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SAMAHAN NG MGA MANGGAGAWA SA HYATT (SAMASAH-NUWHRAIN),

PETITIONER, VS. HON. VOLUNTARY ARBITRATOR BUENAVENTURA C.


MAGSALIN AND HOTEL ENTERPRISES OF THE PHILIPPINES, INC.,
RESPONDENTS.

[G.R. NO. 172303]

SAMAHAN NG MGA MANGGAGAWA SA HYATT (SAMASAH-NUWHRAIN),


PETITIONER, VS. HOTEL ENTERPRISES OF THE PHILIPPINES, INC.,
RESPONDENT.
G.R. No. 164939 | 2011-06-06

THIRD DIVISION

DECISION

VILLARAMA, JR., J.:

Before this Court are two consolidated petitions filed by petitioner Samahan ng mga
Manggagawa sa Hyatt-NUWHRAIN-APL under Rule 45 of the 1997 Rules of Civil
Procedure, as amended. The first petition, docketed as G.R. No. 164939, assails the
Resolutions dated October 3, 2003[1]and August 13, 2004[2] of the Court of Appeals (CA)
in CA-G.R. SP No. 78364, which dismissed petitioner's petition for review at the CA for
being the wrong remedy. The second petition, docketed as G.R. No. 172303, assails the
Decision[3] dated December 16, 2005 and Resolution[4] dated April 12, 2006 of the CA in
CA-G.R. SP No. 77478, modifying the judgment of the Voluntary Arbitrator in NCMB-NCR-
CRN-07-008-01.

The antecedent facts are as follows:

Petitioner Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL is a duly registered


union and the certified bargaining representative of the rank-and-file employees of Hyatt
Regency Manila, a five-star hotel owned and operated by respondent Hotel Enterprises
of the Philippines, Inc. On January 31, 2001, Hyatt's General Manager, David C. Pacey,
issued a Memorandum[5] informing all hotel employees that hotel security have been
instructed to conduct a thorough bag inspection and body frisking in every entrance and
exit of the hotel. He enjoined employees to comply therewith. Copies of the
Memorandum were furnished petitioner.

On February 3, 2001, Angelito Caragdag, a waiter at the hotel's Cafe Al Fresco restaurant
and a director of the union, refused to be frisked by the security personnel. The incident
was reported to the hotel's Human Resources Department (HRD), which issued a
Memorandum[6] to Caragdag on February 5, 2001, requiring him to explain in writing
within forty-eight (48) hours from notice why no disciplinary action should be taken
against him. The following day, on February 6, 2001, Caragdag again refused to be
frisked by the security personnel. Thus, on February 8, 2001, the HRD issued another
Memorandum[7] requiring him to explain.

On February 14, 2001, the HRD imposed on Caragdag the penalty of reprimand for the
February 3, 2001 incident, which was considered a first offense, and suspended him for
three days for the February 6, 2001 incident, which was considered as a second
offense.[8] Both penalties were in accordance with the hotel's Code of Discipline.

Subsequently, on February 22, 2001, when Mike Moral, the manager of Hyatt's Cafe Al
Fresco and Caragdag's immediate superior, was about to counsel two staff members,
Larry Lacambacal and Allan Alvaro, at the training room, Caragdag suddenly opened the
door and yelled at the two with an enraged look. In a disturbing voice he said, "Ang
titigas talaga ng ulo n'yo. Sinabi ko na sa inyo na huwag kayong makikipagusap sa
management habang ongoing pa ang kaso!" (You are very stubborn. I told you not to
speak to management while the case is ongoing!) Moral asked Caragdag what the
problem was and informed him that he was simply talking to his staff. Moral also told
Caragdag that he did not have the right to interrupt and intimidate him during his
counseling session with his staff.

On February 23, 2001, Moral issued a Memorandum[9] requiring Caragdag to explain his
actions in the training room. Caragdag submitted his written explanation on February
25, 2001[10] narrating that he was informed by someone that Lacambacal and Alvaro were
requesting for his assistance because Moral had invited them to the training
room. Believing that he should advise the two that they should be accompanied by a
union officer to any inquisition, he went to the training room. However, before he could
enter the door, Moral blocked him. Thus, he told Lacambacal and Alvaro that they should
be assisted by a union representative before giving any statement to
management. Caragdag also prayed that Moral be investigated for harassing union
officers and union members.

On February 28, 2001, Moral found the explanations unsatisfactory. In a


Memorandum[11] issued on the same date, Moral held Caragdag liable for Offenses Subject
to Disciplinary Action (OSDA) 3.01 of the hotel's Code of Discipline, i.e., "threatening,
intimidating, coercing, and provoking to a fight your superior for reasons directly
connected with his discharge of official duty." Thus, Caragdag was imposed the penalty
of seven days suspension in accordance with the hotel's Code of Discipline.

Still later, on March 2, 2001, Caragdag committed another infraction. At 9:35 a.m. on
the said date, Caragdag left his work assignment during official hours without prior
permission from his Department Head. He was required to submit an explanation, but
the explanation[12] he submitted was found unsatisfactory. On March 17, 2001, Moral
found Caragdag liable for violating OSDA 3.07, i.e., "leaving work assignment during
official working hours without prior permission from the department head or immediate
superior," and suspended him for three days.[13]

Because of the succession of infractions he committed, the HRD also required Caragdag
to explain on May 11, 2001 why the hotel's OSDA 4.32 (Committing offenses which are
penalized with three [3] suspensions during a 12-month period) should not be enforced
against him.[14] An investigation board was formed after receipt of Caragdag's written
explanation, and the matter was set for hearing on May 19, 2001. However, despite
notice of the scheduled hearing, both Caragdag and the Union President failed to
attend. Thereafter, the investigating board resolved on the said date to dismiss Caragdag
for violation of OSDA 4.32.[15] Caragdag appealed but the investigating board affirmed its
resolution after hearing on May 24, 2001.

On June 1, 2001, the hotel, through Atty. Juancho A. Baltazar, sent Caragdag a Notice of
Dismissal,[16] the pertinent portion of which reads:

Based on the findings of the Investigation Board dated May 19, 2001 which was approved
by the General Manager Mr. David Pacey on the same day and which did not merit any
reversal or modification after the hearing on your appeal on May 24, 2001, the penalty
of DISMISSAL is therefore affirmed to take effect on June 1, 2001.

Caragdag's dismissal was questioned by petitioner, and the dispute was referred to
voluntary arbitration upon agreement of the parties. On May 6, 2002, the Voluntary
Arbitrator rendered a decision,[17] the dispositive portion of which reads:
WHEREFORE, premises considered, this Arbiter rules that the three separate suspensions
of Mr. Caragdag are valid, his dismissal is legal and OSDA 4.32 of Hyatt's Code of
Discipline is reasonable.

However, for humanitarian considerations, Hyatt is hereby ordered to grant financial


assistance to Mr. Caragdag in the amount of One Hundred Thousand Pesos
(PhP100,000.00).

In finding the three separate suspensions of Caragdag valid, the Voluntary Arbitrator
reasoned that the union officers and members had no right to breach company rules and
regulations on security and employee discipline on the basis of certain suspicions against
management and an ongoing CBA negotiation standoff. The Voluntary Arbitrator also
found that when Caragdag advised Lacambacal and Alvaro not to give any statement, he
threatened and intimidated his superior while the latter was performing his
duties. Moreover, there is no reason why he did not arrange his time-off with the
Department Head concerned. Thus, Caragdag was validly dismissed pursuant to OSDA
4.32 of Hyatt's Code of Discipline, which states that an employee who commits three
different acts of misconduct within a twelve (12)-month period commits serious
misconduct.

Petitioner sought reconsideration of the decision while respondent filed a motion for
partial reconsideration. However, the Voluntary Arbitrator denied both motions on May
26, 2003.[18]

On August 1, 2003, petitioner assailed the decision of the Voluntary Arbitrator before the
CA in a petition forcertiorari which was docketed as CA-G.R. SP No. 78364.[19] As
mentioned at the outset, the CA dismissed the petition outright for being the wrong
remedy. The CA explained:

Rule 43, Section 5 of the 1997 Rules of Civil Procedure explicitly provides that the proper
mode of appeal from judgments, final orders or resolution of voluntary arbitrators is
through a Petition for Review which should be filed within fifteen (15) days from the
receipt of notice of judgment, order or resolution of the voluntary arbitrator.
Considering that petitioner intends this petition to be a Petition for Certiorari, the Court
hereby resolves to dismiss the petition outright for being an improper mode of appeal.

Even if this Court treats the instant petition as a Petition for Review, still the Court has
no alternative but to dismiss the same for having been filed out of time. As admitted by
the petitioner it received the Order dated 26 May 2003 denying their motion for
reconsideration on 02 June 2003. The fifteen (15) day period within which to appeal
through a Petition for Review is until June 17, 2003. The petitioner filed the present
petition on August 1, 2003, way beyond the reglementary period provided for by the
Rules.[20]

Petitioner duly filed a motion for reconsideration of the dismissal, but the motion was
denied by the CA. Thus, petitioner filed before this Court a petition for review
on certiorari which was docketed as G.R. No. 164939.

In the meantime, on June 30, 2003, respondent also filed a petition for review[21] with the
CA on the ground that the Voluntary Arbitrator committed a grievous error in awarding
financial assistance to Caragdag despite his finding that the dismissal due to serious
misconduct was valid. On December 16, 2005, the CA promulgated a decision in CA-
G.R. SP. No. 77478 as follows:

WHEREFORE, the Decision dated May 6, 2002 of Voluntary Arbitrator Buenaventura C.


Magsalin is AFFIRMED with MODIFICATION by DELETING the award of financial assistance
in the amount of P100,000.00 to Angelito Caragdag.

SO ORDERED.[22]

In deleting the award of financial assistance to Caragdag, the CA cited the case
of Philippine Commercial International Bank v. Abad,[23] which held that the grant of
separation pay or other financial assistance to an employee dismissed for just cause is
based on equity and is a measure of social justice, awarded to an employee who has
been validly dismissed if the dismissal was not due to serious misconduct or causes that
reflected adversely on the moral character of the employee. In this case, the CA agreed
with the findings of the Voluntary Arbitrator that Caragdag was validly dismissed due to
serious misconduct. Accordingly, financial assistance should not have been awarded to
Caragdag. The CA also noted that it is the employer's prerogative to prescribe reasonable
rules and regulations necessary or proper for the conduct of its business or concern, to
provide certain disciplinary measures to implement said rules and to ensure compliance
therewith.

Petitioner sought reconsideration of the decision, but the CA denied the motion for lack
of merit. Hence, petitioner filed before us a petition for review on certiorari docketed as
G.R. No. 172303.

Considering that G.R. Nos. 164939 and 172303 have the same origin, involve the same
parties, and raise interrelated issues, the petitions were consolidated.

