G.R. No.

202961 February 4, 2015

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID,

BONIFACIO MATUNDAN, NORA MENDOZA, et al., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SOLID MILLS, INC., and/or PHILIP
ANG, Respondents.

FACTS: An employer is allowed to withhold terminal pay and benefits pending the
employee's return of its properties.

Petitioners are respondent Solid Mills, Inc.' s (Solid Mills) employees. They are 1

represented by the National Federation of Labor Unions (NAFLU), their collective

bargaining agent. 2

As Solid Mills employees, petitionersand their families were allowed to occupy SMI
Village, a property owned by Solid Mills. According to Solid Mills, this was "[o]ut of
3

liberality and for the convenience of its employees . . . [and] on the condition that the
employees . . . would vacate the premises anytime the Company deems fit." 4

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills
would cease its operations due to serious business losses. NAFLU recognized Solid Mills
5

closure due to serious business losses in the memorandum of agreement dated

September 1, 2003. The memorandum of agreement provided for Solid Mills grant of
6

separation pay less accountabilities, accrued sick leave benefits, vacation leave benefits,
and 13th month pay to the employees. 7

Solid Mills filed its Department of Labor and Employment termination report on September
2, 2003. 9

Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate
SMI Village. 10

Petitioners were no longer allowed to report for work by October 10, 2003. They were
11

required to sign a memorandum of agreement with release and quitclaim before their
vacation and sick leave benefits, 13th month pay, and separation pay would be
released. Employees who signed the memorandum of agreement were considered to
12

have agreed to vacate SMI Village, and to the demolition of the constructed houses inside
as condition for the release of their termination benefits and separation pay. Petitioners
13

refused to sign the documents and demanded to be paid their benefits and separation
pay.14

Hence, petitioners filed complaintsbefore the Labor Arbiter for alleged non-payment of
separation pay, accrued sick and vacation leaves, and 13th month pay. They argued that
15

their accrued benefits and separation pay should not be withheld becausetheir payment is
based on company policy and practice. Moreover, the 13th month pay is based on law,
16

specifically, Presidential Decree No. 851. Their possession of Solid Mills property is not
17

an accountability that is subject to clearance procedures. They had already turned over
18

to SolidMills their uniforms and equipment when Solid Mills ceased operations. 19
The Labor Arbiter ruled in favor of petitioners. According to the Labor Arbiter, Solid Mills
21

illegallywithheld petitioners benefits and separation pay. Petitioners right to the payment
22

of their benefits and separation pay was vestedby law and contract. The memorandum of
23

agreement dated September 1, 2003 stated no condition to the effect that petitioners must
vacate SolidMills property before their benefits could be given to them. Petitioners
24

possession should not be construed as petitioners "accountabilities" that must be cleared

first before the release of benefits. Their possession "is not by virtue of any
25

employer-employee relationship." It is a civil issue, which isoutside the jurisdiction of the

26

Labor Arbiter.27

Solid Mills appealed to the National Labor Relations Commission. It prayed for, among
29

others, the dismissal of the complaints against it and the reversal of the Labor Arbiters
decision.30

The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiters
dispositive portion, but reversed paragraphs 1 and 2.

The National Labor Relations Commission ruled that because of petitioners failure to
vacate Solid Mills property, Solid Mills was justified in withholding their benefits and
separation pay. Solid Mills granted the petitioners the privilege to occupy its property on
35

accountof petitioners employment. It had the prerogative toterminate such

36

privilege. The termination of Solid Mills and petitioners employer-employee relationship

37

made it incumbent upon petitioners to turn over the property to Solid Mills. 38

Petitioners, thus, filed a petition for certiorari before the Court of Appeals to assail the
41

National LaborRelations Commission decision of August 31, 2010 and resolution of

November 30, 2010. 42

On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners
petition.

ISSUE: WON employer can hold separation pay pending return of property.

HELD: No. The Court of Appeals ruled thatSolid Mills act of allowing its employees to
make temporary dwellingsin its property was a liberality on its part. It may be revoked any
time at its discretion. As a consequence of Solid Mills closure and the resulting
45

termination of petitioners, the employer-employee relationship between them ceased to

exist. There was no more reason for them to stay in Solid Mills property. Moreover, the
46

memorandum of agreement between Solid Mills and the union representing petitioners
provided that Solid Mills payment of employees benefits should be "less
accountabilities." 47

Clearly, in this case, it is for the workers to return their housing in exchange for the release
of their benefits. This is what they agreed upon. It is what is fair in the premises.
1wphi1

WHEREFORE, the petition is DENIED. The Court of Appeals' decision is AFFIRMED

G.R. NO. 192105 December 9, 2013

ANTONIO LOCSIN, II, Petitioner,
vs.
MEKENI FOOD CORPORATION, Respondent.

In the absence of specific terms and conditions governing a car plan agreement between
the employer and employe former may not retain the installment payments made by the
latter on the car plan and treat them as rents for the use of the service vehicle, in the event
that the employee ceases his employment and is unable to complete the installment
payments on the vehicle. The underlying reason is that the service vehicle was precisely
used in the former' s business; any personal benefit obtained by the employee from its
use is merely incidental. This Petition for Review on Certiorari assails the January 27,
1

2010 Decision of the Court of Appeals (CA) in CA-G.R. SP No. 109550, as well as its
2

April 23, 2010 Resolution denying petitioners Motion for Partial Reconsideration.
3 4

In February 2004, respondent Mekeni Food Corporation(Mekeni)a Philippine company

engaged in food manufacturing and meat processing offered petitioner Antonio Locsin II
the position of Regional Sales Manager to over see Mekenis National Capital Region
Supermarket/Food Service and South Luzon operations. In addition to a compensation
and benefit package, Mekeni offered petitioner a car plan, under which one-half of the
cost of the vehicle is to be paid by the company and the other half to be deducted from
petitioners salary. Mekenis offer was contained in an Offer Sheet which was presented
5

to petitioner.

Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To be
able to effectively cover his appointed sales territory, Mekeni furnished petitioner with a
used Honda Civic car valued at 280,000.00, which used to be the service vehicle of
petitioners immediate supervisor. Petitioner paid for his 50% share through salary
deductions of 5,000.00 each month.

Subsequently, Locsin resigned effective February 25, 2006. By then, a total of

112,500.00 had been deducted from his monthly salary and applied as part of the
employees share in the car plan. Mekeni supposedly put in an equivalent amount as its
share under the car plan. In his resignation letter, petitioner made an offer to purchase his
service vehicle by paying the outstanding balance thereon. The parties negotiated, but
could not agree on the terms of the proposed purchase. Petitioner thus returned the
vehicle to Mekeni on May 2, 2006.

