Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 169750 February 27, 2007

RURAL BANK OF CANTILAN, INC., and WILLIAM HOTCHKISS III, Petitioners,

vs.
ARJAY RONNEL H. JULVE, Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant Petition for Review on Certiorari assailing the Decision1 of
the Court of Appeals (Twenty Second Division, Cagayan de Oro City) dated September 23,
2004 in CA-G.R. SP No. 77206 and its Resolution of September 6, 2005.

The facts of this case as found by the Court of Appeals are:

On August 1, 1997, the Rural Bank of Cantilan, Inc., petitioner, hired respondent as a
management trainee. Later, he was appointed as planning and marketing officer.

On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank,
issued a memorandum addressed to all its branch managers informing them of the abolition
of the positions of planning and marketing officer and remedial officer; that this was
undertaken in accordance with the bank’s Personnel Streamlining Program; and that the
operations officer shall absorb the functions of the abolished offices.

On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been
appointed bookkeeper I at the bank’s branch in Madrid, Surigao del Sur effective
immediately with the same salary corresponding to his old position. Initially, respondent
agreed to accept the appointment, but eventually, he changed his mind and made the
following notation on Hotchkiss’ memorandum, thus:

I am withdrawing my signature on this appointment because I feel that this is a demotion (on
the position itself and allowances) and not a lateral transfer as what the President told me
yesterday. I believe I do not deserve a demotion.

Thank you.

On August 9, 2001, Hotchkiss appointed respondent as bookkeeper I and assistant branch

head of the Madrid branch. However, he did not report for work.

On September 11, 2001, Hotchkiss directed respondent to explain why he should not be
sanctioned for his failure to assume his new post at the Madrid branch. 1aw phi 1.net

The following day, respondent submitted his written explanation, which partly reads:
I regret to say that I am not accepting the position of Asst. Branch Head of RBCI-Madrid
Branch for the very reason that the papers were not left with me by the Admin. Officer after
she let me read them. Considering that Asst. Branch Head is a newly-created position, I
requested her for a copy of the said papers first so I can thoroughly study them before
making my decision. But she immediately took them back from me after I told her about this.

On September 14, 2001, respondent filed with the Regional Arbitration Branch No. XIII,
National Labor Relations Commission (NLRC), Butuan City, a complaint for constructive
dismissal against petitioners, docketed as NLRC Case No. RAB-13-09-00276-2001.

On January 14, 2002, the Labor Arbiter rendered a Decision, the dispositive portion of which
is partly reproduced below:

WHEREFORE, premises considered, judgment is hereby entered:

1. Declaring complainant as constructively illegally dismissed;

2. Ordering respondents to reinstate complainant to his former or equivalent position

without loss of seniority rights with full backwages from the time his salary was
withheld from him up to the time he is actually reinstated;

3. To pay complainant his partial backwages in the amount of ₱57,165.33 computed

up to the date of this decision as follows:

A. BACKWAGES FROM 16 Oct 2001 to 15 Jan 2002 (4 months) (Partial)

₱12,192.50 + 1,000 x 4 = ₱52,768.00

Plus ₱52,768/13 (13th mo. Pay) = ₱4,397.33

TOTAL BACKWAGES ₱57,165.33

and

4. Ordering respondents to pay complainant moral and exemplary damages in the total
amount of ₱100,000.00 plus ₱15,718.53, as attorney’s fees which is equivalent to 10% of the
total monetary award.

Complainant’s other claims are dismissed for lack of merit.

SO ORDERED.

On appeal by petitioners, the NLRC, in its Resolution dated November 19, 2002, set
aside the Labor Arbiter’s judgment, thus:

WHEREFORE, foregoing premises considered, the appealed decision is Vacated and

Set Aside. In lieu thereof, a new judgment is rendered dismissing the above-entitled
case for lack of merit.

SO ORDERED.
The NLRC held that respondent’s reassignment is not a demotion. There was neither
diminution in functions and pay. Thus, he was not constructively dismissed from
employment. Moreover, respondent himself admitted that he decided not to report for
work at his new station. Yet, he continued receiving his salaries and allowances.

Respondent filed a motion for reconsideration but it was denied by the NLRC.

Respondent then filed with the Court of Appeals a petition for certiorari, docketed as
CA-G.R. SP No. 77206.