Petitioner raises the following issues:

In G.R. No. 164939


THE COURT OF APPEALS ERRED IN DISMISSING OUTRIGHT THE PETITION FOR
CERTIORARI ON THE GROUND THAT THE SAME IS AN IMPROPER MODE OF APPEAL.[24]

In G.R. No. 172303

THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF FINANCIAL ASSISTANCE


IN THE AMOUNT OF P100,000.00 TO ANGELITO CARAGDAG.[25]

The issues for our resolution are thus two-fold: first, whether the CA erred in dismissing
outright the petition for certiorari filed before it on the ground that the same is an
improper mode of appeal; and second, whether the CA erred in deleting the award of
financial assistance in the amount of P100,000.00 to Caragdag.

On the first issue, petitioner argues that because decisions rendered by voluntary
arbitrators are issued under Title VII-A of the Labor Code, they are not covered by Rule
43 of the 1997 Rules of Civil Procedure, as amended, by express provision of Section 2
thereof. Section 2, petitioner points out, expressly provides that Rule 43 "shall not apply
to judgments or final orders issued under the Labor Code of the Philippines." Hence, a
petition for certiorari under Rule 65 is the proper remedy for questioning the decision of
the Voluntary Arbitrator, and petitioner having availed of such remedy, the CA erred in
declaring that the petition was filed out of time since the petition was filed within the
sixty (60)-day reglementary period.

On the other hand, respondent maintains that the CA acted correctly in dismissing the
petition for certiorari for being the wrong mode of appeal. It stresses that Section 1 of
Rule 43 clearly states that it is the governing rule with regard to appeals from awards,
judgments, final orders or resolutions of voluntary arbitrators. Respondent contends that
the voluntary arbitrators authorized by law include the voluntary arbitrators appointed
and accredited under the Labor Code, as they are considered as included in the term
"quasi-judicial instrumentalities."

Petitioner's arguments fail to persuade.

In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v.


Bacungan,[26]we repeated the well-settled rule that a decision or award of a voluntary
arbitrator is appealable to the CA via petition for review under Rule 43. We held that:

The question on the proper recourse to assail a decision of a voluntary arbitrator has
already been settled in Luzon Development Bank v. Association of Luzon Development
Bank Employees, where the Court held that the decision or award of the voluntary
arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals,
in line with the procedure outlined in Revised Administrative Circular No. 1-95 (now
embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like those of the quasi-
judicial agencies, boards and commissions enumerated therein, and consistent with the
original purpose to provide a uniform procedure for the appellate review of adjudications
of all quasi-judicial entities.

Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-
Olalia v. Court of Appeals, the Court reiterated the aforequoted ruling. In Alcantara, the
Court held that notwithstanding Section 2 of Rule 43, the ruling in Luzon Development
Bank still stands. The Court explained, thus:

"The provisions may be new to the Rules of Court but it is far from being a new law.
Section 2, Rules 42 of the 1997 Rules of Civil Procedure, as presently worded, is nothing
more but a reiteration of the exception to the exclusive appellate jurisdiction of the Court
of Appeals, as provided for in Section 9, Batas Pambansa Blg. 129, as amended by
Republic Act No. 7902:

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders
or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards
or commissions, including the Securities and Exchange Commission, the Employees'
Compensation Commission and the Civil Service Commission, except those falling
within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as
amended, the provisions of this Act and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

"The Court took into account this exception in Luzon Development Bank but,
nevertheless, held that the decisions of voluntary arbitrators issued pursuant to the Labor
Code do not come within its ambit x x x"

Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as


amended, provide:

SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of
the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions.
Among these agencies are the x x x, and voluntary arbitrators authorized by law.

xxxx

SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of
Appeals within the period and in the manner therein provided, whether the appeal
involves questions of fact, of law, or mixed questions of fact and law.

SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from
notice of the award, judgment, final order or resolution, or from the date of its last
publication, if publication is required by law for its effectivity, or of the denial of
petitioner's motion for new trial or reconsideration duly filed in accordance with the
governing law of the court or agency a quo. x x x. (Emphasis supplied.)

Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator's Resolution denying
petitioner's motion for reconsideration, petitioner should have filed with the CA, within
the fifteen (15)-day reglementary period, a petition for review, not a petition
for certiorari.

Petitioner insists on a liberal interpretation of the rules but we find no cogent reason in
this case to deviate from the general rule. Verily, rules of procedure exist for a noble
purpose, and to disregard such rules in the guise of liberal construction would be to defeat
such purpose. Procedural rules are not to be disdained as mere technicalities. They may
not be ignored to suit the convenience of a party. Adjective law ensures the effective
enforcement of substantive rights through the orderly and speedy administration of
justice. Rules are not intended to hamper litigants or complicate litigation. But they help
provide for a vital system of justice where suitors may be heard following judicial
procedure and in the correct forum. Public order and our system of justice are well served
by a conscientious observance by the parties of the procedural rules. [27]

On the second issue, petitioner argues that Caragdag is entitled to financial assistance in
the amount of P100,000 on humanitarian considerations. Petitioner stresses that
Caragdag's infractions were due to his being a union officer and his acts did not show
moral depravity. Petitioner also adds that, while it is true that the award of financial
assistance is given only for dismissals due to causes specified under Articles 283 and 284
of the Labor Code, as amended, this Court has, by way of exception, allowed the grant
of financial assistance to an employee dismissed for just causes based on equity.

Respondent on the other hand, asserts that the CA correctly deleted the award of financial
assistance erroneously granted to Caragdag considering that he was found guilty of
serious misconduct and other acts adversely reflecting on his moral
character. Respondent stresses that Caragdag's willful defiance of the hotel's security
policy, disrespect and intimidation of a superior, and unjustifiable desertion of his work
assignment during working hours without permission, patently show his serious and gross
misconduct as well as amoral character.[28]

Again, petitioner's arguments lack merit.

The grant of separation pay or some other financial assistance to an employee dismissed
for just causes is based on equity.[29] In Phil. Long Distance Telephone Co.v. NLRC,[30]we
ruled that severance compensation, or whatever name it is called, on the ground of social
justice shall be allowed only when the cause of the dismissal is other than serious
misconduct or for causes which reflect adversely on the employee's moral character.The
Court succinctly discussed the propriety of the grant of separation pay in this wise:

We hold that henceforth separation pay shall be allowed as a measure of social justice
only in those instances where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character. Where the reason for the
valid dismissal is, for example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not
be required to give the dismissed employee separation pay, or financial assistance, or
whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding
rather than punishing the erring employee for his offense. And we do not agree that the
punishment is his dismissal only and that the separation pay has nothing to do with the
wrong he has committed. Of course it has. Indeed, if the employee who steals from the
company is granted separation pay even as he is validly dismissed, it is not unlikely that
he will commit a similar offense in his next employment because he thinks he can expect
a like leniency if he is again found out. This kind of misplaced compassion is not going to
do labor in general any good as it will encourage the infiltration of its ranks by those who
do not deserve the protection and concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it
is committed by the underprivileged. At best it may mitigate the penalty but it certainly
will not condone the offense. Compassion for the poor is an imperative of every humane
society but only when the recipient is not a rascal claiming an undeserved privilege. Social
justice cannot be permitted to be refuge of scoundrels any more than can equity be an
impediment to the punishment of the guilty. Those who invoke social justice may do so
only if their hands are clean and their motives blameless and not simply because they
happen to be poor. This great policy of our Constitution is not meant for the protection
of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.[31]

Here, Caragdag's dismissal was due to several instances of willful disobedience to the
reasonable rules and regulations prescribed by his employer. The Voluntary Arbitrator
pointed out that according to the hotel's Code of Discipline, an employee who commits
three different acts of misconduct within a twelve (12)-month period commits serious
misconduct. He stressed that Caragdag's infractions were not even spread in a period of
twelve (12) months, but rather in a period of a little over a month. Records show the
various violations of the hotel's rules and regulations were committed by Caragdag. He
was suspended for violating the hotel policy on bag inspection and body frisking. He was
likewise suspended for threatening and intimidating a superior while the latter was
counseling his staff. He was again suspended for leaving his work assignment without
permission. Evidently, Caragdag's acts constitute serious misconduct.

In Piedad v. Lanao del Norte Electric Cooperative, Inc.,[32] we ruled that a series of
irregularities when put together may constitute serious misconduct, which under Article
282 of the Labor Code, as amended, is a just cause for dismissal.

Caragdag's dismissal being due to serious misconduct, it follows that he should not be
entitled to financial assistance. To rule otherwise would be to reward him for the grave
misconduct he committed. We must emphasize that social justice is extended only to
those who deserve its compassion.[33]

WHEREFORE, the petitions for review on certiorari are DENIED. The October 3, 2003
and August 13, 2004 Court of Appeals Resolutions in CA-G.R. SP No. 78364, as well as
the Court of Appeals December 16, 2005 Decision and April 12, 2006 Resolution in CA-
G.R. SP No. 77478, are AFFIRMED and UPHELD.

With costs against the petitioner.

SO ORDERED.

TOYOTA MOTORS PHILIPPINES CORPORATION LABOR UNION, petitioner, vs.


TOYOTA MOTOR PHILIPPINES CORPORATION EMPLOYEES AND WORKERS
UNION, TOYOTA MOTOR PHILIPPINES CORPORATION, and THE SECRETARY OF
LABOR AND EMPLOYMENT, respondents.
G.R. No. 135806 | 2002-08-08

DECISION

BELLOSILLO, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court, as amended, seeking to set aside the
Resolution of 5 June 1998 and the Order of 10 August 1998 both issued by respondent Secretary of
Labor and Employment in OS-A-5-58-98 (NCR-OD-M-9704-0311) which affirmed the decision of the
Med-Arbiter dated 24 February 1998. The assailed decision dismissed both the Petition for Certification
Election filed by respondent Toyota Motor Philippines Corp. Employees and Workers Union
(TMPCEWU) and the Petition-in-Intervention filed by petitioner Toyota Motor Philippines Corp. Labor
Union (TMPCLU).

On 24 April 1997 respondent TMPCEWU filed a Petition for Certification Election before the Med-
Arbitration Unit of the DOLE-National Capital Region (DOLE-NCR) seeking to represent the rank-and-file
employees of the manufacturing division from Levels 1 to 4 of Toyota Motor Philippines Corp. (TMPC).