Petitioner made personal and written follow-ups regarding his unpaid salaries,
commissions, benefits, and offer to purchase his service vehicle. Mekeni replied that the
company car plan benefit applied only to employees who have been with the company for
five years; for this reason, the balance that petitioner should pay on his service vehicle
stood at 116,380.00 if he opts to purchase the same.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia,
a Complaint6for the recovery of monetary claims consisting of unpaid salaries,
commissions, sick/vacation leave benefits, and recovery of monthly salary deductions
which were earmarked for his cost-sharing in the car plan. The case was docketed in the
National Labor Relations Commission(NLRC), National Capital Region(NCR), Quezon
City as NLRC NCR CASE NO. 00-05-04139-07.

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision, decreeing
7

as follows: WHEREFORE, in the light of the foregoing premises, judgment is hereby

rendered directing respondents to turn-over to complainant x x x the subject vehicle upon
the said complainants payment to them of the sum of 100,435.84.SO
ORDERED. Ruling of the National Labor Relations Commission On appeal, the Labor
8 9

Arbiters Decision was reversed in a February 27, 2009 Decision of the NLRC, thus:
10

WHEREFORE, premises considered, the appeal is hereby Granted. The assailed

Decision dated October 30, 2007 is hereby REVERSED and SET ASIDE and a new one
entered ordering respondent-appellee Mekeni Food Corporation to pay
complainant-appellee the following:

1.Unpaid Salary in the amount of 12,511.45;

2.Unpaid sick leave/vacation leave pay in the amount of 14,789.15;

3.Unpaid commission in the amount of 9,780.00; and

4.Reimbursement of complainants payment under the car plan agreement in the amount
of 112,500.00; and

5.The equivalent share of the company as part of the complainants benefit under the car
plan 50/50 sharing amounting to 112,500.00.

Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum of

4,736.50 representing complainant-appellants cash advance from his total monetary
awards. All other claims are dismissed for lack of merit. SO ORDERED. The NLRC held
11

that petitioners amortization payments on his service vehicle amounting to 112,500.00

should be reimbursed; if not, unjust enrichment would result, as the vehicle remained in
the possession and ownership of Mekeni.

In addition, the employers share in the monthly car plan payments should likewise be
awarded to petitioner because it forms part of the latters benefits under the car plan. It
held further that Mekenis claim that the company car plan benefit applied only to
employees who have been with the company for five years has not been substantiated by
its evidence, in which case the car plan agreement should be construed in petitioners
favor. Mekeni moved to reconsider, but in an April 30, 2009 Resolution, the NLRC 12

sustained its original findings.

Mekeni filed a Petition for Certiorari with the CA assailing the NLRCs February 27, 2009
13

Decision, saying that the NLRC committed grave abuse of discretion in holding it liable to
petitioner as it had no jurisdiction to resolve petitioners claims, which are civil in nature.

On January 27, 2010, the CA issued the assailed Decision, decreeing as follows:

WHEREFORE, the petition for certiorari is GRANTED. The Decision of the National Labor
Relations Commission dated 27 February 2009, in NLRC NCR Case No. 00-05-04139-07,
and its Resolution dated 30 April 2009 denying reconsideration thereof, are MODIFIED in
that the reimbursement of Locsins payment under the car plan in the amount of
112,500.00, and the payment to him of Mekenis 50% share in the amount of
112,500.00 are DELETED. The rest of the decision is AFFIRMED.

ISSUE: whether petitioner is entitled to a refund of all the amounts applied to the cost of
the service vehicle under the car plan.
HELD: From the evidence on record, it is seen that the Mekeni car plan offered to
petitioner was subject to no other term or condition than that Mekeni shall cover one-half
of its value, and petitioner shall in turn pay the other half through deductions from his
monthly salary.Mekeni has not shown, by documentary evidence or otherwise, that there
are other terms and conditions governing its car plan agreement with petitioner. There is
no evidence to suggest that if petitioner failed to completely cover one-half of the cost of
the vehicle, then all the deductions from his salary going to the cost of the vehicle will be
treated as rentals for his use thereof while working with Mekeni, and shall not be refunded.
Indeed, there is no such stipulation or arrangement between them.

In the case at bar, the disallowance of the subject car plan benefits would hamper the
officials in the performance of their functions to promote and develop trade which requires
mobility in the performance of official business. Indeed, the car plan benefits are
supportive of the implementation of the objectives and mission of the agency relative to
the nature of its operation and responsive to the exigencies of the service. (Emphasis
26

supplied) Any benefit or privilege enjoyed by petitioner from using the service vehicle was
merely incidental and insignificant, because for the most part the vehicle was under
Mekenis control and supervision. Free and complete disposal is given to the petitioner
only after the vehicles cost is covered or paid in full. Until then, the vehicle remains at the
beck and call of Mekeni. Given the vast territory petitioner had to cover to be able to
perform his work effectively and generate business for his employer, the service vehicle
was an absolute necessity, or else Mekenis business would suffer adversely. Thus, it is
clear that while petitioner was paying for half of the vehicles value, Mekeni was reaping
the full benefits from the use thereof.

In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the
car plan. In the absence of specific terms and conditions governing the car plan
1

arrangement between the petitioner and Mekeni, a quasi-contractual relation was created
between them. Consequently, Mekeni may not enrich itself by charging petitioner for the
use of its vehicle which is otherwise absolutely necessaryto the full and effective
promotion of its business. It may not, under the claim that petitioners payments constitute
rents for the use of the company vehicle, refuse to refund what petitioner had paid, for the
reasons that the car plan did not carry such a condition; the subject vehicle is an old car
that is substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni
for the most part; and any personal benefit obtained by petitioner from using the vehicle
was merely incidental.

Conversely, petitioner cannot recover the monetary value of Mekenis counterpart

contribution to the cost of the vehicle; that is not property or money that belongs to him,
nor was it intended to be given to him in lieu of the car plan. In other words, Mekenis
share of the vehicles cost was not part of petitioners compensation package. To start
with, the vehicle is an asset that belonged to Mekeni. Just as Mekeni is unjustly enriched
by failing to refund petitioners payments, so should petitioner not be awarded the value of
Mekenis counter part contribution to the car plan, as this would unjustly enrich him at
Mekenis expense.

WHEREFORE, the Petition is GRANTED IN PART. The assailed January 27, 2010
Decision and April 23, 2010 Resolution of the Court of Appeals in CA-G.R. SP No. 109550
are MODIFIED, in that respondent Mekeni Food Corporation is hereby ordered to
REFUND petitioner Antonio Locsin II's payments under the car plan agreement in the total
amount of 112,500.00.
G.R. No. 168583 July 26, 2010

ATTY. ALLAN S. MONTAO, Petitioner,

vs.
ATTY. ERNESTO C. VERCELES, Respondent.

