VOL.
472, OCTOBER 12, 2005 453 454
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
G.R. No. 152689. October 12, 2005. * deprive the company of its prerogative to change his assignment or
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
INC., ENRIQUE D. PEREZ, RICARDO R. ZARATE,
ISABELO A. FERIDO, JR. and RODOLFO R. SANTOS,
petitioners, vs. ALFREDO S. PAGUIO, respondent.
G.R. No. 154072. October 12, 2005. *
ALFREDO S. PAGUIO, petitioner, vs. PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY, INC., ENRIQUE D.
PEREZ, RICARDO R. ZARATE, ISABELO A. FERIDO, JR.
and RODOLFO R. SANTOS, respondents.
Civil Procedure; Actions; It is familiar and fundamental
doctrine that it is not the title of the action but the allegations in the
pleading that determines the nature of the action.We note from the
records that there has been no change of cause of action from illegal
demotion to illegal transfer. Illegal demotion is a type of illegal
transfer. Moreover, it is familiar and fundamental doctrine that it
is not the title of the action but the allegations in the pleading that
determines the nature of the action.
Labor Law; Labor Relations; Employer Prerogative; It is the
employers prerogative, based on its assessment and perception of its
employees qualifications, aptitudes, and competence, to deploy its
employees in the various areas of its business operations in order to
ascertain where they will function with maximum benefit to the
company.Jurisprudence abounds that, except as limited by special
laws, an employer is free to regulate, according to his own discretion
and judgment, all aspects of employment, including the transfer of
employees. It is the employers prerogative, based on its assessment
and perception of its employees qualifications, aptitudes, and
competence, to deploy its employees 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
_______________
*FIRST DIVISION.
454
SUPREME COURT REPORTS ANNOTATED
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
transfer him where he will be most useful.
Same; Same; Same; While it may be conceded that management
is in the best position to know its operational needs, the exercise of
management prerogative cannot be utilized to circumvent the law
and public policy on labor and social justice.As correctly pointed
out by the Court of Appeals, there are limits to the management
prerogative. While it may be conceded that management is in the
best position to know its operational needs, the exercise of
management prerogative cannot be utilized to circumvent the law
and public policy on labor and social justice. That prerogative
accorded management should not defeat the very purpose for which
our labor laws exist: to balance the conflicting interests of labor and
management. By its very nature, management prerogative must be
exercised always with the principles of fair play and justice. In
particular, the employer must be able to show that the transfer is
not unreasonable, inconvenient or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. The employer bears the burden of
proving that the transfer of the employee has complied with the
foregoing test.
Civil Law; Damages; Moral Damages; Moral damages are
recoverable upon sufficient proof of moral suffering, mental anguish,
fright or serious anxiety.Moral damages are recoverable upon
sufficient proof of moral suffering, mental anguish, fright or serious
anxiety. The claimant should satisfactorily show the existence of the
factual basis of damages. In the present case, though Paguios
transfer was found unlawful by the appellate court, our review of
the records would show that there is no factual basis for such an
award.
Same; Same; Exemplary Damages; Attorneys Fees; No
exemplary damages can be awarded in the absence of moral or actual
damagesand where the awards for moral and exemplary damages
are eliminated, so must the award for attorneys fees.No exemplary
damages can be awarded in the absence of moral or actual damages.
And where the awards for moral and exemplary damages are
eliminated, so must the award for attorneys fees.