On 13 May 1997, while the case was pending hearing, petitioner TMPCLU claiming to be the legitimate
labor organization, filed a Motion to Intervene with Opposition to the Certification Election praying that
it be allowed to intervene and, thereafter, the petition by TMPCEWU be denied for lack of merit. It
claimed that the petition was premature due to an earlier resolution by the Secretary of Labor ordering
the conduct of a certification election among the rank-and-file employees of TMPC represented by
petitioner which was the subject of certiorari proceedings before the Supreme Court and still awaiting
final resolution at the time; and, that the collective bargaining unit which respondent TMPCEWU sought
to represent violated the "single or employer" unit policy since it excluded the rank-and-file employees
in the other divisions and departments in respondent TMPC.[1]

In its motion petitioner TMPCLU outlined the antecedent events prior to the TMPCEWU's filing of its
Petition for Certification Election on 24 April 1997 thus -

1. On 26 November 1992 it (TMPCLU) filed a petition for certification election before Med-Arbiter
Paterno D. Adap, docketed as NCR-OD-M-9211-053;

2. On 8 March 1993 Med-Arbiter Adap dismissed TMPCLU's petition on the ground that the labor
organization's membership was composed of supervisory and rank-and-file employees in violation of
Art. 245 of the Labor Code, and that at the time of the filing of its petition, TMCPLU had not even
acquired legal personality yet;

3. On appeal, the Secretary of Labor, in a Resolution dated 9 November 1993 signed by Undersecretary
Bienvenido E. Laguesma, set aside the Med-Arbiter's Order and directed the holding of a certification
election among the regular rank-and-file employees of TMPC. In setting aside the assailed order, the
Office of the Secretary argued that:

Contrary to the allegation of herein respondent-appellee, petitioner-appellant was already a legitimate


labor organization at the time of the filing of the petition on 26 November 1992. Records show that on
24 November 1992 or two (2) days before the filing of the said petition, it was issued a certificate of
registration.
4. Acting on TMPC's motion for reconsideration the Secretary of Labor set aside his earlier resolution
and ordered the remand of the case to the Med-Arbiter concluding that the issues raised by TMPC both
on appeal and its motion for reconsideration were factual issues requiring further hearing and
production of evidence;

5. Pursuant to the order above-mentioned, the Med-Arbiter on 28 September 1994 dismissed TMPCLU's
petition for certification election for failure of petitioner to acquire legal personality at the time of the
filing of the said petition;

6. The motion for reconsideration filed by TMPCLU before the Secretary of Labor, which was treated as
an appeal from the order of the Med-Arbiter dated 28 September 1994, was granted and the said order
was set aside. In lieu thereof, a new order was issued giving due course to the petition and directing the
conduct of a certification election among the rank-and-file employees of TMPC;

7. The Secretary of Labor, in his order dated 14 July 1995, denied for lack of merit the motion for
reconsideration filed by TMPC;

8. On 20 April 1996 the Secretary of Labor issued a new resolution directing the conduct of a
certification election among the rank-and-file employees of TMPC; and

9. TMPC lodged a special civil action for certiorari before the Supreme Court assailing the 20 April 1996
Resolution of the Secretary of Labor; and on 19 February 1997, the Supreme Court[2] set aside the
assailed Resolution of the Secretary of Labor and reinstated the Order of the Med-Arbiter dated 28
September 1994. In its decision, the Supreme Court ruled that since TMPCLU's membership list
contained the names of at least twenty-seven (27) supervisory employees in Level Five positions, "the
union could not, prior to purging itself of its supervisory employee members, attain the status of a
legitimate labor organization. Not being one, it cannot possess the requisite personality to file a petition
for certification election."

At the time respondent TMPCEWU filed its Petition for Certification Election on 24 April 1997 the
decision of the Supreme Court had not ripened into a final and executory judgment. Thus petitioner
invoked as among the grounds for opposition thereto in its Motion to Intervene with Opposition to the
Petition for Certification Election that the "pending proceeding before the Supreme Court may be said to
be a pre-judicial question which should be resolved first before the instant petition can prosper."[3]

TMPC also filed a similar comment on 9 June 1997. Hence, on 2 July 1997, the Med-Arbiter ordered the
provisional dismissal of TMPCEWU's Petition for Certification Election pending a final ruling by the
Supreme Court on the Petition for Certification Election.

On 3 June 1997 the decision of the Supreme Court dated 19 February 1997 became final and executory.

In view of respondent TMPCEWU's revival of its Petition for Certification Election, petitioner also filed
on 30 October 1997 its Petition-in-Intervention[4] alleging that (a) it was representing only the rank-
and-file employees; (b) it enjoys the support of the regular rank-and-file workers at large in TMPC, an
unorganized establishment, and not only among the rank-and-file employees in the manufacturing
division thereof; (c) while respondent TMPCEWU professed itself as a legitimate labor organization,
there was serious doubt on such claim inasmuch as there was a pending petition for the cancellation of
its certification of registration on the ground of fraud; (d) respondent TMPCEWU's representation of the
rank-and-file employees, Levels 1 to 4, within the manufacturing division only to the exclusion of those
in the other departments and divisions violated the "single or employer" unit policy; and, (e) the
establishment of the proposed bargaining unit in the manufacturing division composed of employees
from Levels 1 to 4, should respondent's petition be allowed, would induce the proliferation of unions in
a single employer.[5]

On 24 February 1998 the Med-Arbiter rendered a decision dismissing for lack of merit TMPCEWU's
Petition for Certification Election, since it failed to include all rank-and-file employees from Levels 1 to 4
in other departments of TMPC in violation of the "one-union in one-company" policy and likewise
dismissing TMPCLU's Petition-in-Intervention for lack of legal personality.[6] Anent the issue on
whether TMPCLU has the legal personality to file the Petition-in-Intervention, the Med-Arbiter explained
thus -

The uncontroverted fact in this case is that at the time intervenor TMPCLU filed its application for
registration and subsequently thereafter was issued a certificate of registration on November 24, 1992
(Annex "A," Intervenor's petition-in-intervention), its union membership is (sic) composed of
supervisory and rank-and-file employees.

From this we could infer that the registration certificate issued by the Department of Labor and
Employment is void ab initio because at the time of the issuance the constitution of intervenor union
TMPCLU is (sic) a mixture of supervisory and rank-and-file employees as per finding of fact of Med-
Arbiter Paterno Adap in his Order dated March 8, 1993 (Annex "A," respondent's Answer to Petition-in-
Intervention).

On 14 March 1998, dissatisfied with the unfavorable decision, petitioner appealed to the Secretary of
Labor contending that contrary to the finding of the Med-Arbiter it had the legal personality to intervene
in the certification election proceedings as shown by its Certificate of Registration No. NCR-UR-11-996-
92.

In a Resolution dated 5 June 1998, the Secretary of Labor justified his affirmance of the Med-Arbiter's
decision in this wise -[7]

On the first ground raised on appeal, it is true that the employer is a mere by-stander during the conduct
of a certification election. Prior to the election, however, the employer is not precluded from
ascertaining the legitimacy of the union in order that it can be assured that the union it will be dealing
with is a duly registered labor organization which legally represents the bargaining unit sought to be
represented. There is therefore no error in allowing the employer to question the status of appellant as
in the case at bar.

On the second issue, it had earlier been finally ruled by the Supreme Court (G.R. No 121084) involving
herein employer and appellant that since the bargaining unit of the rank-in-file which TMPCLU is
seeking to represent is a mixture of supervisory employees which is prohibited under Article 245 of the
Labor Code, as amended, the union prior to purging itself of supervisory employees-members, had not
attained the status of a legitimate labor organization. Appellant now simply asserts that it has purged its
membership of supervisory employees and therefore is now a legitimate labor organization of the rank-
and-file employees. Appellant has not however shown that it registered anew because admittedly some
of its officers are supervisory employees. The need to register anew is necessary and the purging by
itself of its officers who are holding supervisory position is imperative. One of the requirements for
registration is the submission of the list of officers. Under the circumstances obtaining, appellant has not
as yet attained the status of a legitimate labor organization. It has therefore no legal authority to oppose
the instant petition.

On 10 August 1998 the Secretary issued an Order denying petitioner's motion for reconsideration;
hence, petitioner now comes to us assailing the aforementioned Resolution and Order of the Secretary of
Labor arguing that -
First. At the time it filed its Petition-in-Intervention on 30 October 1997 it was clothed with legal
personality as a bona fide labor union. Petitioner contended that when it filed the Motion to Intervene
with Opposition to the Petition for Certification Election filed by TMPCEWU and its Petition-in-
Intervention, it did have a Certificate of Registration No. NCR-UR-1199692 which was based on its
compliance with the requisites for union registration. Hence, it had the legal personality when it filed the
Petition-in-Intervention and had all the rights as well as obligations of a legitimate labor organization.
There was therefore no necessity for petitioner to register anew when it was already a registered labor
organization.

Second. The Med-Arbiter had no authority to declare that petitioner's certificate of registration was void
ab initio in a certification election proceeding; neither was the representation proceedings before the
Med-Arbiter the appropriate remedy to ventilate such issue.

To buttress its stance, petitioner drew attention to the fact that the Implementing Rules of the Labor
Code of the Philippines, particularly Book V, Rule 1, Sec. 1 (kk) thereof, and the Med-Arbiter's authority
were limited to hearing, conciliating, mediating and deciding representation cases, internal union and
intra-union disputes. Considering that the case before the Med-Arbiter was a Petition for Certification
Election by respondent TMPCEWU, the only task of the Med-Arbiter was to determine the employees'
choice of their bargaining representative, and nothing more.

Third. The Supreme Court in Toyota Motor Philippines v. Toyota Motor Corporation Philippines Labor
Union and Secretary of Labor,[8] limited the finding of petitioner's lack of personality only to the time
when it filed its Petition for Certification Election.

In this regard, petitioner decries the decision of the Secretary of Labor affirming that of the Med-Arbiter
on the basis of the ruling in the aforecited case. It must be stressed, according to petitioner, that contrary
to the interpretation given by the Med-Arbiter as affirmed by the Secretary of Labor, the Supreme
Court's ruling that it did not have legal personality was limited to the time when it filed its Petition for
Certification Election on 26 November 1992. Neither did the Supreme Court, in that case, rule on the
validity of the certificate of registration.

More importantly, according to petitioner, it was erroneous for the Secretary to assume that inasmuch
as petitioner failed to purge itself of its supervisory employee-members when it filed its previous
Petition for Certification Election on 26 November 1992, it could not have possessed the appropriate
legal personality when it filed its Petition-in-Intervention on 30 October 1997. The truth of the matter is
that with the purging completed, absent any finding of the Supreme Court or any other court or tribunal
declaring the invalidity of the certificate of registration, petitioner possessed the legal personality when
it filed its Petition-in-Intervention.

This Court is called upon to resolve the issue of whether petitioner had legal personality on 30 October
1997 when it filed its Petition-in-Intervention. Corollary thereto, should petitioner register anew despite
its alleged purging of the supervisory employee-members as directed by this Court in Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union[9] and the issuance in its
favor of a certificate of registration after it was found to have violated Art. 245 of the Labor Code?

