Labrel 2nd Set

LABREL (2ND SET)

G.R. No. 162233 March 10, 2006

RONALDO B. CASIMIRO, ELISA M. LAT, JOSE L. LALAP, CELESTIN S, LACHICA, REYNALDO S. MALLILLIN, LEONILA G. ROJO, JULIE H. SEBASTIAN, EDITHA M. SOLOMON, EMILIANO T. TAMBAOAN III, FERNANDO G. TROZADO, Petitioners, vs.STERN REAL ESTATE INC. REMBRANDT HOTEL and/or GRACE KRISTIN MEEHAN

(General Manager), and ERIC SINGSON (Owner), Respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, assailing the Decision1 of the Court of Appeals (CA) in CA-G.R. SP. No. 64536, as well as the Resolution2 dated February 16, 2004 denying the motion for reconsideration thereof.

Respondent Stern Real Estate & Development Corporation is a corporation duly organized and existing under Philippine laws, engaged in the business of purchasing, selling and operating buildings and other real properties for profit. One such property it owns is the Hotel Rembrandt located at No. 26 Tomas Morato Avenue, corner Scout Bayoran Street, Quezon City, with Grace Kristine Meehan as General Manager, and Eric Singson as its Director.3 The hotel has been fully operational since 1996.

On May 6, 1999, Meehan issued the following Memorandum4 announcing a Special Separation Program (SSP) for all interested employees:

1. Due to the hotel’s dire financial status, the hotel has decided to implement/offer a one-time non-recurring special separation program (SSP) that all employees can avail of for the limited period of 10th May to 24th May 1999 only. Management, however, shall have the sole option to approve/disapprove the application of any employee.

2. If the number of employees who apply for the Special Separation Program do not meet the minimum number required by the company, management will be constrained to involuntary terminate the services of employees due to financial losses. Those employees who would be terminated after this program would only receive the legal benefits mandated by law.

A. Guidelines

1. Covered Employees - This program is open only to all regular employees of the hotel.

- Pioneer employees will be given a special consideration.

2. Separation Pay - The hotel will pay affected employees in accordance with the following benefit schedule per year of service (computed as 12 months) on a pro-rata basis tax exempt.

a. Basic: One-half (1/2) month basic salary for [every] year of service or one (1) month salary, whichever is higher.

b. Additional: (1) One year of service or less ….. P1,000.00

(2) Two years of service ………... P3,000.00

(3) Three years of service ………. P6,000.00

(4) Four years of service …………P10,000.00

3. Other Entitlements

a. Vacation Leaves. Employees with earned vacation leaves whose applications for separation are accepted under this program, shall be allowed to go on terminal leave to use up their leave credits. While they are on leave, they shall be entitled to correspondingly share in the Service Charges. For employees whose applications for separation are accepted but whose services are needed up to their last day of employment, their earned leaves shall be commuted/paid in cash.

b. Thirteenth (13th) Month Pay. All employees approved to avail of the SSP will be entitled to a pro-rata payment of the 13th month pay (i.e., from 1st January – 31st May 1999)

4. The basis of computation of the separation pay is the monthly basic salary as of Wednesday, 26th May.

5. The release of the special separation package will be around 2 weeks from the submission of the necessary clearances.

6. All applications accepted under this Program shall be effective 31st May 1999.

7. An employee who avails of the Special Separation Program is not entitled to any other benefits by reason of his separation. The employee waives the right to any other benefits normally associated with his/her employment at Hotel Rembrandt.

8. Employees with physical limitations due to recurring illness or advanced age and who can no longer perform their jobs effectively shall be given priority [u]pon the certification of a physician designated by the hotel, if the concerned employee’s physical infirmities/limitations that [sic] may adversely affect the employee’s job performance.

9. The hotel reserves the sole right and discretion to decide on the case of an employee.

10. The number of employees to be separated will depend on:

http://www.lawphil.net/judjuris/juri2006/mar2006/gr_162233_2006.html#fnt4




a. The ability of the company to fund this one time, non-recurring special separation program.

b. The company’s explicit approval of each application on a case-to-case basis.

11. This special separation program is a one-time, non-recurring program. It should not set any precedent nor be invoked in the future.5

On May 24, 1999, the hotel management accepted 49 applications for its SSP.

On May 28, 1999, management filed an Establishment Termination Report6 before the Department of Labor and Employment. Said report covered 29 employees whose termination was to take effect on June 28, 1999. "Financial losses" was the main reason cited, and the other being "company reorganization/downsizing." From June 15 to 21, 1999, letters were sent to the employees concerned informing them that they were considered dismissed from employment one month after receipt of such notice.7

Petitioners were among the retrenched employees.8 They later filed a complaint for "illegal dismissal in the guise of retrenchment and underpayment/non-payment of overtime pay, premium compensation for holiday and rest day" with prayer for moral and exemplary damages and attorney’s fees before the National Labor Relations Commission (NLRC). The complaint was docketed as NLRC NCR Case No. 00-08-08351-99.

According to the complainants, while the hotel management claimed that they were retrenched due to "serious financial losses," it failed to satisfy the requirements of the Labor Code in terminating their employment: no notice was given to the Department of Labor of such intended retrenchment and no evidence was submitted to prove that the hotel had been suffering financial losses. Moreover, respondents had not only advertised their need for personnel vacated by complainants;9 they had already started hiring replacements. The complainants were convinced that their retrenchment was only a ploy to ease them out of their respective jobs.10

On March 6, 2000, Labor Arbiter Donato G. Quinto, Jr. ruled in favor of the retrenched employees. According to the Labor Arbiter, a thorough examination of the financial statements submitted by respondents would readily show that the expenses in 1998 were bloated as compared to the previous year, clearly made to justify the retrenchment of the complainants.11 Moreover, the hotel had advertised job vacancies for extra banquet waiters and waitresses, and likewise failed to rebut the charge that the "last in, first out rule" was not observed in dismissing the employees. The Labor Arbiter also declared that while the complainants executed quitclaims and accepted their separation pay, they were not estopped from challenging the validity of their dismissal. The dispositive portion of the decision reads:

WHEREFORE, premises above considered, a decision is hereby issued declaring the retrenchment of the complainants devoid of factual and legal basis, hence respondent firm[,] Grace Kristen [sic] Meehan and Eric Singson is [sic] hereby ordered to reinstate complainants to their former or equivalent position with full backwages minus what have been received by them as separation benefits, reckoned from the date of their actual dismissal [or] retrenchment until reinstated actually or in payroll, plus attorney’s fees equivalent to ten (10%) percent of the award. For this purpose, the Examination and Computation Unit of this Arbitration branch is hereby directed to make the necessary computation of the complainants’ backwages which computation is hereby adopted and to form an integral part of this decision as Annex "A."

The other claims including damages are hereby dismissed for lack of merit.12

In compliance with the Labor Arbiter’s directive, the Examination and Computation Unit of the NLRC issued a computation of complainants’ entitlement, awarding in their favor a total of P1,988,908.91.13

Respondents appealed the decision to the NLRC, arguing that the Labor Arbiter committed grave abuse of discretion in disregarding the audited financial statements, and choosing to believe the erroneous computation of the complainants without even checking the veracity of their allegations.[14] Aside from the audited financial statements for 1997[15] and 1998,[16] and the Audit Report[17] of Banaria, Banaria and Company, dated April 14, 1999, respondents also attached receipts and vouchers to show that the hotel had really incurred losses.

Complainants, for their part, filed their Comments with Motion to Dismiss Appeal,[18] alleging that respondents did not furnish them with a copy of the Memorandum of Appeal and the Motion to Reduce Supersedeas Bond, which violated their right to due process. They also pointed out that the cash deposit of P50,000.00 made by respondents was a "measly amount," and as such, it was as if no appeal bond was paid and no appeal had been perfected.

In its Decision19 dated January 15, 2001, the NLRC reversed the ruling of the Labor Arbiter and dismissed the complaints for lack of merit. It held that through the duly-audited financial statements submitted to it, the respondent hotel was able to show that it suffered losses in 1996, 1997 and 1998 amounting to P19,272,539.37, P18,512,683.00 and P13,669,695.00, respectively. The NLRC further ruled that the Labor Arbiter erred in disregarding these statements and giving full credence to complainants’ contention that the hotel’s expenses were bloated. It pointed out that respondents presented receipts on appeal to show that the repair and maintenance, light and water expenses, and telephone and communication expenses were not fabricated. Citing The New Valley Times Press v. National Labor Relations Commission,20 it averred that evidence presented on appeal may be considered by it, and pointed out that the complainants did not rebut the evidence despite due notice.

The NLRC further ruled that, contrary to the allegation of the complainants, the first-in-last-out policy was observed by respondents, since evidence of the complainants’ efficiency and performance for the past years were presented to show that this criteria was considered. The labor tribunal pointed out that this evidence was not rebutted by the complainants. It further ruled that complainants failed to show that they were forced to sign quitclaims when they received their respective separation pay. Citing Veloso v. Department of Labor and Employment,21 it declared that "dire necessity" is not an acceptable reason to set aside quitclaims otherwise valid.

Aggrieved, the retrenched employees filed before the CA a Petition for Certiorari under Rule 65 of the Revised Rules of Court. On July 20, 2001, the CA issued a Resolution22 directing petitioners to amend their petition by dropping seven23 of them who failed to sign the verification and certification of non-forum shopping. On October 19, 2001, petitioners Reantaso, Elisa Lat, Lalap, Lachica, Mallillin, Rojo, Sebastian, Solomon, Tambaoan III, Trozado, and Edwin Lat filed their Amended Petition.24 Petitioner Cabardo filed her Amended Petition on November 7, 2001.25

On July 31, 2003, the CA affirmed the ruling of the NLRC and dismissed the petition for lack of merit.26 On the issue of the filing of the cash bond, it ruled that respondents’ action constituted substantial compliance with the rules. It stated that the Labor Arbiter’s decision did not specify the exact amount of the monetary award due the petitioners, prompting respondents to file a P50,000.00 cash bond and motion for the reduction of the supersedeas bond. Once the computation of the monetary award was received on July 14, 2000, they immediately sought thecancellation of the cash bond, and moved that it be substituted with a surety bond equivalent to the monetary award. The CA further ruled that petitioners failed to show that respondents were in bad faith or that they intended to delay payment. It observed that when the Labor Arbiter issued the writ of execution, respondents instructed petitioners to immediately report to the hotel on July 26, 2000. The























appellate court also disagreed with petitioners’ contention that they were deprived of due process when additional documents were submitted before the NLRC. Under the New Rules of Procedure of the NLRC, the submission of new evidence is not prohibited, not being prejudicial to the other party who could still submit counter-evidence.

Citing NDC-Guthrie Plantations, Inc. v. National Labor Relations Commission,27 the CA declared that respondents were able to comply with all the requirements for a valid retrenchment under Article 283 of theLabor Code.

Aggrieved, petitioners now come to this Court, assailing the ruling of the CA on the following grounds:

5.1. THAT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION EQUIVALENT TO LACK OR IN EXCESS OF JURISDICTION WHEN IT RULED THAT THE APPEAL OF THE RESPONDENTS WITH THE NATIONAL LABOR RELATIONS COMMISSION WAS PERFECTED DESPITE THE FACT THAT THE APPEAL OR SURETY BOND OF P1,988,908.91 WAS POSTED SEVENTY (70) DAYS LATE FROM RECEIPT OF THE DECISION OF THE LABOR ARBITER.

5.2. THAT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION EQUIVALENT TO LACK OR IN EXCESS OF JURISDICTION WHEN IT RULED THAT THE PETITIONERS WERE NOT PREJUDICED WHEN THE NLRC ADMITTED THE APPEAL MEMORANDUM AS WELL AS THE ADDITIONAL EVIDENCE OF THE RESPONDENTS EVEN WITHOUT FURNISHING FIRST THE PETITIONERS COPIES THEREOF MORE SPECIFICALLY THE APPEAL MEMORANDUM.

5.3. THAT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION EQUIVALENT TO LACK OR IN EXCESS OF JURISDICTION WHEN IT RULED THAT THERE WAS A VALID RETRENCHMENT TO WARRANT THE DISMISSAL OF THE PETITIONERS.

5.4. THAT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION EQUIVALENT TO LACK OR IN EXCESS OF JURISDICTION WHEN IT RULED THAT THE PETITIONERS EXECUTED A VALID QUITCLAIM.

5.5. THAT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION EQUIVALENT TO LACK OR IN EXCESS OF JURISDICTION WHEN IT ADMITTED AND ENTERTAINED THE COMMENT OF THE RESPONDENTS DESPITE ITS ORDER THAT CONSIDERED SAID RESPONDENTS TO HAVE WAIVED THE RIGHT TO FILE THEIR COMMENT AND SAID ORDER WAS NOT RECONSIDERED AND SET ASIDE THUS LEGALLY STILL IN FULL FORCE AND EFFECT.28

Petitioners insist that a decision in labor cases involving a monetary award may be perfected only upon the posting of a cash or surety bond, as mandated by Republic Act No. 6715, as well as Section 6, Rule VI of the New Rules of Procedure of the NLRC. They aver that the reason behind the rule is to give the workers an assurance that they will be paid in the event that they win the case. They claim that there was no reason why respondents could not afford to deposit the sum of P1,988.908.01. While the late filing of the supersedeas bond has been relaxed in a number of cases, there is no cogent reason to apply a liberal interpretation in the instant case. The word "only" in the provision, according to petitioners, makes it perfectly clear that the lawmakers intended the posting of a cash or surety bond as the exclusive means by which an employer’s appeal may be perfected. They insist that the appeal bond of P50,000.00 is shockingly low and grossly inadequate, as it constitutes only 2.5% of the monetary award.

Petitioners also aver that, contrary to respondents’ claim in the appellate court, they (respondents) were furnished a copy of the Labor Arbiter’s decision, as well as the computation of the monetary award. In fact, it was respondents who did not provide them a copy of their Memorandum of Appeal, contrary to Rule IV, Section 3 of the New Rules of Procedure of the NLRC. On this score alone, the appeal before the NLRC should have been dismissed. Petitioners aver that they were prevented from filing the appropriate pleadings on account of such intentional act. They insist that additional evidence on appeal cannot be filed on personal whims and caprices, and that "there are rules to be observed in order that the rights of the other party will not be prejudiced and trampled upon." They conclude that petitioners’ intentional failure to furnish them a copy of such appeal memorandum deprived them of their right to be heard - ultimately, their right to due process.

On the merits of the case, petitioners stress that respondents were not motivated by honest intentions in effecting their dismissal. They remind the Court that while the law recognizes the employer’s right to protect its interest, such right should be exercised in a manner which does not infringe on the employees’ constitutional right to security of tenure. They insist that respondents presented "sanitized financial statements" to justify the legality of their retrenchment. They reiterate that they were not furnished copies of said statements, hence, their failure to submit evidence to controvert the same. Under the circumstances, respondents should have presented respondent hotel’s income tax returns for the preceding years since audited financial statements are not entirely reliable and can be easily fabricated.

On the appellate court’s finding that the quitclaims they executed were valid, petitioners insist that they were forced to do so since their employer was determined to carry out their dismissal. Since most of them were their respective families’ sole breadwinners, there was no other recourse but for them to sign such waivers out of dire necessity.

Respondents, for their part, allege that no new matter or issue was raised in the instant petition, a mere rehash of petitioners’ arguments before the appellate court, and that such arguments had already been passed upon by the appellate court.