On September 23, 2004, the Court of Appeals rendered its Decision granting the
petition, thus:

WHEREFORE, the instant Petition is hereby GRANTED. The NLRC Resolutions dated
19 November 2002 and 26 February 2003 are hereby ANNULLED and SET ASIDE. The
Labor Arbiter’s Decision dated 14 January 2002 is hereby REINSTATED.

SO ORDERED.

Petitioners filed a motion for reconsideration. However, it was denied by the appellate
court in its Resolution dated September 6, 2005.

The only issue before us is whether the Court of Appeals erred in holding that
respondent was constructively dismissed from employment.

In resolving this issue, we rely on the following guide posts:

Under the doctrine of management prerogative, every employer has the inherent right
to regulate, according to his own discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods, the time, place and manner of
work, work supervision, transfer of employees, lay-off of workers, and discipline,
dismissal, and recall of employees.2 The only limitations to the exercise of this
prerogative are those imposed by labor laws and the principles of equity and
substantial justice.

While the law imposes many obligations upon the employer, nonetheless, it also
protects the employer’s right to expect from its employees not only good
performance, adequate work, and diligence, but also good conduct and loyalty.3 In
fact, the Labor Code does not excuse employees from complying with valid company
policies and reasonable regulations for their governance and guidance.

Concerning the transfer of employees, these are the following jurisprudential

guidelines: (a) a transfer is a movement from one position to another of equivalent
rank, level or salary without break in the service or a lateral movement from one
position to another of equivalent rank or salary;4 (b) the employer has the inherent
right to transfer or reassign an employee for legitimate business purposes;5 (c) a
transfer becomes unlawful where it is motivated by discrimination or bad faith or is
effected as a form of punishment or is a demotion without sufficient cause;6 (d) the
employer must be able to show that the transfer is not unreasonable, inconvenient, or
prejudicial to the employee.7
Constructive dismissal is defined as "quitting when continued employment is
rendered impossible, unreasonable, or unlikely as the offer of employment involves a
demotion in rank and diminution of pay."8

In light of the above guidelines, we agree with the NLRC in ruling that respondent was
not constructively dismissed from employment.

Respondent contends that the abolition of his position as planning and marketing
officer and his appointment as bookkeeper I and assistant branch head of the Madrid
Branch is a demotion. However, a look at the functions of his new position shows the
contrary. The bookkeeper and assistant branch head is not only charged with
preparing financial reports and monthly bank reconciliations, he is also the head of
the Accounting Department of a branch. Under any standard, these are supervisory
and administrative tasks which entail great responsibility. Moreover, respondent’s
transfer did not decrease his pay.

Nor was respondent’s transfer motivated by ill-will or prejudice on the part of

petitioners. His position was not the only one abolished pursuant to the bank’s
Personnel Streamlining Program. We recall that the position of remedial officer was
likewise abolished. Petitioners’ reason was to acquire savings from the salaries it
would pay to full-time personnel in these positions.

Finally, we note that despite respondent’s refusal to accept the new appointment,
petitioners did not dismiss him. Rather, it was he who opted to terminate his
employment when he purposely failed to report for work.

In fine, we hold that the Court of Appeals erred when it concluded that respondent
was constructively dismissed from employment.

WHEREFORE, we GRANT the petition and REVERSE the Decision of the Court of
Appeals in CA-G.R. SP No. 77206. The Resolutions of the NLRC dated November 19,
2002 and February 26, 2003, dismissing respondent’s complaint are AFFIRMED.

SO ORDERED.

ANGELINA SANDOVAL GUTIERREZ

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

(On official leave)

RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Asscociate Justice

CANCIO C. GARCIA
Associate Justice
 CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1
Rollo, pp. 89-102. Penned by Associate Justice Mariflor P. Punzalan-Castillo
and concurred in by Associate Justice Sesinando E. Villon and Associate
Justice Rodrigo F. Lim, Jr.

2Baybay Water District v. Commission on Audit, G.R. Nos. 147248-29, January

23, 2002, 374 SCRA 482, 495-96, citing Tierra International Construction Corp.
v. National Labor Relations Commission, 256 SCRA 36 (1996).

3Durban Apartments Corp. v. Catacutan, G.R. No. 167318, December 14, 2005,
478 SCRA 801, 809.

4Dosch v. National Labor Relations Commission, G.R. No. 51182, July 5, 1983,
123 SCRA 296, 312, citing Millares v. Subido, 20 SCRA 954 (1967).

