BY-PASS OPERATION CAN BE CONSIDERED AS ONCE
AGAIN FIT TO WORK ON BOARD AN OCEAN GOING VESSEL, JUST BECAUSE THE
COMPANY DESIGNATED PHYSICIAN SAY SO[.]
[2.] DOES AN OFFER TO WORK ON BOARD AN OCEAN GOING VESSEL TO A FIFTY
THREE (53) YEAR OLD SEAFARER WHO SUFFERED AND UNDERGONE TRIPLE BYPASS OPERATION ABSOLVE THE EMPLOYERS LIABILITY FOR DISABILITY
COMPENSATION[?]25
By Decision26 dated August 31, 2004, the appellate court reversed that of the
NLRC, ratiocinating as follows:
While the Doctors Renato Abaya and Carter Hill thereafter certified that
[respondent] is physically fit to work again, We note that this occurred only after
[respondent] had already filed a claim for permanent disability. We cannot but
agree with the [respondent] that with the proliferation of obviously biased
company doctors whose loyalty rest completely upon the company they serve,
their findings cannot be taken as gospel truth.
In Wallem Maritime Services v. NLRC, [the] High Tribunal had this to say:

The circular leaves Us no choice but to conclude that [respondent] is no longer

employable considering the kind of ailment he suffered and continues to suffer.
We give judicial notice to the fact that no one fully recovers from a massive
heart attack, and a person who has had a heart condition and has already
suffered a heart attack is in danger of another attack anytime and absent any
warning. [Respondent] therefore cannot be blamed if he is more cautious about
his health and has become loathe to be deployed again. It should be
remembered that [respondent] here is already 53 years old and has undergone a
triple bypass operation during the term of his contract. His medical condition
renders him unemployable as cook in a seafaring vessel. It is also important to
note that such ailment may have been, in all probability, contracted during his
employment with [petitioner]. And being such, he should not have been issued a
work certification by company designated. His disability persists up to this very
day and there is no showing that by some miracle, he has fully recovered from
his ailment.
In Wallem Maritime Services, Inc. v. NLRC, the Supreme Court had occasion to
rule:
"The POEA Standard Employment Contract is designed primarily for the
protection and benefit of Filipino seamen in the pursuit of their employment on
board ocean-going vessels. Its provisions must, therefore, be construed and
applied fairly, reasonably and liberally in favor or for the benefit of the seamen
and their dependents. Only then can its beneficent provisions can be fully carried
into effect."
It is meet to point out that the Standard Employment Contract is not a limitation
but a guaranteed protection to overseas contract workers.
4. That having been said, We find and so hold that there is no necessity for
petitioner to seek the opinion of a third doctor pursuant to his employment

contract, as it is very clear that it is not possible for [respondent] to go back to

work. We take judicial knowledge of the fact that a cooks job is not exactly a
walk in the park. A cook is exposed to constant heat and smoke, and the job may
entail laborious manual tasks. In the case at bench, there is no disputing that
[respondent] suffered a massive heart attack while pushing a rack of glass. What
makes the job all the more difficult is that it is conducted in a moving ship, which
makes for increased work-related stress. All these factors may exacerbate
[respondents] heart condition and expose him to the possibility of another
attack. [Respondents] refusal to go back to work and instead claim permanent
disability benefits could not thus be considered unreasonable and impelled by
nothing but greed but rather, justified by [respondents] health considerations
and a natural desire of every person to preserve his life for as long as possible.
For being human, [respondent] should not be penalized.27 (Emphasis and
underscoring supplied)

claiming seafarer is indeed disabled, hence, respondent is not eligible for an

award of disability benefits as "he was certified fit for sea duty after the conduct
of the last medical examination," and the finding of the American Outpatient
Clinic during his pre-employment medical examination that respondent was unfit
for sea duty, which finding was concurred in by Dr. Hill of HAL, was merely
"initial."
Petitioners go on to argue that the significance of the findings of the companydesignated physician cannot just be disregarded by an all-encompassing
statement motivated by the excessive compassion for seafarers, for the POEA
Standard Contract clearly provides that it is solely the company-designated
physician who shall determine the fitness or degree of disability or injury of a
seafarer for purposes of employment; and if respondent did not agree with the
findings of the company-designated physician, he could have sought an opinion
of a physician to rebut it.

Petitioners Motion for Reconsideration having been denied,28 the present

petition was filed faulting the appellate court in

The petition is bereft of merit.

A.

Section 20 B, paragraph 3 of the POEA Standard Employment Contract reads:

x x x FINDING THAT RESPONDENTS PETITION FOR CERTIORARI WAS SUFFICIENT

IN FORM AND SUBSTANCE IN COMPLIANCE WITH SECTION 1, RULE 65 OF THE
1997 RULES OF CIVIL PROCEDURE.