 455
VOL. 472, OCTOBER 12, 2005 455
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
PETITION for review on certiorari of a decision of the Court
of Appeals and MOTION FOR RECONSIDERATION of a
decision of the Supreme Court.
The facts are stated in the opinion of the Court.
Domingo C. Rodriguez for A. Paguio.
Valdez, Anigan and Associates for Alfredo Paguio.
Dela Rosa, Tejero, Nograles for PLDT, et al.
QUISUMBING, J.:
This petition for review on certiorari docketed as G.R. No.
152689, assails the Decision dated March 7, 2002 of the Court
1 was not made beneficiary of the cut-over bonus. After Santos
of Appeals in CA-G.R. SP No. 61528. It is consolidated with
the Motions for Reconsideration of this Courts Decision dated
2 Isabelo Ferido, Jr., the First Vice-President-GMM Network
December 3, 2002 in G.R. No. 154072.
The antecedent facts of the case are as follows:
Petitioner Philippine Long Distance Telephone Company,
Inc. (PLDT) has 27 Exchanges in its Greater Metro Manila
(GMM) Network. Alfredo S. Paguio was the Head of the
Garnet Exchange.
In 1994, PLDT assessed the performance of the 27
Exchanges comprising the GMM Network. Upon receipt of the
ratings, Paguio sent Rodolfo Santos, his immediate supervisor
and the Assistant Vice-President of the GMM East Center, a
letter criticizing the PLDT criteria for performance rating as
unfair because they depended on manpower. He also
suggested that the criteria failed to recognize that exchanges
with new plants could easily meet the objectives of GMM
compared to those with old plants. Despite Paguios criticism,
Garnet Exchange, the oldest plant in GMM, obtained the top
_______________
1 Rollo (G.R. No. 152689), pp. 72-87. Penned by Associate Justice Marina L.
Buzon, with Associate Justices Cancio C. Garcia (now a Member of this Court),
and Alicia L. Santos concurring.
2 Rollo (G.R. No. 154072), pp. 288-301.
456
456 SUPREME COURT REPORTS ANNOTATED
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
rating in the GMM. Nevertheless, Paguio reiterated his letter
to Santos and objected to the performance rating as it was
based only on the attainment of objectives, without
considering other relevant factors.
In June 1996, PLDT rebalanced the manpower of the East
Center. Paguio wrote Santos and requested reconsideration of
the manpower rebalancing, claiming it was unfair to Garnet
Exchange because as the oldest exchange in the East Center,
it was disallowed to use contractors for new installations and
denied his request, Paguio elevated the matter to respondent
Services.
On January 17, 1997, Paguio was reassigned as Head for
Special Assignment at the Office of the GMM East Center and
asked to turn over his functions as Garnet Exchange Head to
Tessie Go. Believing that his transfer was a disciplinary
action, Paguio requested Ferido for a formal hearing of the
charges against him and asked that his reassignment be
deferred. He also filed a complaint against Santos for grave
abuse of authority and manipulation of the East Center
performance. As no action was taken by Ferido, Paguio
elevated the matter to Enrique D. Perez, the Senior Executive
Vice-President and Chief Operating Officer of PLDT, who
advised him to await the resolution of his complaint.
Consequently, Ferido sent Paguio an inter-office memo
stating that he found Paguios reassignment in order as it was
based on the finding that Paguio was not a team player and
cannot accept decisions of management, which is short of
insubordination. Ferido advised Paguio to transfer to any
group in the company that may avail of his services. Likewise, motion for reconsideration, Paguio elevated the case to this
Perez, thru an inter-office memo, informed Paguio that his Court where it was docketed as G.R. No. 154072. On December
transfer was not in the nature of a disciplinary action that 3, 2002, the Court rendered judgment in G.R. No. 154072 and
required investigation and that he agreed with the reasons of held that
the transfer. _______________
457
Id., at pp. 103-116.
VOL. 472, OCTOBER 12, 2005 457
3