5 Genuino Ice Company, Inc. v. Magpantay, G.R. No. 147790, June 27, 2006.

6Phil. Telegraph & Telephone Corp. v. Laplana, G.R. No. 76645, July 23, 1991,
199 SCRA 485, 491.

7Westmont Pharmaceuticals, Inc. v. Samaniego, G.R. Nos. 146653-54 &

147407-08, February 20, 2006, 482 SCRA 611, 620; Globe-Telecom, Inc. v.
Florendo-Flores, G.R. No. 150092, September 27, 2002, 390 SCRA 201, 213.

8Mobil Protective & Detective Agency v. Ompad, G.R. No. 159195, May 9, 2005,
458 SCRA 308, 321, citing R.P. Dinglasan Construction, Inc. v. Atienza, 433
SCRA 263 (2003).
SECOND DIVISION

[G.R. No. 129843. September 14, 1999]

BLUE DAIRY CORPORATION and/or EDISON T. AVIGUETERO

and PEDRO G. MIGUEL, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and ELVIRA R.
RECALDE, respondents.

DECISION
BELLOSILLO, J.:

BLUE DAIRY CORPORATION, engaged in the processing of dairy and chocolate

products, juices and vegetables, hired on 14 May 1994 private respondent Elvira R.
Recalde as a food technologist in its laboratory with the following specific
functions: microanalysis of toppings and syrup, onions and garlic, and liquid mixes (soft
serve and milk shake); physical and chemical analysis of liquid mixes, including raw
materials for toppings and syrup and its inspection; routine computation for liquid mixes
and supervision while weighing the materials; performing chlorine test for lettuce, red
onion, white onion and green pepper; preparation of forms for toppings and syrup;
sensory evaluation of toppings and syrup; product development (assistant); and,
preparation of food coloring for orange syrup production.[1]
On 22 May 1994, a Sunday, Recalde reported for work but claimed that she was not
given her premium pay.
On 21 October 1994 Recalde accompanied Production Manager Editha N. Nicolas in
conducting a sensory evaluation of vanilla syrup in one of the outlets of a client. While
on their way back to the office a post fell on the company vehicle they were riding due to
a raging typhoon damaging the vehicle's windshield and side mirror.
On 3 December 1994 Recalde was transferred from the laboratory to the vegetable
processing section where she cored lettuce, minced and repacked garlic and performed
similar work, and was restricted from entering the laboratory. She was unhappy. She
considered her new job humiliating and menial. On 14 December 1994 she stopped
reporting for work. The following day she sent a letter to petitioner Edison T. Aviguetero,
the President and Chairman of the Board of Director of Blue Dairy Corporation, reading -

I would like to inform you that I will no longer report for work because of your
drastic and oppressive action. And besides, I have already filed a case against
BLUE DAIRY CORPORATION and/or EDISON T. AVIGUETERO, PEDRO
G. MIGUEL x x x x[2]
 On 16 December 1994 Recalde filed a complaint against petitioner Blue Dairy
Corporation, Edison T. Aviguetero and Pedro G. Miguel[3] for constructive dismissal and non-
payment of premium pay. She also claimed overtime pay as well as moral and exemplary damages plus
attorneys fees.

Petitioners contended that Recalde was given a less sensitive assignment outside of
the laboratory on account of her dishonesty which resulted in loss of trust and
confidence. They seriously took into account the result of the investigation concerning
the 21 October incident that Recalde was actually scouting for a new residence using
company vehicle without prior permission from the General Manager and during office
hours, in violation of par. IV, subpars. B and G, of the company's General Rules and
Regulations. Petitioners accorded credence to the narrations of Rolando V. Flores, driver
of the damaged vehicle, to that effect which act of dishonesty could even have merited
dismissal from employment had they adhered simply to jurisprudential rule but took into
account instead the spirit of the approaching Christmas season.
The Labor Arbiter was convinced that petitioners were guilty of constructive
dismissal as he found the justification for Recaldes transfer unreasonable: first, the
unofficial trip on the way back to the office on 21 October was undertaken through the
bidding of the Production Manager; second, loss of trust and confidence must necessarily
occur in the performance of duties; and third, the new position of Recalde was too
humiliating and demeaning. The Labor Arbiter also found that petitioners failed to grant
premium pay to Recalde for her work performed on 22 May 1994, a Sunday.
On 31 October 1996 petitioners were thus ordered to reinstate Recalde to her former
position as food technologist assisting in the quality assurance processes of the company
and performing laboratory work without loss of seniority rights and privileges, with full
back wages as well as to grant her premium pay, initially computed thus -

Back Wages:

12/14/94 - 12/30/96 = 24.53 mos.