To find solution to the question in the instant case, we need only refer to the earlier case of Toyota
Motor Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union and the Secretary
of Labor and Employment,[10] which sprang from a Petition for Certification Election filed by TMPCLU
among the rank-and-file employees of TMPC. On 8 March 1993, however, its petition was dismissed by
the Med-Arbiter for the reason that the labor organization's membership was composed of supervisory
and rank-and-file employee-members. On appeal, the Secretary of Labor remanded the case to the Med-
Arbiter upon his finding that factual issues remained unresolved. Pursuant to the order of the Secretary
of Labor, the Med-Arbiter, in his decision dated 28 September 1994, dismissed TMPCLU's Petition for
Certification Election on the basis of the following factual findings:

(T)he (in)controvertible fact is that petitioner could not have been issued its Certificate of Registration
on November 24, 1992 when it applied for registration only on November 23, 1992 as shown by the
official receipt of payment of filing fee. As Enrique Nalus, Chief LEO, this office, would attest in his letter
dated September 8, 1994 addressed to Mr. Porfirio T. Reyes, Industrial Relations Officer of Respondent
company, in response to a query posed by the latter, it is unlikely that an application for registration is
approved on the date that it is filed or the day thereafter as the processing course had to pass through
routing, screening, and assignment, evaluation, review and initialing, and approval/disapproval
procedure, among others, that a 30-day period is provided for under the Labor Code for this purpose, let
alone opposition thereto by interested parties which must be also given due course."

Another evidence which petitioner presented is the "Union Registration 1992 Logbook of IRD" and the
entry date 25 November 1992 as allegedly the date of the release of its registration certificate. On the
other hand, respondent company presented a certified true copy of an entry on page 265 of the Union
Registration Logbook showing the pertinent facts about petitioner but which did not show that
petitioner's registration was issued on or before 26 November 1992.

The Med-Arbiter also found that TMPCLU had not acquired legal personality for the reason that its
composition, being a mixture of supervisory and rank-and-file employees, was in direct violation of Art.
245 of the Labor Code.[11]

Although there is a divergence of factual backdrops between Toyota Motor Philippines Corporation v.
Toyota Motor Philippines Corporation Labor Union and the Secretary of Labor and Employment[12] and
the instant petition in the sense that in the former the filing of a Petition for Certification Election by
petitioner gave rise to the controversy while the present case arose from the filing of a Petition-in-
Intervention, the bottom-line issue in both cases nonetheless involves the legitimacy of petitioner
TMPCLU to file petitions.

We recall that in the first Toyota case, although there was no categorical pronouncement on the validity
of petitioner's certificate of registration considering that we deemed it entirely irrelevant in the light of
the finding that petitioner was not entirely a rank-and-file labor organization, we sustained however in
the same decision the entire factual findings of the Med-Arbiter when we observed -

The foregoing discussion, therefore, renders entirely irrelevant the technical issue raised as to whether
or not respondent union was in possession of the status of a legitimate labor organization at the time of
filing, when, as petitioner vigorously claims, the former was still at the stage of processing of its
application for recognition as a legitimate labor organization. The union's composition being in violation
of the Labor Code's prohibition of unions composed of supervisory and rank-and-file employees, it could
not possess the requisite personality to file for recognition as a legitimate labor organization. In any
case, the factual issue, albeit ignored by the public respondent's assailed Resolution, was adequately
threshed out in the Med-Arbiter's September 28, 1994 Order (underscoring supplied).

In effect therefore, we already impressed our stamp of approval on the factual findings of the Med-
Arbiter in his 28 September 1994 decision, i.e., that petitioner had no valid certificate of registration and
therefore no legal personality to file the Petition for Certification Election and in the absence of any
attempt on its part to rectify the legal infirmity, likewise the disputed Petition-in-Intervention.

It is thus fatuous on petitioner's part to resurrect the issue of legitimacy in the instant case
notwithstanding our earlier ruling sustaining the factual findings of the Med-Arbiter.
We cannot also accede to petitioner's submission that the issuance of a certificate of registration in its
favor is an adequate and unassailable proof that it possesses the requisite legal personality to file a
Petition for Certification Election. Not necessarily. As we emphasized in Progressive Development Corp.
- Pizza Hut v. Laguesma,[13] if a labor organization's application for registration is vitiated by
falsification and serious irregularities, a labor organization should be denied recognition as a legitimate
labor organization. And if a certificate of registration has been issued, the propriety of its registration
could be assailed directly through cancellation of registration proceedings in accordance with Arts. 238
and 239 of the Labor Code, or indirectly, by challenging its petition for the issuance of an order for
certification election. We believe the procedural requirements to impugn the registration by petitioner
were more than adequately complied with as shown in the 1997 case of Toyota Motor Philippines
Corporation v. Toyota Motor Philippines Corporation Labor Union.[14]

There is no reason to belabor the primordial importance of strictly complying with the registration
requirements of the Labor Code. As we have explained in a long line of cases, the activities of labor
organizations, associations and unions are impressed with public interest, hence, must be protected.

WHEREFORE the petition is DISMISSED for lack of merit. Accordingly, the assailed Resolution dated 5
June 1998 and Order dated 10 August 1998 of the Secretary of Labor and Employment affirming the
decision of the Med-Arbiter dated 24 February 1998 which dismissed both the Petition for Certification
Election filed by respondent Toyota Motor Philippines Corp. Employees and Workers Union
(TMPCEWU) and the Petition-in-Intervention of petitioner Toyota Motor Philippines Corp. Labor Union
(TMPCLU) are AFFIRMED.

SIME DARBY PILIPINAS, INC., petitioner, vs. NATIONAL LABOR RELATIONS


COMMISSION (2ND DIVISION) and SIME DARBY SALARIED EMPLOYEES
ASSOCIATION (ALU-TUCP), respondents.
G.R. No. 119205 | 1998-04-15

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Discussions citing this case or law are available.

Labor Law; Labor Standards; Management Prerogative; Right to Change Working Hours of Employees
Coffee breaks or Rest breaks

DECISION

BELLOSILLO, J:

Is the act of management in revising the work schedule of its employees and discarding their paid lunch
break constitutive of unfair labor practice?

Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other
rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an
association of monthly salaried employees of petitioner at its Marikina factory. Prior to the present
controversy, all company factory workers in Marikina including members of private respondent union
worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break.

On 14 August 1992 petitioner issued a memorandum to all factory - based employees advising all its
monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality
Assurance Department working on shifts, a change in work schedule effective 14 September 1992 thus -

TO : ALL FACTORY-BASED EMPLOYEES

RE : NEW WORK SCHEDULE

Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows:

7:45 A.M. - 4:45 P.M. (Monday to Friday)

7:45 A.M. - 11:45 A.M. (Saturday).

Coffee break time will be ten minutes only anytime between:

9:30 A.M. - 10:30 A.M. and

2:30 P.M. - 3:30 P.M.

Lunch break will be between:

12:00 NN - 1:00 P.M. (Monday to Friday).

Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their
work and break time schedules will be maintained as it is now. 1

Since private respondent felt affected adversely by the change in the work schedule and discontinuance
of the 30-minute paid "on call" lunch break, it filed on behalf of its members a complaint with the Labor
Arbiter for unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this
Court in Sime Darby International Tire Co., Inc. v. NLRC. 2 However, the Labor Arbiter dismissed the
complaint on the ground that the change in the work schedule and the elimination of the 30-minute paid
lunch break of the factory workers constituted a valid exercise of management prerogative and that the
new work schedule, break time and one-hour lunch break did not have the effect of diminishing the
benefits granted to factory workers as the working time did not exceed eight (8) hours.

The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to
be paid during their lunch break even if they were no longer "on call" or required to work during the
break. He also ruled that the decision in the earlier Sime Darby case 3 was not applicable to the instant
case because the former involved discrimination of certain employees who were not paid for their 30-
minute lunch break while the rest of the factory workers were paid; hence, this Court ordered that the
discriminated employees be similarly paid the additional compensation for their lunch break.

Private respondent appealed to respondent National Labor Relations Commission (NLRC) which
sustained the Labor Arbiter and dismissed the appeal. 4 However upon motion for reconsideration by
private respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier
retired, reversed its earlier decision of 20 April 1994 as well as the decision of the Labor Arbiter. 5 The
NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case wherein
petitioner was ordered to pay "the money value of these covered employees deprived of lunch and/or
working time breaks." The public respondent declared that the new work schedule deprived the
employees of the honored benefits of a time-honored company practice of providing its employees a 30-
minute paid lunch break resulting in an unjust diminution of company privileges prohibited by Art. 100
of the Labor Code, as amended. Hence, this petition alleging that public respondent committed grave
abuse of discretion amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed
unfair labor practice in the implementation of the change in the work schedule of its employees from
7:45 a.m. - 3:45 p.m. to 7:45 a.m. - 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in
holding that there was diminution of benefits when the 30-minute paid lunch break was eliminated; (c)
in failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC, petitioner
was authorized to discontinue the practice of having a 30-minute paid lunch break should it decide to do
so; and, (d) in ignoring petitioner's inherent management prerogative of determining and fixing the
work schedule of its employees which is expressly recognized in the collective bargaining agreement
between petitioner and private respondent.

The Office of the Solicitor General filed in lieu of comment a manifestation and motion recommending
that the petition be granted, alleging that the 14 August 1992 memorandum which contained the new
work schedule was not discriminatory of the union members nor did it constitute unfair labor practice
on the part of petitioner.

We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests
principally on their employer. In the instant case petitioner, as the employer, cites as reason for the
adjustment the efficient conduct of its business operations and its improved production. 6 It rationalizes
that while the old work schedule included a 30-minute paid lunch break, the employees could be called
upon to do jobs during that period as they were "on call." Even if denominated as lunch break, this
period could very well be considered as working time because the factory employees were required to
work if necessary and were paid accordingly for working. With the new work schedule, the employees
are now given a one-hour lunch break without any interruption from their employer. For a full one-hour
undisturbed lunch break, the employees can freely and effectively use this hour not only for eating but
also for their rest and comfort which are conducive to more efficiency and better performance in their
work. Since the employees are no longer required to work during this one-hour lunch break, there is no
more need for them to be compensated for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of eight (8) hours without violating the Labor
Code. 7 Besides, the new schedule applies to all employees in the factory similarly situated whether they
are union members or not. 8

Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby
case 9 with the facts obtaining in this case. That ruling in the former case is not applicable here. The
issue in that case involved the matter of granting lunch breaks to certain employees while depriving the
other employees of such breaks. This Court affirmed in that case the NLRC's finding that such act of
management was discriminatory and constituted unfair labor practice.

The case before us does not pertain to any controversy involving discrimination of employees but only
the issue of whether the change of work schedule, which management deems necessary to increase
production, constitutes unfair labor practice. As shown by the records, the change effected by
management with regard to working time is made to apply to all factory employees engaged in the same
line of work whether or not they are members of private respondent union. Hence, it cannot be said that
the new scheme adopted by management prejudices the right of private respondent to self-
organization.

Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain
that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. 10 Thus, management is free to
regulate, according to its own discretion and judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and manner of work, processes to be followed,
supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers. 11 Further, management retains the prerogative,
whenever exigencies of the service so require, to change the working hours of its employees. So long as
such prerogative is exercised in good faith for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold such exercise. 12

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every dispute will be automatically decided in favor of labor.
Management also has rights which, as such, are entitled to respect and enforcement in the interest of
simple fair play. Although this Court has inclined more often than not toward the worker and has upheld
his cause in his conflicts with the employer, such favoritism has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine. 13

WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission
dated 29 November 1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993
dismissing the complaint against petitioner for unfair labor practice is AFFIRMED.