The issues involved in this case are procedural and substantial in nature. On the procedural aspect, petitioners question the filing of the cash bond, which, according to them, was a measly amount as compared to the award of the Labor Arbiter. They likewise question the fact that the CA considered the evidence submitted by respondents on appeal before the NLRC, and they contend that this is a violation of their right to due process. On the other hand, the main and substantial issue to be resolved by the Court is whether petitioners were validly retrenched, and, corollarily, whether respondents presented adequate proof of financial losses, and whether the quitclaims executed by petitioners are valid and binding.

At the outset, the Court stresses that the substantial issues for resolution are factual in nature, and generally, factual findings of the NLRC are accorded respect. However, there is compelling reason to deviate from this salutary principle where, as in this case, such findings of facts of the NLRC are in conflict with that of the Labor Arbiter. Accordingly, this Court must of necessity review the records to determine which findings should be preferred as more conformable to the evidentiary facts.29

A careful perusal of the records show that respondents filed their Memorandum of Appeal on May 17, 2000 before the NLRC, together with the P50,000.00 cash bond. They also filed a Motion for Reduction of Supersedeas Bond. Thereafter, respondents’ new counsel filed a Manifestation with Motion to Substitute (Cash Bond with Supersedeas Bond), alleging that a copy of the monetary award had not been attached to the copy of the Labor Arbiter’s decision which was furnished them. The NLRC approved the substitution in a Resolution30 dated December 28, 2000. In light of the fact that in his decision, the Labor Arbiter directed the Examination and Computation Unit of the NLRC to compute the backwages of the





retrenched employees, it would not have been possible for respondents to obtain a copy of such computation. As such, the initial filing of the P50,000.00 cash bond was justified under the circumstances.

The second paragraph of Article 223 of the Labor Code states that when a judgment involving monetary award is appealed by the employer, the appeal may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment. This is to assure the workers that if they finally prevail in the case, the monetary award will be given to them upon dismissal of the employer’s appeal, and is meant to discourage employers from using the appeal to delay or evade payment of their obligations to the employees.31 However, as provided for in Section 6, Rule VI of the New Rules of Procedure of the NLRC, such amount of the bond may be reduced in meritorious cases, upon motion of the appellant. The exercise of this authority is not a matter of right on the part of the movant but lies within the sound discretion of the NLRC upon showing of meritorious grounds.32 Indeed, an unreasonable and excessive amount of bond would be oppressive and unjust, and would have the effect of depriving a party of his right to appeal.33

The Court likewise holds that the NLRC did not err in admitting the receipts and other evidence attached to the Memorandum of Appeal of respondents. In Tanjuan v. Philippine Postal Savings Bank, Inc.,34 where this Court was confronted with the similar question, i.e., whether proof of business losses may be admitted on appeal before the NLRC, we declared that the NLRC is not precluded from receiving evidence on appeal because technical rules of procedure are not binding in labor cases, which rule applies to both employer and employee.35 Moreover, the fact that evidence was not presented before the Labor Arbiter will not justify its outright rejection, particularly since such evidence is absolutely necessary to resolve the issue of whether retrenched employees were validly terminated.36 No less than the Labor Code directs labor officials to use all reasonable means to ascertain the facts speedily and objectively, with little regard to technicalities or formalities,37 while Section 10, Rule VII of the New Rules of Procedure of the NLRC provides that technical rules are not binding.38 Indeed, the application of technical rules of procedure may be relaxed in labor cases to serve the demand of substantial justice.39

Contrary to petitioners’ claim, they were not denied due process. The essence of due process in administrative proceedings is simply an opportunity to explain one’s side or an opportunity to present evidence in support of one’s defense.40 In this case, petitioners submitted their respective pleadings to controvert the allegations of respondents.

Article 28341 of the Labor Code of the Philippines authorizes retrenchment as one of the valid causes to dismiss employees as a measure to avoid or minimize business losses.42 Retrenchment is the "termination of employment initiated by the employer through no fault of the employees and without prejudice to the latter, resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation."43 Simply put, it is a reduction in manpower, a measure utilized by an employer to minimize losses incurred in the operation of its business. It is a management prerogative consistently recognized and affirmed by this Court.44 In Danzas Intercontinental, Inc. v. Daguman, 45 we enumerated the requirements for a valid retrenchment which the employer must prove by clear and convincing evidence:

x x x (1) that retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) that the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (3) that the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one-half (1/2) month pay for every

year of service, whichever is higher; (4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and (5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.46

In this case, respondents presented audited financial statements and receipts to prove that the hotel had been incurring business losses. As found by the appellate court:

In the case at bar, the respondent hotel undertook a Special Separation Program (SSP) which all employees can avail of for the limited period of May 10 to 24, 1999, due to the dire financial status it was experiencing. Forty-nine (49) employees were accepted for this separation program. The private respondents then decided that a retrenchment program was further needed in order to stem the losses. The private respondents then informed the DOLE through an Establishment Termination Report filed on May 28, 1999, that they were retrenching twenty-nine (29) employees effective June 28, 1999, among whom included the herein petitioners. The private respondents likewise informed these twenty-nine (29) employees that their services would be terminated thirty (30) days after the receipt of the written notification. After one month from receipt of the letters of termination, the twenty-nine (29) employees were given their separation pay and the corresponding quitclaims were signed.

x x x x

The private respondents in the instant case presented balance sheets for the years 1997, 1998 and 1999 as audited by independent auditors, which showed that respondent Stern experienced net losses for several years, as follows:

1996 = P19,272,539.77

1997 = P18,512,683.11

1998 = P13,669, 095.80

1999 = P14,626,684.36

Hence, for a period of four (4) years, respondent Stern accumulated losses amounting to around P66,000,000.00, with no sign of abating in the future. The petitioners failed to back up their allegation that the expenses presented in the financial statements were bloated. Nor did the petitioners explain why independent public accountants Clemente Uson & Co. and Banaria, Banaria and Company would knowingly allow false figures to be included in the balance sheets. Consequently, we are more inclined to affirm the finding of the public respondent that the expenses presented by the private respondents were not fabricated.47

Contrary to the allegation of petitioners, income tax returns are self-serving documents because they are generally filled up by the taxpayer himself, and are still to be examined by the Bureau of Internal Revenue for their correctness.48

The Court notes that petitioners failed to dispute the validity of the financial statements and receipts submitted by respondents, or that any false entries were made therein. They also failed to prove, much less impute, any ill motive on the part of the independent auditors who prepared the financial statements which respondents submitted.



















The Court also finds that the quitclaims executed by the individual petitioners in this case are valid and binding. Indeed, quitclaims executed by employees are commonly frowned upon as being contrary to public policy, and where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or where the terms of settlement are unconscionable on their faces, the law will step in to annul the questionable transactions.49 However, when such quitclaim was made voluntarily and there is no evidence that the employer was guilty of fraud or intimidation in obtaining such waiver, as in this case, the validity of the quitclaim must be upheld. As the Court held in Magsalin v. National Organization of Working Men:50

x x x While quitclaims executed by employees are commonly frowned upon as being contrary to public policy and are ineffective to bar claims for the full measure of their legal rights, there are, however, legitimate waivers that represent a voluntary and reasonable settlement of laborers’ claims which should be so respected by the Court as the law between the parties. Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and binding undertaking. "Dire necessity" is not an acceptable ground for annulling the release, when it is not shown that the employee has been forced to execute it (emphasis supplied).51

Verily, it is neither the function of the law nor its intent to supplant the prerogative of management in running its business, such as, to compel the latter to operate at a continuing loss simply because it has to maintain its workers in employment. Such an act would be tantamount to the taking of property without due process of law.52

CONSIDERING THE FOREGOING, the instant petition is DENIED for lack of merit. The Decision of the Court of Appeals in CA- CA-G.R. SP. No. 64536 is AFFIRMED.

SO ORDERED.

LINTON COMMERCIAL CO., INC. G.R. No. 163147and DESIREE ONG, Petitioners, Present: QUISUMBING, J., Chairperson,

-versus- CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.ALEX A. HELLERA, FRANCISCORACASA, DANTE ESCARLAN, DONATO SASA, RODOLFO OLINAR, Promulgated:DANIEL CUSTODIO, ARTURO POLLO,ROBERT OPELIÑA, B. PILAPIL,

WINIFREG BLANDO, JUANITO October 10, 2007GUILLERMO, DONATO BONETE,ISAGANI YAP, CESAR RAGONON, BENEDICTOILAGAN, REXTE SOLANOY, RODOLFOLIM, ERNESTO ALCANTARA, DANTEDUMAPE, FELIPE CAGOCO, JR., JOSENARCE, NELIO CANTIGA, QUIRINO C.ADA, MANUEL BANZON, JOEL F. ADA,SATPARAM ELMER, ROMEO BALAIS,CLAUDIO S. MORALES, DANILO NORLE,LEONCIO RACASA, NOEL LEONCIORACASA, NOEL ACEDILLA, ELPIDIO E.VERGABINIA, JR., CONRADO CAGOCO,ROY BORAGOY, EDUARDO GULTIA,REYNALDO SANTOS, LINO VALENCIA,ROY DURANO, LEO VALENCIA, ROBERTOBLANDO, JAYOMA A., NOMER ALTAREJOS,RAMON OLINAR III, SATURNINO C. EBAYA,FERNANDO R. REBUCAS, NICANOR L. DECASTRO, EDUARDO GONZALES, ISAGANIGONZALES, THOMAS ANDRAB, JR., MINIETODURANO, ERNESTO VALLENTE, NONITO I.DULA, NESTOR M. BONETE, JOSE SALONOY,ALBERTO LAGMAN, ROLANDO TORRES,ROLANDO TOLDO, ROLINDO CUALQUIERA,ARMANDO LIMA, FELIX D. DUMARE, ALFREDOSELAPIO, MARTIN V. VILLACAMPA, JR., CARLITOPABLE, DANTE ESCARLAN, M. DURANO, RAMONROSO, LORETA RAFAEL, and ELEZAR MELLEJOR, Respondents. x-------------------------------------------------------------------------------------x

D E C I S I O N

TINGA, J.:

This is a petition for review under Rule 45 of the Rules of Civil Procedure seeking the reversal

of the Decision[1] of the Court of Appeals promulgated on 12 December 2003 as well as its

Resolution[2] promulgated on 2 April 2004 denying petitioners’ motion for reconsideration.

This case originated from a labor complaint filed before the National Labor Relations

Commission (NLRC) in which herein respondents contended that petitioner Linton Commercial Company,

Inc. (Linton) had committed illegal reduction of work when it imposed a reduction of work hours thereby

affecting its employees.

http://sc.judiciary.gov.ph/jurisprudence/2007/october2007/163147.htm#_ftn2






Linton is a domestic corporation engaged in the business of importation, wholesale, retail

and fabrication of steel and its by-products.[3] Petitioner Desiree Ong is Linton’s vice president.[4] On 17

December 1997, Linton issued a memorandum[5] addressed to its employees informing them of the

company’s decision to suspend its operations from18 December 1997 to 5 January 1998 due to the

currency crisis that affected its business operations. Linton submitted an establishment termination

report[6] to the Department of Labor and Employment (DOLE) regarding the temporary closure of the

establishment covering the said period. The company’s operation was to resume on 6 January 1998.

On 7 January 1997,[7] Linton issued another memorandum[8] informing them that effective 12

January 1998, it would implement a new compressed workweek of three (3) days on a rotation basis. In

other words, each worker would be working on a rotation basis for three working days only instead for

six days a week. On the same day, Linton submitted an establishment termination report[9] concerning

the rotation of its workers. Linton proceeded with the implementation of the new policy without waiting

for its approval by DOLE.

Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal reduction of

workdays with the Arbitration Branch of the NLRC on 17 July 1998.

On the other hand, the workers pointed out that Linton implemented the reduction of work

hours without observing Article 283 of the Labor Code, which required submission of notice thereof to

DOLE one month prior to the implementation of reduction of personnel, since Linton filed only the

establishment termination report enacting the compressed workweek on the very date of its

implementation.[10]

Petitioners, on the other hand, contended that the devaluation of the peso created a negative

impact in international trade and affected their business because a majority of their raw materials were

imported. They claimed that their business suffered a net loss of P3,569,706.57 primarily due to currency

devaluation and the slump in the market. Consequently, Linton decided to reduce the working days of its

employees to three (3) days on a rotation basis as a cost-cutting measure. Further, petitioners alleged

that the compressed workweek was actually implemented on 12 January 1998 and not on 7 January

1998, and that Article 283 was not applicable to the instant case.[11]

Pending decision of the Labor Arbiter, twenty-one (21) of the workers signed individual

release and quitclaim documents stating that they had voluntarily tendered their resignation as

employees of Linton and that they had been fully paid of all monetary compensation due them.[12]

On 28 January 2000, the Labor Arbiter rendered a Decision[13] finding petitioners guilty of

illegal reduction of work hours and directing them to pay each of the workers their three (3) days/week’s

worth of work compensation from 12 January 1998 to 13 July 1998.

Petitioners appealed to the National Labor Relations Commission (NLRC). In a

Resolution[14] promulgated on 29 June 2001, the NLRC reversed the decision of the Labor Arbiter. The

NLRC held that an employer has the prerogative to control all aspects of employment in its business

organization, including the supervision of workers, work regulation, lay-off of workers, dismissal and

recall of workers. The NLRC took judicial notice of the Asian currency crisis in 1997 and 1998 thus finding

Linton’s decision to implement a compressed workweek as a valid exercise of management prerogative.

Moreover, the NLRC ruled that Article 283 of the Labor Code, which requires an employer to submit a

written notice to DOLE one (1) month prior to the closure or reduction of personnel, is not applicable to

the instant case because no closure was undertaken and no reduction of employees was implemented

by Linton. Lastly, the NLRC took note that there were twenty-one (21) complainants-workers[15] who had

already resigned and executed individual waivers and quitclaims. Consequently, the NRLC considered

them as dropped from the list of complainants. The workers’ motion for reconsideration was denied in a

Resolution[16] dated 24 September 2001.

The workers then filed before the Court of Appeals[17] a petition for certiorari under Rule 65 of

the Rules of Civil Procedure assailing the decision[18] of the NLRC and its resolution[19] that denied their

Motion for Reconsideration. In the petition, the workers claimed that the NLRC erred in finding that the

one (1) month notice requirement under Article 283 of the Labor Code did not apply to the instant case;


















that Linton did not exceed the limits of its business prerogatives; and that Linton was able to establish a

factual basis on record to justify the reduction of work days.

In its Comment,[20] Linton highlighted the fact that the caption, the body as well as the

verification of the petition submitted by complainants-workers indicated solely “Alex Hellera, et al.” as

petitioners. Linton argued that the petition was defective and did not necessarily include the other

workers in the proceedings before the NLRC. Linton also mentioned that 21 out of the 68 complainants-

workers executed individual resignation letters and individual waivers and quitclaims.[21] With these

waivers and quitclaims, Linton raised in issue whether the petition still included the signatories of said

documents. Moreover, Linton pointed out that the caption of the petition did not include the NLRC as

party respondent, which made for another jurisdictional defect. The rest of its arguments were merely a

reiteration of its arguments before the NLRC.

In reversing the NLRC, the Court of Appeals, in its Decision[22] dated 12 December 2003 ruled

that the failure to indicate all the names of petitioners in the caption of the petition was not violative

of the Rules of Court because the records of the case showed that there were sixty-eight (68) original

complainants who filed the complaint before the Arbitration Branch of the NLRC. The appellate court

likewise considered the quitclaims and release documents as “ready documents” which did not change

the fact that the 21 workers were impelled to sign the same. The appellate court gave no credence to

the said quitclaims, considering the economic disadvantage that would be suffered by the employees.