P183.33 x 30 days x 24.53 mos. - - - - - - - P134,912.54

Premium Pay for Rest Day:

(May 22, 1994): P183.33 x 30% = P55.00 - - - 55.00

___________

TOTAL AWARD: - - - - - - - - - - - - - - - - - P134,967.54

The other claims were dismissed for lack of merit.[4]

On 30 April 1997 public respondent National Labor Relations Commission (NLRC)
affirmed the ruling.[5] On 19 June 1997 reconsideration was denied.[6]
 Petitioners insist that the transfer of Recalde from the laboratory to the vegetable
processing section was effected in the exercise of management prerogative. It did not
amount to a constructive dismissal as Recalde erroneously maintained. Moreover,
petitioners submit that the coring of lettuce together with the other production jobs
connected therewith is one of the most important aspects of the corporations existence; in
fact, those assigned to the vegetable processing section are mostly professionals like
teachers, computer secretaries and forestry graduates.
No grave abuse of discretion was committed by the NLRC. Indeed, it is the
prerogative of management to transfer an employee from one office to another within the
business establishment based on its assessment and perception of the employees
qualifications, aptitudes and competence, and in order to ascertain where he can function
with maximum benefit to the company.[7] 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.[8]
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 that right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker.[9] 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.[10] 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 in
pay.[11] Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the employee
leaving him with no option but to forego with his continued employment.[12]
In the present case, petitioners failed to justify Recaldes transfer from the position of
food technologist in the laboratory to a worker in the vegetable processing section. We
recall that what triggered Recaldes transfer was the 21 October incident where she was
found to have allegedly utilized company vehicle in looking for a new residence during
office hours without permission from management. In petitioners view, she was dishonest
such that they lost their trust and confidence in her. Yet, it does not appear that Recalde
was provided an opportunity to refute the reason for the transfer. Petitioners merely relied
on the narrations of the company driver. Nor was Recalde notified in advance of her
impending transfer which was, as we shall elucidate later, a demotion in rank.In Gaco v.
NLRC[13] we noted -

While due process required by law is applied in dismissals, the same is also
applicable to demotions as demotions likewise affect the employment of a
worker whose right to continued employment, under the same terms and
conditions, is also protected by law. Moreover, considering that demotion is,
like dismissal, also a punitive action, the employee being demoted should, as in
cases of dismissals, be given a chance to contest the same.

Further, petitioners overstretched the effect of Recaldes claimed wrongdoing. We

have ruled that breach of trust and confidence as a ground for dismissal from employment
must be related to the performance of the duties of the employee such as would show him
to be thereby unfit to continue working for the employer.[14] By analogy, breach of trust
and confidence as a ground for reassignment must be related to the performance of the
duties of the employee such as would show him to be thereby unfit to discharge the same
task. Clearly, the act of dishonesty imputed to Recalde has no bearing at all to her work
in the laboratory.
Further still, granting that Recalde was proved guilty of dishonesty, the companys
General Rules and Regulations provide the corresponding sanctions therefor. Recalde
appears to have no prior record of infractions. For "leaving post temporarily without
permission during working hours" committed for the first time, "warning" is imposable,
whereas for "unauthorized use of any company vehicle" committed for the first time, the
commensurate penalty is "15 days suspension."[15] Although petitioners invoked the
pertinent provisions of the rules and regulations which Recalde allegedly violated, for
reasons known only to them, they disregarded those sanctions. Instead, they gave her a
less sensitive assignment outside of the laboratory as they claimed that had they adhered
to the rules she would have been dismissed outright for her dishonesty in the
unauthorized use of company property. Then too is their claim that they were moved by
compassion on account of the then approaching Christmas season. Commendable as this
"compassionate" gesture may seem, nevertheless, petitioners failed to realize that it was
not relief from dismissal which they provided to Recalde when they assigned her to the
vegetable processing section but discomfiture.
We find insignificant the submission of petitioners that "the coring of lettuce
together with the other production jobs connected therewith is one of the most important
aspects of the corporations existence" and that "those assigned to the vegetable
processing section are mostly professionals like teachers, computer secretaries and
forestry graduates." Rather, the focus should be on the comparison between the nature of
Recaldes work in the laboratory and in the vegetable processing section. As food
technologist in the laboratory, she occupied a highly technical positionrequiring use of
her mental faculty. As a worker in the vegetable processing section, she performed mere
mechanical work. It was virtually a transfer from a position of dignity to a servile or
menial job.[16] We agree with the observation of the Office of the Solicitor General that
the radical change in Recaldes nature of work unquestionably resulted in, as rightly
perceived by her, a demeaning and humiliating work condition. The transfer was a
demotion in rank, beyond doubt.
Another aspect of comparison is the workplaces themselves. Petitioners admitted in
their answer to Recaldes complaint that -