SO ORDERED.

CHINA BANKING CORPORATION, Petitioner, versus MARIANO M. BORROMEO,


Respondent.
G.R. No. 156515 | 2004-10-19

DECISION

CALLEJO, SR., J.:


Before the Court is the petition for review on certiorari filed by China Banking Corporation seeking the
reversal of the Decision[1] dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365,
remanding to the Labor Arbiter for further hearings the complaint for payment of separation pay, mid-
year bonus, profit share and damages filed by respondent Mariano M. Borromeo against the petitioner
Bank. Likewise, sought to be reversed is the appellate court's Resolution dated January 6, 2003, denying
the petitioner Bank's motion for reconsideration.

The factual antecedents of the case are as follows:

Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989 as Manager assigned at
the latter's Regional Office in Cebu City. He then had the rank of Manager Level I. Subsequently, the
respondent was laterally transferred to Cagayan de Oro City as Branch Manager of the petitioner Bank's
branch thereat.

For the years 1989 and 1990, the respondent received a "highly satisfactory" performance rating and
was given the corresponding profit sharing/performance bonus. From 1991 up to 1995, he consistently
received a "very good" performance rating for each of the said years and again received the
corresponding profit sharing/performance bonus. Moreover, in 1992, he was promoted from Manager
Level I to Manager Level II. In 1994, he was promoted to Senior Manager Level I. Then again, in 1995, he
was promoted to Senior Manager Level II. Finally, in 1996, with a "highly satisfactory" performance
rating, the respondent was promoted to the position of Assistant Vice-President, Branch Banking Group
for the Mindanao area effective October 16, 1996. Each promotion had the corresponding increase in the
respondent's salary as well as in the benefits he received from the petitioner Bank.

However, prior to his last promotion and then unknown to the petitioner Bank, the respondent, without
authority from the Executive Committee or Board of Directors, approved several DAUD/BP
accommodations amounting to P2,441,375 in favor of Joel Maniwan, with Edmundo Ramos as surety.
DAUD/BP is the acronym for checks "Drawn Against Uncollected Deposits/Bills Purchased." Such
checks, which are not sufficiently funded by cash, are generally not honored by banks. Further, a
DAUD/BP accommodation is a credit accommodation granted to a few and select bank clients through
the withdrawal of uncollected or uncleared check deposits from their current account. Under the
petitioner Bank's standard operating procedures, DAUD/BP accommodations may be granted only by a
bank officer upon express authority from its Executive Committee or Board of Directors.

As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town checks (7
PCIB checks and 3 UCPB checks) of various dates amounting to P2,441,375 were returned unpaid from
September 20, 1996 to October 17, 1996. Each of the returned checks was stamped with the notation
"Payment Stopped/Account Closed."

On October 8, 1996, the respondent wrote a Memorandum to the petitioner Bank's senior management
requesting for the grant of a P2.4 million loan to Maniwan. The memorandum stated that the loan was
"to regularize/liquidate subject's (referring to Maniwan) DAUD availments." It was only then that the
petitioner Bank came to know of the DAUD/BP accommodations in favor of Maniwan. The petitioner
Bank further learned that these DAUD/BP accommodations exceeded the limit granted to clients, were
granted without proper prior approval and already past due. Acting on this information, Samuel L.
Chiong, the petitioner Bank's First Vice- President and Head-Visayas Mindanao Division, in his
Memorandum dated November 19, 1996 for the respondent, sought clarification from the latter on the
following matters:

1) When DAUD/BP accommodations were allowed, what efforts, if any, were made to establish the
identity and/or legitimacy of the alleged broker or drawers of the checks accommodated?

2) Did the branch follow and comply with operating procedure which require that all checks
accommodated for DAUD/BP should be previously verified with the drawee bank and history if not
outright balances determined if enough to cover the checks?

3) How did the accommodations reach P2,441,375.00 when our records indicate that the borrowers
B/P-DAUD line is only for P500,000.00? When did the accommodations start exceeding the limit of
P500,000.00 and under whose authority?

4) When did the accommodated checks start bouncing?

5) What is the status of these checks now and what has the branch done so far to protect/ensure
collectibility of the returned checks?

6) What about client Joel Maniwan and surety Edmund Ramos, what steps have they done to pay the
checks returned?[2]

In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the foregoing queries
in seriatim and explained, thus:

1. None

2. No
3. The accommodations reach P2.4 million upon the request of Mr. Edmund Ramos, surety, and this
request was subsequently approved by undersigned. The excess accommodations started in July '96
without higher management approval.

4. Checks started bouncing on September 20, 1996.

5. Checks have remained unpaid. The branch sent demand letters to Messrs. Maniwan and Ramos and
referred the matter to our Legal Dept. for filing of appropriate legal action.

6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention to settle by Feb. 1997.

Justification for lapses committed (Item nos. 1 to 3).

The account was personally endorsed and referred to us by Mr. Edmund Ramos, Branch Manager of
Metrobank, Divisoria Br., Cagayan de Oro City. In fact, the CASA account was opened jointly as &/or
(Maniwan &/or Ramos). Mr. Ramos gave us his full assurance that the checks that we intend to purchase
are the same drawee that Metrobank has been purchasing for the past one (1) year already. He even
disclosed that these checks were verified by his own branch accountant and that Mr. Maniwan's loan
account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin of CIFC. To show his
sincerity, Mr. Ramos signed as surety for Mr. Maniwan for P2.5MM. Corollary to this, Mr. Ramos applied
for a loan with us mortgaging his house, lot and duplex with an estimated market value of P4.508MM.
The branch, therefore, is not totally negligent as officer to officer bank checking was done. In fact, it is
also for the very same reason that other banks granted DAUD to subject account and, likewise, the
checks returned unpaid, namely:

Solidbank P1.8 Million

Allied Bank .8

Far East Bank 2.0

MBTC 5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself. Further to this, undersigned
conferred with the acting BOH VSYap if these checks are legitimate 3rd party checks.
On the other hand, Atty. Musni continues to insist that Mr. Maniwan was gypped by a broker in the total
amount of P10.00 Million.

Undersigned accepts full responsibility for committing an error in judgment, lapses in control and abuse
of discretion by relying solely on the word, assurance, surety and REM of Mr. Edmund Ramos, a friend
and a co-bank officer. I am now ready to face the consequence of my action.[3]

In another Letter dated April 8, 1997, the respondent notified Chiong of his intention to resign from the
petitioner Bank and apologized "for all the trouble I have caused because of the Maniwan case."[4] The
respondent, however, vehemently denied benefiting therefrom. In his Letter dated April 30, 1997, the
respondent formally tendered his irrevocable resignation effective May 31, 1997.[5]

In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D. Yang, the petitioner
Bank's Senior Vice-President and Head-Branch Banking Group, informed the former that his approval of
the DAUD/BP accommodations in favor of Maniwan without authority and/or approval of higher
management violated the petitioner Bank's Code of Ethics. As such, he was directed to restitute the
amount of P1,507,736.79 representing 90% of the total loss of P1,675,263.10 incurred by the petitioner
Bank. However, in view of his resignation and considering the years of service in the petitioner Bank, the
management earmarked only P836,637.08 from the respondent's total separation benefits or pay. The
memorandum addressed to the respondent stated:

After a careful review and evaluation of the facts surrounding the above case, the following have been
conclusively established:

1. The branch granted various BP/DAUD accommodations to clients Joel Maniwan/Edmundo Ramos in
excess of approved lines through the following out-of-town checks which were returned for the reason
"Payment Stopped/Account Closed":

1. PCIB Cebu Check No. 86256 P251,816.00

2. PCIB Cebu Check No. 86261 235,880.00

3. PCIB Cebu Check No. 8215 241,443.00

4. UCPB Tagbilaran Check No. 277,630.00


5. PCIB Bogo, Cebu Check No. 6117 267,418.00

6. UCPB Tagbilaran Check No. 216070 197,467.00

7. UCPB Tagbilaran Check No. 216073 263,920.00

8. PCIB Bogo, Cebu Check No. 6129 253,528.00

9. PCIB Bogo, Cebu Check No. 6122 198,615.00

10. PCIB Bogo, Cebu Check No. 6134 253,658.00

2. The foregoing checks were accommodated through your approval which was in excess of your
authority.

3. The branch failed to follow the fundamental and basic procedures in handling BP/DAUD
accommodations which made the accommodations basically flawed.

4. The accommodations were attended by lapses in control consisting of failure to report the exception
and failure to cover the account of Joel Maniwan with the required Credit Line Agreement.

Since the foregoing were established by your own admissions in your letter explanation dated 5
December 1996, and the Audit Report and findings of the Region Head, Management finds your actions
in violation of the Bank's Code of Ethics:

Table 6.2., no. 1: Compliance with Standard Operating Procedures

- "Infraction of Bank procedures in handling any bank transactions or work assignment which results in
a loss or probable loss."

Table 6.3., no. 6: Proper Conduct and Behavior -

"Willful misconduct in the performance of duty whether or not the bank suffers a loss," and/or

Table 6.5., no. 1: Work Responsibilities -

"Dereliction of duty whether or not the Bank suffers a loss," and/or

Table 6.6., no. 2: Authority and Subordination -

"Failure to carry out lawful orders or instructions of superiors."


Your approval of the accommodations in excess of your authority without prior authority and/or
approval from higher management is a violation of the above cited Rules.

In view of these, you are directed to restitute the amount of P1,507,736.79 representing 90% of the total
loss of P1,675,263.10 incurred by the Bank as your proportionate share. However, in light of your
voluntary separation from the Bank effective May 31, 1997, in view of the years of service you have
given to the Bank, management shall earmark and segregate only the amount of P836,637.08 from your
total separation benefits/pay. The Bank further directs you to fully assist in the effort to collect from Joel
Maniwan and Edmundo Ramos the sums due to the Bank.[6]

In the Letter dated May 26, 1997 addressed to the respondent, Remedios Cruz, petitioner Bank's Vice-
President of the Human Resources Division, again informed him that the management would withhold
the sum of P836,637.08 from his separation pay, mid-year bonus and profit sharing. The amount
withheld represented his proportionate share in the accountability vis-á -vis the DAUD/BP
accommodations in favor of Maniwan. The said amount would be released upon recovery of the sums
demanded from Maniwan in Civil Case No. 97174 filed against him by the petitioner Bank with the
Regional Trial Court in Cagayan de Oro City.

Consequently, the respondent, through counsel, made a demand on the petitioner Bank for the payment
of his separation pay and other benefits. The petitioner Bank maintained its position to withhold the
sum of P836,637.08. Thus, the respondent filed with the National Labor Relations Commission (NLRC),
Regional Arbitration Branch No. 10, in Cagayan de Oro City, the complaint for payment of separation
pay, mid-year bonus, profit share and damages against the petitioner Bank.

