G.R. No.

169472

January 20, 2009

TRANSFER CERTIFICATE OF TITLE No. T-135952 "A parcel of land (Lot 9856 of the Cad. Survey of Tayabas) with the improvements thereon, situated in the Barrio of Mationa, Municipality of Tayabas. x x x containing an area of Nineteen Thousand Thirty Two (19,032) square meters, more or less, x x x." TRANSFER CERTIFICATE OF TITLE No. T-135929

FRANCISCO LANDICHO, FEDERICO LANDICHO AND BUENAVENTURA LANDICHO, Petitioners, vs.FELIX SIA, Respondent. PUNO, C.J.: At bar is a Petition for Review on Certiorari of the Decision and Resolution of the Court of Appeals in CA G.R. SP No. 61554, dated February 23, 2005 and July 6, 2005, respectively, reversing the decision of the Department of Agrarian Reform (DAR), Adjudication Board (DARAB), in DARAB Case No. 4599. The DARAB decision affirmed with modification the Decision of the Provincial Adjudicator of Region IV, Quezon, in PARAD Case No. IV-QUI-0343-94 dated October 24, 1995, awarding the petitioners disturbance compensation, a home lot consisting of 200 square meters, and damages. The appellate court found that the complaint against the respondent is dismissible for lack of cause of action on the ground of prescription. The instant case involves three parcels of agricultural land located in Barangay Mateona, Tayabas, Quezon, covered by Transfer Certificate of Title (TCT) No. 135953 - Lot No. 9297,3 TCT No. 135952 - Lot No. 9856,4 and TCT No. 135929 - Lot No. 9895,5 with an aggregate area of approximately 27,287 square meters. The subject parcels of land were originally owned by Loreanne Z. Aragon, Alberto Z. Aragon, Jr., and Alberto Z. Aragon III (Aragons).6 The agricultural land was tenanted by the late Arcadio Landicho from 1949 until his death in 19727 after which his tenancy rights were succeeded by his son, petitioner Francisco Landicho.8 The other petitioners, Buenaventura Landicho, Francisco Landichos son, and Federico Landicho, Franciscos brother, helped him cultivate the land.9 On January 31, 1976, Francisco Landicho voluntarily surrendered his tenancy rights over the three parcels of land to Eloisa Zolota, married to Alberto Aragon, through a notarized "Kasulatan sa Pagsasauli ng Gawaing Palayan" (1976 Kasulatan),10 for a consideration of PhP1,000.00. The 1976 Kasulatan provides, viz.: KASULATAN SA PAGSASAULI NG GAWAING PALAYAN HAYAG SA SINUMANG MAKABABASA:
1 2

"A parcel of land (Lot 9895 of the Cadastral Survey of Tayabas), with the improvements thereon, situated in the Barrio of Mationa, Municipality of Tayabas, x x x containing an area of Three Thousand Eight Hundred Seventy Two (3,872) square meters, more or less, x x x." Na sapagkat ako ay mayroon pang ilang palayang ginagawa at alang-alang din sa halagang ISANG LIBONG PISO (P1,000.00), salaping umiiral na ibinayad at tinanggap ko naman ng buong kasiyahan buhat kay Eloisa Zolota, may sapat na gulang, Filipino [sic] kasal kay Alberto Aragon at sa ngayon ay naninirahan din dito sa bayan ng Tayabas, lalawigan ng Quezon, ay aking kusang loob na ISASAULI AT IBABALIK sa may-ari nito ang tatlong (3) parcelang palayan na binabanggit sa itaas nito x x x. (emphasis supplied) SA KATUNAYAN NG LAHAT, ay nilalagdaan ko ito ngayong ika-31 ng Enero, taong 1976, dito sa bayan ng Tayabas, lalawigan ng Quezon. DIGPI NG KANANG HINLALAKI FRANCISCO LANDICHOManggagawa xxxx Notwithstanding the execution of the 1976 Kasulatan, the petitioners continued cultivating the subject landholdings11 until 1987 when another notarized "Kasulatan ng Pagsasauli ng Gawaing Palayan" (1987 Kasulatan)12 was executed on July 2, 1987 by Francisco Landicho through which he surrendered his tenancy rights to the Aragons for a consideration of PhP3,000.00.13 The 1987 Kasulatan provides, viz.: KASULATAN NG PAGSASAULI NG GAWAIN

Ako, Francisco,[sic] Landicho, may sapat na gulang, may asawa, filipino, at sa ngayon ay naninirahan sa nayon ng Mationa, bayan ng Tayabas, lalawigan ng Quezon, sa bisa ng Kasulatang itoy NAGSASAYSAY: Na ako ang tunay at rehistradong mangagawa ng tatlong (3) parcelang palayan na may kasamang niogan, na natatayo sa nayon ng Mationa, bayan ng Tayabas, lalawigan ng Quezon, na ang mga sukat, at hangganan nito ay lalong makikilala at matutonton sa mga palatandaang sumusunod: (emphasis supplied) TRANSFER CERTIFICATE OF TITLE No. T-135953 "A parcel of land (Lot 9297 of the Cad. Survey of Tayabas), with the improvements thereon, situated in the Barrio of Mationa, Municipality of Tayabas, Quezon. x x x containing an area of Four Thousand Three Hundred Eighty Three (4,383) square meters more or less, x x x."