3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to
sickness allowance equivalent to his basic wage until he is declared fit to work or
the degree of permanent disability has been assessed by the companydesignated physician but in no case shall this period exceed one hundred twenty
(120) days.

B.
. . . AWARDING PERMANENT DISABILITY BENEFITS TO RESPONDENT IN LIGHT OF
THE PROVISIONS OF THE POEA STANDARD CONTRACT.
C.
. . . APPLYING THE "THIRD DOCTOR CLAUSE" OF THE POEA STANDARD
CONTRACT.
D.
. . . FINDING THAT THE "RELEASE AND QUITCLAIM" EXECUTED AND SIGNED BY
RESPONDENT IS NOT PROOF THAT THE LATTER HAS RECEIVED ALL BENEFITS TO
WHICH HE IS ENTITLED.29
Petitioners argue that, among other things, the provisions on disability benefits
operate only upon certification by the company-designated physician that the

For this purpose, the seafarer shall submit himself to a post-employment medical
examination by a company-designated physician within three working days upon
his return except when he is physically incapacitated to do so, in which case, a
written notice to the agency within the same period is deemed as compliance.
Failure of the seafarer to comply with the mandatory reporting requirement shall
result in his forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment, a third
doctor may be agreed jointly between the employer and the seafarer. The third
doctors decision shall be final and binding on both parties.30 (Emphasis
supplied)
Contrary to petitioners argument, the findings of the company-designated
physician were not disregarded. As gathered from the records of the case, two
company-designated physicians, Dr. Abesamis of the American Outpatient Clinic
and HALs Dr. Hill, found respondent to be unfit for sea duty. It was on the basis

of such finding that respondent anchored his claim for disability benefits. There
was no reason for respondent to seek the opinion of another physician because
he was not contesting Doctors Abesamis and Hills identical finding.

Costs against petitioners.

SO ORDERED

Petitioners allegation that the diagnosis of respondent being "unfit" was merely
"initial" fails. In HALs correspondence with ULP on March 16, 1999, it reiterated
its declaration that respondent was "permanently unfit" and even asked ULP to
determine the partial disability percentage, it positing that permanent unfitness
is different from permanent disability.
Notatu dignum is the correct observation of the appellate court in its abovequoted portion of its decision that it was only after respondent had filed a claim
for permanent disability that Doctors Abaya and Hill declared him fit for sea
duty.1wphi1

G.R. No. 166649

November 24, 2006

ROBERT B. CABUYOC, Petitioner,

vs.
INTER-ORIENT NAVIGATION SHIPMANAGEMENT, INC., and INTER-ORIENT
NAVIGATION CO., LIMITED, Respondents.
DECISION
GARCIA, J.:

But even in the absence of an official finding by the company-designated

physicians that respondent is unfit for sea duty, respondent is deemed to have
suffered permanent disability. Permanent disability is the inability of a worker to
perform his job for more than 120 days, regardless of whether he loses the use
of any part of his body.31 It is undisputed that from the time respondent suffered
a heart attack on December 5, 1997, he was unable to work for more than 120
days, his cardiac rehabilitation and physical therapy having ended only on May
28, 1998.
That respondent was found to be "fit to return to work" by Clinica Manila (where
he underwent regular cardiac rehabilitation program and physical therapy from
January 15 to May 28, 1998 under UPLs account) on September 22, 1998 or a
few months after his rehabilitation does not matter. Crystal Shipping Inc., v.
Natividad32teaches:
Petitioners tried to contest the above findings by showing that respondent was
able to work again as a chief mate in March 2001. Nonetheless, this information
does not alter the fact that as a result of his illness, respondent was unable to
work as a chief mate for almost three years. It is of no consequence that
respondent was cured after a couple of years. The law does not require that the
illness should be incurable. What is important is that he was unable to perform
his customary work for more than 120 days which constitutes permanent total
disability. An award of a total and permanent disability benefit would be germane
to the purpose of the benefit, which is to help the employee in making ends
meet at the time when he is unable to work. (Underscoring supplied)
WHEREFORE, the petition is DENIED.