The appellate court also noted that the records did not show that the 21 workers desisted from pursuing

the petition and that the waivers and quitclaims would not bar the 21 complainants from continuing the

action.[23]

On the failure to include the NLRC as party respondent, the appellate court treated the NLRC

as a nominal party which ought to be joined as party to the petition simply because the technical rules

require its presence on record. The inclusion of the NLRC in the body of the petition was deemed by the

appellate court as substantial compliance with the rules.

On the main issues, the Court of Appeals ruled that the employees were constructively

dismissed because the short period of time between the submission of the establishment termination

report informing DOLE of its intention to observe a compressed workweek and the actual

implementation thereat was a manifestation of Linton’s intention to eventually retrench the

employees. It found that Linton had failed to observe the substantive and procedural requirements of a

valid dismissal or retrenchment to avoid or minimize business losses since it had failed to present

adequate, credible and persuasive evidence that it was indeed suffering, or would imminently suffer,

from drastic business losses. Linton’s financial statements for 1997-1998 showed no indication of

financial losses, and the alleged loss of P3,645,422.00 in 1997 was considered insubstantial considering

its total asset of P1,065,948,601.00.Hence, the appellate court considered Linton’s losses as de minimis.

[24]

Lastly, the appellate court found Linton to have failed to adopt a more sensible means of

cutting the costs of its operations in less drastic measures not grossly unfavorable to labor. Hence, Linton

failed to establish enough factual basis to justify the necessity of a reduced workweek.[25]

Petitioners filed a motion for reconsideration[26] which the appellate court denied through a

Resolution[27] dated 2 April 2004.

In filing the instant petition for review, petitioners allege that the Court of Appeals erred

when it considered the petition as having been filed by all sixty (68) workers, in disregard of the fact that

only “Alex Hellera, et al.” was indicated as petitioner in the caption, body and verification of the petition

and twenty-one (21) of the workers executed waivers and quitclaims. Petitioners further argue that the

Court of Appeals erred in annulling the release and quitclaim documents signed by 21 employees

because no such relief was prayed for in the petition. The validity of the release and quitclaim was also

not raised as an issue before the labor arbiter nor the NLRC. Neither was it raised in the very petition

filed before the Court of Appeals. Petitioners conclude that the Court of Appeals, therefore, had

invalidated the waivers and quitclaims motu proprio.









Petitioners also allege that the Court of Appeals erred when it held that the reduction of

workdays is equivalent to constructive dismissal. They posit that there was no reduction of salary but

instead only a reduction of working days from six to three days per week. Petitioners add that the

reduction of workdays, while not expressly covered by any of the provisions of the Labor Code, is

analogous to the situation contemplated in Article 286[28] of the Labor Code because the company

implemented the reduction of workdays to address its financial losses. Lastly, they note that since there

was no retrenchment, the one-month notice requirement under Article 283 of the Labor Code is not

applicable.

First, we resolve the procedural issues of the case. Rule 7, Section 1 of the Rules of Court

states that the names of the parties shall be indicated in the title of the original complaint or

petition. However, the rules itself endorses its liberal construction if it promotes the objective of

securing a just, speedy and inexpensive disposition of the action or proceeding. [29] Pleadings shall be

construed liberally so as to render substantial justice to the parties and to determine speedily and

inexpensively the actual merits of the controversy with the least regard to technicalities.[30]

In Vlason Enterprises Corporation v. Court of Appeals[31] the Court pronounced that, while the

general rule requires the inclusion of the names of all the parties in the title of a complaint, the non-

inclusion of one or some of them is not fatal to the cause of action of a plaintiff, provided there is a

statement in the body of the petition indicating that a defendant was made a party to such action. If

in Vlason the Court found that the absence of defendant’s name in the caption would not cause the

dismissal of the action, more so in this case where only the names of some of petitioners were not

reflected. This is consistent with the general rule that mere failure to include the name of a party in the

title of a complaint is not fatal by itself.[32]

Petitioners likewise challenge the absence of the names of the other workers in the body and

verification of the petition. The workers’ petition shows that the petition stipulated as parties-

petitioners “Alex A. Hellera, et al.” as employees of Linton, meaning that there were more than one

petitioner who were all workers of Linton. The petition also attached the resolution [33] of the NLRC where

the names of the workers clearly appear. As documents attached to a complaint form part thereof,[34] the

petition, therefore has sufficiently indicated that the rest of the workers were parties to the petition.

With respect to the absence of the workers’ signatures in the verification, the verification

requirement is deemed substantially complied with when some of the parties who undoubtedly have

sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the

same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have

been made in good faith or are true and correct, and not merely speculative. [35] The verification in the

instant petition states that Hellera, the affiant, is the president of the union of “which complainants are

all members and officers.”[36] As the matter at hand is a labor dispute between Linton and its employees,

the union president undoubtedly has sufficient knowledge to swear to the truth of the allegations in the

petition. Hellera’s verification sufficiently meets the purpose of the requirements set by the rules.

Moreover, the Court has ruled that the absence of a verification is not jurisdictional, but only

a formal defect.[37] Indeed, the Court has ruled in the past that a pleading required by the Rules of Court

to be verified may be given due course even without a verification if the circumstances warrant the

suspension of the rules in the interest of justice.[38]

We turn to the propriety of the Court of Appeals’ ruling on the invalidity of the waivers and

quitclaims executed by the 21 workers. It must be remembered that the petition filed before the Court

of Appeals was a petition for certiorari under Rule 65 in which, as a rule, only jurisdictional questions

may be raised, including matters of grave abuse of discretion which are equivalent to lack of jurisdiction.

[39] The issue on the validity or invalidity of the waivers and quitclaims was not raised as an issue in the

petition. Neither was it raised in the NLRC. There is no point of reference from which one can determine

whether or not the NLRC committed grave abuse of discretion in its finding on the validity and binding

effect of the waivers and quitclaims since this matter was never raised in issue in the first place.

In addition, petitioners never had the opportunity to support or reinforce the validity of the

waivers and quitclaims because the authenticity and binding effect thereof were never challenged. In the













interest of fair play, justice and due process, the documents should not have been unilaterally evaluated

by the Court of Appeals. Thus, the corresponding modification of its Decision should be ordained.

After resolving the technical aspects of this case, we now proceed to the merits thereof. The

main issue in this labor dispute is whether or not there was an illegal reduction of work when Linton

implemented a compressed workweek by reducing from six to three the number of working days with

the employees working on a rotation basis.

In Philippine Graphic Arts, Inc. v. NLRC,[40] the Court upheld for the validity of the reduction of

working hours, taking into consideration the following: the arrangement was temporary, it was a more

humane solution instead of a retrenchment of personnel, there was notice and consultations with the

workers and supervisors, a consensus were reached on how to deal with deteriorating economic

conditions and it was sufficiently proven that the company was suffering from losses.

The Bureau of Working Conditions of the DOLE, moreover, released a bulletin[41] providing for

in determining when an employer can validly reduce the regular number of working days. The said

bulletin states that a reduction of the number of regular working days is valid where the arrangement is

resorted to by the employer to prevent serious losses due to causes beyond his control, such as when

there is a substantial slump in the demand for his goods or services or when there is lack of raw

materials.

Although the bulletin stands more as a set of directory guidelines than a binding set of

implementing rules, it has one main consideration, consistent with the ruling inPhilippine Graphic Arts

Inc., in determining the validity of reduction of working hours—that the company was suffering from

losses.

Petitioners attempt to justify their action by alleging that the company was suffering from

financial losses owing to the Asian currency crisis. Was petitioners’ claim of financial losses supported by

evidence?

The lower courts did not give credence to the income statement submitted by Linton because

the same was not audited by an independent auditor.[42] The NLRC, on the other hand, took judicial

notice of the Asian currency crisis which resulted in the devaluation of the peso and a slump in market

demand.[43] The Court of Appeals for its part held that Linton failed to present adequate, credible and

persuasive evidence to show that it was in dire straits and indeed suffering, or would imminently suffer,

from drastic business losses. It did not find the reduction of work hours justifiable, considering that the

alleged loss of P3,645,422.00 in 1997 is insubstantial compared to Linton’s total asset

ofP1,065,948,601.76.[44]

A close examination of petitioners’ financial reports for 1997-1998 shows that, while the

company suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of earnings[45] and

operating income.[46] Clearly then, while Linton suffered from losses for that year, there remained

enough earnings to sufficiently sustain its operations. In business, sustained operations in the black is

the ideal but being in the red is a cruel reality. However, a year of financial losses would not warrant the

immolation of the welfare of the employees, which in this case was done through a reduced workweek

that resulted in an unsettling diminution of the periodic pay for a protracted period. Permitting reduction

of work and pay at the slightest indication of losses would be contrary to the State’s policy to afford

protection to labor and provide full employment.[47]

Certainly, management has the prerogative to come up with measures to ensure profitability

or loss minimization. However, such privilege is not absolute. Management prerogative must be

exercised in good faith and with due regard to the rights of labor.[48]

As previously stated, financial losses must be shown before a company can validly opt to

reduce the work hours of its employees. However, to date, no definite guidelines have yet been set to

determine whether the alleged losses are sufficient to justify the reduction of work hours. If the

standards set in determining the justifiability of financial losses under Article 283 ( i.e., retrenchment) or

Article 286 (i.e., suspension of work) of the Labor Code were to be considered, petitioners would end up










failing to meet the standards. On the one hand, Article 286 applies only when there is a bona fide

suspension of the employer’s operation of a business or undertaking for a period not exceeding six (6)

months.[49] Records show that Linton continued its business operations during the effectivity of the

compressed workweek, which spanned more than the maximum period. On the other hand, for

retrenchment to be justified, any claim of actual or potential business losses must satisfy the following

standards: (1) the losses incurred are substantial and notde minimis; (2) the losses are actual or

reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in

preventing the expected losses; and (4) the alleged losses, if already incurred, or the expected imminent

losses sought to be forestalled, are proven by sufficient and convincing evidence.[50] Linton failed to

comply with these standards.

All taken into account, the compressed workweek arrangement was unjustified and illegal.

Thus, petitioners committed illegal reduction of work hours.

In assessing the monetary award in favor of respondents, the Court has taken the following

factors into account:

(1) The compressed workweek arrangement was lifted after six (6) months, or on 13 July 1998.[51] Thus,

Linton resumed its regular operations and discontinued the emergency measure;

(2) The claims of the workers, as reflected in their pleadings, were narrowed to petitioners’ illegal

reduction of their work hours and the non-payment of their compensation for three (3) days a week

from 12 January 1998 to 13 July 1998. They did not assert any other claims;

(3) As found by the NLRC, 21 of the workers are no longer entitled to any monetary award since they had

already executed their respective waivers and quitclaims. We give weight to the finding and exclude the

21 workers as recipients of the award to be granted in this case. Consequently, only the following

workers are entitled to the award, with the amounts respectively due them stated opposite their names:

1. Alex A. Hellera - P16,368.30

2. Francisco Racasa - 16,458.003. Dante Escarlan - 15,912.004. Donato Sasa - 15,580.505. Rodolfo Olinar - 15,912.006. Daniel Custodio - 15,912.007. Arturo Pollo - 16,660.808. B. Pilapil - 16,075.809. Donato Bonete - 15,600.0010. Isagani Yap - 15,678.0011. Cesar Ragonon - 16,068.0012. Benedicto Bagan - 15,775.5013. Rexte Solanoy - 15,678.0014. Felipe Cagoco, Jr. - 15,990.0015. Jose Narce - 16,348.8016. Quirino C. Ada - 15,990.0017. Salfaram Elmer - 16,302.0018. Romeo Balais - 16,302.0019. Claudio S. Morales - 15,947.1020. Elpidio E. Vergabinia - 15,561.0021. Conrado Cagoco - 15,990.0022. Roy Boragoy - 15,892.5023. Reynaldo Santos - 16,200.6024. Lino Valencia - 15,678.0025. Roy Durano - 15,678.0026. Leo Valencia - 15,678.0027. Jayoma A. - 15,561.0028. Ramon Olinar III - 15,678.0029. Saturnino C. Ebaya - 15,919.8030. Nicanor L. de Castro - 16,614.0031. Eduardo Gonzales - 15,678.0032. Isagani Gonzales - 16,469.7033. Thomas Andrab, Jr. - 15,912.0034. Minieto Durano - 16,660.8035. Ernesto Vallente - 15,997.8036. Nestor M. Bonete - 15,705.3037. Jose Salonoy - 16,458.0038. Alberto Lagman - 16,660.8039. Rolando Torres - 15,678.0040. Rolindo Cualquiera - 16,068.0041. Armando Lima - 16,426.8042. Alfredo Selapio - 16,060.2043. Martin V. Villacampa - 15,939.3044. Carlito Pable - 16,263.0045. Dante Escarlan - 15,912.0046. M. Durano - 16,614.0047. Ramon Roso - 16,302.00[52]

(4) The Labor Arbiter’s decision in favor of respondents was reversed by the NLRC. Considering that there

is no provision for appeal from the decision of the NLRC,[53]petitioners should not be deemed at fault in

not paying the award as ordered by the Labor Arbiter. Petitioners’ liability only gained a measure of

certainty only when the Court of Appeals reversed the NLRC decision. In the interest of justice, the 6%






legal interest on the award should commence only from the date of promulgation of the Court of

Appeals’ Decision on 12 December 2003.

WHEREFORE, the Petition is GRANTED IN PART. The decision of the Court of Appeals reinstating the

decision of the Labor Arbiter is AFFIRMED with MODIFICATION to the effect that the 21 workers who

executed waivers and quitclaims are no longer entitled to back payments. Petitioners are ORDERED TO

PAY respondents, except the aforementioned 21 workers, the monetary award as computed,[54] pursuant

to the decision of the Labor Arbiter[55] with interest at the rate of 6% per annum from 12 December 2003,

the date of promulgation of the Court of Appeals’ decision, until the finality of this decision, and

thereafter at the rate of 12% per annum until full payment.

SO ORDERED.

G.R. No. 91298 June 22, 1990

CORAZON PERIQUET, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and THE PHIL. NATIONAL CONSTRUCTION CORPORATION (Formerly Construction Development Corp. of the Phils.), respondents.

Tabaquero, Albano & Associates for petitioner.

The Government Corporate Counsel for private respondent.

CRUZ, J.:

It is said that a woman has the privilege of changing her mind but this is usually allowed only in affairs of the heart where the rules are permissibly inconstant. In the case before us, Corazon Periquet, the herein petitioner, exercised this privilege in connection with her work, where the rules are not as fickle.

The petitioner was dismissed as toll collector by the Construction Development Corporation of the Philippines, private respondent herein, for willful breach of trust and unauthorized possession of

accountable toll tickets allegedly found in her purse during a surprise inspection. Claiming she had been "framed," she filed a complaint for illegal dismissal and was sustained by the labor arbiter, who ordered her reinstatement within ten days "without loss of seniority rights and other privileges and with fun back wages to be computed from the date of her actual dismissal up to date of her actual reinstatement." 1 On appeal, this order was affirmed in toto by public respondent NLRC on August 29, 1980. 2

On March 11, 1989, almost nine years later, the petitioner filed a motion for the issuance of a writ of execution of the decision. The motion was granted by the executive labor arbiter in an order dated June 26, 1989, which required payment to the petitioner of the sum of P205,207.42 "by way of implementing the balance of the judgment amount" due from the private respondent. 3 Pursuant thereto, the said amount was garnished by the NLRC sheriff on July 12, 1989. 4 On September 11, 1989, however, the NLRC sustained the appeal of the CDCP and set aside the order dated June 20, 1989, the corresponding writ of execution of June 26, 1989, and the notice of garnishment. 5

In its decision, the public respondent held that the motion for execution was time-barred, having been filed beyond the five-year period prescribed by both the Rules of Court and the Labor Code. It also rejected the petitioner's claim that she had not been reinstated on time and ruled as valid the two quitclaims she had signed waiving her right to reinstatement and acknowledging settlement in full of her back wages and other benefits. The petitioner contends that this decision is tainted with grave abuse of discretion and asks for its reversal. We shall affirm instead.