TANTUIN ANG SINUMANG MAKAKABASA NITO: Ako, FRANCISCO LANDICHO, asawa ni Lucia Reyes, may sapat na gulang, filipino,[sic] at naninirahan sa bayan ng Tayabas, lalawigan ng Quezon, dito ay nagsasalaysay ng mga sumusunod: (emphasis supplied) Na ako ang siyang gumagawa at nagaalaga ng tatlong palagay na lupa na mayroong pagkakaayos gaya ng sumusunod: (emphasis supplied) TRANSFER CERTIFICATE OF TITLE NO. T-135953 A parcel of land (Lot 9897 of the Cad. Survey of Tayabas), with the improvements thereon, situated in the Barrio of Mationa, Municipality of Tayabas, Quezon. x x x containing an area of Four Thousand Eight Hundred Three [sic] (4,383) square meters

A parcel of land (Lot 9856) of the Cadastral Survey of Tayabas), with the improvements thereon, situated in the Barrio of Mationa, Municipality of Tayabas. x x x containing an area of Nineteen Thousand Thirty Two (19,032) square meters, more or less A parcel of land (Lot 9895 of the Cad. Survey of Tayabas), with the improvements thereon, situated in the Barrio of Mationa, Municipality of Tayabas x x x containing an area of Three Thousand Eight Hundred Seventy Two (3,872) square meters, more or less Naitong [sic] naulit na lupa ay pagaari nila Loreanne Z. Aragon, Alberto Aragon, Jr., Alberto Aragon III, gayondin sapagkat ako ay matanda na at gayondin hindi ko na kayang gumawa sa naulit na lupa, kaya itong naulit na lupa ay aking ISINASAULI at IBINABALIK sa naulit na mayaring nasasabi sa taas nito; (emphasis supplied) Na simula ngayon ay mayroong karapatan na sila na kumuha o humanap ng ibang gagawa sa naulit na lupa at hindi na akong makikiaalam dito, at gayondin mayroong laya silang ipagbili ang naulit na lupa, at hindi ako makikialam dito; na ito ay binasa sa akin at naunawaan ko naman ang nilalaman nito;(emphasis supplied) SA KATUNAYAN ng lahat, *sic+ ng ito akoy lumagda sa kasulatang ito ngayong ika 2 ng Hulyo, /*sic+1987 dito sa Tayabas, Quezon. Diin ng Kgg. Hinki FRANCISCO LANDICHOManggagawa xxxx On the same day as the execution of the 1987 Kasulatan, the three parcels of land were sold to respondent Felix L. Sia by the spouses Alberto P. Aragon and Eloisa Zolota Aragon by virtue of a general power of attorney executed in their favor by their children, the Aragons. A "Deed of Absolute Sale"14 was executed, whereby the three parcels of land mentioned above were sold, transferred and conveyed by way of an absolute sale for and in consideration of PhP50,000.00. Upon the sale of the subject land to respondent Felix Sia, he converted the same to a residential subdivision without a DAR Clearance and ejected the petitioners from the subject land. 15 Aggrieved, the petitioners first sought the assistance of Barangay Agrarian Reform Committee (BARC) Chairman Rosalio Cabuyao,16 who in turn brought the matter to the Provincial Agrarian Reform Office (PARO) of Quezon. Petitioners Federico Landicho and Buenaventura Landicho then filed a protest before the DAR PARO, Legal Division of Lucena City17 alleging that they are the tenants of the parcels of land owned by respondent Felix Sia and claimed that they are entitled to a disturbance compensation. During the mediation conference held at the DAR Provincial Agrarian Reform Office on July 22, 1992, it was admitted by Francisco Landicho that he voluntarily surrendered his tenancy rights over the subject parcels of land in consideration of PhP3,000.00.18 Thus, in the Report and Recommendation19 of DAR Provincial Legal Officer III, Ernesto M. Arro, Jr., dated October 1, 1992, it was found that the petitioners had no claim for tenancy rights over the subject parcels of land. It was held by the DAR Provincial Legal Officer that Francisco Landicho is the legal and bona fide tenant of the parcels of land but he cannot be awarded disturbance compensation because he voluntarily surrendered his tenancy rights over the said properties twice, through the 1976 and the 1987 Kasulatan. In the case of Buenaventura and Federico Landicho, it was found that they are merely farm helpers of Francisco Landicho and are not entitled to