The parties submitted their respective position papers to the Labor Arbiter. Thereafter, the respondent
filed a motion to set case for trial or hearing. Acting thereon, the Labor Arbiter, in the Order dated
January 29, 1999, denied the same stating that:

... This Branch views that if complainant finds the necessity to controvert the allegations in the
respondent's pleadings, then he may file a supplemental position paper and adduce thereto evidence
and additional supporting documents, the soonest possible time. All the evidence will be evaluated by
the Branch to determine whether or not a clarificatory hearing shall be conducted.[7]

On February 26, 1999, the Labor Arbiter issued another Order submitting the case for resolution upon
finding that he could judiciously pass on the merits without the necessity of further hearing.
On even date, the Labor Arbiter promulgated the Decision[8] dismissing the respondent's complaint.
According to the Labor Arbiter, the respondent, an officer of the petitioner Bank, had committed a
serious infraction when, in blatant violation of the bank's standard operating procedures and policies, he
approved the DAUD/BP accommodations in favor of Maniwan without authorization by senior
management. Even the respondent himself had admitted this breach in the letters that he wrote to the
senior officers of the petitioner Bank.

The Labor Arbiter, likewise, made the finding that the respondent offered to assign or convey a property
that he owned to the petitioner Bank as well as proposed the withholding of the benefits due him to
answer for the losses that the petitioner Bank incurred on account of unauthorized DAUD/BP
accommodations. But even if the respondent had not given his consent, the Labor Arbiter held that the
petitioner Bank's act of withholding the benefits due the respondent was justified under its Code of
Ethics. The respondent, as an officer of the petitioner Bank, was bound by the provisions of the said
Code.

Aggrieved, the respondent appealed to the National Labor Relations Commission. After the parties had
filed their respective memoranda, the NLRC, in the Decision dated October 20, 1999, dismissed the
appeal as it affirmed in toto the findings and conclusions of the Labor Arbiter. The NLRC preliminarily
ruled that the Labor Arbiter committed no grave abuse of discretion when he decided the case on the
basis of the position papers submitted by the parties. On the merits, the NLRC, like the Labor Arbiter,
gave credence to the petitioner Bank's allegation that the respondent offered to pledge his property to
the bank and proposed the withholding of his benefits in acknowledgment of the serious infraction he
committed against the bank. Further, the NLRC concurred with the Labor Arbiter that the petitioner
Bank was justified in withholding the benefits due the respondent. Being a responsible bank officer, the
respondent ought to know that, based on the petitioner Bank's Code of Ethics, restitution may be
imposed on erring employees apart from any other penalty for acts resulting in loss or damage to the
bank. The decretal portion of the NLRC decision reads:

WHEREFORE, the decision of the Labor Arbiter is Affirmed. The appeal is Dismissed for lack of merit.

SO ORDERED.[9]

The respondent moved for a reconsideration of the said decision but the NLRC, in the Resolution of
December 20, 1999, denied his motion.

The respondent then filed a petition for certiorari with the Court of Appeals alleging that the NLRC
committed grave abuse of discretion when it affirmed the findings and conclusions of the Labor Arbiter.
He vehemently denied having offered to pledge his property to the bank or proposed the withholding of
his separation pay and other benefits. Further, he argued that the petitioner Bank deprived him of his
right to due process because it unilaterally imposed the penalty of restitution on him. The DAUD/BP
accommodations in favor of Maniwan allegedly could not be considered as a "loss" to the bank as the
amounts may still be recovered. The respondent, likewise, maintained that the Labor Arbiter should not
have decided the case on the basis of the parties' position papers but should have conducted a full-
blown hearing thereon.

On July 19, 2002, the CA rendered the Decision[10] now being assailed by the petitioner Bank. The CA
found merit in the respondent's contention that he was deprived of his right to due process by the
petitioner Bank as no administrative investigation was conducted by it prior to its act of withholding the
respondent's separation pay and other benefits. The respondent was not informed of any charge against
him in connection with the Maniwan DAUD/BP accommodations nor afforded the right to a hearing or
to defend himself before the penalty of restitution was imposed on him. This, according to the appellate
court, was contrary not only to the fundamental principle of due process but to the petitioner Bank's
Code of Ethics as well.

The CA further held that the Labor Arbiter, likewise, failed to afford the respondent due process when it
denied his motion to set case for trial or hearing. While the authority of the Labor Arbiter to decide a
case based on the parties' position papers and documents is indubitable, the CA opined that factual
issues attendant to the case, including whether or not the respondent proposed the withholding of his
benefits or pledged the same to the petitioner Bank, necessitated the conduct of a full-blown trial. The
appellate court explained that:

Procedural due process, as must be remembered, has two main concerns, the prevention of unjustified
or mistaken deprivation and the promotion of participation and dialogue by affected individuals in the
decision-making process. Truly, the magnitude of the case and the withholding of Borromeo's property
as well as the willingness of the parties to conciliate, make a hearing imperative. As manifested by the
bank, it did not contest Borromeo's motion for hearing or trial inasmuch as the bank itself wanted to
fully ventilate its side.[11]

Accordingly, the CA set aside the decision of the NLRC and ordered that the records of the case be
remanded to the Labor Arbiter for further hearings on the factual issues involved.

The petitioner Bank filed a motion for reconsideration of the said decision but the CA, in the assailed
Resolution of January 6, 2003, denied the same as it found no compelling ground to warrant
reconsideration.[12] Hence, its recourse to this Court alleging that the assailed CA decision is contrary to
law and jurisprudence in that:

I.

THE FACTUAL FINDINGS OF THE LABOR ARBITER AS AFFIRMED BY THE NATIONAL LABOR
RELATIONS COMMISSION ARE SUPPORTED BY SUBSTANTIAL EVIDENCE AND SHOULD HAVE BEEN
ACCORDED RESPECT AND FINALITY BY THE COURT OF APPEALS IN ACCORDANCE WITH GOVERNING
JURISPRUDENCE.
II.

AT ALL TIMES, THE LABOR ARBITER ACTED IN ACCORDANCE WITH THE REQUIREMENTS OF DUE
PROCESS IN THE PROCEEDINGS A QUO.

III.

THERE WAS NO VIOLATION BY PETITIONER BANK OF RESPONDENT'S RIGHT TO DUE PROCESS AS NO


ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE CONDUCTED ON HIS ADMITTED
MISCONDUCT.[13]

The petitioner Bank posits that the sole factual issue that remained in dispute was whether the
respondent pledged his benefits as guarantee for the losses the bank incurred resulting from the
unauthorized DAUD/BP accommodations in favor of Maniwan. On this issue, both the Labor Arbiter and
the NLRC found that the respondent had indeed pledged his benefits to the bank. According to the
petitioner Bank, this factual finding should have been accorded respect by the CA as the same is
supported by the evidence on record. By ordering the remand of the case to the Labor Arbiter, the CA
allegedly unjustifiably analyzed and weighed all over again the evidence presented.

The petitioner Bank insists that the Labor Arbiter acted within his authority when he denied the
respondent's motion to set case for hearing or trial and instead decided the case on the basis of the
position papers and evidence submitted by the parties. Due process simply demands an opportunity to
be heard and the respondent was not denied of this as he was even given the opportunity to file a
supplemental position paper and other supporting documents, but he did not do so.

The petitioner Bank takes exception to the findings of the appellate court that the respondent was not
afforded the right to a hearing or to defend himself by the petitioner Bank as it did not conduct an
administrative investigation. The petitioner Bank points out that it was poised to conduct one but was
preempted by the respondent's resignation. In any case, respondent himself in his Letter dated
December 5, 1996, in reply to the clarificatory queries of Chiong, admitted that the DAUD/BP
accommodations were granted "without higher management approval" and that he (the respondent)
"accepts full responsibility for committing an error of judgment, lapses in control and abuse of
discretion ..." Given the respondent's admission, the holding of a formal investigation was no longer
necessary.

For his part, the respondent, in his Comment, maintains that the DAUD/BP accommodations in favor of
Maniwan were approved, albeit not expressly, by the senior management of the petitioner Bank. He cites
the regular reports he made to Chiong, his superior, regarding the DAUD/BP transactions made by the
branch, including that of Maniwan, and Chiong never called his attention thereto nor stopped or
reprimanded him therefor. These reports further showed that he did not conceal these transactions to
the management.
The respondent vehemently denies having offered the withholding of his benefits or pledged the same to
the petitioner Bank. The findings of the Labor Arbiter and the NLRC that what he did are allegedly not
supported by the evidence on record.

The respondent is of the view that restitution is not proper because the petitioner Bank has not, as yet,
incurred any actual loss as the amount owed by Maniwan may still be recovered from him. In fact, the
petitioner Bank had already instituted a civil case against Maniwan for the recovery of the sum and the
RTC rendered judgment in the petitioner Bank's favor. The case is still pending appeal. In any case, the
respondent argues that the petitioner Bank could not properly impose the accessory penalty of
restitution on him without imposing the principal penalty of "Written Reprimand/Suspension" as
provided under its Code of Ethics. He, likewise, vigorously avers that, in contravention of its own Code of
Ethics, he was denied due process by the petitioner Bank as it did not conduct any administrative
investigation relative to the unauthorized DAUD/BP accommodations. He was not informed in writing of
any charge against him nor was he given the opportunity to defend himself.

The petition is meritorious.

The Court shall first resolve the procedural issue raised in the petition, i.e., whether the CA erred in
remanding the case to the Labor Arbiter. The Court rules in the affirmative. It is settled that
administrative bodies like the NLRC, including the Labor Arbiter, are not bound by the technical niceties
of the law and procedure and the rules obtaining in courts of law.[14] Rules of evidence are not strictly
observed in proceedings before administrative bodies like the NLRC, where decisions may be reached
on the basis of position papers.[15] The holding of a formal hearing or trial is discretionary with the
Labor Arbiter and is something that the parties cannot demand as a matter of right.[16] As a corollary,
trial-type hearings are not even required as the cases may be decided based on verified position papers,
with supporting documents and their affidavits.[17]

Hence, the Labor Arbiter acted well within his authority when he issued the Order dated February 26,
1999 submitting the case for resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing. On the other hand, the assailed CA decision's directive
requiring him to conduct further hearings constitutes undue interference with the Labor Arbiter's
discretion. Moreover, to require the conduct of hearings would be to negate the rationale and purpose of
the summary nature of the proceedings mandated by the Rules and to make mandatory the application
of the technical rules of evidence.[18] The appellate court, therefore, committed reversible error in
ordering the remand of the case to the Labor Arbiter for further hearings.