The Federation/Unions Constitution and By-Laws govern the relationship between and
among its members. They are akin to ordinary contracts in that their provisions have
obligatory force upon the federation/ union and its member. What has been expressly
stipulated therein shall be strictly binding on both.

By this Petition for Review on Certiorari,1 petitioner Atty. Allan S. Montao (Atty. Montao)
assails the Decision2dated May 28, 2004 and Resolution3 dated June 28, 2005 of the
Court of Appeals (CA) in CA-G.R. SP No. 71731, which declared as null and void his
election as the National Vice-President of Federation of Free Workers (FFW), thereby
reversing the May 8, 2002 Decision4 of the Bureau of Labor Relations (BLR) in
BLR-O-TR-66-7-13-01.

Atty. Montao worked as legal assistant of FFW Legal Center on October 1,

1994.5 Subsequently, he joined the union of rank-and-file employees, the FFW Staff
Association, and eventually became the employees union president in July 1997. In
November 1998, he was likewise designated officer-in-charge of FFW Legal Center.6

During the 21st National Convention and Election of National Officers of FFW, Atty.
Montao was nominated for the position of National Vice-President. In a letter dated May
25, 2001,7 however, the Commission on Election (FFW COMELEC), informed him that he
is not qualified for the position as his candidacy violates the 1998 FFW Constitution and
By-Laws, particularly Section 76 of Article XIX8 and Section 25 (a) of Article VIII,9 both in
Chapter II thereof. Atty. Montao thus filed an Urgent Motion for
Reconsideration10 praying that his name be included in the official list of candidates.

Election ensued on May 26-27, 2001 in the National Convention held at Subic
International Hotel, Olongapo City. Despite the pending motion for reconsideration with
the FFW COMELEC, and strong opposition and protest of respondent Atty. Ernesto C.
Verceles (Atty. Verceles), a delegate to the convention and president of University of the
East Employees Association (UEEA-FFW) which is an affiliate union of FFW, the
convention delegates allowed Atty. Montaos candidacy. He emerged victorious and was
proclaimed as the National Vice-President.

On May 28, 2001, through a letter11 to the Chairman of FFW COMELEC, Atty. Verceles
reiterated his protest over Atty. Montaos candidacy which he manifested during the
plenary session before the holding of the election in the Convention. On June 18, 2001,
Atty. Verceles sent a follow-up letter12 to the President of FFW requesting for immediate
action on his protest.

On July 13, 2001, Atty. Verceles, as President of UEEA-FFW and officer of the Governing
Board of FFW, filed before the BLR a petition13 for the nullification of the election of Atty.
Montao as FFW National Vice-President. He alleged that, as already ruled by the FFW
COMELEC, Atty. Montao is not qualified to run for the position because Section 76 of
Article XIX of the FFW Constitution and By-Laws prohibits federation employees from
sitting in its Governing Board. Claiming that Atty. Montaos premature assumption of
duties and formal induction as vice-president will cause serious damage, Atty. Verceles
likewise prayed for injunctive relief.14
Atty. Montao filed his Comment with Motion to Dismiss15 on the grounds that the
Regional Director of the Department of Labor and Employment (DOLE) and not the BLR
has jurisdiction over the case; that the filing of the petition was premature due to the
pending and unresolved protest before the FFW COMELEC; and that, Atty. Verceles has
no legal standing to initiate the petition not being the real party in interest.

On May 8, 2002, the BLR rendered a Decision18 dismissing the petition for lack of merit.
While it upheld its jurisdiction over the intra-union dispute case and affirmed, as well, Atty.
Verceles legal personality to institute the action as president of an affiliate union of FFW,
the BLR ruled that there were no grounds to hold Atty. Montao unqualified to run for
National Vice-President of FFW. It held that the applicable provision in the FFW
Constitution and By-Laws to determine whether one is qualified to run for office is not
Section 76 of Article XIX19 but Section 26 of Article VIII20 thereof. The BLR opined that
there was sufficient compliance with the requirements laid down by this applicable
provision and, besides, the convention delegates unanimously decided that Atty. Montao
was qualified to run for the position of National Vice-President.

Atty. Verceles filed a Motion for Reconsideration but it was denied by the BLR.

Atty. Verceles thus elevated the matter to the CA via a petition for certiorari,21 arguing that
the Convention had no authority under the FFW Constitution and By-Laws to overrule and
set aside the FFW COMELECs Decision rendered pursuant to the latters power to
screen candidates.

On May 28, 2004, the CA set aside the BLRs Decision. While it agreed that jurisdiction
was properly lodged with the BLR, that Atty. Verceles has legal standing to institute the
petition, and that the applicable provision of FFW Constitution and By-Laws is Section 26
of Article VIII and not Section 76 of Article XIX, the CA however ruled that Atty. Montao
did not possess the qualification requirement under paragraph (d) of Section 26 that
candidates must be an officer or member of a legitimate labor organization. According to
the CA, since Atty. Montao, as legal assistant employed by FFW, is considered as
confidential employee, consequently, he is ineligible to join FFW Staff Association, the
rank-and-file union of FFW. The CA, thus, granted the petition and nullified the election of
Atty. Montao as FFW National Vice-President.

ISSUE: WON the Regional Director of the Department of Labor and Employment (DOLE)
and not the BLR has jurisdiction over the case.

HELD: The petition is devoid of merit.

The BLR has jurisdiction over intra-union disputes involving a federation.

We find no merit in petitioners claim that under Section 6 of Rule

XV26 in relation to Section 1 of Rule XIV27 of Book V of the Omnibus Rules Implementing
the Labor Code, it is the Regional Director of the DOLE and not the BLR who has
jurisdiction over election protests.

Section 226 of the Labor Code28 clearly provides that the BLR and the Regional Directors
of DOLE have concurrent jurisdiction over inter-union and intra-union disputes. Such
disputes include the conduct or nullification of election of union and workers association
officers.29 There is, thus, no doubt as to the BLRs jurisdiction over the instant dispute
involving member-unions of a federation arising from disagreement over the provisions of
the federations constitution and by-laws.

We agree with BLRs observation that:

Rule XVI lays down the decentralized intra-union dispute settlement mechanism. Section
1 states that any complaint in this regard shall be filed in the Regional Office where the
union is domiciled. The concept of domicile in labor relations regulation is equivalent to
the place where the union seeks to operate or has established a geographical presence
for purposes of collective bargaining or for dealing with employers concerning terms and
conditions of employment.