disturbance compensation. Dissatisfied with the ruling of the DAR PARO of Lucena City, petitioners Buenaventura and Federico Landicho filed another Protest before the DAR Legal Division, Region IV, Pasig, Metro Manila. On February 15, 1993, a Memorandum20 was issued by Legal Officer II, Dandumum D. Sultan, Jr., which also dismissed the protest of the petitioners. It was likewise found that Federico and Buenaventura are not tenants of the land in question but are merely farm helpers of the legitimate tenant, Francisco Landicho, who surrendered his tenancy rights to the former owner, the Aragons. During an interview with Buenaventura Landicho conducted by Legal Officer II Dandumum Sultan, Jr. it was affirmed by Buenaventura that it was only Francisco Landicho, his father, who was allowed and permitted to work on the subject land and that both he and Federico had not secured the permission of the landowner to farm the land.21 In response to the complaint of BARC Chairman Rosalio Cabuyao, DAR Region IV Director Percival C. Dalugdug wrote a letter, dated April 25, 1994, stating that the results of an investigation conducted by their representatives revealed that Buenaventura Landicho and Federico Landicho are not tenants of the subject land and are thus not entitled to disturbance compensation. It was also stated in the letter that it is only Francisco Landicho who is the legitimate tenant of the land owned by the Aragons. However, he surrendered his tenancy rights by virtue of the 1976 and 1987 Kasulatan.22 The letter23 states: Ika-25 ng Abril 1994 G. Rosalio J. Cabuyao BARC Chairman Brgy. Mationa, Tayabas, Quezon Mahal na G. Cabuyao, Kami po ay lumiham sa inyo upang ipaabot sa inyo ang pinakahuling ulat mula sa aming PARO sa Quezon I [sic] hinggil sa inyong iniharap na reklamo na ayon po sa inyo ay hindi binibigyang pansin ni Atty. Rolando Roldan. xxxx Hinggil naman sa pagbibigay ng disturbance compensation kina G. Buenaventura at Federico Landicho, ikinalulungkot po naming ipaalam sa inyo na wala tayong sapat na batayan upang magawa ito. Ayon sa pagsisiyasat na isinagawa ng aming kawani, ang magkapatid na Buenaventura at Federico ay hindi kasama o walang ugnayang kasama (tenancy relationship) sa may-ari ng lupa sapagkat ang kanilang ama ang siyang may karapatan at lehitimong kasama. Ayon din sa ulat, sa pamamagitan ng kasulatan sa pagsasauli ng gawaing palayan ay isinuko na ni G. Francisco Landicho ang kanyang mga karapatan bilang kasama at magsasaka sa lupang pinaguusapan. x x x. Maraming salamat po sa inyong pagsulat at sana ay nabigyang linaw namin ang inyong hinaing. Sumasainyo, (Sgd.)Percival C. DalugdugDirektor Pangrehiyon On June 10, 1994, petitioners Francisco Landicho, Federico Landicho and Buenaventura Landicho filed a Complaint24 against Alberto Aragon, Jr., Alberto Aragon III and Felix Sia before the DARAB for fixing and payment of disturbance compensation and awarding of home lot. The petitioners allege that they are tenants of the subject land since January 31, 1976 and that they were unlawfully ejected from the

subject land by virtue of the 1976 and 1987 Kasulatan which they allege to be invalid, since they were executed by Francisco through the insidious words, undue influence and strategy employed by the Aragons, in connivance with respondent Sia. In their Answer25 dated July 7, 1994, the Aragons recognized only Francisco as their former tenant until he surrendered his tenancy rights through the 1976 Kasulatan and finally surrendered the land upon the execution of the 1987 Kasulatan. They assert that there was no undue advantage exerted over petitioner Francisco Landicho since the 1976 and the 1987 Kasulatan were written in Tagalog, a language understood by Francisco.26 They raised the defense that the petitioners have no cause of action on the grounds of prescription, laches, and estoppel, that the claim is barred by prior judgment, and that the claim has been abandoned or otherwise extinguished.27 On the other hand, respondent Felix Sia, in his Answer with Counterclaim28 dated July 11, 1994, alleged that when he bought the subject parcels of land, they were free from tenants since Francisco had already relinquished his tenancy rights therein through the execution of public documents. After the filing of the parties respective position papers, the DAR Provincial Adjudicator of Region IV rendered a decision in PARAD Case No. IV-QUI-0343-94,29 dated October 24, 1995, in favor of the petitioners. Provincial Adjudicator Oscar C. Dimacali ruled that against their will, the petitioners were dispossessed of the land that they have been cultivating. He also ruled that it is not necessary to decide on the issue of whether Federico and Buenaventura are merely farm helpers of Francisco, nor is it essential to determine whether the 1976 and 1987 Kasulatan are valid. The dispositive portion30 of the decision reads: WHEREFORE, premises considered, the following are hereby ordered: 1. defendant Felix Sia to pay each of the plaintiffs a disturbance compensation equivalent to five (5) years based from the average normal harvest to be determined by the MARO concerned who is hereby required to make a report to this Office within one (1) month from receipt hereof; 2. defendant Felix Sia to provide each plaintiff a homelot [sic] of 200 square meters in the subject landholdings; and, 3. defendants to pay the plaintiffs jointly and severally the sum of P10,000.00 as moral damages and P5,000.00 as exemplary damages. No pronounce [sic] as to cost. SO ORDERED. The Aragons and respondent Sia appealed the foregoing decision to the DARAB,31 which issued a decision32 on September 18, 2000 that affirmed in part the decision of the Provincial Adjudicator, and deleted the award of disturbance compensation on the basis of the finding that the petitioners are still bona fide tenants in their respective landholdings. The DARAB did not give credit to the report and recommendation of Legal Officer III Ernesto M. Arro and Legal Officer II Dandumum D. Sultan, Jr. that Francisco Landicho voluntarily surrendered his tenancy rights.33 The DARAB found that a tenancy relationship exists between the petitioners and the Aragons and that when Felix Sia became the owner of the subject land, he assumed to exercise the rights and obligations that pertain to the previous owners. The dispositive portion34 of the DARAB decision provides: WHEREFORE, premises considered, the appealed decision dated October 24, 1995, is hereby affirmed