4 Id., at pp. 147-148.

Philippine Long Distance Telephone Company, Inc. vs. 5 Id., at pp. 151-153.

Paguio 6 Id., at p. 59.

7 Id., at pp. 60-61.

Aggrieved, Paguio filed, before the Regional Arbitration 458
Branch of the National Labor Relations Commission (NLRC), 458 SUPREME COURT REPORTS ANNOTATED
a complaint for illegal dismissal with prayer for reinstatement
Philippine Long Distance Telephone Company, Inc. vs.
and damages. He later amended his complaint to illegal
Paguio
demotion with prayer for reversion to old position, damages
and attorneys fees. On November 27, 1998, the Labor Arbiter Paguio was not entitled to the monetary award representing
upheld the validity of Paguios transfer and dismissed the the 16% monthly salary increase. However, the Court awarded
him moral and exemplary damages and attorneys fees.
complaint.
8
3

Both Paguio and PLDT sought reconsideration. On

Paguio appealed to the NLRC, which reversed the Labor
Arbiters decision. The NLRC found the transfer February 26, 2003, the Court ordered the consolidation of G.R.
unlawful, firstly, because Paguios comments were done in No. 152689 and the motions for reconsideration in G.R. No.
good faith to help his team see their strong and weak points. 154072. 9

According to the NLRC, this showed that he strove to improve In G.R. No. 152689, PLDT imputes the following errors to
his team and was, indeed, a team player. The NLRC noted that the appellate court:
THE HONORABLE COURT OF APPEALS COMMITTED
the companys manual emphasized the importance of
SERIOUS ERROR IN AFFIRMING THE NLRCS DECISION AND
communication and what Paguio did was merely to ventilate RESOLUTION BY RULING THAT THE TRANSFER OR RE-
his opinions and observations. Secondly, Paguios transfer ASSIGNMENT OF PRIVATE RESPONDENT PAGUIO WAS
involved a diminution of his salary, benefits and other UNLAWFUL AND ILLEGAL.
privileges.
4
THE HONORABLE COURT OF APPEALS FINDING ON
PLDT moved for reconsideration but the same was denied UNLAWFULNESS OF PAGUIOS TRANSFER OR
by the NLRC. Consequently, PLDT filed a petition for
5 REASSIGNMENT CONSTITUTES A DRASTIC DEPARTURE OF
certiorari with the Court of Appeals. The appellate court THE INSTANCES CONSIDERED TO CONSTITUTE AN
affirmed the decision of the NLRC but deleted the monetary ILLEGAL TRANSFER AS RULED IN SETTLED
award representing the 16% monthly salary increase. 6
JURISPRUDENCE INVOLVING SIMILAR CASES.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
PLDT appealed directly to this Court. Its petition was
IN CONSIDERING PETITIONERS ACT OF CHANGING THE
docketed as G.R. No. 152689.
PRIVATE RESPONDENTS ASSIGNMENT ON LEGITIMATE
On the other hand, Paguio sought for partial GROUNDS AS TANTAMOUNT TO AN ILLEGAL TRANSFER.
reconsideration. Upon the appellate courts denial of his
7
 THE HONORABLE COURT OF APPEALS CONTRADICTED
THE SETTLED JURISPRUDENCE ON THE MATTER WHEN IT
ORDERED THE REINSTATEMENT OF PAGUIO. 10
In brief, the petitioner asks this Court to resolve now the
legality of Paguios transfer.
PLDT contends that the appellate court erred in lending
more weight to the factual findings of the NLRC over those of
_______________
8 Id., at pp. 288-301.
9 Id., at p. 447.
10 Rollo (G.R. No. 152689), pp. 44, 53, 59, 62.
459
VOL. 472, OCTOBER 12, 2005 459
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
the Labor Arbiter without stating its basis. Moreover, PLDT
alleges that the NLRC ruling would allow a change of cause of
action since the complaint alleged illegal demotion while the
decision involved illegal transfer. PLDT asserts that the
reassignment of Paguio was not a demotion because it was
merely a transfer to a position of equivalent rank and salary.
According to PLDT, transfer, as a rule is allowed by law unless
it is vitiated by improper motive or is used as a disguise to
remove or punish the employee. It maintains that the
appellate court failed to ascribe any illicit or improper motive
behind the transfer of Paguio. Lastly, PLDT claims that the
reinstatement of Paguio is no longer possible as his
relationship with the company is already strained and that his
position no longer exists due to a company-wide
reorganization.
Paguio argues that his transfer was a demotion since he
was assigned to a functionless position with neither office nor
staff and deprived of the opportunity to be promoted as he
would have no performance to speak of in his new post.
Prefatorily, we note from the records that there has been no
change of cause of action from illegal demotion to illegal with the principles of fair play and justice. In particular, the
transfer. Illegal demotion is a type of illegal transfer.
Moreover, it is familiar and fundamental doctrine that it is not
the title of the action but the allegations in the pleading that
determines the nature of the action. 11
Now, on the crux of the matter, jurisprudence abounds that,
except as limited by special laws, an employer is free to
regulate, according to his own discretion and judgment, all
aspects of employment, including the transfer of employees. It 12
is the employers prerogative, based on its assessment and
perception of its employees qualifications, aptitudes, and
competence, to deploy its employees in the various areas of its
_______________
11 See Almuete v. Andres, G.R. No. 122276, 20 November 2001, 369 SCRA
619, 627.