Under consideration is this petition for review under Rule 45 of the Rules of
Court, seeking the reversal and setting aside of the Decision1 dated November
12, 2004 as reiterated in the Resolution2 dated January 12, 2005 of the Court of
Appeals (CA) in CA G.R. SP No. 84300, entitled, "Inter-Orient Navigation
Shipmanagement, Inc. and Inter-Orient Navigation Co., Ltd., v. National Labor
Relations Commission and Robert B. Cabuyoc." The assailed CA decision
overturned that of the National Labor Relations Commission (NLRC) in case RABIV-5-495-96-L3 finding the herein petitioner Robert B. Cabuyoc, who is afflicted
with schizophrenic form of mental disorder, as totally and permanently disabled
pursuant to the old POEA Standard Employment Contract.
As synthesized by the CA in the decision under review, the facts are as follows:
On June 23, 1993, [petitioner] Robert B. Cabuyoc was hired by [respondent]
Inter-Orient Shipmanagement, Inc. to work as Messman on board the "M/V
Olandia" owned by its foreign principal, [respondent] Inter-Orient Navigation
Company Limited. The contract of employment was for a period of ten (10)
months with monthly salary of US$300.00. However, after rendering services for
only two (2) months and eleven (11) days, [petitioner] was discharged on
September 7, 1993 at Sydney, Australia. He was examined by a company
physician at Sydney and was found to be suffering from "nervous breakdown"
and was declared "unfit for work at sea". He was eventually repatriated to the
Philippines and received final wages and earnings in October 1993.
On October 9, 1995, [petitioner] filed a complaint before the Philippine Overseas
Employment Administration (POEA) for non-payment of overtime pay,

hospitalization benefit and sickness allowance. [Petitioner] detailed the hostile

treatment and emotional/mental trauma he suffered in the hands of German ship
officers while working on board the M/V Olandia. This led to his nervous
breakdown and untimely repatriation to the Philippines after being declared unfit
for work by the foreign employers physician who examined him. [Petitioner]
alleged that upon returning to the country, he sought financial assistance from
[respondents] for his medical expenses but they refused to extend help to him.
He was referred to the Philippine General Hospital (PGH) in Manila after being
examined by a doctor at the Manila Sanitarium. He also complained to the POEA
and Overseas Workers Welfare Administration (OWWA) but he was ignored.
Attached to the original complaint was a Medical Certificate dated October 3,
1995 issued by the PGH Medical Records Chief stating that he was examined at
the Out-Patient Services Department and the findings revealed his illness as
"Psychosis; to consider Paranoia disorder." He had received a fax message from
Captain Monterroyo who instructed that he report immediately for work and
when he asked to be given time to recuperate, [respondents] told him there was
no medical assistance for him. [Petitioner] sought to hold the [respondents]
liable for illegal dismissal and payment of his salaries corresponding to the
unexpired portion of his contract and medical/hospitalization benefit.

early as November 21, 1996. A petition to revive and/or re-open the case was
filed by [petitioners] counsel on March 12, 1997. [He] filed his position paper on
July 1, 1997.

The case was referred to the National Labor Relations Commission (NLRC)
Regional Arbitration Branch No. IV and hearings were conducted before
Executive Labor Arbiter Nieves V. De Castro (NLRC OCW Case No. RAB-IV-5-49596-L).

"3. Whether or not [petitioner] is entitled to permanent disability benefit of

US$60,000.00, moral damages and attorneys fees.

On November 21, 1996, [respondents] filed their Position Paper denying the
charge of illegal dismissal and claiming that [petitioners] contract was preterminated and he was repatriated to Manila on September 7, 1993 due to
medical findings that he had become unfit for work at sea. They admitted that
[petitioner] reported to the INC office the following day and was verbally
instructed to have an examination by a company-designated clinic duly
accredited by the Department of Labor and Employment (DOLE) and the POEA.
However, nothing was heard of [petitioner] until the filing of the present
complaint. [Respondents] contended that under the provisions of the POEA
Standard Employment Contract Governing the Employment of all Filipino
Seamen on board Ocean-Going Vessels, the failure of the seaman to submit
himself to post-employment medical examination by the company-designated
physician within three (3) working days upon his return shall result in the
forfeiture of his right to claim compensation and benefits for sickness.
On February 18, 1997, the case was dismissed for failure of the [petitioner] to
submit his position paper as directed by the regional arbitration branch office as

The proceedings before the Labor Arbiter were resumed and subsequently
[petitioner] filed a motion to admit an Amended Complaint. After further
exchange of pleadings by the parties, the case was submitted for decision
without need of formal hearings. [Petitioner] had sought the assistance of the
Office of the President (OP) for expeditious resolution of the case and said office
referred his request to the Labor Arbiter.
On February 26, 1999, Labor Arbiter Neives V. De Castro rendered her Decision
with the following findings and conclusions:
"The issues therefore are:
"1.Whether or not [petitioner] is entitled to his claim for overtime.
"2. Whether or not he is entitled to sickness benefit.