with MODIFICATION in so far as the disturbance compensation which is not obtaining in the case at bar considering that plaintiffs-appellees are still bona fide tenants in their respective landholdings. Furthermore, the DAR-BALA of Quezon Province in coordination with the Office of the DAR Secretary, is hereby directed to file criminal charges for illegal conversion against defendants-appellants, if circumstances may still warrant. No Pronouncement as to Costs. SO ORDERED. Felix Sia then filed a Petition for Review35 under Rule 43 with the Court of Appeals, which rendered a decision36 on February 23, 2005 that set aside the decision of the DARAB and dismissed the complaint. The Court of Appeals found that the essential requisites are not present to establish a tenancy relationship between petitioners Buenaventura and Federico Landicho and the Aragons, and that the tenant-landlord relationship between Francisco Landicho and the Aragons also ended upon the surrender of his tenancy rights through the 1976 and 1987 Kasulatan; consequently, no tenancy relationship also exists between the petitioners and respondent Felix Sia. The Court of Appeals also ruled that even assuming that the petitioners have a cause of action, the same had already prescribed since the complaint was only filed seven years from the time the cause of action accrued.37 On March 22, 2005, the petitioners filed a Motion for Reconsideration38 of the Court of Appeals decision. The Court of Appeals issued a Resolution39 on July 6, 2005, denying the motion for reconsideration. Hence, this Petition for Review on Certiorari40 of the Decision and Resolution of the Court of Appeals with the following assignment of errors:41 The Honorable Court of Appeals erred: 1. When it gave due course to the petition and consequently granted the same; and 2. When it disregarded the finding of facts [sic] of the DARAB that petitioners are bonafide [sic] tenants of the land purchased by herein respondent and therefore entitled to security of tenure. The parties filed their respective Memoranda42 which both raised the following issues:43 (1) whether or not the petitioners are bona fide tenants of the land purchased by the respondent; and (2) whether or not the cause of action of the petitioners already prescribed at the time of the filing of the complaint. We deny the petition. The case before us involves the determination of whether the petitioners are tenants of the land purchased by the respondent, which is essentially a question of fact. As a general rule, questions of fact are not proper in a petition under Rule 45.44 But, since the findings of facts of the DARAB and the Court of Appeals contradict each other, it is crucial to go through the evidence and documents on record as a matter of exception to the rule.45 In determining the existence of a tenancy relationship between the petitioners and the respondent, it is necessary to make a distinction between petitioner Francisco Landicho and petitioners Buenaventura and Federico Landicho.

With respect to Francisco, both the petitioners and the respondent agree that he was recognized by the Aragons as a bona fide tenant of the subject land when he continued the cultivation of the land after the death of his father Arcadio in 1972.46 The dispute between the parties arose when the petitioners were ejected from the land on the basis of the 1976 and the 1987 Kasulatan, the validity of which is questioned by the petitioners. The petitioners assert that the Aragons, the predecessors-in-interest of the respondent, through insidious words and machinations, took advantage of Francisco Landichos illiteracy and old age in order to make him sign the 1976 and 1987 Kasulatan.47 The Aragons and respondent Felix Sia deny that they took advantage of petitioner Francisco Landicho and the respondent also denies employing any fraudulent scheme48 since both the 1976 and the 1987 Kasulatan were written in Tagalog, a language understood by Francisco Landicho.49 They further argue that these are public documents, the validity of which cannot be collaterally attacked.50 They aver that the 1976 and 1987 Kasulatan were voluntarily executed by Francisco Landicho and that he willingly surrendered his tenancy rights, which thus validly extinguished the tenancy relationship.51 With respect to Buenaventura and Federico Landicho, it is asserted by the petitioners that they have been cultivating the three lots, which were divided among them for cultivation in this wise: TCT No. 135953 with Lot No. 9895- tenanted by Francisco Landicho TCT No. 135952 with Lot No. 9896- tenanted by Federico Landicho TCT No. 135929 with Lot No. 9897- tenanted by Buenaventura Landicho.52 They claim that there was an implied tenancy relationship because the Aragons have personal knowledge of the fact that the petitioners were the ones who cultivated the land53 and they were in continuous possession of the land until sometime in 1987 when they were unlawfully ejected by virtue of the invalid 1987 Kasulatan.54 The DARAB did not give credit to the report and recommendation of the DAR Provincial Legal Officer and DAR Provincial Adjudicator of Region IV that Francisco Landicho voluntarily surrendered his tenancy rights through the 1987 Kasulatan and that Federico and Buenaventura Landicho were merely farm helpers. The DARAB found that a landlord-tenant relationship exists between the petitioners and the respondent and ruled in this wise: However, We find it hard to believe that plaintiffs-appellees who have been tilling the land in question for so long a time, would suddenly lose interest in it for good time [sic] when they know that full ownership over the same would soon be in their hands. Besides, plaintiffs-appellees Francisco Landicho et., [sic] al., would not even thought [sic] of filing a complaint if they have already abandoned or surrendered the subject landholdings in favor of herein defendants-appellants. Anyone in his right mind for that matter, would not waste time[,] effort and money especially if he is poor to prosecute an unworthy action. 55 The Court of Appeals reversed the decision of the DARAB and agreed with the ruling of the DAR PARO and the Region IV DAR Legal Division that only petitioner Francisco Landicho was the tenant of all of the three lots covered by TCT No. 135953, TCT No. 135952 and TCT No. 135929 and that he voluntarily surrendered his tenancy rights upon the execution of the 1987 Kasulatan. The Court of Appeals also agreed with the PARO and the Region IV DAR that Federico and Buenaventura Landicho were merely farm helpers of Francisco, ruling that they were considered as part of the bona fide tenants immediate farm household and for this reason, the Aragons cannot be faulted for not questioning their possession and cultivation of the subject landholdings.56