12 Habana v. National Labor Relations Commission, G.R. No. 121486, 16
November 1998, 298 SCRA 537, 557.
460
460 SUPREME COURT REPORTS ANNOTATED
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
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. 13
Nonetheless, as correctly pointed out by the Court of
Appeals, there are limits to the management prerogative.
While it may be conceded that management is in the best
position to know its operational needs, the exercise of
management prerogative cannot be utilized to circumvent the
law and public policy on labor and social justice. That
prerogative accorded management should not defeat the very
purpose for which our labor laws exist: to balance the
conflicting interests of labor and management. By its very
nature, management prerogative must be exercised always
14
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. The employer bears
15
the burden of proving that the transfer of the employee has
complied with the foregoing test. 16
In the present case, we see no credible reason for Paguios
transfer except his criticisms of the companys performance
evaluation methods. Based on the undisputed facts, Garnet
Exchange was doing well and excelled in the performance
rating. In the same way, Paguios performance was consis-
_______________
13 Isabelo v. National Labor Relations Commission (Fifth Division), G.R.
Nos. 113366-68, 24 July 1997, 276 SCRA 141, 146.
14 Philippine Airlines, Inc. v. Pascua, G.R. No. 143258, 15 August 2003, 409
SCRA 195, 203.
15 Mendoza v. Rural Bank of Lucban, G.R. No. 155421, 7 July 2004, 433
SCRA 756, 766; Blue Dairy Corporation v. National Labor Relations
Commission, G.R. No. 129843, 14 September 1999, 314 SCRA 401, 408.
16 Mendoza v. Rural Bank of Lucban, Id., at p. 767.
461
VOL. 472, OCTOBER 12, 2005 461
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
tently rated as outstanding. There was also no proof that
Paguio refused to comply with any management policy.
Patently, his transfer could not be due to poor performance.
Neither was it because he was needed in the new post for the
new assignment was functionless and it was nothing but a
title. Paguios transfer could only be caused by the
managements negative reception of his comments. It is
prejudicial to Paguio because it left him out for a possible
promotion as he was assigned to a functionless position with
neither office nor staff.
In the motion for reconsideration in G.R. No. 154072,
Paguio maintains that it is speculation on the part of the Court
to rule that he would not maintain his outstanding
performance. Thus, he prays for a monthly salary increase.
In its motion for reconsideration, PLDT points out that one
reason for the award of damages and attorneys fees was the
Courts mistaken belief that the company failed to appeal the
Court of Appeals decision. However, PLDT contends that
there was a pending appeal of the Court of Appeals finding of
illegal transfer, particularly G.R. No. 152689.
We reiterate our decision in G.R. No. 154072 that awarding
a monthly salary increase would be merely based on
speculation. A salary increase is conditioned on both the
outstanding performance of the employee and high returns for
the company. It is not a demandable right but a benefit given
by management, subject to the attainment of specific goals.
Paguios future performance could not be guaranteed to be
excellent, with high returns to the company, simply because in
the past he did excel. That is the basic reason for a periodic
performance rating.
Now, moral damages are recoverable upon sufficient proof
of moral suffering, mental anguish, fright or serious anxiety.
The claimant should satisfactorily show the existence of the
462
462 SUPREME COURT REPORTS ANNOTATED
Philippine Long Distance Telephone Company, Inc. vs.
Paguio
factual basis of damages. In the present case, though Paguios
17
transfer was found unlawful by the appellate court, our review
of the records would show that there is no factual basis for
such an award.
No exemplary damages can be awarded in the absence of
moral or actual damages. And where the awards for moral and
exemplary damages are eliminated, so must the award for
attorneys fees.
18
WHEREFORE, the petition in G.R. No. 152689 is DENIED.
The Decision dated March 7, 2002 of the Court of Appeals in
CA-G.R. SP No. 61528 is AFFIRMED. The motion for
reconsideration by Alfredo Paguio of the Decision dated
December 3, 2002 in G.R. No. 154072 is DENIED. The motion
for reconsideration of Philippine Long Distance Telephone
Company, Inc. is GRANTED IN PART by deleting the award
in the Decision dated December 3, 2002, for moral and
exemplary damages and attorneys fees.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Ynares-
Santiago, Carpio and Azcuna, JJ., concur.
Petition denied, judgment affirmed. Motion for
reconsideration denied.
Note.It is the employers prerogative to prescribe
reasonable rules and regulations necessary or proper for the
conduct of its business or concern. (Gustilo vs. Wyeth
Philippines, Inc., 440 SCRA 67 [2004])

o0o
_______________

17 See Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 127473, 8

December 2003, 417 SCRA 196, 212.

18 Cathay Pacific Airways, Ltd. v. Sps. Vazquez, G.R. No. 150843, 14 March

2003, 447 Phil. 306, 324; 399 SCRA 207, 223.

463
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