"From the [petitioners] own assertions we believe that [he] receive in full his
overtime pay. The document entitled Final Wage Account dated September 8,
1993 marked as Annex B (Petitioners Position Paper), duly signed by the
[petitioner] acknowledging receipt of the amount states therein, is confirmed by
the [petitioner] himself in paragraph 2, page 9 of his Position Paper, to wit:
While the chief mate was handling part of the [petitioners] wages, the latter
was visibly shaking which struck the attention of the customs officer.
This event happened on the day he was repatriated to the Philippines. And since
the repatriation took place on September 8, 1993, it can be safely inferred that
the [petitioner] indeed signed the Final wage Account after the receipt of the
monetary considerations contained therein.
On the second issue, we find the [petitioner] that he is still entitled to the
sickness wages as provided for under the POEA Standard Employment Contract,
which provision reads:

The employer shall pay the seaman his basic wages from the time he leaves the
vessel for medical treatment. After discharge from the vessel, the seaman is
entitled to 100% of his basic wages until he is declared fit to work on the degree
of permanent disability has been accessed [sic] assessed by the company
designated physician, but in [no] case shall this period exceed 120 days. Fro this
purpose, the seaman shall submit himself to a post-employment medical
examination by the company designated physician within three working days
upon his return except when he is incapacitated to do so, in which case a written
notice to the agency within the same period is deemed as compliance. Failure of
the seaman to comply with the mandatory reporting requirement shall result in
his forfeiture of the right to claim the above benefit.

the Philippines. The fact that he was not subjected to actual post-employment
medical examination is the fault of respondent INC, particularly Capt. De los
Angeles and Capt. Sigfredo Monterroyo, who bluntly denied [petitioner] such
requirement. Nobody is to be blamed but the INC and INC alone. For in bad faith,
and will ill(sic) motive of evading payment of sickness wages to a co-filipino who
suffered badly on board and can no longer hope to work again as a seaman or
any other job, respondent INC must be suffered to pay moral damages of not
less than P50,000.00 and another P50,000.00 by way of exemplary damages to
teach them and those employees similarly motivated not to trifle with law and
justice. This, of course, is on top of the sickness wages computed as follows:
"US$300 X 4 MONTHS (120 days) = US$1,200.00

In the case at bar, the wife of the [petitioner] presented the [petitioner] before
the respondents office for any assistance that may be given to her unfortunate
husband who was still mute and in shock. This fact is confirmed by the
respondents in their position paper, to quote:
Complainant reported to the respondents INC office the following day (Sept. 9,
1993), following his arrival on Sept. 8, 1993), and was verbally instructed to
undergo post-medical examination with the company designated clinic duly
accredited by the DOH and POEA. xxx.
We take exception, however, to the later part of the respondents statement.
[Petitioners] wife, in accompanying [petitioner] to INCs office is to ask for any
assistance. Had respondent really instructed to undergo post-medical
examination with the company designated clinic, [petitioners] wife would have
proceeded immediately that very same day to the clinic, but nay. The truth is, as
succinctly stated by the wife of the [petitioner], that she asked for medical
assistance from the respondent, i.e., from Capt De los Angeles and Capt.
Sigfredo Monterroyo, but the request was unjustifiably denied.

"[Petitioners] disability is total and permanent. He worked with respondent INC

in another vessel to finish his contract. Respondent INC was satisfied with
[petitioners] efficiency and hard work that when the very first opportunity where
a vacancy occur, [petitioner] was immediately called to join the vessel MV
Olandia.
"Barely two and a half months after joining MV Olandia, the misery and mental
torture he suffered totally disabled him. The supporting medical certification
issued by a government physician/hospital and by another expert in the field of
psychiatry respectively find him suffering from psychosis and scyzophrenia
which under OWWA Impediment Classification falls under Grade I-A (Annex C /
complaint). Under the POEA Revised Standard Employment Contract the
employment of all Filipino Seaman on board ocean-going vessel, particularly
appendix 1-A, Schedule of Disability Allowances, Impediment Grade I, the
disability allowance is the maximum rate multiplied by 120%. The maximum rate
schedule is:
Master and Chief Engineer - US$15,000

"Furthermore, if indeed respondent INC instructed [petitioner] and wife to

proceed to the company designated clinic for post-medical examination,
[petitioner] could not have proceeded to the Philippine General Hospital for
medical examination. It was respondent-INCs blunt denial of the request for
medical assistance that caused [petitioners] wife to take him to the Philippine
General Hospital, where he was actually examined and diagnosed to be suffering
from psychosis to consider paranoid disorder.
"Taking into account the above established facts, the mandated three-day period
within which seaman-Cabuyoc shall submit himself to the company designated
physician has been complied with, specifically on the first day after his arrival in

Officers including radio operators and

Masters electricians US$13,000
Ratings US$11,000
"[Petitioner] falling under the category of Ratings (meaning position lower than
the officers) is entitled to 120% of US$11,000 or a total sum of US13,200 to be
paid in Philippine Currency equivalent at the exchange rate prevailing during the
time of payment.