We agree with the Court of Appeals and give credence to the findings of the DAR PARO and Region IV DAR. A tenant is defined under Section 5(a) of Republic Act No. 1199, otherwise known as the Agricultural Tenancy Act of the Philippines, as: x x x a person who, himself and with the aid available from within his immediate farm household, cultivates the land belonging to, or possessed by, another, with the latter's consent for purposes of production, sharing the produce with the landholder under the share tenancy system, or paying to the landholder a price certain or ascertainable in produce or in money or both, under the leasehold tenancy system.57 A tenancy relationship arises between a landholder and a tenant once they agree, expressly or impliedly, to undertake jointly the cultivation of a land belonging to the landholder, as a result of which relationship the tenant acquires the right to continue working on and cultivating the land.58 The existence of a tenancy relationship cannot be presumed and claims that one is a tenant do not automatically give rise to security of tenure.59 For a tenancy relationship to exist, all of the following essential requisites must be present: (1) the parties are the landowner and the tenant; (2) the subject matter is agricultural land; (3) there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation by the tenant; and, (6) there is sharing of the harvests between the parties.60 Not all of these requisites obtain in the case at bar. The essential element of consent is absent because the landowners never recognized petitioners Federico and Buenaventura Landicho as legitimate tenants of the subject land. And, although Federico and Buenaventura claim that they are tenants of "Lot No. 9896 and Lot No. 9897," 61 respectively, simply because they continuously cultivated and openly occupied the subject land; there was no evidence presented to establish the presence of the essential requisites of a tenancy relationship other than the self-serving statements of the petitioners. Furthermore, both the 1976 and the 1987 Kasulatan only mentioned Francisco as the tenant of the subject parcels of land, and there was no mention of petitioners Federico and Buenaventura. The petitioners cannot rely on their self-serving statements to prove the existence of a tenancy relationship because independent and concrete evidence, aside from self-serving statements, is needed to prove personal cultivation, sharing of harvests, or consent of the landowner.62 A tiller or a farmworker does not automatically become an agricultural tenant recognized under agrarian laws by mere occupation or cultivation of an agricultural land.63 The DARAB did not cite any evidence to show the existence of the requisites of a tenancy relationship and merely based the conclusion that the petitioners are tenants of the Aragons on the weak reasoning that filing a complaint is inconsistent with the voluntary surrender of the landholdings and that it is unlikely that petitioners would suddenly lose interest in the subject land when they know that ownership would soon be transferred to them.64 The DARABs inferences are without basis and are purely speculative, and except for its sweeping conclusion, there is no other independent and concrete evidence in the record of the case that would sustain the finding that Federico and Buenaventura are tenants of the Aragons. It was not shown that Federico and Buenaventura cultivated the land with the consent of the landowners. The Court of Appeals correctly held that only Francisco was the bona fide tenant of the land