Before delving on the merits of the case, it is well to remember that factual findings of the NLRC
affirming those of the Labor Arbiter, both bodies being deemed to have acquired expertise in matters
within their jurisdiction, when sufficiently supported by evidence on record, are accorded respect, if not
finality, and are considered binding on this Court.[19] As long as their decisions are devoid of any
arbitrariness in the process of their deduction from the evidence proffered by the parties, all that is left
is for the Court to stamp its affirmation.[20]

In this case, the factual findings of the Labor Arbiter and those of the NLRC concur on the following
material points: the respondent was a responsible officer of the petitioner Bank; by his own admission,
he granted DAUD/BP accommodations in excess of the authority given to him and in violation of the
bank's standard operating procedures; the petitioner Bank's Code of Ethics provides that
restitution/forfeiture of benefits may be imposed on the employees for, inter alia, infraction of the
bank's standard operating procedures; and, the respondent resigned from the petitioner Bank on May
31, 1998. These factual findings are amply supported by the evidence on record.

Indeed, it had been indubitably shown that the respondent admitted that he violated the petitioner
Bank's standard operating procedures in granting the DAUD/BP accommodations in favor of Maniwan
without higher management approval. The respondent's replies to the clarificatory questions
propounded to him by way of the Memorandum dated November 19, 1996 were particularly significant.
When the respondent was asked whether efforts were made to establish the identity and/or legitimacy
of the drawers of the checks before the DAUD/BP accommodations were allowed,[21] he replied in the
negative.[22] To the query "did the branch follow and comply with operating procedure which require
that all checks accommodated for DAUD/BP should be previously verified with the drawee bank and
history, if not outright balances, determined if enough to cover the checks?"[23] again, the respondent
answered "no."[24] When asked under whose authority the excess DAUD/BP accommodations were
granted,[25] the respondent expressly stated that they were "approved by undersigned (referring to
himself)" and that the excess accommodation was granted "without higher management approval."[26]
More telling, however, is the respondent's statement that he "accepts full responsibility for committing
an error in judgment, lapses in control and abuse of discretion by relying solely on the word, assurance,
surety and REM of Mr. Edmundo Ramos."[27] The respondent added that he was "ready to face the
consequence of [his] action."[28]

The foregoing sufficiently establish that the respondent, by his own admissions, had violated the
petitioner Bank's standard operating procedures. Among others, the petitioner Bank's Code of Ethics
provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES

VIOLATIONS
PENALTIES

1ST
2ND
3RD
4TH
1. Infraction of Bank procedures in handling any Bank transaction or work assignment which results in a
loss or probable loss
Written Reprimand/ Suspension*
Suspension/ Dismissal*
Dismissal*

* With restitution, if warranted.

Further, the said Code states that:

7.2.5. Restitution/Forfeiture of Benefits

Restitution may be imposed independently or together with any other penalty in case of loss or damage
to the property of the Bank, its employees, clients or other parties doing business with the Bank. The
Bank may recover the amount involved by means of salary deduction or whatever legal means that will
prompt offenders to pay the amount involved. But restitution shall in no way mitigate the penalties
attached to the violation or infraction.

Forfeiture of benefits/privileges may also be effected in cases where infractions or violations were
incurred in connection with or arising from the application/availment thereof.

It is well recognized that company policies and regulations are, unless shown to be grossly oppressive or
contrary to law, generally binding and
valid on the parties and must be complied with until finally revised or amended unilaterally or
preferably through negotiation or by competent authority.[29] Moreover, management has the
prerogative to discipline its employees and to impose appropriate penalties on erring workers pursuant
to company rules and regulations.[30] With more reason should these truisms apply to the respondent,
who, by reason of his position, was required to act judiciously and to exercise his authority in harmony
with company policies.[31]

Contrary to the respondent's contention that the petitioner Bank could not properly impose the
accessory penalty of restitution on him without imposing the principal penalty of "Written
Reprimand/Suspension," the latter's Code of Ethics expressly sanctions the imposition of
restitution/forfeiture of benefits apart from or independent of the other penalties. Obviously, in view of
his voluntary separation from the petitioner Bank, the imposition of the penalty of reprimand or
suspension would be futile. The petitioner Bank was left with no other recourse but to impose the
ancillary penalty of restitution. It was certainly within the petitioner Bank's prerogative to impose on
the respondent what it considered the appropriate penalty under the circumstances pursuant to its
company rules and regulations.

Anent the issue that the respondent's right to due process was violated by the petitioner Bank since no
administrative investigation was conducted prior to the withholding of his separation benefits, the Court
rules that, under the circumstances obtaining in this case, no formal administrative investigation was
necessary. Due process simply demands an opportunity to be heard and this opportunity was not denied
the respondent.[32]

Prior to the respondent's resignation, he was furnished with the Memorandum[33] dated November 19,
1996 in which several clarificatory questions were propounded to him regarding the DAUD/BP
accommodations in favor of Maniwan. Among others, the respondent was asked whether the bank's
standard operating procedures were complied with and under whose authority the accommodations
were granted. From the tenor thereof, it could be reasonably gleaned that the said memorandum
constituted notice of the charge against the respondent.

Replying to the queries, the respondent, in his Letter[34] dated December 5, 1996, admitted, inter alia,
that he approved the DAUD/BP accommodations in favor of Maniwan and the amount in excess of the
credit limit of P500,000 was approved by him without higher management approval. The respondent,
likewise, admitted non-compliance with the bank's standard operating procedures, specifically, that
which required that all checks accommodated for DAUD/BP be previously verified with the drawee
bank and history, if not outright balances determined if enough to cover the checks. In the same letter,
the respondent expressed that he
"accepts full responsibility for committing an error in judgment, lapses in control and abuse of
discretion" and that he is "ready to face the consequence of his action."

Contrary to his protestations, the respondent was given the opportunity to be heard and considering his
admissions, it became unnecessary to hold any formal investigation.[35] More particularly, it became
unnecessary for the petitioner Bank to conduct an investigation on whether the respondent had
committed an "[I]nfraction of Bank procedures in handling any Bank transaction or work assignment
which results in a loss or probable loss" because the respondent already admitted the same. All that was
needed was to inform him of the findings of the management[36] and this was done by way of the
Memorandum[37] dated May 23, 1997 addressed to the respondent. His claim of denial of due process
must perforce fail.

Significantly, the respondent is not wholly deprived of his separation benefits. As the Labor Arbiter
stressed in his decision, "the separation benefits due the complainant (the respondent herein) were
merely withheld."[38] The NLRC made the same conclusion and was even more explicit as it opined that
the respondent "is entitled to the benefits he claimed in pursuance to the Collective Bargaining
Agreement but, in the meantime, such benefits shall be deposited with the bank by way of pledge."[39]
Even
the petitioner Bank itself gives "the assurance that as soon as the Bank has satisfied a judgment in Civil
Case No. 97174, the earmarked portion of his benefits will be released without delay."[40]

It bears stressing that the respondent was not just a rank and file employee. At the time of his
resignation, he was the Assistant Vice- President, Branch Banking Group for the Mindanao area of the
petitioner Bank. His position carried authority for the exercise of independent judgment and discretion,
characteristic of sensitive posts in corporate hierarchy.[41] As such, he was, as earlier intimated,
required to act judiciously and to exercise his authority in harmony with company policies.[42]

On the other hand, the petitioner Bank's business is essentially imbued with public interest and owes
great fidelity to the public it deals with.[43] It is expected to exercise the highest degree of diligence in
the selection and supervision of their employees.[44] As a corollary, and like all other business
enterprises, its prerogative to discipline its employees and to impose appropriate penalties on erring
workers pursuant to company rules and regulations must be respected.[45] The law, in protecting the
rights of labor, authorized neither oppression nor self-destruction of an employer company which itself
is possessed of rights that must be entitled to recognition and respect.[46]

WHEREFORE, the petition is GRANTED. The Decision dated July 19, 2002 of the Court of Appeals and its
Resolution dated January 6, 2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The
Resolution dated October 20, 1999 of the NLRC, affirming the Decision dated February 26, 1999 of the
Labor Arbiter, is REINSTATED.

SO ORDERED.

J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs.


NATIONAL LABOR RELATIONS COMMISSION and JOSE F. MASCARINAS,
respondents.
G.R. No. 148340 | 2004-01-26

DECISION

QUISUMBING, J.:
For review are the Decision[1] dated February 27, 2001 of the Court of Appeals in CA-G.R. SP No. 60337,
and its Resolution[2] dated May 28, 2001, denying the motion for reconsideration. The Court of Appeals
dismissed the petition for certiorari filed by petitioners and affirmed the Resolution[3] of the National
Labor Relations Commission (NLRC), Third Division, which affirmed the Decision[4] of Labor Arbiter
Jose G. De Vera in NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal
dismissal and ordered petitioners to pay private respondent Jose Mascarinas separation pay, backwages,
legal holiday pay, service incentive leave pay and 13th month pay in the aggregate sum of P85,871.00.

The facts, as culled from the records, are as follows:

Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged in the
business of selling second-hand heavy equipment. JAT is owned by its namesake, co-petitioner Jesusa
Adlawan Torobu. Sometime in April 1997, JAT hired private respondent Jose F. Mascarinas as helper
tasked to coordinate with the cleaning and delivery of the heavy equipment sold to customers. Initially,
private respondent was hired as a probationary employee and was paid P165 per day that was
increased to P180 in July 1997 and P185 in January 1998.

In October 1997, the sales of heavy equipment declined because of the Asian currency crisis.
Consequently, JAT temporarily suspended its operations. It advised its employees, including private
respondent, not to report for work starting on the first week of March 1998. JAT indefinitely closed shop
effective May 1998.

A few days after, private respondent filed a case for illegal dismissal and underpayment of wages against
petitioners before the NLRC.

In his Complaint, private respondent alleged that he started as helper mechanic of JAT on January 6,
1997 with an initial salary rate of P165.00 per day, which was increased to P180.00 per day after six (6)
months in employment. He related that he was one of those retrenched from employment by JAT and
was allegedly required to sign a piece of paper which he refused, causing his termination from
employment.

On December 14, 1998, JAT filed an Establishment Termination Report with the Department of Labor
and Employment (DOLE), notifying the latter of its decision to close its business operations due to
business losses and financial reverses.

After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding the dismissal of
herein private respondent unjustified and ordering JAT to pay private respondent separation pay and
backwages, among others. The decretal portion of the decision reads as follows:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the
respondents [herein petitioners] to pay complainant the aggregate sum of P85,871.00.

SO ORDERED.[5]

The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas' dismissal was unjustified
because of petitioners' failure to serve upon the private respondent and the DOLE the required written
notice of termination at least one month prior to the effectivity thereof and to submit proof showing that
petitioners suffered a business slowdown in operations and sales effective January 1998; (2) private
respondent may recover backwages from March 1, 1998 up to March 1, 1999 or P66,924.00[6] and
separation pay, in lieu of reinstatement, at the rate of one (1) month pay for every year of service, or
P10,296.00;[7] (3) the payrolls submitted by JAT showed that effective May 1, 1997, private
respondent's wages did not conform to the prevailing minimum wage, hence, private respondent is
entitled to salary differentials from May 1, 1997 to January 6, 1998, in the amount of P1,066.00;[8] (4)
that private respondent be awarded legal holiday pay in the amount of P1,850.00,[9] service incentive
leave pay in the amount of P925.00[10] and 13th month pay for 1997 in the amount of P4,810.00.[11]

On appeal, the NLRC affirmed the decision of the labor arbiter.[12] The NLRC found that the financial
statements submitted on appeal were questionable, unreliable and inconsistent with petitioners'
allegations in the pleadings, particularly as to the date of the alleged closure of operation; hence, they
cannot be used to support private respondent's dismissal. The NLRC also affirmed the monetary awards
because petitioners failed to prove the payment of benefits claimed by private respondent.

Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of Appeals, which
the latter dismissed. The decretal portion of the decision reads as follows:

WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact and in law, is
hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed decision of the National Labor
Relations Commission AFFIRMED, with costs to petitioners.

SO ORDERED.[13]

The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal of the
private respondent. The appellate court held that the petitioners failed to prove by clear and convincing
evidence their compliance with the requirements for valid retrenchment. It cited the findings of the
NLRC on the belated submission of the financial statements during appeal that could not be given
sufficient weight, and that the petitioners' late submission of notice of closure is indicative of their bad
faith.

Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.

Hence, the present petition alleging that the:

A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF TEMPORARY SUSPENSION OF BUSINESS;

B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS NOT DISMISSED FROM SERVICE
AT THE TIME THE COMPLAINT WAS FILED;

C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE BURDEN OF PROVING
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES;

D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED TO COMPLY WITH
THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN AWARDING BACKWAGES AND/OR
SEPARATION PAY TO PRIVATE RESPONDENT EVEN FOR PERIOD AFTER PETITIONERS FILED A
NOTICE OF ACTUAL CLOSURE OF THE COMPANY BEFORE THE LABOR DEPARTMENT.[14]

The relevant issues for our resolution are: (a) whether or not private respondent was illegally dismissed
from employment due to closure of petitioners' business, and (b) whether or not private respondent is
entitled to separation pay, backwages and other monetary awards.

On the first issue, the petitioners claim that the Court of Appeals erroneously concluded that they are
liable for illegal dismissal because of non-compliance of the procedural and substantive requirements of
terminating employment due to retrenchment and cessation of business. They argued that there was no
closure but only suspension of operation in good faith in March 1998, when private respondent claimed
to have been illegally dismissed, due to the decline in sales and heavy losses incurred in its business
arising from the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the Labor Code, a
bona fide suspension of the operation of a business for a period not exceeding six (6) months shall not
terminate employment and no notice to an employee is required. However, petitioners relate that JAT
was compelled to permanently close its operation eight (8) months later or on November 1998, when
the hope of recovery became nil but only after sending notices to all its workers and DOLE. Thus,
petitioners argue that it cannot be held liable for illegal dismissal in March 1998 since there was no
termination of employment during suspension of operations and a notice to employee is not required,
unlike in the case of permanent closure of business operation.

We need not belabor the issue of notice requirement for a suspension of operation of business under
Article 286[15] of the Labor Code. This matter is not pertinent to, much less determinative of, the
disposition of this case. Suffice it to state that there is no termination of employment during the period
of suspension, thus the procedural requirement for terminating an employee does not come into play
yet. Rather, the issue demanding a sharpened focus here concerns the validity of dismissal resulting
from the closure of JAT.

A brief discussion on the difference between retrenchment and closure of business as grounds for
terminating an employee is necessary. While the Court of Appeals defined the issue to be the validity of
dismissal due to alleged closure of business, it cited jurisprudence relating to retrenchment to support
its resolution and conclusion. While the two are often used interchangeably and are interrelated, they
are actually two separate and independent authorized causes for termination of employment.
Termination of an employment may be predicated on one without need of resorting to the other.

Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a complete
cessation of business operations and/or an actual locking-up of the doors of establishment, usually due
to financial losses. Closure of business as an authorized cause for termination of employment aims to
prevent further financial drain upon an employer who cannot pay anymore his employees since
business has already stopped. On the other hand, retrenchment is reduction of personnel usually due to
poor financial returns so as to cut down on costs of operations in terms of salaries and wages to prevent
bankruptcy of the company. It is sometimes also referred to as down-sizing. Retrenchment is an
authorized cause for termination of employment which the law accords an employer who is not making
good in its operations in order to cut back on expenses for salaries and wages by laying off some
employees. The purpose of retrenchment is to save a financially ailing business establishment from
eventually collapsing.[16]

In the present case, we find the issues and contentions more centered on closure of business operation
rather than retrenchment. Closure or cessation of operation of the establishment is an authorized cause
for terminating an employee under Article 283 of the Labor Code, to wit:

ART. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Department of Labor and Employment at least one (1) month before the intended date
thereof. ... In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
However, the burden of proving that such closure is bona fide falls upon the employer.[17] In the
present case, JAT justifies its closure of business due to heavy losses caused by declining sales. It
belatedly submitted its 1997 Income Statement[18] and Comparative Statement of Income and Capital
for 1997 and 1998[19] to the NLRC to prove that JAT suffered losses starting 1997. However, as noted
earlier, these were not given much evidentiary weight by the NLRC as well as the Court of Appeals, to
wit:

The financial statements submitted by the respondents on appeal are questionable for the following
reasons: (1) the figures in Annexes "D-2" and "E" of the appeal memorandum (which both refer to 1997)
do not tally; (2) they (the respondents) allegedly closed on March 1, 1998. Yet, their 1998 financial
statement (Annex "E") indicates operations up to and ending December 31, 1998. In view of the
foregoing, the above-mentioned financial statements do not justify the complainant's dismissal. ...[20]

The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent reason to set it
aside. While business reverses or losses are recognized by law as an authorized cause for terminating
employment, it is an essential requirement that alleged losses in business operations must be proven
convincingly. Otherwise, said ground for termination would be susceptible to abuse by scheming
employers, who might be merely feigning business losses or reverses in their business ventures in order
to ease out employees.[21] In this case, the financial statements were not only belatedly submitted but
were also bereft of necessary details on the extent of the alleged losses incurred, if any. The income
statements only indicated a decline in sales in 1998 as compared to 1997. These fell short of the
stringent requirement of the law that the employer prove sufficiently and convincingly its allegation of
substantial losses. While the comparative income statement shows a net loss of P207,091 in 1998, the
income statement of 1997 still shows JAT posting a net income of P19,361. Both statements need
interpretation as to their impact on the company's termination of certain personnel as well as business
closure.

Having concluded that private respondent was not validly dismissed resulting from closure of business
operations due to substantial losses, we now proceed to determine whether or not private respondent
was validly dismissed on the ground of closure or cessation of operations for reasons other than
substantial business losses.

A careful examination of Article 283 of the Labor Code shows that closure or cessation of business
operation as a valid and authorized ground of terminating employment is not limited to those resulting
from business losses or reverses. Said provision in fact provides for the payment of separation pay to
employees terminated because of closure of business not due to losses, thus implying that termination
of employees other than closure of business due to losses may be valid.

Hence, in one case,[22] we emphasized that:

...Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation" of
business establishments "NOT due to serious business losses or financial reverses x x x." Where,
however, the closure was due to business losses-as in the instant case, in which the aggregate losses
amounted to over P20 billion-the Labor Code does not impose any obligation upon the employer to pay
separation benefits, for obvious reasons. There is no need to belabor this point. Even the public
respondents, in their Comment filed by the Solicitor General, impliedly concede this point.

In another case,[23] we held more emphatically that:

In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business
operations or undertaking even if he is not suffering from serious business losses or financial reverses,
as long as he pays his employees their termination pay in the amount corresponding to their length of
service. It would, indeed, be stretching the intent and spirit of the law if we were to unjustly interfere in
management's prerogative to close or cease its business operations just because said business operation
or undertaking is not suffering from any loss.

In the present case, while petitioners did not sufficiently establish substantial losses to justify closure of
the business, its income statement shows declining sales in 1998, prompting the petitioners to suspend
its business operations sometime in March 1998, eventually leading to its permanent closure in
December 1998. Apparently, the petitioners saw the declining sales figures and the unsustainable
business environment with no hope of recovery during the period of suspension as indicative of bleak
business prospects, justifying a permanent closure of operation to save its business from further
collapse. On this score, we agree that undue interference with an employer's judgment in the conduct of
his business is uncalled for. Even as the law is solicitous of the welfare of employees, it must also protect
the right of an employer to exercise what is clearly a management prerogatives. As long as the
company's exercise of the same is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the law or a valid agreement such exercise
will be upheld.[24]

In the event, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation
of business operations, namely: (a) service of a written notice to the employees and to the DOLE at least
one (1) month before the intended date thereof; (b) the cessation of business must be bona fide in
character; and (c) payment to the employees of termination pay amounting to at least one-half (1/2)
month pay for every year of service, or one (1) month pay, whichever is higher.[25]

The closure of business operation by petitioners, in our view, is not tainted with bad faith or other
circumstance that arouses undue suspicion of malicious intent. The decision to permanently close
business operations was arrived at after a suspension of operation for several months precipitated by a
slowdown in sales without any prospects of improving. There were no indications that an impending
strike or any labor-related union activities precipitated the sudden closure of business. Further,
contrary to the findings of the Labor Arbiter, petitioners had notified private respondent[26] and all
other workers through written letters dated November 25, 1998 of its decision to permanently close its
business and had submitted a termination report to the DOLE.[27] Generally, review of labor cases
elevated to this Court on a petition for review on certiorari is confined merely to questions of law. But in
certain cases, we are constrained to analyze or weigh the evidence again if the findings of fact of the
labor tribunals and the appellate court are in conflict, or not supported by evidence on record or the
judgment is based on a misapprehension of facts.[28]

In this case, we are persuaded that the closure of JAT's business is not unjustified. Further we hold that
private respondent was validly terminated, because the closure of business operations is justified.

Nevertheless in this case, we must stress that the closure of business operation is allowed under the
Labor Code, provided separation pay be paid to the terminated employee. It is settled that in case of
closure or cessation of operation of a business establishment not due to serious business losses or
financial reverses, the employees are always given separation benefits.[29] The amount of separation
pay must be computed from the time private respondent commenced employment with petitioners until
the time the latter ceased operations.[30]

Considering that private respondent was not illegally dismissed, however, no backwages need to be
awarded. Backwages in general are granted on grounds of equity for earnings which a worker or
employee has lost due to illegal dismissal.[31] It is well settled that backwages may be granted only
when there is a finding of illegal dismissal.[32]

The other monetary awards to private respondent are undisputed by petitioners and unrefuted by any
contrary evidence. These awards, namely legal holiday pay, service incentive leave pay and 13th month
pay, should be maintained.

WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of Appeals in CA-
G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that the award of P66,924.00 as backwages is
deleted. The award of separation pay amounting to P10,296.00 and the other monetary awards, namely
salary differentials in the amount of P1,066.00, legal holiday pay in the amount of P1,850.00, service
incentive leave pay in the amount of P925.00 and 13th month pay in the amount of P4,910, or a total of
P29,047.00 are maintained. No pronouncement as to costs.

SO ORDERED.