"[Petitioners], would have been a foregone cause, had it not been for the
services of his counsel who took pity and handled his case without asking him
even a single centavo. It is only proper that attorneys fees of 10% of the total
entitlement be paid by the respondents.
SO ORDERED."
{Respondents] appealed to the National Labor Relations Commission (NLRC)
alleging grave abuse of discretion on the part of the Labor Arbiter on grounds
that [petitioner] suffered merely from nervous breakdown and not from
psychosis or schizophrenia, and even assuming that he was so diagnosed, there
was no showing that the illness was contracted during the employment or that
the same was work-connected. [Respondents] contended that psychosis or
schizophrenia is not compensable under the POEA Standard Employment
Contract for Filipino Seafarers on board Ocean-Going Vessels, and even granting
that [petitioner] is entitled to disability benefit his mental incapacity is not grave,
and/or that he is estopped from pursuing or forfeited his claims in this case.
Finally, [respondents] claimed that they had not acted in bad faith as to entitle
[petitioner] to moral and exemplary damages, and that he is barred from
amending his original complaint to include the disability benefits.
On November 24, 2003, the NLRCs Second Division rendered its Resolution
dismissing the appeal and affirming the decision of the Labor Arbiter. The NLRC
gave full credence on the medical certificate issued by the PGH upon the
presumption of regularity in the performance of the public duties, PGH being a
government hospital. [Respondents] admission that [petitioner] was medically
examined by their own physician and found "unfit to work at sea" confirmed the
findings of the OWWA physician that [petitioners] illness was Schizophrenic form
of disorder and rated it as Impediment Grade 1-A.As to the argument that
[petitioners] disease was not work-connected, the NLRC cited the Supreme
Courts ruling that under the POEA Standard Employment Contract, it is not
necessary that the illness be work-connected before disability compensation is
awarded to the seaman repatriated due to medical reasons for as long as such
illness occurred during the employment.
As to the other issues raised in the appeal, the NLRC ruled as follows:
"Likewise bereft of the scant consideration is Respondents argument that
psychosis or schizophrenia is not compensable, claiming that such mental
disorder does not result from 0traumatic head injury which contemplates
accidents involving physical or head contracts. There is nothing in the Standard

Terms and Conditions Governing the Employment of Filipino Seafarers On-Board

Ocean-Going Vessels, particularly Section 30 thereof, that specifically states that
traumatic head injury contemplates accidents involving physical or head
contacts. Notably, the New Britannica-Webster Dictionary & Reference Guide,
Copyright 1988 by Encyclopedia Britannica, Inc. defines the word injury as 1:
an act of the damages or hurts; WRONG 2: hurt, damage, or loss sustained.
Here, said dictionary does not specifically state that hurt, damage, or loss
sustained should be physical in nature, hence, the same may involve mental or
emotional hurt, damage or loss sustained. Further, said dictionary defines the
word trauma as a: a bodily injury caused by a physical force applied from
without; b: a disordered psychic or physical force applied from without; b: a
disordered psychic or behavioral state resulting from stress or injury. From the
above definitions, it is patent that traumatic head injury does not only involve
physical damage but mental or emotional damage as well. [Petitioners] illness
occurred during the term of his employment contract with them, hence,
Respondents are liable therefor.
"xxx. We find untenable Respondents claim that [Petitioners] Impediment
Grade 1 is without any basis. Respondents themselves insist that they
repatriated [petitioner]because he became unfit to work at sea and up to this
writing, or more than eight (8) months from the date of his repatriation.
Respondents have not submitted any evidence to prove that he is already fit to
work. x x x
xxx

xxx

xxx

The NLRC also sustained the grant of moral and exemplary damages, noting that
[respondents] refused to give the [petitioner] any of the sickness benefits under
the POEA standard employment contract. The NLRC likewise rejected the
argument that [petitioners] claims were barred by prescription. It pointed out
that [petitioners] cause of action began to run from the time [respondents]
refused to grant [petitioner] permanent disability benefit despite the evaluation
of impediment grade for the illness so diagnosed. Finally, the NLRC found no
merit in [respondents] contention that [petitioner] had already forfeited any
right to disability benefits because the failure to submit to medical examination
within three (3) days by a company-designated physician was their own fault and
that [petitioner] accompanied by his wife was unjustifiably refused any
assistance by the [respondents] when the claim for sickness benefit or
compensation was brought to their attention.
[Respondents] moved to reconsider the dismissal of their appeal, but the NLRC
denied their motion on April 30, 2004.