in question and that Federico and Buenaventura were just farm helpers of Francisco, as part of his immediate farm household.65 This is supported by the evidence on record where, in the Memorandum of DAR Region IV Legal Officer II Dandumum Sultan, Jr., it is stated that during an interview conducted with Buenaventura Landicho, he disclosed that it was only Francisco Landicho, his father, who was allowed and permitted to work on the subject land and that both he and Federico had not secured the permission of the landowner to farm the land.66 There was also no evidence presented to show that Federico and Buenaventura gave a share of their harvest to the Aragons. Independent evidence, such as receipts, must be presented to show that there was a sharing of the harvest between the landowner and the tenant.67 And, assuming the landowners received a share of the harvest, it was held in the case of Cornelio de Jesus, et al. v. Moldex Realty, Inc. 68 that "[t]he fact of receipt, without an agreed system of sharing, does not ipso facto create a tenancy."69 There is no tenancy relationship between the Aragons and petitioners Federico and Buenaventura without the essential elements of consent and sharing of agricultural produce.70 Neither can we give any weight to the petitioners contention that there was an implied tenancy by reason alone of their continuous cultivation of the land. Acquiescence by the landowner of their cultivation of the land does not create an implied tenancy if the landowners have never considered petitioners Federico and Buenaventura as tenants of the land and if the essential requisites of a tenancy relationship are lacking. There was no intention to institute the petitioners as agricultural tenants. In the case of Epitacio Sialana v. Mary Y. Avila, et al.71 it was held that "x x x for an implied tenancy to come about, the actuations of the parties taken in their entirety must be demonstrative of an intent to continue a prior lease established by the landholder x x x."72 With respect to petitioner Francisco Landicho, the Court of Appeals also correctly held that although Francisco was the legal tenant of the subject land, he voluntarily surrendered his tenancy rights when he knowingly and freely executed the 1987 Kasulatan.73 This conclusion finds basis in the investigation conducted by the PARO, where during the mediation conference, petitioner Francisco Landicho admitted that he voluntarily surrendered his tenancy rights over the subject parcels of land in consideration of PhP3,000.00.74 The tenancy relationship was validly extinguished through the execution of the 1987 Kasulatan and upon the voluntary surrender of the landholdings pursuant to Section 8 of Republic Act No. 3844, otherwise known as the Agricultural Land Reform Code, to wit: SECTION 8. Extinguishment of Agricultural Leasehold Relation. The agricultural leasehold relation established under this Code shall be extinguished by: (1) Abandonment of the landholding without the knowledge of the agricultural lessor; (2) Voluntary surrender of the landholding by the agricultural lessee, written notice of which shall be served three months in advance; or (3) Absence of the persons under Section nine to succeed to the lessee, in the event of death or permanent incapacity of the lessee.75 The petitioners also failed to support their claim that the Aragons took advantage of Franciscos old age and illiteracy and employed fraudulent schemes in order to deceive him into signing the Kasulatan. It has been held that "[a] person is not incapacitated to contract merely because of advanced years or by reason of physical infirmities. It is only when such age or infirmities impair the mental faculties to such extent as to prevent one from properly, intelligently, and fairly protecting her property rights, is she considered incapacitated."76

The petitioners contention that the Aragons employed fraud, aside from being unsubstantiated, is also contrary to the records of the case. Both the 1976 and the 1987 Kasulatan were also written in Tagalog, which is the language understood by Francisco Landicho. They were written in an uncomplicated manner and clearly stated that he is returning the land that he has been cultivating to the landowners because he is already old and could no longer work on the land.77 The 1987 Kasulatan also states that the contents of the document were read to him and that he understands the same. It is also important to note that both the 1976 and 1987 Kasulatan are duly notarized and are considered as public documents evidencing the surrender of Franciscos tenancy rights over the subject landholdings. They were executed with all the legal formalities of a public document and thus the legal presumption of the regularity and validity of the Kasulatan are retained in the absence of full, clear and convincing evidence to overcome such presumption.78 Strong evidence is required to prove a defect of a public instrument,79 and since such strong and convincing evidence was not presented in the instant case, the 1976 and the 1987 Kasulatan are presumed valid. Coming now to the second issue of prescription, the petitioners argue that they did not sleep on their rights because although the Complaint with the DARAB was filed on June 10, 1994, they already filed a protest before the DAR Legal Division of Lucena prior to their Complaint before the DARAB.80 This contention cannot be sustained. An action to enforce rights as an agricultural tenant is barred by prescription if not filed within three (3) years.81 Section 38 of Republic Act No. 3844, otherwise known as the Agricultural Land Reform Code, specifically provides that: SECTION 38. Statute of Limitations. An action to enforce any cause of action under this Code shall be barred if not commenced within three years after such cause of action accrued.82 The records of the case show that the protest before the DAR Legal Division of Lucena was filed sometime in 1992 when the case was set for a mediation conference.83 Even assuming that they have a cause of action, this arose in 1987 when they were ejected from the landholdings they were cultivating which means that it took them about five (5) years to file a protest before the DAR Legal Division of Lucena, and it took them seven (7) years to file a Complaint before the DARAB. Clearly, their cause of action has already prescribed. Accordingly, the petitioners complaint against the respondent is dismissible on the ground of prescription and for lack of cause of action. IN VIEW WHEREOF, the Decision and Resolution of the Court of Appeals under review are hereby AFFIRMED without pronouncement as to costs. SO ORDERED.