The matter of venue becomes problematic when the intra-union dispute involves a
federation, because the geographical presence of a federation may encompass more than
one administrative region. Pursuant to its authority under Article 226, this Bureau
exercises original jurisdiction over intra-union disputes involving federations. It is
well-settled that FFW, having local unions all over the country, operates in more than one
administrative region. Therefore, this Bureau maintains original and exclusive jurisdiction
over disputes arising from any violation of or disagreement over any provision of its
constitution and by-laws.30

The petition to annul Atty. Montaos election as VP was not prematurely filed.

There is likewise no merit to petitioners argument that the petition should have been
immediately dismissed due to a pending and unresolved protest before the FFW
COMELEC pursuant to Section 6, Rule XV, Book V of the Omnibus Rules Implementing
the Labor Code.31

We find that both the BLR and CA erred in their findings.

To begin with, FFW COMELEC is vested with authority and power, under the FFW
Constitution and By-Laws, to screen candidates and determine their qualifications and
eligibility to run in the election and to adopt and promulgate rules concerning the conduct
of elections.39 Under the Rules Implementing the Labor Code, the Committee shall have
the power to prescribe rules on the qualification and eligibility of candidates and such
other rules as may facilitate the orderly conduct of elections.40 The Committee is also
regarded as the final arbiter of all election protests.41 From the foregoing, FFW COMELEC,
undeniably, has sufficient authority to adopt its own interpretation of the explicit provisions
of the federations constitution and by-laws and unless it is shown to have committed
grave abuse of discretion, its decision and ruling will not be interfered with. The FFW
Constitution and By-laws are clear that no member of the Governing Board shall at the
same time perform functions of the rank-and-file staff. The BLR erred in disregarding this
clear provision. The FFW COMELECs ruling which considered Atty. Montaos candidacy
in violation of the FFW Constitution is therefore correct.

We, thus, concur with the CA that Atty. Montao is not qualified to run for the position but
not for failure to meet the requirement specified under Section 26 (d) of Article VIII of FFW
Constitution and By-Laws. We note that the CAs declaration of the illegitimate status of
FFW Staff Association is proscribed by law, owing to the preclusion of collateral
attack.42 We nonetheless resolve to affirm the CAs finding that Atty. Montao is
disqualified to run for the position of National Vice-President in view of the proscription in
the FFW Constitution and By-Laws on federation employees from sitting in its Governing
Board. Accordingly, the election of Atty. Montao as FFW Vice-President is null and void.
WHEREFORE, the petition is DENIED. The assailed May 28, 2004 Decision of the Court
of Appeals in CA-G.R. SP No. 71731 nullifying the election of Atty. Allan S. Montao as
FFW National Vice-President and the June 28, 2005 Resolution denying the Motion for
Reconsideration are AFFIRMED.

G.R. No. 167225 October 22, 2014

RADIO MINDANAO NETWORK, INC., Petitioner,

vs.
MICHAEL MAXIMO R. AMURAO III, Respondent.

This appeal deals with the issue of whether the quitclaim executed by the employee was
valid and effective against him.

On February 16, 1989, petitioner Radio Mindanao Network, Inc. (RMN) hired respondent
Michael Maximo R. Amurao III (Michael) as a radio broadcaster for its DWKC-FM station
and production manager for its metropolitan radio operations at a monthly salary of
28,400.00. 1

Years later, RMN decided to reformat and restructure the programming of its DWKC-FM
station to meet the demands of the broadcasting industry. On April 25, 2002, the president
of RMN met with Michael and other personnel of the station to inform them of the
management's decision, advising them that the reformatting and restructuring of the
station's programs would necessarily affect their employment; but assuring that they
would be paid their retirement pay and other benefits. To formalize the discussions had in
2

their meeting, RMN furnished Michael and other personnel separate letters dated May 14,
2002 reading as follows:

This is to formalize your meeting with our President Mr. Eric S. Canoy, last April 25, 2002.
During said meeting, you have been informed that in line with the Networks
reformatting/restructuring program for operations, your services are deemedended
effective June 15, 2002. However, effective May 16, 2002, you will no longer [be] required
to report for work. And for the services you have rendered, Radio Mindanao Network, Inc.
will pay your separation benefits, service incentive leave pay, proportionate 13th month
pay and salary for the month of May 16 to June 15, 2002.

Radio Mindanao Network, Inc. extends its gratitude and prayers to you and to your loved
ones. Thank you and God bless. 3

However, Michael and the other personnel refused to sign in receipt when the letters were
served on them. Not long after, however, they accepted the offer of RMN and executed
affidavits relinquishing all their claims against the employer. In Michaels case, the
Affidavit of Release/Quitclaim Dated May 30, 2002 (quitclaim) stated as follows:

AFFIDAVIT OF RELEASE/QUITCLAIM

That I, MICHAEL MAXIMO R. AMURAO III, of legal age, Filipino, and a resident of Manila
after having been duly sworn to according to law, hereby depose and say:
1. That I have retired from my position as Production Manager from RADIO MINDANAO
NETWORK INC.EFFECTIVE June 15, 2002;

2. That for and in consideration of sum THREE HUNDRED ELEVEN THOUSAND NINE
HUNDRED TWENTY-TWO PESOS & 00 CENTS. (311,922.00)in Philippine Currency,
to me in hand paid by RADIO MINDANAO NETWORK, INC. in additional retirement
benefits per corrected employment period, receipt of which is hereby acknowledged to my
complete and full satisfaction;

3. That I hereby RELEASE AND DISCHARGE RADIO MINDANAO NETWORK, INC., its
Officers, Directors, and Managers from any and all claims and demands whatsoever as
maybe due to me incident to employment with radio station DWKC-FMand/or cessation of
the same with Radio Mindanao Network, Inc., on June 15, 2002.

4. That I hereby state further that I have no more claims, right or action whatsoever nature
whether past, present or contingent against said corporation;

5. That, I manifest that the terms of this release and quitclaim have been read and
thoroughly understoodby me and accepted said terms on my own consent." 4

On October 14, 2002, or 5 months after receiving his benefits and his execution of the
quitclaim, Michael filed a complaint against RMN for illegal dismissal with money claims in
the National Labor Relations Commission (NLRC). 5

On November 12, 2002, the Labor Arbiter rendered a decision declaring the dismissal of
6

Michael as illegal on the ground that the reformatting and restructuring of RMNs radio
programming did not fall under any of the just or authorized causes specified under Article
282, Article 283 and Article 284 of the Labor Codethat would make the termination of his
employment valid; and holding the quitclaim Michael signed as void because it was not
voluntarily executed. The decision disposed thusly:

WHEREFORE, premises considered, judgment is hereby rendered declaring that the

dismissal of the complainant from the respondents employment is illegal and that the
Affidavit of Release/Quitclaim is null and void.