Sec. 6, Rule 39 of the Revised Rules of Court, provides:

SEC. 6. Execution by motion or by independent action. — A judgment may be executed on motion within five (5) years from the date of its entry or from the date it becomes final and executory. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action.

A similar provision is found in Art. 224 of the Labor Code, as amended by RA 6715, viz.

ART. 224. Execution of decision, orders, awards. — (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter or Med-Arbiter, or the Voluntary Arbitrator may, motu propio, or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce a final decision, order or award. ...

The petitioner argues that the above rules are not absolute and cites the exception snowed in Lancita v. Magbanua, 6 where the Court held:

Where judgments are for money only and wholly unpaid, and execution has been previously withheld in the interest of the judgment debtor, which is in financial difficulties, the court has no discretion to deny motions for leave to issue execution more than five years after the judgments are entered. (Application of Molnar, Belinsky, et al. v. Long Is. Amusement Corp., I N.Y.S, 2d 866)

In computing the time limited for suing out of an execution, although there is authority to the contrary, the general rule is that there should not be included the time when execution is stayed, either by agreement of the parties for a definite time, by injunction, by the taking of an appeal or writ of error so as to operate as a



supersedeas, by the death of a party, or otherwise. Any interruption or delay occasioned by the debtor will extend the time within which the writ may be issued without scire facias.

xxx xxx xxx

There has been no indication that respondents herein had ever slept on their rights to have the judgment executed by mere motions, within the reglementary period. The statute of limitation has not been devised against those who wish to act but cannot do so, for causes beyond their central.

Periquet insists it was the private respondent that delayed and prevented the execution of the judgment in her favor, but that is not the way we see it. The record shows it was she who dilly-dallied.

The original decision called for her reinstatement within ten days from receipt thereof following its affirmance by the NLRC on August 29, 1980, but there is no evidence that she demanded her reinstatement or that she complained when her demand was rejected. What appears is that she entered into a compromise agreement with CDCP where she waived her right to reinstatement and received from the CDCP the sum of P14,000.00 representing her back wages from the date of her dismissal to the date of the agreement. 7

Dismissing the compromise agreement, the petitioner now claims she was actually reinstated only on March 16, 1987, and so should be granted back pay for the period beginning November 28, 1978, date of her dismissal, until the date of her reinstatement. She conveniently omits to mention several significant developments that transpired during and after this period that seriously cast doubt on her candor and bona fides.

After accepting the sum of P14,000.00 from the private respondent and waiving her right to reinstatement in the compromise agreement, the petitioner secured employment as kitchen dispatcher at the Tito Rey Restaurant, where she worked from October 1982 to March 1987. According to the certification issued by that business, 8 she received a monthly compensation of P1,904.00, which was higher than her salary in the CDCP.

For reasons not disclosed by the record, she applied for re-employment with the CDCP and was on March 16,1987, given the position of xerox machine operator with a basic salary of P1,030.00 plus P461.33 in allowances, for a total of P1,491.33 monthly. 9

On June 27, 1988; she wrote the new management of the CDCP and asked that the rights granted her by the decision dated August 29, 1980, be recognized because the waiver she had signed was invalid. 10

On September 19, 1988, the Corporate Legal Counsel of the private respondent (now Philippine National Construction Corporation) recommended the payment to the petitioner of the sum of P9,544.00, representing the balance of her back pay for three years at P654. 00 per month (minus the P14,000.00 earlier paid). 11

On November 10, 1988, the petitioner accepted this additional amount and signed another Quitclaim and Release reading as follows:

KNOW ALL MEN BY THESE PRESENTS:

THAT, I CORAZON PERIQUET, of legal age, married and resident of No. 87 Annapolis St., Quezon City, hereby acknowledged receipt of the sum of PESOS: NINE THOUSAND FIVE HUNDRED FORTY FOUR PESOS ONLY (P9,544.00) Philippine currency, representing the unpaid balance of the back wages due me under the judgment award in NLRC Case No. AB-2-864-79 entitled "Corazon Periquet vs. PNCC- TOLLWAYS" and I further manifest that this payment is in full satisfaction of all my claims/demands in the aforesaid case. Likewise, I hereby manifest that I had voluntarily waived reinstatement to my former position as TOLL TELLER and in lieu thereof, I sought and am satisfied with my present position as XEROX MACHINE OPERATOR in the Central Office.

Finally, I hereby certify that delay in my reinstatement, after finality of the Decision dated 10 May 1979 was due to my own fault and that PNCC is not liable thereto.

I hereby RELEASE AND DISCHARGE the said corporation and its officers from money and all claims by way of unpaid wages, separation pay, differential pay, company, statutory and other benefits or otherwise as may be due me in connection with the above-entitled case. I hereby state further that I have no more claims or right of action of whatever nature, whether past, present, future or contingent against said corporation and its officers, relative to NLRC Case No. AB-2-864-79.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of November 1988 at Mandaluyong, Metro Manila. (Emphasis supplied.) 12

The petitioner was apparently satisfied with the settlement, for in the memorandum she sent the PNCC Corporate Legal Counsel on November 24, 1988, 13 she said in part:

Sir, this is indeed my chance to express my gratitude to you and all others who have helped me and my family enjoy the fruits of my years of stay with PNCC by way of granting an additional amount of P9,544.00 among others ...

As per your recommendation contained therein in said memo, I am now occupying the position of xerox machine operator and is (sic) presently receiving a monthly salary of P2,014.00.

Reacting to her inquiry about her entitlement to longevity pay, yearly company increases and other statutory benefits, the private respondent adjusted her monthly salary from P2,014.00 to P3,588.00 monthly.

Then the lull. Then the bombshell.

On March 11, 1989, she filed the motion for execution that is now the subject of this petition.

It is difficult to understand the attitude of the petitioner, who has blown hot and cold, as if she does not know her own mind. First she signed a waiver and then she rejected it; then she signed another waiver which she also rejected, again on the ground that she had been deceived. In her first waiver, she acknowledged full settlement of the judgment in her favor, and then in the second waiver, after accepting additional payment, she again acknowledged fun settlement of the same judgment. But now she is singing a different tune.

In her petition she is now disowning both acknowledgments and claiming that the earlier payments both of which she had accepted as sufficient, are insufficient. They were valid before but they are not valid now. She also claimed she was harassed and cheated by the past management of the CDCP and sought

the help of the new management of the PNCC under its "dynamic leadership." But now she is denouncing the new management-for also tricking her into signing the second quitclaim.

Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. As in this case.

The question may be asked: Why did the petitioner sign the compromise agreement of September 16, 1980, and waive all her rights under the judgment in consideration of the cash settlement she received? It must be remembered that on that date the decision could still have been elevated on certiorari before this Court and there was still the possibility of its reversal. The petitioner obviously decided that a bird in hand was worth two on the wing and so opted for the compromise agreement. The amount she was then waiving, it is worth noting, had not yet come up to the exorbitant sum of P205,207.42 that she was later to demand after the lapse of eight years.

The back pay due the petitioner need not detain us. We have held in countless cases that this should be limited to three years from the date of the illegal dismissal, during which period (but not beyond) the dismissed employee is deemed unemployed without the necessity of proof. 14 Hence, the petitioner's contention that she should be paid from 1978 to 1987 must be rejected, and even without regard to the fact (that would otherwise have been counted against her) that she was actually employed during most of that period.

Finally, the petitioner's invocation of Article 223 of the Labor Code to question the failure of the private respondent to file a supersedeas bond is not well-taken. As the Solicitor General correctly points out, the bond is required only when there is an appeal from the decision with a monetary award, not an order enforcing the decision, as in the case at bar.

As officers of the court, counsel are under obligation to advise their clients against making untenable and inconsistent claims like the ones raised in this petition that have only needlessly taken up the valuable time of this Court, the Solicitor General, the Government Corporate Counsel, and the respondents. Lawyers are not merely hired employees who must unquestioningly do the bidding of the client, however unreasonable this may be when tested by their own expert appreciation of the pertinent facts and the applicable law and jurisprudence. Counsel must counsel.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

[G.R. NO. 156761 : October 17, 2006]

LADY LYDIA CORNISTA-DOMINGO, SYLVIA SALANGA, LIWAYWAY SILAPAN, CYNTHIA ALICANTE, ALBERTO ANCHETA, ANA MARIA SANCHEZ, ELENA TUMBAGA, PEDRO JOSUÉ, TERESITA VOCAL, ROSIE ANCHETA, LILIA PINUELA-JULIAN, IMELDA ERESE, NORMA YABUT, LOURDES PINEDA, CORAZON CARANDANG, ERLINDA GUTIERREZ, MARIO MILAN, FLAVIANO MEJIA, JR., ESTELA AYSON, ENRIQUE

GARAYGAY, ROSE DAILEG, JOSE CALDO, RITA BATAC, MARIA CORAZON GALAN, MA. ELISA GAYO, DEBBIE RODRIGUEZ, CAROLINA CABEBE, EDGARDO BOLIVAR, FE ILAGAN, TERESITA MONDEJAR, ELVIRA ANGELES, PEDRO EMPIG, LUZ MARQUEZ, TERESITA DORIA, ABELARDO BONTOC, MADELON REYES-YEE and FILOMENO CINCO, JR., Petitioners, v.NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER EDUARDO J. CARPIO, PHILIPPINE VETERANS BANK and/or SUNDAY LAVIN, PHILIPPINE VETERANS BANK EMPLOYEES UNION and/or FELIZARDO SARAPAT, AMELITA DURIAN, RICARDO RICAFRENTE, LEON MAGALONA, FERMIN CASTILLO, NORMINIO MOJICA and OLYMPIO DE GUZMAN, Respondents.

D E C I S I O N

GARCIA, J.:

By this Petition for Review on Certiorari, 1 petitioners seek the review and reversal of the consolidated Decision2dated December 21, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 51218, CA-G.R. SP No. 51219 and CA-G.R. SP No. 51220 declaring as null and void the September 14, 1993 decision and the November 22, 1993 resolution of the National Labor Relations Commission (NLRC) and reinstating the decision dated March 31, 1993 of Labor Arbiter Eduardo J. Carpio. Likewise, assailed is the CA Resolution of January 8, 2003, denying the petitioners' motion for reconsideration.

The ultimate facts material to the resolution of the case are as follows:

On April 10, 1983, by virtue of Resolution No. 334 of the Central Bank's Monetary Board, the Philippine Veterans Bank (Bank, hereafter) was placed under receivership.

In consequence, the Bank adopted a retrenchment and reorganization program which was challenged before this Court by the Philippine Veterans Bank Employees Union (Union, hereafter) on the ground that the program allegedly violated the security of tenure of the Bank's employees, in G.R. No. 67125 entitled Philippine Veterans Bank Employees Union-NUBE v. Philippine Veterans Bank.

While G.R. No. 67125 was pending, the Monetary Board issued Resolution No. 612, dated June 7, 1985, ordering the liquidation of the Bank. The Monetary Board then appointed a liquidator who, pursuant to the authority vested by the same Board, terminated the employment of all the employees of the Bank effective June 15, 1985. Thereafter, the liquidator commenced payment of separation pay and other benefits to the terminated employees.

Although a number of the Bank employees accepted their separation pay and other benefits and executed quitclaims and releases therefor in favor of the Bank, others chose to question their termination. Thus, on September 25, 1985, the Union filed a supplemental petition for prohibition with preliminary injunction in G.R. No. 67125 opposing Monetary Board Resolution No. 612.

On August 24, 1990, the Court promulgated a consolidated3 en banc Decision4 in G.R. No. 67125 upholding the authority of the Monetary Board to place the respondent Bank under liquidation as well as the legality of the termination of all the Bank's employees, including the members of the Union. The

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Court also rejected the dismissed employees' claim for back wages as it held that they were not illegally dismissed but lawfully separated as a result of the Bank's liquidation upon order of the Monetary Board.

On January 2, 1992, Congress enacted Republic Act (R.A.) No. 7169,5 authorizing the Central Bank to reopen the Bank.

To facilitate the implementation of R.A. No. 7169, a Rehabilitation Committee was created by the Monetary Board. The committee thus created was given the power to select and to organize an initial manning force headed by a management team to be staffed by a trained workforce. Hiring preference was given the veterans and their dependents, other qualifications being equal.6

At this juncture, several employees of the Bank initiated a series of cases claiming that the enactment of R.A. No. 7169 nullified Monetary Board Resolution No. 612 placing respondent Bank under liquidation and, in effect, also nullified the liquidator's termination of the Bank's employees.

On January 20, 1992, the Union filed a petition with the Secretary of Labor and Employment charging the Bank with unfair labor practices and praying that the Rehabilitation Committee be directed to cease and desist from screening and hiring new employees and to immediately reinstate the Bank's former employees. The petition, docketed asNLRC NCR No. 00-02426-92, also sought payment of the accrued collective bargaining agreement benefits and back wages of the employees from the time they were terminated from employment in 1985 up to the time of their actual reinstatement. Several other petitions seeking essentially the same relief were consolidated with NLRC NCR No. 00-02426-92.

In the meantime, on August 3, 1992, the respondent Bank resumed operations.

On March 31, 1993, Labor Arbiter Eduardo J. Carpio rendered a decision7 dismissing NLRC NCR No. 00-02426-92 and all cases consolidated therewith for lack of merit. The dispositive portion of said decision reads:

Wherefore, premises considered, the claim of the Union for reinstatement of the individual complainants it represents as well as the claims for payment of backwages, other benefits and damages are hereby, as they should be, dismissed for lack of merit.

The charge for unfair labor practice filed by the Union against the respondent Bank is likewise dismissed for lack of factual and legal basis.

SO ORDERED.

In time, the Union appealed the Labor Arbiter's decision to the NLRC proper.

On September 14, 1993, the NLRC rendered a Decision8 reversing and setting aside that of the Labor Arbiter. Additionally, the NLRC directed the immediate reinstatement of all Union members subject to the operational requirements of the Bank which it likewise ordered to cease and desist from further hiring new employees. More specifically, the fallo of the NLRC decision reads:

ACCORDINGLY, the decision of the Labor Arbiter is hereby SET ASIDE and a new one entered, finding the claim for reinstatement of the appellant to be legal and proper. Accordingly, Appellee bank therefore is hereby ordered to immediately reinstate all members of the appellant union inclusive of those who have executed their quitclaims and release and all the rest of the PVBEU members, who will signify their intention to be reinstated from the date of this Decision. In the meanwhile, however, that the bank has

not fully reopened and activated all its operational departments, offices and branches, the employees' reinstatement shall be conditioned to actual personnel requirement of the department branch office to be reopened, for which reason, preference shall be given to employees formerly occupying the position being reinstated or reactivated or at the prerogative and discretion of management, to any position in the office provided the latter is of equivalent rank and at least has the same rate of pay.

For this purpose, appellee is hereby ordered to temporarily cease and desist from further hiring new employees which might affect the full compliance to this Decision. The claim for backwages and other CBA benefits are hereby denied for lack merit.

The claim for unfair labor practice is also hereby denied for lack of merit.

SO ORDERED.

On October 1, 1993, the Bank sought a reconsideration of the said decision. Six days later, or on October 7, 1993, the Union also moved for its partial reconsideration. Both motions, however, were denied by the NLRC in its resolution of November 22, 1993.