G.R. No. 169570

March 2, 2007

and caretaker of respondent bank was recalled; however, his appointment as Acting Assistant VicePresident, was retained.9 In line with its policy to attain financial stability, respondent bank adopted measures directed to cut down administrative overhead expenses through streamlining. Thus, respondent bank came up with an early voluntary retirement program. On 15 April 2001, petitioner opted to avail himself of this retirement package, supposedly, under protest, and received the amount of P1.324 Million as retirement pay.10 On 11 July 2002, petitioner filed a complaint against the respondent bank and Macalino for constructive dismissal and underpayment of wages, 13th month pay and retirement benefits before the Labor Arbiter.11 In his Position Paper,12 petitioner alleged that due to discrimination, unfair treatment, and intense pressure he had received from the new management through Macalino, he was forced to retire at the prime of his life. In a Decision13 dated 30 June 2003, the Labor Arbiter adjudged the respondent bank guilty of illegal dismissal, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered, finding complainant to have been illegally dismissed. Concomitantly, Respondents are jointly and solidarily liable to pay RICARDO PORTUGUEZ the following: P1,148,333.33 representing backwages; 1,280,000.00 representing separation pay; 443,884.32 representing salary differentials; 500,000.00 representing moral damages; 400,000.00 representing exemplary damages; Ten percent of the total award as attorneys fees. Other claims are dismissed for lack of merit. The detailed computation of the Computation & Examination Unit, National Capital Region is made part of this Decision.14 Aggrieved, respondent bank appealed the adverse decision to the NLRC which adopted in toto the findings of the Labor Arbiter. In a Decision15 dated 30 January 2004, the NLRC dismissed the appeal and found the decision of the Labor Arbiter to be sufficiently supported by the facts on record and law on the matter. Respondent banks Motion for Reconsideration was likewise denied by the NLRC in its Resolution16 dated 22 June 2004 for failing to show that patent or palpable errors have been committed in the assailed decision. The NLRC Resolution dated 22 June 2004, denying respondent banks motion for reconsideration, was prematurely declared final and executory and was entered into judgment on 6 August 2004.17 Shortly thereafter, on 16 August 2004, respondent bank timely elevated the matter to the Court of Appeals through a Special Civil Action for Certiorari18 under Rule 65 of the Revised Rules of Court. Incorporated with its petition was the Urgent Application for the Issuance of Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction. Pending resolution of its petition and application for the issuance of TRO and/or writ of preliminary

RICARDO PORTUGUEZ, Petitioner, vs.GSIS FAMILY BANK (Comsavings Bank) and THE HON. COURT OF APPEALS, Respondents. CHICO-NAZARIO, J.: For resolution is a Petition for Review by Certiorari under Rule 45 of the Revised Rules of Court, of the Decision1 dated 25 April 2005 and the Resolution2 dated 25 August 2005 of the Court of Appeals. The assailed Decision and Resolution reversed the findings of both the National Labor Relations Commission (NLRC) and the Labor Arbiter, in their Decisions dated 30 January 2004 and 30 June 2003, respectively, that respondent GSIS Family Bank is guilty of the illegal dismissal of petitioner Ricardo Portuguez. The dispositive portion of the assailed decision of the appellate court reads: IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED, the assailed NLRC Decision dated January 30, 2004, together with the Resolution dated June 22, 2004, are RECALLED and SET ASIDE, and a new one entered DISMISSING NLRC NCR CA No. 037015-03 (NLRC NCR Case. No. 07-05075-2002). No pronouncement as to costs.3 The factual and procedural antecedents of this instant petition are as follows: Petitioner was employed by the respondent bank as utility clerk on 1 February 1971. Later, he rose from the ranks and was promoted as branch manager of the Gen. Trias Branch, and was subsequently assigned to other branches of respondent bank within the Province of Cavite. Eventually, he was appointed as Business Development and Public Relations (BDPR) Officer of the entire respondent bank.4 In addition to his regular duties as BDPR Officer, petitioner was designated as a member of the Procurement Bidding and Awards Committee (PBAC), Oversight Committee and Investigating Committee of the respondent bank.5 On 23 October 1997, petitioner was temporarily assigned as caretaker of respondent bank. Finally, he was designated as Acting Assistant Vice-President and at the same time Officer-In-Charge of the respondent bank on 15 June 1998.6 Respondent bank, on the other hand, is a banking institution duly authorized and existing as such under the Philippine laws. It was originally known as Royal Savings Bank. In 1983 and the early part of 1984, respondent bank underwent serious liquidity problems and was placed by the Central Bank of the Philippines (Central Bank) under receivership. However, due to the continued inability to maintain a state of liquidity, the Central Bank ordered its closure on 9 July 1984. After two months, the respondent bank was reopened under the control and management of the Commercial Bank of Manila and was then renamed as Comsavings Bank.7 In 1987, the Government Service Insurance System (GSIS) acquired the interest of the Commercial Bank of Manila in the respondent bank and together with the Central Bank and the Philippine Deposit Insurance Corporation (PDIC), GSIS infused a substantial amount of fresh capital into respondent bank in order to ensure its effective rehabilitation. Resultantly, GSIS took over the control and management of the respondent bank that was renamed as GSIS Family Savings Bank.8 Accordingly, Amando Macalino (Macalino) was appointed as President of the respondent bank on 21 December 1998. In view of Macalinos appointment, the designation of petitioner as Officer-In-Charge