RMN appealed to the NLRC, contending that the decision of the Labor Arbiter was
premature for being rendered without first issuing an order either setting the case for
hearing or declaring the same submitted for decision in violation of Rule V, Section II of
the Rules of Procedure of the NLRC, as amended; that the quitclaim signed in its favor
8

was valid and binding because it represented a voluntary and reasonable settlement of
Michaels claims; and that Michael was estopped from filing the illegal dismissal case
against it.
9

In its decision rendered on November 28, 2003, the NLRC found no merit in the
10

contention of RMN that the appealed decision was prematurely rendered. It noted that the
constancia dated October 28, 2002, which stated "counsel for respondent appeared and
asked for a period of ten (10) days from today within which to file reply and after the lapse
of the allotted period, with or without said pleading, case shall be submitted for resolution,"
clearly showed that RMN was sufficiently apprised that the case would be decided after
the lapse of the 10-day period RMN prayed for regardless of whether it filed its reply or not.
It held that the quitclaim was null and void for not being voluntarily executed; modified the
decision of the Labor Arbiter in that the amount already received by Michael was to be
deducted from the monetary benefits awarded to him;and deleted the awards for moral
and exemplary damages.

RMN moved for reconsideration, but the NLRC denied its motion. 11

Decision of the Court of Appeals

Consequently, RMN filed with the Court of Appeals (CA) its petition for
certiorari, submitting that the NLRC thereby committed a grave abuse of its discretion
12

amounting to lackor excess of its jurisdiction.

On August 31, 2004, however, the CA denied due course to the petition and dismissed it
for lack of merit. 13

RMN sought for reconsideration of the resolution of the CA, but its motion for that purpose
was similarly denied by the CA.

ISSUE: whether the quitclaim was valid and binding.

HELD: The CA was quick to rule that Michael had been coerced into signing the quitclaim.
It did so because he had assailed the voluntariness of the execution of the quitclaim. It
noted thatthe fact that Michael had refused to sign the May 14, 2002 letter and thereby
indicate his acceptance of the terms of his termination stated therein was proof enough of
the quitclaim not being freely signed. 18

The Court finds and considers the CAs ruling unfounded.

RMN consistently contended that a series of negotiations between Michael and the
management preceded the giving of the settlement pay that they had considered as
reasonable. Not once did Michael refute this contention. Worth noting is that Michael
19

signed the quitclaim to release RMN from any and all claims that could be due to him by
reason of his employment after he receiving the agreed settlement pay of 311,922.00.

Not all quitclaims are per sein valid or against public policy. A quitclaim is invalid or
contrary to public policy only: (1) where there is clear proof that the waiver was wrangled
from an unsuspecting or gullible person; or (2) where the terms of settlementare
unconscionable on their face. In instances of invalid quitclaims, the law steps in to annul
the questionable waiver. Indeed, there are legitimate waivers that represent the voluntary
and reasonable settlements of laborers claims that should be respected by the Court as
the law between the parties. Where the party has voluntarily made the waiver, with a full
understanding of its terms as well as its consequences, and the consideration for the
quitclaimis credible and reasonable, the transaction must be recognized as a valid and
binding undertaking, and may not later be disowned simply because of a change of
mind. A waiver is essentially contractual.
20

In our view, the requisites for the validity of Michaels quitclaim were satisfied.
Firstly, Michael acknowledged in his quitclaim that he had read and thoroughly
understood the terms of his quitclaim and signed it of his own volition. Being a radio
broadcaster and production manager, he occupied a highly responsible position in the
company.It would be implausible to hold, therefore, that he could be easily duped into
simply signing away his rights. Besides, the language and content ofthe quitclaim were
clear and uncomplicated such that he could not claim that he did not understand what he
was signing.

Secondly, the settlement pay of 311,922.00 was credible and reasonable considering
that Michael did not even assail such amount as unconscionably low, or even state that he
was entitled to a higher amount.

Thirdly, that he was required to sign the quitclaim as a condition to the release of the
settlement pay did not prove that its execution was coerced. Having agreed to part with a
21

substantial amount of money, RMN took steps to protect its interest and obtain its release
from all obligations once it paid Michael his settlement pay, which it did in this case.

And, lastly, that he signed the quitclaim out of fear of not being able to provide for the
needs of his family and for the schooling of his children did not immediately indicate that
he had been forced to sign the same. Dire necessity should not necessarily be an
22

acceptable ground for annulling the quitclaim, especially because it was not at all shown
that he had been forced to execute it. Nor was it even proven that the consideration for the
quitclaim was unconscionably low, and that he had been tricked into accepting the
consideration. 23

With the quitclaim having been freely and voluntarily signed, RMN was released and
absolved from any liability in favor of Michael. Suffice it to say that the quitclaim is
ineffective in barring recovery of the full measure of an employee's rights only when the
transaction is shown to be questionable and the consideration is scandalously low and
inequitable. Such is not true here.
24

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and
SETS ASIDE the decision promulgated on August 31, 2004; DECLARES the Affidavit of
Release/Quitclaim executed by and between respondent Michael Maximo R. Amurao III
and petitioner Radio Mindanao Network, Inc. valid and binding; and DISMISSES the
complaint for illegal dismissal of Michael Maximo R. Amurao III. No pronouncement on
costs of suit.

MARIETTA N. PORTILLO v. RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF APPEALSG.R. No.
196359, October 10, 2012

FACTS:

- In a letter agreement, signed by individual respondent Rudolf Lietz and conformed to by Portillo,
the latter(Portillo) was hired by the former under the conditions that Portillo will not engage in any
other gainful employment by [her]self or with any other company either directly or indirectly without
written consent of [LietzInc.] and a breach of which will render [Portillo] liable to [Lietz Inc.] for
liquidated damages. - On her tenth (10th) year of service with Lietz Inc., Portillo was promoted
to Sales Representative. In this regard,Portillo signed another letter agreement containing a "Goodwill
Clause:"It remains understood and you agreed that, on the termination of your employment by act
of either you or[Lietz Inc.], and for a period of three (3) years thereafter, you shall not engage directly
or indirectly as employee, manager, proprietor, or solicitor for yourself or others in a similar or
competitive business or the same character of work which you were employed by [Lietz Inc.] to do
and perform. Should you breach this good will clause of this Contract, you shall pay [Lietz Inc.] as
liquidated damages the amount of 100% of your gross compensation over the last 12 months, it being
agreed that this sum is reasonable and just. Three (3) years thereafter Portillo resigned from Lietz Inc.
During her exit interview, Portillo declared that she intended to engage in business a rice dealership,
selling rice in wholesale.-