From the foregoing rulings and decisions of the Labor Arbiter and the NLRC,
herein respondents went to the CA via the special civil action of certiorari under
Rule 65 of the Rules of Court, thereat docketed as CA-G.R. SP No. 84300.
In the herein assailed decision4 dated November 12, 2004, the CA reversed and
set aside that of the NLRC, thus:
"WHEREFORE, premises considered, the present petition is hereby GIVEN DUE
COURSE and the writ prayed for, accordingly GRANTED. The Resolutions dated
November 24, 2003 and April 30, 2004 of the NLRC (Second Division) in NLRC
NCR CA No.019757-99 (POEA Case No. 95-10-2220) are hereby REVERSED and
SET ASIDE. A new judgment is hereby entered DISMISSING the case and denying
[petitioners] claims for compensation under the Standard Employment Contract
for Filipino Seafarers on Board Ocean-Going Vessels, and damages.

DISORDERS THAT ARE NOT THE DIRECT CONSEQUENCE OR EFFECT OF SUCH

CAUSES CONSIDERED AS "TRAUMATIC."
III
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN RULING THAT
PETITIONERS EVIDENCE IS INSUFFICIENT TO SUPPORT HIS CLAIM FOR DISABILITY
BENEFITS AND IN GIVING NO EVIDENTIARY WEIGHT AND CREDENCE TO THE
MEDICAL CERTIFICATE ISSUED BY THE GOVERNMENT PHYSICIAN CATEGORICALLY
CLASSIFYING HIS DISABILITY AS FALLING UNDER IMPEDIMENT GRADE 1.
IV
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN MISREADING
AND ALTOGETHER TAKING OUT OF CONTEXT THE DIAGNOSIS THAT PETITIONER
IS ALREADY

No pronouncements as to costs.
UNFIT TO PERFORM SHIPBOARD-RELATED ACTIVITIES.
SO ORDERED."
V
With his motion for reconsideration having been denied by the CA in its
resolution5 of January 12, 2005, petitioner is now with this Court via the present
recourse on the following grounds:

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN

UNREASONABLY IGNORING THE OVERWHELMING EVIDENCE IN SUPPORT OF
PETITIONERS ENTITLEMENT TO MAXIMUM DISABILITY BENEFITS.

I
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN FINDING THAT
THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN ITS FINDINGS OF FACT
AND LAW DESPITE THE ABSENCE OF EVIDENCE SHOWING THAT SAID LABOR
AGENCY HAD PATENTLY AND GROSSLY ABUSED ITS DISCRETION AS TO AMOUNT
TO AN EVASION OF A POSITIVE DUTY, OR A VIRTUAL REFUSAL TO PERFORM THE
DUTY ENJOINED OR ACT IN CONTEMPLATION OF LAW, OR THAT ITS POWER WAS
EXERCISED IN AN ARBITRARY AND DESPOTIC MANNER BY REASON OF PASSION
AND PERSONAL HOSTILITY.
II
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN CONSTRUING
AS COMPENSABLE ONLY THOSE HEAD INJURIES UNDER THE POEA STANDARD
EMPLOYMENT CONTRACT THAT INCLUDE CONDITIONS OR ILLNESSES CAUSED BY
EXTERNAL OR PHYSICAL FORCE AND NOT THE MENTAL CONDITIONS OR

(A) PETITIONER IS TOTALLY AND PERMANENTLY DISABLED CONSIDERING THAT HE

COULD NO LONGER RETURN TO WORK AS A SEAFARER, THE JOB HE WAS
ACCUSTOMED TO PERFORM.
(B) PETITIONER IS SUFFERING FROM TOTAL AND PERMANENT DISABILITY SINCE
HE REMAINS INCAPACITATED FOR A PERIOD OF MORE THAN ONE HUNDRED
TWENTY (120) DAYS.
VI
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN DISMISSING
PETITIONERS CLAIMS FOR MORAL AND EXEMPLARY DAMAGES AS WELL AS
ATTORNEYS FEES NOTWITHSTANDING PRIVATE RESPONDENTS BRAZEN
DISREGARD TO COMPLY WITH THEIR CONTRACTUAL OBLIGATIONS.
VII

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN DELETING THE

AWARD OF SICKNESS ALLOWANCE CONSIDERING THAT THERE IS NO BASIS IN
THE DELETION SINCE ITS PAYMENT IS INDEPENDENT, SEPARATE AND DISTINCT
FROM PAYMENT OF DISABILITY BENEFITS UNDER THE POEA STANDARD
EMPLOYMENT CONTRACT.

physical force," it follows that mental disorders which are not the direct
consequence or effect of such external or physical force were not intended by
law to be compensable. And while the CA gives judicial emphasis to the word
"traumatic," it did not bother to explain why petitioners illness, classified as
schizophrenia, should not be considered "traumatic" and compensable. Thus, in
its challenged decision, the CA observes:

We find for the petitioner.