Therefrom, the Bank and the Union interposed separate petitions to this Court.

The Bank, in its petition, docketed as G.R. No. 113423,9 sought to nullify the NLRC decision of September 14, 1993, reinstating the members of the Union, and its Resolution of November 22, 1993, denying the Bank's motion for reconsideration. While in its petition, docketed as G.R. No. 115421,10 the Union sought a modification of the same decision so as to include the award of backwages.

On January 26, 1996, while G.R. NOS. 113423 and 115421 were pending before the Court, the Union, through its duly authorized officers, and the Bank entered into a Compromise Agreement11 for the amicable settlement of all other cases and claims then pending with the NLRC and/or other tribunals arising from the employment of the individual complainants with the Bank.

A substantial majority of the members of the Union ratified the compromise agreement.

On February 16, 1996, Labor Arbiter Eduardo J. Carpio approved the compromise agreement and issued an Order12which reads:

WHEREFORE, finding the terms and conditions set forth in the Compromise Agreement to be not contrary to law, morals and public policy, the same is hereby approved and considered as in complete and full satisfaction of the Decision in the above-entitled case dated September 14, 1993.

The parties are hereby enjoined to comply strictly and faithfully with the terms and conditions of the Compromise Agreement.

SO ORDERED.

A number of the employees, in separate appeals to the NLRC, contested the foregoing Order of the Labor Arbiter. They argued that the compromise agreement is contrary to law and jurisprudence.

On February 29, 1996, the Bank and the Union filed before the Court their Joint Motion to Dismiss Petition in G.R. Cases No. 113423 and 115421.









In a Resolution dated June 17, 1996, the Court denied said Joint Motion. In the same resolution, the Court gave due course to an Urgent Motion for Leave to Intervene and to Oppose Motion to Dismiss Petition filed by the bank employees led by a certain Nestor Garcia and the Urgent Motion With Leave of Court for Individual Union Members Petitioners to Intervene and to Participate in Their Individual Capacities And To Oppose Joint Motion to Dismiss Petition filed by the herein petitioners Lady Lydia Domingo, et al.

On October 2, 1996, the NLRC decided the aforementioned separate appeals from the Labor Arbiter's Order of February 16, 1996 approving the compromise agreement. The NLRC ruled that those who received and acknowledged receipt of the first payment, as agreed upon in the questioned Compromise Agreement, and who executed the corresponding Quitclaim, Waiver and Release were bound by the same Compromise Agreement. The decision dispositively reads:

WHEREFORE, in the interest of substantial justice and fair play, the order appealed from is hereby partially vacated and Set Aside in that:

a) For those union members who received and acknowledged receipt of the first payment as agreed upon in the Compromise Agreement dated January 26, 1996 and who executed the corresponding Quitclaim, Waiver and Release will be bound by the said Compromise Agreement which was made the basis of the Order dated February 16, 1996 appealed from and they shall continue to receive the money due them on the second and third payments due on December 15, 1996 and December 15, 1997, respectively.

b) For those union members who signified their opposition and those who are similarly situated who did not receive and acknowledge receipt of the money, let the case be remanded to the Arbitration Branch of origin for further proceedings. The Labor Arbiter so designated to hear is hereby ordered to proceed with dispatch so as not to prejudice the parties as the disposition hereof has been duly delayed.

SO ORDERED.

Separate petitions were then filed with the Court by the Bank, the Union and the petitioners. The Bank assailed the reinstatement of union members while the Union questioned the lack of award for backwages. For their part, the petitioners questioned the validity of the compromise agreement.

On December 7, 1998, the Court issued a Resolution referring the three aforesaid petitions to the CA for appropriate action and disposition, pursuant to St. Martin Funeral Homes v. NLRC.13 In the CA, the Bank's petition, PVB v. NLRC, et al., was docketed as CA-G.R. SP No. 51218, that of the Union, PVBEU-NUBE v. NLRC, et al., was docketed as CA-G.R. SP No. 51219, and that of herein petitioners' Lady Lydia Cornista Domingo, et al. v. NLRC, et al., was docketed as CA-G.R. SP No. 51220. The three (3) petitions were thereafter consolidated.

On December 21, 2001, the CA rendered the herein challenged consolidated decision declaring that the NLRC gravely abused its discretion in ordering the reinstatement of the union members and accordingly declared null and void its September 14, 1993 decision and the November 22, 1993 resolution, and instead reiterated the March 31, 1993 decision of the Labor Arbiter, to wit:

PREMISES CONSIDERED, the assailed NLRC decision dated September 14, 1993 as well as its Resolution dated November 22, 1993 (CA-G.R. SP No. 51218) are both declared NULL and VOID and SET ASIDE. The Decision dated March 31, 1993 of the Labor Arbiter Eduardo J. Carpio is hereby ordered REINSTATED.

Accordingly, the other two (2) petitions, CA-G.R. SP No. 51219 and CA-G.R. SP No. 51220 are hereby DISMISSED for lack of merit.

SO ORDERED.

Partly says the CA in its decision:

1. The Supreme Court said in G.R. No. 67125 (189 SCRA 14) that the PVB employees were not "illegally dismissed but lawfully separated." This is a pronouncement, as categorical as can be, that the employment relationship between the Bank and the separated employees had definitely ceased to exist as of that time;

xxx xxx xxxx

4. It is a well-settled doctrine that reinstatement is proper only in cases of illegal dismissal. The pronouncement of the Supreme Court that the PVB employees were "not illegally dismissed" forecloses any right of reinstatement under any circumstance.

While the PVB employees concerned should be given priority in hiring, they cannot demand it as a matter of right.

x x x

Evidently, Domingo, et al. ratified the Compromise Agreement and even voluntarily received the first payment under that agreement, executing the corresponding Quitclaim, Waiver and Release in the process. Having done that, they are deemed bound by the Compromise Agreement under the previously discussed principle of res judicata and/or estoppel.

x x x

Petitioners are now before the Court via the present recourse essentially arguing that the CA committed reversible error in foreclosing their right to be reinstated to their former employment with the Bank upon its rehabilitation and in upholding the validity of the Compromise Agreement entered into by the Bank and the Union.

Petitioners argue that the passage of R.A. No. 7169,14 which reopened and rehabilitated the Bank, gave them the right to be reinstated and entitled them to the payment of back wages and other benefits. They call the Court's attention to Congress Resolution No. 1104 expressing the sentiments of some congressmen to give preference to veterans and their dependents in the employment with the Bank. This resolution, according to petitioners, strengthens their claim for reinstatement.

We are not persuaded.

As we see it, upon implementation of Monetary Board Resolution No. 612 and prior to the passage of R.A. No. 7169, the Bank ceased to exist. Its subsequent rehabilitation was not an ordinary rehabilitation. R.A. No. 7169 had to be passed as a legislative fiat to breathe life into the Bank. While it is true that the Bank used its old name, a new law had to be enacted to restructure its outstanding liabilities. As it is, the Bank's present state of finances, the enormous cost of backwages and other benefits that have to be



paid its employees seeking to be reinstated would surely put an end to the economic viability of the Bank.

The enactment of R.A. No. 7169 did not nullify Monetary Board Resolution No. 612 which earlier placed the Bank under liquidation and caused the termination of employment of the petitioners. The Bank's subsequent rehabilitation did not, by any test of reason, "revive" what was already a dead relationship between the petitioners and the Bank. Neither did such rehabilitation affect the Court's pronouncement in Philippine Veterans Bank Employees Union-NUBE v. Philippine Veterans Bank15 that the actions of the Monetary Board and its duly appointed liquidator were valid and that the former employees' claim for back wages must be rejected as they were lawfully separated. Reinstatement is a relief accorded only to an employee who was illegally dismissed.16

To reiterate, the forcible closure of the Bank by operation of law permanently severed the employer-employee relationship between it and its employees when it ceased operations from April 10, 1983 to August 3, 1992. Thus, the claim for reinstatement and payment of back wages and other benefits, having no leg to stand on, must necessarily fall.

Whilst House Resolution No. 1104 expressed sentiments of some congressmen that "preferential right to employment be given to veterans and their dependents" under Section 7(b) of R.A. No. 7169, without more, such sentiments did not operate as a compulsion to the newly opened Bank to accept an employee earlier separated from work as a result of its closure. If at all, such sentiments only provide that all things being equal, preference shall be given to veterans and their dependents in the hiring of new employees. While the employees concerned should be given priority in hiring, they cannot demand it as a matter of right.

Verily, the clear wordings of Section 7 of R.A. No. 7169 gave the rehabilitation committee created thereunder a free hand in the selection and appointment of the Bank's new employees. We quote Section 7 of the law:

Sec. 7. Rehabilitation Committee. - To facilitate the implementation of the provisions this Act, there is hereby created a rehabilitation committee which shall have a term of three (3) months from the date of the approval of this Act composed of the following: the Executive Secretary, as Chairman, and the Administrator of the Philippine Veterans Affairs Office, the President of the Veterans Federation of the Philippines, a representative from the executive board of the Veterans Federation of the Philippines and a representative from the Board of Trustees of the Veterans of World War II or their respective representatives, as members.

Specifically, the committee shall:

(a) Prepare, finalize and submit a viable rehabilitation plan to the Monetary Board of the Central Bank;

(b) Select and organize an initial manning force headed by a management team to be composed of competent, experienced and professional managers who must possess all qualifications and none of the disqualifications provided under Central Bank rules and regulations. The management team shall be staffed by a trained workforce: Provided, That preference shall be given to the veterans and their dependents, other qualifications being equal;

The mandate given the Bank's rehabilitation committee to "select and organize an initial manning force" shows that the lawmakers recognize the fact that the new bank is entirely without any working force. Congress, therefore, gave the Bank full authority and discretion to recruit and form a new staff. Had Congress intended that separated employees be rehired and given priority in the hiring of new

employees, it would have clearly stated this in R.A. No. 7169. The fact that it did not only shows its clear legislative intent to give the new bank a free hand in the selection and hiring of its new staff.

We have to acknowledge the sad reality that giving in to petitioners' demand of wholesale reinstatement with back wages, bonuses, holiday pay, vacation and sick leave benefits would be a fatal blow to the very intention of R.A. No. 7169 to rehabilitate the Bank. The payment of such substantial amounts would definitely further dissipate the remaining assets of the Bank and cripple its finances even as, at this point, the Bank is barely making a profit under the weight of its present liabilities, and ultimately make impossible its desired rehabilitation. This clearly contravenes the intent and spirit of R.A. No. 7169.

Petitioners fault the CA in upholding the validity of the Compromise Agreement. They claim that said agreement is not binding on employees who did not ratify it and even to those who were allegedly tricked and/or deceived by the Union into accepting the first payment under the same agreement.

The argument is utterly baseless. A labor union's function is to represent its members. It can file an action or enter into compromise agreements on behalf of its members. Here, majority of the Bank's employees authorized the Union to enter into a compromise agreement with the Bank on their behalves. Union members were bound by the resulting compromise agreement when they affixed their signatures thereon, thereby giving their individual assent thereto, and when they accepted the benefits due them under that agreement. As it is, the Compromise Agreement in question detailed the amounts to be received by each employee. Petitioners and other employees of the Bank knew exactly what they were ratifying when they affixed their signatures in the said compromise agreement.

Further, respondent Union is a closed shop union. For this reason, it was the only one with legal authority to negotiate, transact, and enter into any agreement with the Bank. The Compromise Agreement was ratified by 282 Union members representing a majority of its entire 529 membership. The ratification of the Compromise Agreement by the majority of the Union members necessarily binds the minority.

The general rule that the Labor Arbiter must be present during the signing of the compromise agreement is not immune to certain exceptions. Here, the submission of the Compromise Agreement on joint motion of the parties for approval by the Labor Arbiter cured whatever defect the signing of the agreement in the absence of the Labor Arbiter would have caused. So it is that in Santiago v. De Guzman,17 the Court ruled:

A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before whom the case is pending shall be approved by him, if after confronting the parties, particularly the complainants, he is satisfied that they understand the terms and conditions of "the settlement and that it was entered into freely and voluntarily by them.

It is incumbent upon the Labor Arbiter not only to persuade the parties to settle amicably, but equally to ensure the compromise agreement is a fair one and that the same was forged freely, voluntarily with full understanding of the terms and conditions embodies therein as well as the consequences thereof."

It is likewise noteworthy that as of March 31, 2004, thirty (30) of the herein thirty-seven (37) petitioners already received payment under the same Compromise Agreement. The acceptance by said petitioners of the benefits bars them from repudiating the agreement. They cannot be allowed to adopt an inconsistent position at the expense of the Bank. Petitioners cannot belatedly reject or repudiate their acts of accepting the monetary consideration under the compromise agreement, to the prejudice of the Bank.18 We, thus, quote with approval the following observation of the CA in its challenged Decision of December 21, 2001:





As regards the third petition for certiorari filed by Lady Lydia Cornista Domingo, et. al. (CA-G.R. SP No. 51220), the position taken by the petitioners is that NLRC committed grave abuse of discretion by: a) ordering petitioners who received the first payment under the Compromise Agreement to be bound by it, and b) resolving to remand the case to the Labor Arbiter for further proceedings insofar as those who did not receive payment are concerned.

Petitioners Domingo et. al. allege that "(a)s found out by the respondent NLRC, the Compromise Agreement was not entered into in the presence of the labor Arbiter and it (NLRC) faulted the latter in not calling the parties especially the complainants, to a conference and satisfy himself that they (complainants) understand the terms and conditions of the settlement; and that the agreement was entered into freely and voluntarily" (Rollo of SP No. 51218-20, p. 886) as called for under Section 2, Rule V of the New Rules of Procedure of the NLRC.

Further, petitioners contend that "(h)ad the respondents NLRC and Labor Arbiter Carpio followed the rules, they would have found out that those who received the first payment were only tricked and deceived in(to) receiving the payment;" that "had the respondents Labor Arbiter and NLRC been more circumspect in their solemn duties, they should have required the respondent union officers to present a special power of attorney as required under Article 1878(3) of the Civil Code." (Ibid., pp. 886-887).

We are not convinced.

Evidently, Domingo, et. al. ratified the Compromise Agreement and even voluntarily received the first payment under that agreement, executing the corresponding Quitclaim, Waiver and Release in the process. Having done that, they are deemed bound by the Compromise Agreement under the previously discussed principle of res judicata and/or estoppel.

We find that the subsequent decision of petitioners Domingo, et. al. to repudiate the Compromise Agreement was merely an afterthought, whatever would be the reason for their subsequent change of mind. Since they had entered into a binding contract on their own volition and received benefits therefrom, they are therefore estopped from questioning the validity of said contract later on. Parenthetically, it is interesting to note that while the petitioners try to impugn the Compromise Agreement that they themselves entered into, they have not made any offer or effort to return the money they received as first payment under said agreement.

The other allegation of the petitioners that "those who received the first payment were only tricked and deceived in(to) receiving the payment" deserves scant consideration. Said petitioners are not only ordinary laborers but mature, educated and intelligent people with college degrees, and considering the size of their group, it is unbelievable that they could have been easily duped into doing something against their will and self-interest. Absent a showing that they were indeed victims of trickery and deception, outside of their own self-serving affidavits, the petitioners' allegation does not hold water.

Here, the petitioners and other employees legally separated were in fact given termination or separation pay despite the staggering loss sustained by the Bank. They were given a very good bargain in the compromise agreement. They, therefore, have no reason to complain. Without the subject compromise agreement, they would not have received any separation pay in light of our ruling in State Investment House, Inc. v. CA,19 and North Davao Mining Corporation v. NLRC,20 where we held that in cases of serious losses or financial reverses, the Labor Code does not impose any obligation upon the employer to pay separation benefits, for obvious reasons.