On 15 June 2005, Lietz Inc. accepted Portillos resignation and reminded her of the "Goodwill Clause"
in the last letter agreement she had signed.- Subsequently, Lietz Inc. learned that Portillo had
been hired by Ed Keller Philippines, Limited to head its Pharma Raw Material Department. Ed Keller
Limited is purportedly a direct competitor of Lietz Inc.-Meanwhile, Portillos demands from Lietz Inc.
for the payment of her remaining salaries and commissions
went unheeded.- On 14 September 2005, Portillo filed a complaint with the NLRC for non-

payment of 1 months salary, two (2)months commission, 13th month pay, plus moral, exemplary
and actual damages and attorneys fees. - In its position paper, Lietz Inc. admitted liability for
Portillos money claims in the total amount of P110,662.16.

However, Lietz Inc. raised the defense of legal compensation: Portillos money claims should be offset
against heR liability to Lietz Inc. for liquidated damages in the amount of 869,633.097 for Portillos
alleged breach of the "Goodwill Clause" in the employment contract when she became employed
with Ed Keller Philippines, Limited.- On 25 May 2007, the Labor Arbiter granted Portillos complaint,
ordering Lietz, Inc. to pay Portillo the amount ofPhp110,662.16, representing her salary and
commissions, including 13th month pay.On appeal by respondents Lietz Inc., the NLRC affirmed the
ruling of the Labor Arbiter. The motion for reconsideration was denied by NLRC.- Lietz Inc. filed
a petition for certiorari before the Court of Appeals, alleging grave abuse of discretion in the labor

tribunals rulings. The CA initially affirmed the labor tribunals, but on motion for reconsideration,
modified its previous decision. While upholding the monetary award in favor of Portillo in the
aggregate sum of 110,662.16, the CA allowed legal compensation or set-off of such award of
monetary claims by her liability to Lietz Inc. For liquidated damages arising from her violation of the
"Goodwill Clause" in her employment contract with them.Portillos motion for reconsideration was
denied.- Hence, this petition for certiorari before the SC.

ISSUE:

Whether Portillos money claims for unpaid salaries may be offset against Lietz Inc.s claim for
liquidated damages.

RULING:-

Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the CA on the
"causal connection between Portillos monetary claims against respondents and the latters claim
from liquidated damages against the former." Art. 217. Jurisdiction of Labor Arbiters and the
Commission. (a) Except as otherwise provided under this code, the Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30)calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic notes, the
following case involving all workers, whether agricultural or nonagricultural:x x x x4. Claims for actual,
moral, exemplary and other forms of damages arising from the employer-employee relations;

J-PHIL MARINE, INC. v. NLRC

G.R. No. 175366; August 11, 2008

Ponente: J. Carpio-Morales

FACTS:
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 complaint 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 attorney's fees.

Respondent's total claim against petitioners was P864,343.30 plus P117,557.60 representing interest
and P195,928.66 representing attorney's fees

By Decision of August 29, 2003, Labor Arbiter Fe Superiaso-Cellan dismissed respondent's complaint
for lack of merit.

On appeal, the NLRC, by Decision of September 27, 2004, reversed the Labor Arbiter's decision.

During the pendency of the case before the Supreme 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.

ISSUE:
Whether the act of Dumalaog in entering into a compromise agreement without the assistance of a
counsel is proper

HELD:

Yes, the act of Dumalaog in entering into a compromise agreement without a lawyer is proper.

The Supreme Court held that the relation of attorney and client is in many respects one of agency,
and the general rules of agency apply to such relation. The acts of an agent are deemed the acts of
the principal only if the agent acts within the scope of his authority. The circumstances of this case
indicate that respondent's counsel is acting beyond the scope of his authority in questioning the
compromise agreement.

Dumalaog has undoubtedly the right to compromise a suit without the intervention of his lawyer
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.

In the case at bar, there is no showing that respondent intended to defraud his counsel of his fees.
VICTORIANO VS. ELIZALDE UNION

NOVEMBER 17, 2013 ~ VBDIAZ

BENJAMIN VICTORIANO, plaintiff-appellee, vs. ELIZALDE ROPE WORKERS UNION and ELIZALDE ROPE
FACTORY, INC., defendants, ELIZALDE ROPE WORKERS UNION, defendant-appellant.
GRN L-25246 September 12, 1974

FACTS:

Benjamin Victoriano (Appellee), a member of the religious sect known as the Iglesia ni Cristo, had
been in the employ of the Elizalde Rope Factory, Inc. (Company) since 1958. He was a member of the
Elizalde Rope Workers Union (Union) which had with the Company a CBA containing a closed shop
provision which reads as follows: Membership in the Union shall be required as a condition of
employment for all permanent employees workers covered by this Agreement.

Under Sec 4(a), par 4, of RA 975, prior to its amendment by RA 3350, the employer was not precluded
from making an agreement with a labor organization to require as a condition of employment
membership therein, if such labor organization is the representative of the employees. On June 18,
1961, however, RA 3350 was enacted, introducing an amendment to par 4 subsection (a) of sec 4 of
RA 875, as follows: xxx but such agreement shall not cover members of any religious sects which
prohibit affiliation of their members in any such labor organization.

Being a member of a religious sect that prohibits the affiliation of its members with any labor
organization, Appellee presented his resignation to appellant Union. The Union wrote a formal letter
to the Company asking the latter to separate Appellee from the service because he was resigning
from the Union as a member. The Company in turn notified Appellee and his counsel that unless the
Appellee could achieve a satisfactory arrangement with the Union, the Company would be
constrained to dismiss him from the service.

Appellee filed an action for injunction to enjoin the Company and the Union from dismissing Appellee.
The Union invoked the union security clause of the CBA and assailed the constitutionality of RA
3350 and contends it discriminatorily favors those religious sects which ban their members from
joining labor unions.

ISSUE:
Whether Appellee has the freedom of choice in joining the union or not.