To begin with, we must stress that herein respondents went to the CA from the
adverse decision of the NLRC thru the vehicle of certiorari under Rule 65 of the
Rules of Court. Reviewing the records of this case, the Court is convinced that at
no time at all did the NLRC commit grave abuse of discretion. Its affirmance of
the Labor Arbiters award of disability benefits in favor of the petitioner was
based on the arbiters findings of facts which are supported by substantial
evidence. Such findings, therefore, cannot be made the subject of the special
civil action of certiorari under Rule 65. For it is settled that in a petition for
certiorari under Rule 65, the inquiry is confined to issues of jurisdiction or grave
abuse of discretion.6 Besides, resort to judicial review of the decisions of the
NLRC by way of a special civil action of certiorari under Rule 65 is limited only to
issues of want or excess of jurisdiction and grave abuse of discretion on the part
of the labor tribunal. It does not include an inquiry as to the correctness of the
evaluation of evidence which was the basis of the labor agency in reaching its
conclusion. Neither is it for the CA nor this Court to re-examine conflicting
evidence, re-evaluate the credibility of witnesses or substitute the findings of
fact of an administrative body which has gained expertise in its specialized field.
Arguably, there may even be some error in judgment. This, however, is not
within the office of the extraordinary remedy of certiorari.7 Findings of facts of
quasi-judicial agencies, like the NLRC, which have acquired expertise in the
specific matters entrusted to their jurisdiction are accorded by this Court not
only respect but even finality if supported by substantial evidence.8 Only
substantial, not preponderance of evidence is necessary.9 Section 5, Rule 133 of
the Rules of Court states in express terms that in cases filed before
administrative or quasi-judicial bodies, a fact may be deemed established if it is
supported by substantial evidence, or that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.
As to the basic issue raised herein, the CA confined the resolution of the dispute
to the enumerated list of injuries under the category "HEAD" per Appendix 1 of
the old POEA Standard Employment Contract, and ruled that only those injuries
that are "traumatic" shall be considered compensable.10 The CA ratiocinated
that "[B]ecause the enumeration of head injuries listed under the category of
HEAD includes only those mental conditions or illnesses caused by external or

This conclusion is especially relevant considering that what is involved is a

condition, schizophrenia, which is not a simple medical case so that a reliable
diagnosis would require a more exhaustive and extensive examination of the
patient.
Psychosis is a loss of contact with reality, typically including delusions (false
ideas about what is taking place or who one is) and hallucinations (seeing or
hearing things which arent there). It is a severe mental condition, the numerous
potential causes of which include alcohol and certain drugs, brain tumors, manic
depression, epilepsy and schizophrenia. Psychosis is generally regarded by
mainstream psychiatry to be a symptom of a severe mental illness, and
particularly associated with schizophrenia. It is not uncommon in cases of brain
injury and may occur after drug use. It is a descriptive term for a complex group
of behaviors and experiences and as such is not a medical explanation itself.
However, the term psychosis is to be distinguished from mental illness, as it may
be regarded as a symptom of other mental illness, but as a descriptive concept it
is not considered an illness in its own right.
Initial examination of private respondent indicated the possibility of psychosis,
stated as paranoia, or schizophrenia. The findings of the clinic designated by the
foreign employer stating that private respondent exhibited "nervous breakdown"
could have been just one of the symptoms which may or may not establish
psychosis. At any rate, a more precise identification or determination of private
respondents illness is not possible due to dearth of evidence.
The NLRC construed such medical finding as supporting the claim for permanent
disability benefit considering that [petitioner] could no longer perform his work
as seaman after he was repatriated for medical reasons. The NLRC noted that
notwithstanding the diagnosis of a simple "breakdown" by the company
physician in the foreign clinic, [petitioner] was nevertheless declared "not fit to
work as seaman" and was repatriated immediately precisely because of this
sickness. However, in view of insufficient evidence and particularly inconclusive
medical findings, there is no factual basis for the ruling of compensability.11

As it were, the foregoing observation of the appellate court contradicts both the
ruling of the Labor Arbiter and the NLRC. In its decision, the labor arbiter states:

Suffice it to state that [petitioners] illness occurred during the term of his
employment contract with them, hence, respondents are liable therefor.13

[Petitioners] disability is total and permanent. He worked with respondent INC in

another vessel to finish his contract. Respondent INC was satisfied with
[petitioners] efficiency and hard work that when the very first opportunity where
a vacancy occur, [petitioner] was immediately called to joint the vessel MV
Olandia.