Records reveal that when the Bank offered termination or separation pay to its remaining employees by way of a compromise agreement, a great majority of them accepted the amount as justifiable settlement

of their claims.21Like these quitclaims and releases, there are voluntary agreements which represent reasonable settlements and are considered binding on the parties.22 Petitioners, therefore, cannot renege on the compromise agreement they entered into after accepting benefits earlier simply because they may have felt that they committed a mistake in accepting their termination/separation pay. As no proof was presented to show that the compromise agreement in dispute was entered into through fraud, misrepresentation or coercion, the same must be recognized as valid and binding upon all the 529 employees of the Bank. In fine, the petitioners and the other employees are estopped from questioning the validity of the Compromise Agreement.

In law, a compromise agreement, once approved, has the effect of res judicata between the parties and should not be disturbed except for vices of consent, forgery, fraud, misrepresentation and coercion,23 none of which exists in this case. The Compromise Agreement between the Union and the Bank binds the minority Union members.

All told, the Court finds and so holds that the CA committed no reversible error in rendering its challenged decision of December 21, 2001 and Resolution of January 8, 2003.

IN VIEW WHEREOF, the instant petition is DENIED.

No pronouncement as to costs.

SO ORDERED.

[G.R. No. 106518. March 11, 1999]

ABS – CBN SUPERVISORS EMPLOYEE UNION MEMBERS, petitioner, vs. ABS – CBN BROADCASTING CORP., HERBERT RIVERA, ALBERTO BERBON, CINDY MUNOZ, CELSO JAMBALOS, SALVADOR DE VERA, ARNULFO ALCAZAR, JAKE MADERAZO, GON CARPIO, OSCAR LANDRITO, FRED GARCIA, CESAR LOPEZ and RUBEN BARRAMEDA, respondents.

D E C I S I O N

PURISIMA, J.:

At bar is a special civil action for Certiorari[1] seeking the reversal of the Order[2] dated July 31, 1992 of public respondent Department of Labor and Employment Undersecretary Bienvenido E. Laguesma[3] in Case No. NCR – OD – M – 90 – 07 - 037.

From the records on hand, it can be gathered, that:

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On December 7, 1989, the ABS-CBN Supervisors Emloyees Union (“the Union”), represented by respondent Union Officers, and ABS-CBN Broadcasting Corporation (“the Company”) signed and concluded a Collective Bargaining Agreement with the following check-off provision, to wit:

“Article XII – The [C]ompany agrees to advance to the Union a sum equivalent to 10% of the sum total of all the salary increases and signing bonuses granted to the Supervisors under this collective Bargaining Agreement and upon signing hereof to cover the Union’s incidental expenses, including attorney’s fees and representation expenses for its organization and (sic) preparation and conduct hereof, and such advance shall be deducted from the benefits granted herein as they accrue.”

On September 19, 1990, Petitioners[4] filed with the Bureau of Labor Relations, DOLE-NCR, Quezon City, a Complaint against the Union Officers[5] and ABS-CBN Broadcasting corporation, praying that (1) the special assessment of ten percent (10%) of the sum total of all salary increases and signing bonuses granted by respondent Company to the members of the Union be declared illegal for failure to comply with the labor Code, as amended, particularly Article 241, paragraphs (g), (n), and (o); and in utter violation of the Constitution and By-Laws of the ABS-CBN Supervisors Employees Union; (2) respondent Company be ordered to suspend further deductions from petitioners’ salaries for their shares thereof.

In their Answers, respondent Union Officers and Company prayed for the dismissal of the Complaint for lack of merit. They argued that the check-off provision is in accordance with law as majority of the Union members individually executed a written authorization giving the Union officers and the Company a blanket authority to deduct subject amount.

On January 21, 1991, Med-Arbiter Rasidali C. Abdula issued the following Order:[6]

“WHEREFORE, premises considered, judgment is hereby rendered:

a) declaring the special assessment of 10% of the sum total of CBA benefits as illegal;

b) ordering respondents union officers to refund to the complainants and other union members the amount of five Hundred Thousand Pesos (P500,000.00) advanced by the respondent Company as part of the 10% sum total of CBA benefits without unnecessary delay;

c) ordering the respondent company to stop and desist from further making advances and deductions from the union members’ salaries their share in the advances already made to the union;

d) ordering the respondent Company to remit directly to the complainants and other union members the amount already deducted from the union members’ salaries as part of their share in the advances already made to the union and which it had kept in trust during the pendency of this case; and

e) directing the respondents union officers and respondent Company to submit report on the compliance thereof.

SO ORDERED.”

On appeal, respondent DOLE Undersecretary Bienvenido E. Laguesma handed down a Decision[7] on July 1, 1991, disposing as follows:

“WHEREFORE, the appeals are hereby denied, the Order of the Med-Arbiter is affirmed en toto.”

On July 5, 1991, the aforesaid Decision was received by the respondent Union Officers and respondent Company. On July 13, 1991, they filed their Motion for Reconsideration stating, inter alia that the questioned ten percent (10%) special assessment is valid pursuant to the ruling in Bank of the Philippine Islands Employee Union – ALU vs. NLRC.[8]

On July 31, 1992, Undersecretary B.E. Laguesma issued an Order[9]; resolving, thus:

"WHEREFORE, the Decision dated 01 July 1991 is hereby SET ASIDE. In lieu thereof, a new one is hereby entered DISMISSING the Complaint/Petition for lack of merit."

Hence, the present petition seeking to annul and set aside the above-cited Order of public respondent Undersecretary B.E. Laguesma, for being allegedly tainted with grave abuse of discretion amounting to lack of jurisdiction.

Did the public respondent act with grave abuse of discretion in issuing the challenged Order reversing his own Decision of July 1, 1991? Such is the sole issue posited,which we resolve in the negative. The petition is unmeritorious.

Petitioners claim[10] that the Decision of the Secretary of Labor and Employment dated July 1, 1991, affirming in toto the Order of Med-Arbiter Rasidali Abdullah dated January 31, 1991, cannot be a subject of a motion for reconsideration because it is final and unappealable pursuant to Section 8, Rule VIII, Book V of the Omnibus Rule Implementing the Labor Code. It is further argued that the only remedy of the respondent Union Officers' is to file a petition for certiorari with this Court.

Section 8, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code, provides:

"The Secretary shall have fifteen (15) calendar days within which to decide the appeal from receipt of the records of the case. The decision of the Secretary shall be final and inappealable." [Underscoring supplied]. (Comment, p. 101)

The aforecited provision cannot be construed to mean that the Decision of the public respondent cannot be reconsidered since the same is reviewable by writ of certiorari under Rule 65 of the Rules of Court. As a rule, the law requires a motion for reconsideration to enable the public respondent to correct his mistakes, if any. In Pearl S. Buck Foundation, Inc., vs. NLRC,[11] this Court held:

"Hence, the only way by which a labor case may reach the Supreme Court is through a petition for certiorari under Rule 65 of the Rules of Court alleging lack or excess of jurisdiction or grave abuse of discretion. Such petition may be filed within a reasonable time from receipt of the resolution denying the motion for reconsideration of the NLRC decision." [Underscoring; supplied].

Clearly, before a petition for certiorari under Rule 65 of the Rules of Court may be availed of, the filing of a motion for reconsideration is a condition sine qua non to afford an opportunity for the correction of the error or mistake complained of.

So also, considering that a decision of the Secretary of Labor is subject to judicial review only through a special civil action of certiorari and, as a rule, cannot be resorted to without the aggrieved party having exhausted administrative remedies through a motion for reconsideration, the aggrieved party, must be allowed to move for a reconsideration of the same so that he can bring a special civil action for certiorari before the Supreme Court.[12]

Furthermore, it appears that the petitioners filed with the public respondent a Motion for Early Resolution[13] dated June 24, 1992. Averring that private respondents' Motion for Reconsideration did not contain substantial factual or legal grounds for the reversal of subject decision. Consequently,











petitioners are now estopped from raising the issue sought for resolution. In Alfredo Marquez vs. Secretary of Labor,[14] the Court said:

"xxx The active participation of the party against whom the action was brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on impugning the court or body's jurisdiction."

What is more, it was only when the public respondents issued the Order adverse to them that the petitioners raised the question for the first time before this Court. Obviously, it is a patent afterthought which must be abhorred.

Petitioners also argued that the check-off provision in question is illegal because it was never submitted for consideration and approval to "all the members at a general membership meeting called for the purpose"; and further alleged that the formalities mandated by Art. 241, paragraphs (n) and (o) of the Labor Code, as amended, were not complied with.

"A check-off is a process or device whereby the employer, on agreement with the Union, recognized as the proper bargaining representative, or on prior authorization from its employees, deducts union dues or agency fees from the latter's wages and remits them directly to the union." [15] Its desirability in a labor organization is quite evident. It is assured thereby of continuous funding. As this Court has acknowledged, the system of check-off is primarily for the benefit of the Union and only indirectly, for the individual employees.

The legal basis of check-off is found in statutes or in contracts.[16] The statutory limitations on check-offs are found in Article 241, Chapter II, Title IV, Book Five of the Labor Code, which reads:

"Rights and conditions of membership in a labor organization. - The following are the rights and conditions of membership in a labor organization:

x x x

(g) No officer, agent, member of a labor organization shall collect any fees, dues, or other contributions in its behalf or make any disbursement of its money or funds unless he is duly authorized pursuant to its constitution and by-laws.

x x x

(n) No special assessment or other extraordinary fees may be levied upon the members of a labor organization unless authorized by a written resolution of a majority of all the members of a general membership meeting duly called for the purpose. The secretary of the organization shall record the minutes of the meeting including the list of all members present, the votes cast, the purpose of the special assessment or fees and the recipient of such assessment or fees. The record shall be attested to by the president.

(o) Other than for mandatory activities under the Code, no special assessments, attorney's fees, negotiation fees or any other extraordinary fees may be checked off from any amount due to an employee with an individual written authorization duly signed by the employee. The authorization should specifically state the amount, purpose and beneficiary of the deductions. [Underscoring; supplied]

Article 241 of the Labor Code, as amended, must be read in relation to Article 222, paragraph (b) of the same law, which states:

"No attorney's fees, negotiation fees or similar charges of any kind arising from collective bargaining negotiations or conclusion of the collective agreement shall be imposed on any individual member of the contracting union:Provided, however, that attorney's fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void." [Underscoring; supplied]

And this court elucidated the object and import of the said provision of law in Bank of Philippine Islands Employees Union - Association Labor Union (BPIEU-ALU) vs. National Labor Relations Commission:[17]

"The Court reads the afore-cited provision (Article 222 [b] of the Labor Code) as prohibiting the payment of attorney's fees only when it is effected through forced contributions from the workers from their own funds as distinguished from the union funds. xxx"

Noticeably, Article 241 speaks of three (3) requisites that must be complied with in order that the special assessment for Union's incidental expenses, attorney's fees and representation expenses, as stipulated in Article XII of the CBA, be valid and upheld namely: 1) authorization by a written resolution of the majority of all the members at the general membership meeting duly called for the purpose; (2) secretary's record of the minutes of the meeting; and (3) individual written authorization for check-off duly signed by the employee concerned.

After a thorough review of the records on hand, we find that the three (3) requisites for the validity of the ten percent (10%) special assessment for Union's incidental expenses, attorney's fees and representation expenses were met.

It can be gleaned that on July 14, 1989, the ABS-CBN Supervisors Employee Union held its general meeting, whereat it was agreed that a ten percent (10%) special assessment from the total economic package due to every member would be checked-off to cover expenses for negotiation, other miscellaneous expenses and attorney's fees. The minutes of the said meeting were recorded by the Union's Secretary, Ma. Carminda M. Munoz, and noted by its President, Herbert Rivera.[18]

On May 24, 1991, said Union held its General Membership Meeting, wherein majority of the members agreed that "in as much as the Union had already paid Atty. P. Pascual the amount of P500,000.00, the same must be shared by all the members until this is fully liquidated."[19]

Eighty-five (85) members of the same Union executed individual written authorizations for check-off, thus:

"Towards that end, I hereby authorize the Management and/or Cashier of ABS-CBN BROADCASTING CORPORATION to deduct from my salary the sum of P30.00 per month as my regular union dues and said Management and/or Cashier are further authorize (sic) to deduct a sum equivalent to 10% of all and whatever benefits that will become due to me under the COLLECTIVE BARGAINING AGREEMENT (CBA) that may be agreed upon by the UNION and MANAGEMENT and to apply the said sum to the advance that Management will make to our Union for incidental expenses such as attorney's fees, representations and other miscellaneous expenses pursuant to Article XII of the proposed CBA."[20]

Records do not indicate that the aforesaid check-off authorizations were executed by the eighty-five (85) Union members under the influence of force or compulsion. There is then, the presumption that such check-off authorizations were executed voluntarily by the signatories thereto. Petitioner’s contention that the amount to be deducted is uncertain[21] is not persuasive because the check-off









authorization clearly stated that the sum to be deducted is equivalent to ten percent (10%) of all and whatever benefits may accrue under the CBA. In other words, although the amount is not fixed, it is determinable.

Petitioners further contend that Article 241 (n) of the Labor Code, as amended, on special assessments, contemplates a general meeting after the conclusion of the collective bargaining agreement.

Subject Article does not state that the general membership meeting should be called after the conclusion of a collective bargaining agreement. Even granting ex gratia argumenti that the general meeting should be heldafter the conclusion of the CBA, such requirement was complied with since the May 24, 1991 General Membership Meeting was held after the conclusion of the Collective Bargaining Agreement, which was signed and concluded on December 7, 1989.

Considering that the three requisites afforesaid for the validity of a special assessment were observed or met, we uphold the validity of the ten percent (10%) special assessment authorized in Article XII of the CBA.

We also concur in the finding by public respondent that the Bank of the Philippine Islands Employees Union – ALU vs. NLRC[22] is apposite in this case. In BPIEU-ALU, the petitioners, impugned the Order of the NLRC, holding that the validity of the five percent (5%) special assessment for attorney’s fees is contrary to Article 222, paragraph (b) of the Labor Code, as amended. The court ratiocinated, thus:

“The Court reads the aforecited provision as prohibiting the payment of attorney’s fees only when it is effected through forced contributions from the workers from their own funds a distinguished from the union funds. The purpose of the provision is to prevent imposition on the workers of the duty to individually contribute their respective shares in the fee to be paid the attorney for his services on behalf of the union in its negotiations with the management. xxx” [Underscoring supplied]

However, the public respondent overlooked the fact that in the said case, the deduction of the stipulated five percent (5%) of the total economic benefits under the new collective bargaining agreement was applied only to workers who gave their individual signed authorizations. The Court explained:

“xxx And significantly, the authorized deduction affected only the workers who adopted and signed the resolution and who were the only ones from whose benefits the deductions were made by BPI. No similar deductions were taken from the other workers who did not sign the resolution and so were not bound by it.” [Underscoring; supplied]

While the court also finds merit in the finding by the public respondents that Palacol vs. Ferrer-Calleja[23] is inapropos in the case under scrutiny, it does not subscribe to public respondent’s reasoning – that Palacolshould not be retroactively applied to the present case in the interest of justice, equity and fairplay.[24] The inapplicability of Palacol lies in the fact that it has a different factual milieu from the present case. In Palacol, the check-off authorization was declared invalid because majority of the Union members had withdrawn their individual authorizations, to wit:

“Paragraph (o) on the other hand requires an individual written authorization duly signed by every employee in order that special assessment maybe validly check-off. Even assuming that the special assessment was validly levied pursuant to paragraph (n), and granting that individual written authorizations were obtained by the Union, nevertheless there can be no valid check-off considering that the majority of the Union members had already withdrawn their individual authorizations. A withdrawal of individual authorization is equivalent to no authorization at all.” xxx [Underscoring; supplied]

In this case, the majority of the Union members gave their individual written check-off authorizations for the ten percent (10%) special assessment. And they have never withdraw their individual written authorizations for check-off.