RULING:

YES. The Constitution and RA 875 recognize freedom of association. Sec 1 (6) of Art III of the
Constitution of 1935, as well as Sec 7 of Art IV of the Constitution of 1973, provide that the right to
form associations or societies for purposes not contrary to law shall not be abridged. Section 3 of RA
875 provides that employees shall have the right to self-organization and to form, join of assist labor
organizations of their own choosing for the purpose of collective bargaining and to engage in
concerted activities for the purpose of collective bargaining and other mutual aid or protection. What
the Constitution and the Industrial Peace Act recognize and guarantee is the right to form or join
associations. A right comprehends at least two broad notions, namely: first, liberty or freedom, i.e.,
the absence of legal restraint, whereby an employee may act for himself without being prevented by
law; and second, power, whereby an employee may, as he pleases, join or refrain from joining an
association. It is, therefore, the employee who should decide for himself whether he should join or
not an association; and should he choose to join, he himself makes up his mind as to which
association he would join; and even after he has joined, he still retains the liberty and the power to
leave and cancel his membership with said organization at any time. The right to join a union includes
the right to abstain from joining any union. The law does not enjoin an employee to sign up with any
association.

The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace
Act is, however, limited. The legal protection granted to such right to refrain from joining is
withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop,
by virtue of which the employer may employ only members of the collective bargaining union, and
the employees must continue to be members of the union for the duration of the contract in order to
keep their jobs. By virtue of a closed shop agreement, before the enactment of RA 3350, if any person,
regardless of his religious beliefs, wishes to be employed or to keep his employment he must become
a member of the collective bargaining union. Hence, the right of said employee not to join the labor
union is curtailed and withdrawn.

To that all-embracing coverage of the closed shop arrangement, RA No.3350 introduced an exception,
when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: but such
agreement shall not cover members of any religious sects which prohibit affiliation of their members
in any such labor organization. Republic Act No. 3350 merely excludes ipso jure from the application
and coverage of the closed shop agreement the employees belonging to any religious sects which
prohibit affiliation of their members with any labor organization. What the exception provides is that
members of said religious sects cannot be compelled or coerced to join labor unions even when said
unions have closed shop agreements with the employers; that in spite of any closed shop agreement,
members of said religious sects cannot be refused employment or dismissed from their jobs on the
sole ground that they are not members of the collective bargaining union. It does not prohibit the
members of said religious sects from affiliating with labor unions. It still leaves to said members the
liberty and the power to affiliate, or not to affiliate, with labor unions. If, notwithstanding their
religious beliefs, the members of said religious wets prefer to sign up with the labor union, they can
do so. If in deference and fealty to their religious faith, they refuse to sign up, they can do so; the law
does not coerce them to join; neither does the law prohibit them from joining, and neither may the
employer or labor union compel them to join.

The Company was partly absolved by law from the contractual obligation it had with the Union of
employing only Union members in permanent positions. It cannot be denied, therefore, that there
was indeed an impairment of said union security clause.

The prohibition to impair the obligation of contracts is not absolute and unqualified. The prohibition is
general. The prohibition is not to be read with literal exactness, for it prohibits unreasonable
impairment only. In spite of the constitutional prohibition, the State continues to possess authority to
safeguard the vital interests of its people. Legislation appropriate to safeguarding said interests may
modify or abrogate contracts already in effect. For not only are existing laws read into contracts in
order to fix the obligations as between the parties, but the reservation of essential attributes of
sovereign power is also read into contracts as a postulate of the legal order. The contract clause of
the Constitution. must be not only in harmony with, but also in subordination to, in appropriate
instances, the reserved power of the state to safeguard the vital interests of the people. This has
special application to contracts regulating relations between capital and labor which are not merely
contractual, and said labor contracts, for being impressed with public interest, must yield to the
common good.

The purpose to be achieved by RA 3350 is to insure freedom of belief and religion, and to promote
the general welfare by preventing discrimination against those members of religious sects which
prohibit their members from joining labor unions, confirming thereby their natural, statutory and
constitutional right to work, the fruits of which work are usually the only means whereby they can
maintain their own life and the life of their dependents.
The individual employee, at various times in his working life, is confronted by two aggregates of
power collective labor, directed by a union, and collective capital, directed by management. The
union, an institution developed to organize labor into a collective force and thus protect the
individual employee from the power of collective capital, is, paradoxically, both the champion of
employee rights, and a new source of their frustration. Moreover, when the Union interacts with
management, it produces yet a third aggregate of group strength from which the individual also
needs protection the collective bargaining relationship.

The free exercise of religious profession or belief is superior to contract rights. In case of conflict, the
latter must yield to the former.

The purpose of RA 3350 is to serve the secular purpose of advancing the constitutional right to the
free exercise of religion, by averting that certain persons be refused work, or be dismissed from work,
or be dispossessed of their right to work and of being impeded to pursue a modest means of
livelihood, by reason of union security agreements. To help its citizens to find gainful employment
whereby they can make a living to support themselves and their families is a valid objective of the
state. The Constitution even mandated that the State shall afford protection to labor, promote full
employment and equality in employment, ensure equal work opportunities regardless of sex, race or
creed and regulate the relation between workers and employers.

The primary effects of the exemption from closed shop agreements in favor of members of religious
sects that prohibit their members from affiliating with a labor organization, is the protection of said
employees against the aggregate force of the collective bargaining agreement, and relieving certain
citizens of a burden on their religious beliefs; and by eliminating to a certain extent economic
insecurity due to unemployment, which is a serious menace to the health, morals, and welfare of the
people of the State, the Act also promotes the well-being of society. It is our view that the exemption
from the effects of closed shop agreement does not directly advance, or diminish, the interests of any
particular religion. Although the exemption may benefit those who are members of religious sects
that prohibit their members from joining labor unions, the benefit upon the religious sects is merely
incidental and indirect.

The purpose of RA 3350 was not to grant rights to labor unions. The rights of labor unions are amply
provided for in Republic Act No. 875 and the new Labor Code.

The Act does not require as a qualification, or condition, for joining any lawful association
membership in any particular religion or in any religious sect; neither does the Act require affiliation
with a religious sect that prohibits its members from joining a labor union as a condition or
qualification for withdrawing from a labor union. Joining or withdrawing from a labor union requires a
positive act Republic Act No. 3350 only exempts members with such religious affiliation from the
coverage of closed shop agreements. So, under this Act, a religious objector is not required to do a
positive act-to exercise the right to join or to resign from the union. He is exempted ipso jure without
need of any positive act on his part.

WHEREFORE, the instant appeal is dismissed.

G.R. No. 177131 : June 7, 2011

BOY SCOUTS OF THE PHILIPPINES, Petitioner, v. COMMISSION ON AUDIT, Respondent.

LEONARDO-DE CASTRO, J.:

FACTS:

COA issued Resolution No. 99-0115 on August 19, 1999 with the subject "Defining the Commissions
policy with respect to the audit of the Boy Scouts of the Philippines." In its whereas clauses, the COA
Resolution stated that the BSP was created as a public corporation under CA No. 111, as amended by
PD No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v. NLRC, the Supreme
Court ruled that the BSP, as constituted under its charter, was a "government-controlled corporation
within the meaning of Article IX(B)(2)(1) of the Constitution"; and that "the BSP is appropriately
regarded as a government instrumentality under the 1987 Administrative Code." The COA Resolution
also cited its constitutional mandate under Section 2(1), Article IX (D).