Respondents Laboratory is the most expensive area, on a per-square-meter

basis, in the companys premises. It is here where the quality of the companys
products is tested and assured. Since these products are food items ingested by
the consuming public, this Laboratory becomes several folds critical. Hence,
only highly trusted authorized personnel are allowed access to this place.[17]

In other words, the laboratory is the place where the quality of the totality of
petitioners' products such as dairy, juices, chocolates and vegetables is tested. On the
other hand, the vegetable processing section, as the name implies, involves processing of
vegetables alone. Definitely, a transfer from a workplace where only highly trusted
authorized personnel are allowed access to a workplace that is not as critical is another
reason enough for Recalde to howl a protest.
We reiterate that the NLRC did not commit grave abuse of discretion in affirming
the ruling of the Labor Arbiter that petitioners are guilty of constructive
dismissal. Recalde is entitled to reinstatement as food technologist without loss of
seniority rights and privileges and with full back wages, as directed by the Labor
Arbiter. We clarify however that conformably with Art. 279 of the Labor Code, as
amended by Sec. 34 of RA 6715, to be included in the computation of back wages are the
illegally dismissed employees allowances and other benefits or their monetary equivalent.
WHEREFORE, the petition is DISMISSED. The Decision of public respondent
National Labor Relations Commission finding that private respondent Elvira R. Recalde
was constructively dismissed from employment and entitled to premium pay is
AFFIRMED. Petitioners Blue Dairy Corporation, Edison T. Aviguetero and Pedro G.
Miguel are ordered to reinstate private respondent Recalde as food technologist in the
laboratory without loss of seniority rights and privileges and with full back wages
inclusive of allowances and other benefits or their monetary equivalent to be computed
from her dismissal on 14 December 1994 up to actual reinstatement, and to grant her
premium pay of P55.00 for work performed on 22 May 1994, a Sunday. Costs against
petitioners.
SO ORDERED.
Mendoza, Quisumbing, and Buena, JJ., concur.

[1]
NLRC Records, p. 14.
[2]
Id., p. 26.
[3]
Vice President and General Manager, Blue Diary Corporation.
[4]
Decision penned by Labor Arbiter Leandro M. Jose; NLRC Records, pp. 109-110.
[5]
Decision penned by Commissioner Rogelio I. Rayala, concurred in by Presiding Commissioner Raul T.
Aquino and Commissioner Victoriano R. Calaycay; Rollo, p. 34.
[6]
Rollo, p. 36.
[7]
Yuco Chemical Industries v. Ministry of Labor, G. R. No. 75656, 28 May 1990, 185 SCRA 727;
Philippine Telegraph and Telephone Corporation v. Laplana, G. R. No. 76045, 23 July 1991, 199 SCRA
485; M. Ramirez Industries v. Secretary of Labor and Employment, G. R. No. 89894, 3 January 1997, 266
SCRA 111.
[8]
Yuco Chemical Industries v. Ministry of Labor; see Note 8.
[9]
Philippine Telegraph and Telephone Corporation v. Laplana; see Note 8.
[10]
Philippine-Japan Active Carbon Corporation v. NLRC, G. R. No. 83239, 8 March 1989, 171 SCRA 164.
[11]
Ibid.
[12]
Philippine Advertising Counselors, Inc. v. NLRC, G. R. No. 120008, 18 October 1996, 263 SCRA 395.
[13]
G. R. No. 104690, 23 February 1994, 230 SCRA 260.
[14]
Equitable Banking Corporation v. NLRC, G. R. No. 102467, 13 June 1997, 273 SCRA 352.
[15]
Par. IV (B and G) of petitioner companys general rules and regulations; NLRC Records, pp. 29 and 30.
[16]
Quisaba v. Sta Ines-Melale Veneer and Plywood, Inc., No. L-38088, 30 August 1974, 58 SCRA 771.
[17]
NLRC Records, p. 20.