There is thus cogent reason to uphold the assailed Order, it appearing from the records of the case that twenty (20)[25] of the forty-two (42) petitioners executed as Compromise Agreement[26] ratifying the controversial check-off provision in the CBA.

Premises studiedly considered, we are of the irresistable conclusion and, so find, that the ruling in BPIEU-ALU vs. NLRC that (1) the prohibition against attorney’s fees in Article 222, paragraph (b) of the Labor Code applies only when the payment of attorney’s fees is effected through forced contributions from the workers; and (2) that no deductions must be taken from the workers who did not sign the check-off authorization, applies to the case under consideration.

WHEREFORE, the assailed Order, dated July 31, 1992, of DOLE Undersecretary B.E. Laguesma is AFFIRMED except that no deductions shall be taken from the workers who did not give their individual written check-off authorization. No pronouncement as to costs.

SO ORDERED.

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners,

- versus -

PHILIPPINE AIRLINES, INC., Respondent.

G.R. No. 164856 Present: PUNO, C.J.,QUISUMBING,YNARES-SANTIAGO,CARPIO,AUSTRIA-MARTINEZ,CORONA,CARPIO MORALES,AZCUNA,TINGA,CHICO-NAZARIO,VELASCO, JR.,NACHURA,LEONARDO-DE CASTRO, andBRION, JJ. Promulgated: January 20, 2009

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

D E C I S I O N

CARPIO MORALES, J.:






Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April

16, 2004 Resolution of the Court of Appeals[1] in CA-G.R. SP No. 69540 which granted the petition for

certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners’ Motion for

Reconsideration, respectively. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE. SO ORDERED.[2]

The case stemmed from the administrative charge filed by PAL against its employees-herein

petitioners[3] after they were allegedly caught in the act of sniffing shabu when a team of company

security personnel and law enforcers raided the PAL Technical Center’s Toolroom Section on July 24,

1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of

Discipline,[4] prompting them to file a complaint for illegal dismissal and damages which was, by Decision

of January 11, 1999,[5] resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter

alia, immediately comply with the reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange Commission

(SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial losses,

under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation

Receiver on June 7, 1999.

From the Labor Arbiter’s decision, respondent appealed to the NLRC which, by Resolution

of January 31, 2000, reversed said decision and dismissed petitioners’ complaint for lack of merit.[6]

Petitioners’ Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry

of Judgment was issued on July 13, 2000.[7]

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting

the reinstatement aspect of his January 11, 1999 Decision, and onOctober 25, 2000, he issued a Notice of

Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while

petitioners moved to release the garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by

Resolutions of November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the

Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation Receiver

for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged Decision

and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a

subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a

labor arbiter’s decision (the first ground), and (2) the impossibility to comply with the reinstatement

order due to corporate rehabilitation provides a reasonable justification for the failure to exercise the

options under Article 223 of the Labor Code (the second ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively

reinstated the NLRC Resolutions insofar as it suspended the proceedings , viz:

Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners’ case for illegal dismissal and should instead have directed them to lodge their claim before PAL’s receiver. However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar circumstances of the case– that their dismissal was eventually held valid with only the matter of reinstatement pending appeal being the issue– this Court deems it legally expedient to suspend the proceedings in this case.

http://sc.judiciary.gov.ph/jurisprudence/2009/jan2009/164856.htm#_ftn7







WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.

SO ORDERED.[8] (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the

SEC, by Order of September 28, 2007, granted its request to exit from rehabilitation proceedings.[9]

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve

the remaining issue for consideration, which is whether petitioners may collect their wages during the

period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC decision

overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid

dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision.

On this score, the Court’s attention is drawn to seemingly divergent decisions concerning

reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is

the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora,

[10] while on the other is the recent case ofGenuino v. National Labor Relations Commission.[11] At the

core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which

reads: In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal . The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis and underscoring supplied)

The view as maintained in a number of cases is that: x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period.[12] (Emphasis in the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled

to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a

restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it

is mandatory on the employer to comply therewith.[13]

The opposite view is articulated in Genuino which states: If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund. Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision.[14] (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their

dismissal was found to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the

employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of








cases,[15] the Court did not order the refund of salaries garnished or received by payroll-reinstated

employees despite a subsequent reversal of the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render

inutile the rationale of reinstatement pending appeal. x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man.

x x x x

These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability.

x x x x

x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal.

x x x x

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family.[16]

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of

unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The

constitutional and statutory precepts portray the otherwise “unjust” situation as a condition affording

full protection to labor.

Even outside the theoretical trappings of the discussion and into the mundane realities of human

experience, the “refund doctrine” easily demonstrates how a favorable decision by the Labor Arbiter

could harm, more than help, a dismissed employee. The employee, to make both ends meet, would

necessarily have to use up the salaries received during the pendency of the appeal, only to end up

having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the

employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to

refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably,

the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to

return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of

the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the

horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also

institutes a scheme unduly favorable to management. Under such scheme, the salaries

dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the event

of a reversal of the Labor Arbiter’s decision ordering reinstatement, the employer gets back the same

amount without having to spend ordinarily for bond premiums. This circumvents, if not directly

contradicts, the proscription that the “posting of a bond [even a cash bond] by the employer shall not

stay the execution for reinstatement.”[17]

In playing down the stray posture in Genuino requiring the dismissed employee on payroll

reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the

Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis the

effect of a reversal on appeal.

Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more

basis to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice

Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and

allied cases inapplicable because, unlike the present case, the writ of execution therein was

secured prior to the reversal of the Labor Arbiter’s decision.




The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion

stopped there without considering the cause of the delay. Second, it requires the issuance of a writ of

execution despite the immediately executory nature of the reinstatement aspect of the

decision. In Pioneer Texturing Corp. v. NLRC,[18] which was cited in Panuncillo v. CAP Philippines, Inc.,

[19] the Court observed: x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement . The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic exercise. x x x[20] (Italics in the original; emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor

Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages

of the dismissed employee during the period of appeal until reversal by the higher court.[21] It settles the

view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to

either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or

to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must

pay the employee’s salaries. [22]

Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground

relied upon by the appellate court in the assailed issuances. The Court sustains the appellate court’s

finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for respondent

to exercise its option under the circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor

Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution needs

no further elaboration. Reinstatement pending appeal necessitates its immediate execution during the

pendency of the appeal, if the law is to serve its noble purpose. At the same time, any attempt on the

part of the employer to evade or delay its execution, as observed in Panuncillo and as what actually

transpired inKimberly,[23] Composite,[24] Air Philippines,[25] and Roquero,[26] should not be countenanced.

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred

from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending

appeal was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement

pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the

employer’s unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the

employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s

decision.

In Genuino, there was no showing that the employer refused to reinstate the employee, who was

the Treasury Sales Division Head, during the short span of four months or from the promulgation on May

2, 1994 of the Labor Arbiter’s Decision up to the promulgation on September 3, 1994 of the NLRC

Decision. Notably, the former NLRC Rules of Procedure did not lay down a mechanism to promptly










effectuate the self-executory order of reinstatement, making it difficult to establish that the employer

actually refused to comply.

In a situation like that in International Container Terminal Services, Inc. v. NLRC[27] where it was

alleged that the employer was willing to comply with the order and that the employee opted not to

pursue the execution of the order, the Court upheld the self-executory nature of the reinstatement

order and ruled that the salary automatically accrued from notice of the Labor Arbiter's order of

reinstatement until its ultimate reversal by the NLRC. It was later discovered that the employee indeed

moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that scenario where

the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed

to act upon the employee’s motion for the issuance of a writ of execution may no longer adversely affect

the cause of the dismissed employee in view of the self-executory nature of the order of reinstatement.

[28]

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer

to submit a report of compliance within 10 calendar days from receiptof the Labor Arbiter’s decision,

[29] disobedience to which clearly denotes a refusal to reinstate. The employee need not file a motion for

the issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue the

writ. With the new rules in place, there is hardly any difficulty in determining the employer’s

intransigence in immediately complying with the order.

In the case at bar, petitioners exerted efforts[30] to execute the Labor Arbiter’s order of

reinstatement until they were able to secure a writ of execution, albeit issued onOctober 5,

2000 after the reversal by the NLRC of the Labor Arbiter’s decision. Technically, there was still actual

delay which brings to the question of whether the delay was due to respondent’s unjustified act or

omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but

whether such omission was justified depends on the onset of the exigency of corporate

rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims

before any court, tribunal or board against the corporation shall ipso jure be suspended.[31] As stated

early on, during the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed

respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the

SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of

reinstatement is ministerial and mandatory.[32] This injunction or suspension of claims by legislative

fiat[33] partakes of the nature of a restraining order that constitutes a legal justification for respondent’s

non-compliance with the reinstatement order. Respondent’s failure to exercise the alternative options of

actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondent’s

obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did

not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the survival

or even the life of the dismissed employee and his family, it does not contemplate the period when the

employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to

survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the non-

exercise of its options, on the one hand, and a claim of actual and imminent substantial losses as ground

for retrenchment, on the other hand, stops at the red line on the financial statements. Beyond the

analogous condition of financial gloom, as discussed by Justice Leonardo Quisumbing in his Separate

Opinion, are more salient distinctions. Unlike the ground of substantial losses contemplated in a

retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a competent

court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under

rehabilitation. Respondent was, during the period material to the case, effectively deprived of the








alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction but

also in view of the interim relinquishment of management control to give way to the full exercise of the

powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may have

opted for actual physical reinstatement pending appeal to optimize the utilization of resources. Then

again, though the management may think this wise, the rehabilitation receiver may decide otherwise,

not to mention the subsistence of the injunction on claims.

In sum, the obligation to pay the employee’s salaries upon the employer’s failure to exercise the

alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the

inherent constraints of corporate rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of

December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity

of the Writ of Execution and the Notice of Garnishment are concerned, the Court finds no reversible

error.

SO ORDERED.

[G.R. No. 118651. October 16, 1997]

PIONEER TEXTURIZING CORP. and/or JULIANO LIM, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PIONEER TEXTURIZING WORKERS UNION and LOURDES A. DE JESUS, respondents.

D E C I S I O N

FRANCISCO, J.:

The facts are as follows:

Private respondent Lourdes A. de Jesus is petitioners’ reviser/trimmer since 1980. As reviser/trimmer, de Jesus based her assigned work on a paper note posted by petitioners. The posted paper which contains the corresponding price for the work to be accomplished by a worker is identified by its P.O. Number. On August 15, 1992, de Jesus worked on P.O. No. 3853 by trimming the cloths’ ribs. She thereafter submitted tickets corresponding to the work done to her supervisor. Three days later, de Jesus received from petitioners’ personnel manager a memorandum requiring her to explain why no disciplinary action should be taken against her for dishonesty and tampering of official records and documents with the intention of cheating as P.O. No. 3853 allegedly required no trimming. The memorandum also placed her under preventive suspension for thirty days starting from August 19, 1992. In her handwritten explanation, de Jesus maintained that she merely committed a mistake in trimming P.O. No. 3853 as it has the same style and design as P.O. No. 3824 which has an attached price list for trimming the ribs and admitted that she may have been negligent in presuming that the same work was to be done with P.O. No. 3853, but not for dishonesty or tampering Petitioners’ personnel department, nonetheless, terminated her from employment and sent her a notice of termination dated September 18, 1992.

On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The Labor Arbiter who heard the case noted that de Jesus was amply accorded procedural due process in her termination from service. Nevertheless, after observing that de Jesus made some further trimming on P.O. No. 3853 and that her dismissal was not justified, the Labor Arbiter held petitioners guilty of illegal dismissal. Petitioners were accordingly ordered to reinstate de Jesus to her previous position without loss of seniority rights and with full backwages from the time of her suspension on August 19, 1992. Dissatisfied with the Labor Arbiter’s decision, petitioners appealed to the public respondent National Labor Relations Commission (NLRC). In its July 21, 1994 decision, the NLRC[1] ruled that de Jesus was negligent in presuming that the ribs of P.O. No. 3853 should likewise be trimmed for having the same style and design as P.O. No. 3824, thus petitioners cannot be entirely faulted for dismissing de Jesus. The NLRC declared that the status quo between them should be maintained and affirmed the Labor Arbiter’s order of reinstatement, but without backwages. The NLRC further “directed petitioner to pay de Jesus her back salaries from the date she filed her motion for execution on September 21, 1993 up to the date of the promulgation of [the] decision.”[2] Petitioners filed their partial motion for reconsideration which the NLRC denied, hence this petition anchored substantially on the alleged NLRC’s error in holding that de Jesus is entitled to reinstatement and back salaries. On March 6, 1996, petitioners filed its supplement to the petition amplifying further their arguments. In a resolution dated February 20, 1995, the Court required respondents to comment thereon. Private respondent de Jesus and the Office of the Solicitor General, in behalf of public respondent NLRC, subsequently filed their comments. Thereafter, petitioners filed two rejoinders [should be replies] to respondents’ respective comments. Respondents in due time filed their rejoinders.

These are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegally dismissed, and (2) whether or not an order for reinstatement needs a writ of execution.

Petitioners insist that the NLRC gravely abused its discretion in holding that de Jesus is entitled to reinstatement to her previous position for she was not illegally dismissed in the first place. In support thereof, petitioners quote portions of the NLRC decision which stated that “respondent [petitioners herein] cannot be entirely faulted for dismissing the complaint”[3] and that there was “no illegal dismissal to speak of in the case at bar”.[4]Petitioners further add that de Jesus breached the trust reposed in her, hence her dismissal from service is proper on the basis of loss of confidence, citing as authority the cases of Ocean Terminal Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola Bottlers Phil., Inc. v. NLRC, 172 SCRA 751, and Piedad v. Lanao del Norte Electric Cooperative,[5] 154 SCRA 500.

http://sc.judiciary.gov.ph/jurisprudence/1997/oct1997/118651.htm#_edn5





The arguments lack merit.

The entire paragraph which comprises the gist of the NLRC’s decision from where petitioners derived and isolated the aforequoted portions of the NLRC’s observation reads in full as follows:

“We cannot fully subscribe to the complainant’s claim that she trimmed the ribs of PO3853 in the light of the sworn statement of her supervisor Rebecca Madarcos (Rollo, p. 64) that no trimming was necessary because the ribs were already of the proper length. The complainant herself admitted in her sinumpaang salaysay (Rollo, p. 45) that “Aking napansin na hindi pantay-pantay ang lapad ng mga ribs PO3853 - mas maigsi ang nagupit ko sa mga ribs ng PO3853 kaysa sa mga ribs ng mga nakaraang PO’s. The complaint being an experienced reviser/trimmer for almost twelve (12) years should have called the attention of her supervisor regarding her observation of PO3853. It should be noted that complainant was trying to claim as production output 447 pieces of trimmed ribs of PO3853 which respondents insists that complainant did not do any. She was therefore negligent in presuming that the ribs of PO3853 should likewise be trimmed for having the same style and design as PO3824. Complainant cannot pass on the blame to her supervisor whom she claimed checked the said tickets prior to the submission to the Accounting Department. As explained by respondent, what the supervisor does is merely not the submission of tickets and do some checking before forwarding the same to the Accounting Department. It was never disputed that it is the Accounting Department who does the detailed checking and computation of the tickets as has been the company policy and practice. Based on the foregoing and considering that respondent cannot be entirely faulted for dismissing complainant as the complainant herself was also negligent in the performance of her job, We hereby rule that status quo between them should be maintained as a matter of course. We thus affirm the decision of Labor Arbiter reinstating the complainant but without backwages. The award of backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. (Indophil Acrylic Mfg. Corporation vs. NLRC , G.R. No. 96488 September 27, 1993) There being no illegal dismissal to speak in the case at bar, the award for backwages should necessarily be deleted.”[6]

We note that the NLRC’s decision is quite categorical in finding that de Jesus was merely negligent in the performance of her duty. Such negligence, the Labor Arbiter delineated, was brought about by the petitioners’ plain improvidence. Thus:

“After careful assessment of the allegations and documents available on record, we are convinced that the penalty of dismissal was not justified.