COA General Counsel, Director Sunico wrote BSP that latter have to comply with COA Resolution No.
99-011, among which is to conduct an annual financial audit therein.

Upon the BSPs request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for
Review with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA.
This was denied by the COA in its questioned Decision, which held that the BSP is under its audit
jurisdiction. The BSP moved for reconsideration but this was likewise denied under its questioned
Resolution.

This led to the filing by the BSP of this petition for prohibition with preliminary injunction and
temporary restraining order against the COA.

ISSUE: Whether the BSP falls under the COAs audit jurisdiction.

HELD: The BSP is under the COAs audit jurisdiction.

POLITICAL LAW personality of BSP

We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987
Administrative Code.

It thus appears that the BSP may be regarded as both a "government controlled corporation with an
original charter" and as an "instrumentality" of the Government within the meaning of Article IX (B) (2)
(1) of the Constitution.

The existence of public or government corporate or juridical entities or chartered institutions by

legislative fiat distinct from private corporations and government owned or controlled corporation is
best exemplified by the 1987 Administrative Code cited above, which we quote in part:

Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:

(10) "Instrumentality" refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered institutions and
government-owned or controlled corporations.

(12) "Chartered institution" refers to any agency organized or operating under a special charter, and
vested by law with functions relating to specific constitutional policies or objectives. This term
includes the state universities and colleges and the monetary authority of the State.
(13) "Government-owned or controlled corporation" refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51)
per cent of its capital stock: Provided, That government-owned or controlled corporations may be
further categorized by the Department of the Budget, the Civil Service Commission, and the
Commission on Audit for purposes of the exercise and discharge of their respective powers, functions
and responsibilities with respect to such corporations.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government
because of reduction of the number of representatives of the government in the BSP Board, it does
not follow that it also ceases to be a government instrumentality as it still retains all the
characteristics of the latter as an attached agency of the DECS under the Administrative Code. Vesting
corporate powers to an attached agency or instrumentality of the government is not constitutionally
prohibited and is allowed by the above-mentioned provisions of the Civil Code and the 1987
Administrative Code.

Historically, therefore, the BSP had been subjected to government audit in so far as public funds had
been infused thereto. However, this practice should not preclude the exercise of the audit jurisdiction
of COA, clearly set forth under the Constitution, which pertinently provides:

Section 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds
and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities, including government-owned and controlled corporations with original
charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c)
other government-owned or controlled corporations with original charters and their subsidiaries; and
(d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through
the Government, which are required by law of the granting institution to submit to such audit as a
condition of subsidy or equity.

Since the BSP, under its amended charter, continues to be a public corporation or a government
instrumentality, we come to the inevitable conclusion that it is subject to the exercise by the COA of
its audit jurisdiction in the manner consistent with the provisions of the BSP Charter.

The Petition for prohibition is dismissed.

Bank of the Philippine Islands v. BPI Employees Union Davao Chapter Federation of Unions in BPI
Unibank, G.R. No. 164301, August 10, 2010.

29APR

[LEONARDO-DE CASTRO, J.]

FACTS

Bangko Sentral ng Pilipinas approved the Articles of Merger executed by and between BPI, herein
petitioner, and Far East Bank and Trust Company (FEBTC) and was approved by the Securities and
Exchange Commission. The Articles of Merger and Plan of Merger did not contain any specific
stipulation with respect to the employment contracts of existing personnel of the non-surviving entity
which is FEBTC. Pursuant to the said Article and Plan of Merger, all the assets and liabilities of FEBTC
were transferred to and absorbed by BPI as the surviving corporation. FEBTC employees, including
those in its different branches across the country, were hired by petitioner as its own employees, with
their status and tenure recognized and salaries and benefits maintained.

ISSUE

Whether or not employees are ipso jure absorbed in a merger of the two corporations.

RULING

NO. [H]uman beings are never embraced in the term assets and liabilities.Moreover, BPIs
absorption of former FEBTC employees was neither by operation of law nor by legal consequence of
contract. There was no government regulation or law that compelled the merger of the two banks or
the absorption of the employees of the dissolved corporation by the surviving corporation. Had there
been such law or regulation, the absorption of employees of the non-surviving entities of the merger
would have been mandatory on the surviving corporation. In the present case, the merger was
voluntarily entered into by both banks presumably for some mutually acceptable consideration. In
fact, the Corporation Code does not also mandate the absorption of the employees of the
non-surviving corporation by the surviving corporation in the case of a merger.

[The] Court cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC
assets and liabilities to BPI as set forth in the Articles of Merger necessarily includes the transfer of all
FEBTC employees into the employ of BPI and neither BPI nor the FEBTC employees allegedly could do
anything about it. Even if it is so, it does not follow that the absorbed employees should not be
subject to the terms and conditions of employment obtaining in the surviving corporation.

Furthermore, [the] Court believes that it is contrary to public policy to declare the former FEBTC
employees as forming part of the assets or liabilities of FEBTC that were transferred and absorbed by
BPI in the Articles of Merger. Assets and liabilities, in this instance, should be deemed to refer only to
property rights and obligations of FEBTC and do not include the employment contracts of its
personnel. A corporation cannot unilaterally transfer its employees to another employer like
chattel. Certainly, if BPI as an employer had the right to choose who to retain among FEBTCs
employees, FEBTC employees had the concomitant right to choose not to be absorbed by BPI. Even
though FEBTC employees had no choice or control over the merger of their employer with BPI, they
had a choice whether or not they would allow themselves to be absorbed by BPI. Certainly nothing
prevented the FEBTCs employees from resigning or retiring and seeking employment elsewhere
instead of going along with the proposed absorption.

Employment is a personal consensual contract and absorption by BPI of a former FEBTC employee
without the consent of the employee is in violation of an individuals freedom to contract. It would
have been a different matter if there was an express provision in the articles of merger that as a
condition for the merger, BPI was being required to assume all the employment contracts of all
existing FEBTC employees with the conformity of the employees. In the absence of such a provision
in the articles of merger, then BPI clearly had the business management decision as to whether or not
employ FEBTCs employees. FEBTC employees likewise retained the prerogative to allow themselves
to be absorbed or not; otherwise, that would be tantamount to involuntary servitude.

[Note: The decision as to absorption of employees upon merger is reversed in the Resolution of MR
dated October 19, 2011]