The above findings of the NLRC are in recognition of the emotional turmoil that
petitioner experienced in the hands of the less compassionate German officers.
This Court has ruled that schizophrenia is compensable. In NFD International
Manning Agents, Inc. v. NLRC,14 the Court went further by saying:

Barely two and a half months after joining MV Olandia, the misery and mental
torture he suffered totally disabled him. The supporting medical certification
issued by a government physician/hospital and by another expert in the field of
psychiatry, respectively find him suffering from "psychosis" and "schizophrenia"
which under the OWWA impediment classification falls under Grade I-A (Annex C/
Complaint). Under the POEA Revised Standard Employment Contract, the
employment of all Filipino Seamen on board ocean-going vessel, particularly
appendix 1-A, Schedule of Disability Allowances, Impediment Grade 1, the
disability allowance is maximum rate multiplied by 120%.12
The above findings of the Labor Arbiter were seconded by the NLRC in this wise:
Likewise bereft of scant consideration is Respondents argument that psychosis
or schizophrenia is not compensable, claiming that such mental disorder does
not result form traumatic head injury which contemplates accidents involving
physical or head contacts. There is nothing in the Standard Terms and Conditions
governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessels,
particularly Section 30, thereof, that specifically states that traumatic head
injury contemplates accidents involving physical or head contacts. Notably, The
New Britannica-Webster Dictionary & Reference Guide, Copyright 1988 by
Encyclopedia Britannica, Inc. defines the word "injure" as "1: an act that
damages or hurts: WRONG 2: hurt, damage, or loss sustained." here, said
dictionary does not specifically state that the hurt, damage, or loss sustained
should be physical in nature, hence, the same may involve mental or emotional
hurt, damage or loss sustained. Further, said dictionary defines the word
"trauma" as "a: a bodily injury caused by a physical force applied from without;
b: a disordered psychic or behavioral state resulting from stress or injury." From
the above definitions, it is patent that "traumatic head injury" does not only
involve physical damage but mental or emotional damage as well. Respondents
argument that [petitioners] co-seaman belied the claimed harassment is bereft
of merit.

Strict rules of evidence, its must be remembered, are not applicable in claims for
compensation and disability benefits.1wphi1 Private respondent having
substantially established the causative circumstances leading to his permanent
total disablility to have transpired during his employment, we find the NLRC to
have acted in the exercise of its sound discretion in awarding permanent total
disability benefits to private respondent. Probability and not the ultimate degree
of certainty is the test of proof in compensation proceedings.
The findings of both the Labor Arbiter and the NLRC as well as the records of the
case convince the Court that petitioners claim is substantiated by enough
evidence to show that his disability is permanent and total. First, there is the
medical findings15 of the Philippine General Hospital that petitioner is down with
"psychosis; to consider paranoid disorder, making it extremely difficult for him to
return to shipboard action"; and second, the findings of the Social Benefits
Division of the Overseas Workers Welfare Administration16 through its attending
doctor Leonardo Bascar, that petitioner is suffering from "schizophrenic form
disorder."
Time and again, the Court has consistently ruled that"disability should not be
understood more on its medical significance but on the loss of earning
capacity."17 Permanent total disability means disablement of an employee to
earn wages in the same kind of work, or work of similar nature that she was
trained for or accustomed to perform, or any kind of work which a person of her
mentality and attainment could do. It does not mean absolute helplessness. In
disability compensation, it is not the injury which is compensated, but rather it is
the incapacity to work resulting in the impairment of ones earning capacity.18
Lastly, it is right that petitioner be awarded moral and exemplary damages and
attorneys fees. Article 2220 of the Civil Code provides:
Willful injury to property may be a legal ground for awarding moral damages if
the court should find that, under the circumstances, such damages are justly
due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith.

Here, petitioners illness and disability were the direct results of the demands of
his shipboard employment contract and the harsh and inhumane treatment of
the officers on board the vessel "Olandia." For no justifiable reason, respondents
refused to pay their contractual obligations in bad faith. Further, it cannot be
gainsaid that petitioners disability is not only physical but mental as well
because of the severe depression, mental torture, anguish, embarrassment,
anger, sleepless nights and anxiety that befell him. To protect his rights and
interest, petitioner was constrained to institute his complaint below and hire the
services of an attorney.

As correctly resolved by the NLRC, the Labor Arbiter committed no grave abuse
of discretion in awarding petitioner P50,000.00 as moral damages; P50,000.00
as exemplary damages; US$1,200.00 sickness wages; US$13,200.00 disability
allowance; and attorneys fees of ten percent (10%) of the total entitlement.
WHEREFORE, the instant petition is GRANTED. Accordingly, the challenged
decision and resolution of the CA are REVERSED and SET ASIDE. The decision
dated November 24, 2003 of the NLRC, affirmatory of that of the Labor Arbiter, is
REINSTATED.
SO ORDERED.

On the whole, we find the decision of the Labor Arbiter, as affirmed by the NLRC,
awarding the petitioners money claims to be supported by substantial evidence.