“At the outset, it is remarkable that respondents did not deny nor dispute that P.O. 3853 has the same style and design as P.O. 3824; that P.O. 3824 was made as guide for the work done on P.O. 3853; and, most importantly, that the notation correction on P.O. 3824 was made only after the error was discovered by respondents’ Accounting Department.

“Be sure that as it may, the factual issue in this case is whether or not complaint trimmed the ribs of P.O. 3853?

“Respondents maintained that she did not because the record in Accounting Department allegedly indicates that no trimming is to be done on P.O. 3853. Basically, this allegation is unsubstantiated.

“It must be emphasized that in termination cases the burdent of proof rests upon the employer.

“In the instant case, respondents’ mere allegation that P.O. 3853 need not be trimmed does not satisfy the proof required to warrant complainant’s dismissal.

“Now, granting that the Accounting record is correct, we still believe that complainant did some further trimming on P.O. 3853 based on the following grounds:

“First, Supervisor Rebecca Madarcos who ought to know the work to be performed because she was in-charged of assigning jobs, reported no anomally when the tickets were submitted to her.

“Incidentally, supervisor Madarcos testimony is suspect because if she could recall what she ordered the complainant to do seven (7) months ago (to revise the collars and plackets of shirts) there was no reason for her not to detect the alleged tampering at the time complainant submitted her tickets, after all, that was part of her job, if not her main job.

“Secondly, she did not exceed her quota, otherwise she could have simply asked for more.

“That her output was remarkably big granting misinterpreted it is true, is well explained in that the parts she had trimmed were lesser compared to those which she had cut before.

“In this connection, respondents misinterpreted the handwritten explanation of the complainant dated 20 August 1992, because the letter never admits that she never trimmed P.O. 3853, on the contrary the following sentence,

‘Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis na pala ang presyo ng Sec. 9 P.O. 3853 na ito.’

is crystal clear that she did trim the ribs on P.O. 3853.” [7]

Gleaned either from the Labor Arbiter’s observations or from the NLRC’s assessment, it distinctly appears that petitioners’ accusation of dishonesty and tampering of official records and documents with intention of cheating against de Jesus was not substantiated by clear and convincing evidence. Petitioners simply failed, both before the Labor Arbiter and the NLRC, to discharge the burdent of proof and to validly justify de Jesus’ dismissal from service. The law, in this light, directs the employers, such as herein petitioners, not to terminate the services of an employee except for a just or authorized cause under the Labor Code.[8] Lack of a just cause in the dismissal from service of an employee, as in this case, renders the dismissal illegal, despite the employer’s observance of procedural due process.[9] And while the NLRC stated that “there was no illegal dismissal to speak of in the case at bar” and that petitioners cannot be entirely faulted therefor, said statements are inordinate pronouncements which did not remove the assailed dismissal from the realm of illegality. Neither can these pronouncements preclude us from holding otherwise.

We also find the imposition of the extreme penalty of dismissal against de Jesus as certainly harsh and grossly disproportionate to the negligence committed, especially where said employee holds a faithful and an untarnished twelve-year service record. While an employer has the inherent right to discipline its employees, we have always held that this right must always be exercised humanely, and the penalty it must impose should be commensurate to the offense involved and to the degree of its infraction.[10] The employer should bear in mind that, in the exercise of such right, what is at stake is not only the employee’s position but her livelihood as well.

Equally unmeritorious is petitioners’ assertion that the dismissal is justified on the basis of loss of confidence. While loss of confidence, as correctly argued by petitioners, is one of the valid grounds for termination of employment, the same, however, cannot be used as a pretext to vindicate each and every instance of unwarranted dismissal. To be a valid ground, it must shown that the employee concerned is responsible for the misconduct or infraction and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position.[11] In this cae, petitioners were unsuccessful in establishing their accusations of dishonesty and tampering of records with intention of cheating. Indeed, even if petitioners’ allegations against de Jesus were true, they just the same failed to prove that her position needs the continued and unceasing trust of her employee’s functions.[12] Surely, de Jesus who occupies the position of a reviser/trimmer does not require the petitioners’ perpetual and full confidence. In this regard, petitioners’ reliance on the cases of Ocean








Terminal Services, Inc. v. NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad v. Lanao del Norte Electric Cooperative, which when perused involve positions that require the employers’ full trust and confidence, is wholly misplaced. In Ocean Terminal Services, for instance, the dismissed employee was designated as expediter and canvasser whose responsibility is mainly to make emergency procurements of tools and equipments and was entrusted with the necessary cash for buying them. The case of Coca-Cola Bottlers, on the other hand, involves a sales agent whose job exposes him to the everyday financial transactions involving the employer’s goods and funds, while that of Piedad concerns a bill collector who essentially handles the employer’s cash collections. Undoubtedly, the position of a reviser/trimmer could not be equated with that of a canvasser, sales agent, or a bill collector. Besides, the involved employees in the three aforementioned cases were clearly proven guilty of infractions unlike private respondent in the case at bar. Thus, petitioners dependence on these cited cases is inaccurate, to say the least. More, whether or not de Jesus meets the day’s quota of work she, just the same, is paid the daily minimum wage.[13]

Corollary to our determination that de Jesus was illegally dismissed is her imperative entitlement to reinstatement and backwages as mandated by law.[14] Whence, we move to the second issue, i.e., whether or not an order for reinstatement needs a writ of execution.

Petitioners’ theory is that an order for reinstatement is not self-executory. They stress that there must be a writ of execution which may be issued by the NLRC or by the Labor Arbiter motu proprio or on motion of an interested party. They further maintain that even if a writ of execution was issued, a timely appeal coupled by the posting of appropriate supersedeas bond, which they did in this case, effectively forestalled and stayed execution of the reinstatement order of the Labor Arbiter. As supporting authority, petitioners emphatically cite and bank on the case of Maranaw Hotel Resort Corporation (Century Park Sheraton Manila) v. NLRC, 238 SCRA 190.

Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her immediately after the decision of the Labor Arbiter ordering her reinstatement was promulgated since the law mandates that an order for reinstatement is immediately executory. An appeal, she says, could not stay the execution of a reinstatement order for she could either be admitted back to work or merely reinstated in the payroll without need of a writ of execution. De Jesus argues that a writ of execution is necessary only for the enforcement of decisions, orders, or awards which have acquired finality. In effect, de Jesus is urging the Court to re-examine the ruling laid down in Maranaw.

Article 223 of the Labor Code, as amended by R.A. No. 6715 which took effect on March 21, 1989, pertinently provides:

“ART. 223. Appeal. --Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal maybe entertained only on any of the following grounds:

xxx xxx xxx

“In an event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reistated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.

xxx xxx xxx

We initially interpreted the aforequoted provision in Inciong v. NLRC.[15] The Court[16] made this brief comment:

“The decision of the Labor Arbiter in this case was rendered on December 18, 1988, or three (3) months before Article 223 of the Labor Code was amended by Republic Act 6715 (which

became law on March 21, 1989), providing that a decision of the Labor Arbiter ordering the reinstatement of a dismissed or separated employee shall be immediately executory insofar as the reinstatement aspect is concerned, and the posting of an appeal bond by the employer shall not stay such execution. Since this new law contains no provision giving it retroactive effect (Art. 4, Civil Code), the amendment may not be applied to this case.”

which the Court adopted and applied in Callanta v. NLRC.[17] In Zamboanga City Water District v. Buat,[18] the Court construed Article 223 to mean exactly what it says. We said:

“Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or separated employee insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal. The employer shall reinstate the employee concerned either by: (a) actually admitting him back to work under the same terms and conditions prevailing prior to his dismissal or separation; or (b) at the option of the employer, merely reinstating him in the payroll. Immediate reinstatement is mandated and is not stayed by the fact that the employer has appealed, or has posted a cash or surety bond pending appeal.”[19]

We expressed a similar view a year earlier in Medina v. Consolidated Broadcasting System (CBS) – DZWX[20] and laid down the rule that an employer who fails to comply with an order of reinstatement makes him liable for the employee’s salaries. Thus:

“Petitioners construe the above paragraph to mean that the refusal of the employer to reinstate an employee as directed in an executory order of reinstatement would make it liable to pay the latter’s salaries. This interpretation is correct. Under Article 223 of the Labor Code, as amended, an employer has two options in order for him to comply with an order of reinstatement, which is immediately executory, even pending appeal. Firstly, he can admit the dismissed employee back to work under the same terms and conditions prevailing prior to his dismissal or separation or to a substantially equivalent position if the former position is already filled up as we have ruled in Union of Supervisors (RB) NATU vs. Sec. of Labor, 128 SCRA 442 [1984]; and Pedroso vs. Castro, 141 SCRA 252 [1986]. Secondly, he can reinstate the employee merely in the payroll. Failing to exercise any of the above options, the employer can be compelled under pain of contempt, to pay instead the salary of the employee. This interpretation is more in consonance with the constitutional protection to labor (Section 3, Art. XIII, 1987 Constitution). The right of a person to his labor is deemed to be property within the meaning of the constitutional guaranty that no one shall be deprived of life, liberty, and property without due process of law. Therefore, he should be protected against any arbitrary and unjust deprivation of his job (Bondoc vs. People’s Bank and Trust Co., Inc., 103 SCRA 599 [1981]). The employee should not be left without any remedy in case the employer unreasonably delays reinstatement. Therefore, we hold that the unjustified refusal of the employer to reinstate an illegally dismissed employee entitles the employee to payment of his salaries x x x.”[21]

The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting the import of Article 223 in Maranaw, the Court[22] declared that the reinstatement aspect of the Labor Arbiter’s decision needs a writ of execution as it is not self-executory, a declaration the Court recently reiterated and adopted in Archilles Manufacturing Corp. v. NLRC.[23]

We note that prior to the enactment of R.A. No. 6715, Article 223[24] of the Labor Code contains no provision dealing with the reinstatement of an illegally dismissed employee. The amendment introduced by R.A. No. 6715 is an innovation and a far departure from the old law indicating therby the legislature’s unequivocal intent to insert a new rule that will govern the reinstatement aspect of a decision or resolution in any given labor dispute. In fact, the law as now worded employs the phrase “shall immediately be executory” without qualification emphasizing the need for prompt compliance. As a rule, “shall” in a statute commonly denotes an imperative obligation and is inconsistent with the idea of discretion[25] and that the presumption is that the word “shall”, when used in a statute, is mandatory.[26] An appeal or posting of bond, by plain mandate of the law, could not even forestall nor stay the executory nature of an order of reinstatement. The law, moreover, is unambiguous and clear. Thus, it















must be applied according to its plain and obvious meaning, according to its express terms. In Globe-Mackay Cable and Radio Corporation v. NLRC,[27] we held that:

“Under the principles of statutory construction, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain-meaning rule or verba legisderived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent by the use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.”[28]

And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3) of the New Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the employer to immediately reinstate the dismissed employee. Thus:

“In case the decision includes an order of reinstatement, the Labor Arbiter shall direct the employer to immediately reinstate the dismissed or separated employee even pending appeal. The order of reinstatement shall indicate that the employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll.”

In declaring that reinstatement order is not self-executory and needs a writ of execution, the Court, in Maranaw, adverted to the rule provided under Article 224. We said:

“It must be stressed, however, that although the reinstatement aspect of the decision is immediately executory, it does not follow that it is self-executory. There must be a writ of execution which may be issuedmotu proprio or on motion of an interested party. Article 224 of the Labor Code provides:

‘ART. 224. Execution of decisions, orders or awards. –(a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu propio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory …’ (emphasis supplied)

“The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC also provides:

‘The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of origin shall, motu propio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory …. No motion for execution shall be entertained nor a writ be issued unless the Labor Arbiter is in possession of the records of the case which shall include an entry of judgment.’ (emphasis supplied)

xxx xxx xxx

“In the absence them of an order for the issuance of a writ of execution on the reinstatement aspect of the decision of the Labor Arbiter, the petitioner was under no legal obligation to admit back to work the private respondent under the terms and conditions prevailing prior to her dismissal or, at the petitioner’s option, to merely reinstate her in the payroll. An option is a right of election to exercise a privilege, and the option in Article 223 of the Labor Code is exclusively granted to the employer. The event that gives rise for its exercise is not the reinstatement decree of a Labor Arbiter, but the writ for its execution commanding the employer to reinstate the employee, while the final

act which compels the employer to exercise the option is the service upon it of the writ of execution when, instead of admitting the employee back to his work, the employer chooses to reinstate the employee in the payroll only. If the employer does not exercise this option, it must forthwith admit the employee back to work, otherwise it may be punished for contempt.”[29]

A closer examination, however, shows that the necessity for a writ of execution under Article 224 applies only to final and executory decisions which are not within the coverage of Article 223. For comparison, we quote the material portions of the subject articles:

“ART. 223. Appeal. x x x

“In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.

xxx xxx xxx

“ART. 224. Execution of decisions, orders, or awards. --(a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu propio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce final decicions, orders or awards of the Secretary of Labor and Employment or regional director, the Commission, the arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish immediately the counsels of record and the parties with copies of said decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible officer to appropriate administrative sanctions."

Article 224 states that the need for a writ of execution applies only within five (5) years from the date a decision, an order or awards becomes final and executory. It cannot relate to an award or order of reinstatement still to be appealed or pending appeal which Article 223 contemplates. The provision of Article 223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative content is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i. e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordaineda valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. [30] And where statues are fairly susceptible of two or more construction, that construction should be adopted which will most tend to give effect to the manifest intent of the law maker and promote the object for which the statute was enacted, and a construction should be rejected which would tend to render abortive other provisions of the statute and to defeat the object which the legislator sought to attain by its





enactment.[31] In introducing a new rule on the reinstatement aspect of a labor decision under R.A. No. 6715, Congress should not be considered to be indulging in mere semantic exercise. On appeal, however, the appellate tribunal concerned may enjoin or suspend the reinstatement order in the exercise of its sound discretion.

Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws should be resolved in favor of labor. In ruling that an order or award for reinstatement does not require a writ of execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rule that an award or order for reinstatement is self-executory. After receipt of the decision or resolution ordering the employee's reinstatement, the employer has the right to choose whether to re-admit the employee to work under the same terms and conditions prevailing prior to his dismissal or to reinstate the employee in the payroll. In either instance, the employer has to inform the employee of his choice. The notification is based on practical considerations for without notice, the employee has no way of knowing if he has to report for work or not.

WHEREFORE, the petition is DENIED and the decision of the Labor Arbiter is hereby REINSTATED.

Costs against petitioner.

SO ORDERED.


Labrel 2nd Set

Documents

Transcript of Labrel 2nd Set