injunction before the appellate court, the Labor Arbiter, on 16 September 2004, issued a Writ of Execution19 for the satisfaction of the NLRC decision dated 30 January 2004. On the same date, a Notice of Garnishment20 was served on the manager/cashier of respondent bank in the Pamplona Uno, Las Pias City Branch. Acting on the application for TRO, the Court of Appeals enjoined the implementation of the NLRC decision dated 30 January 2004 and therefore, the satisfaction of the Writ of Execution dated 16 September 2004 issued by the Labor Arbiter was tolled for a period of 60 days.21 Eventually, the appellate court issued a Writ of Preliminary Injunction 22 permanently enjoining the execution of the NLRC decision dated 30 January 2004 until the final resolution of the case. On 25 April 2005, the Court of Appeals resolved the controversy by reversing the judgment of the Labor Arbiter and the NLRC and ruling out constructive dismissal considering that petitioners separat ion from service was voluntary on his part when he chose to avail himself of the respondent banks early retirement program and received the amount of P1.324 Million as retirement pay.23 Similarly ill-fated was Petitioners Motion for Reconsideration which was denied by the Court of Appeals in its Resolution24 dated 25 August 2005. Hence, this instant Petition for Review on Certiorari.25 For the resolution of this Court are the following issues: I. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT PETITIONER WAS NOT CONSTRUCTIVELY DISMISSED FROM EMPLOYMENT. II. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT PETITIONER IS NOT ENTITLED TO SALARY DIFFERENTIAL. Before we delve into the merits of the case, it is best to underscore that the factual findings of the NLRC affirming those of the Labor Arbiter, who are deemed to have acquired expertise on the matters within their jurisdiction, when sufficiently supported by evidence on record, are accorded respect if not finality, and are considered binding on this Court.26 It is equally true, however, that when the findings of the Labor Arbiter and the NLRC are inconsistent with that of the Court of Appeals, there is a need to review the records to determine which of them should be preferred as more conformable to evidentiary facts.27 As borne by the records, it appears that there is a divergence between the findings of the Labor Arbiter as affirmed by the NLRC, and those of the Court of Appeals. For the purpose of clarity and intelligibility, therefore, this Court will make an infinitesimal scrunity of the records and recalibrate and reevaluate the evidence presented by the parties all over again. We have already repeatedly held that this Court is not a trier of facts. Rule 45 of the Revised Rules of Court limits the office of a Petition for Review to questions of law and leaves the factual issues as found by the quasi-judicial bodies, as long as they are supported by evidence.28 We never fail to stress as well

that when the rulings of the labor tribunal and the appellate court are in conflict, we are constrained to analyze and weigh the evidence again.29 Substantively, petitioner alleges that respondent bank, through Macalino, subjected him to all forms of unbearable harassment that can be mustered in order to force him to resign. Petitioner specifically claims that he was deprived of his salary and other benefits and privileges appurtenant to his position as the Acting Assistant Vice-President, including his office. Respondent bank allegedly granted much higher salary to the newly hired bank officers compared to what he was receiving during his tenure. In contrast, respondent bank maintains that petitioner was not coerced to resign but voluntarily opted to avail himself of the early retirement program and was duly paid his retirement benefits. It posits that petitioner was merely holding the position of Assistant Vice-President in acting capacity subject to the ratification of the respondent banks Board of Directors and since his appointment has never been ratified by the Board, respondent bank cannot therefore grant him the salary and benefits accorded to such position. In finding that petitioner was not constructively dismissed from employment, the Court of Appeals stressed that there was no showing that petitioners separation from employment was due to involuntary resignation or forced severance. Neither was it shown that there was a decrease in salary and privileges or downgrading of petitioners rank. What can be clearly deduced from the evidence was that until his voluntary retirement in 2001, petitioner was holding the position of Acting Assistant VicePresident and was receiving the salary and benefits accorded thereto. After scrupulously examining the contrasting positions of the parties, and the conflicting decisions of the Labor Arbiter and the NLRC, on one hand, and the appellate court, on the other, we find the records of the case bereft of evidence to substantiate the conclusions reached by both the Labor Arbiter and the NLRC that petitioner was constructively dismissed from employment. Constructive dismissal or constructive discharge has been defined as quitting because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay. 30 In the case at bar, a demotion in rank or diminution in pay was never raised as an issue. Settled then is the fact that petitioner suffered no demotion in rank or diminution in pay that could give rise to a cause of action against respondent bank for constructive dismissal under this definition. Worthy to stress, however, is that constructive dismissal does not always take the form of demotion in rank or diminution in pay. In several cases, we have ruled that the act of a clear discrimination, insensibility or disdain by an employer may become so unbearable on the part of the employee so as to foreclose any choice on his part except to resign from such employment.31 It is upon the aforementioned legal tenet that petitioner anchored his case. Petitioner strenuously argues that while the newly hired bank officers were given higher salaries and fat allowances, he was merely paid the amount of P15,000 basic pay and P4,000 allowance for the position of Acting Assistant Vice-President which, according to him, was way below what the newly hired bank officers were enjoying. Stated differently, petitioner avers that he was discriminated against by the respondent bank in terms of payment of salary and grant of benefits and allowances. We do not agree. Upon careful perusal of the position papers, memoranda and other pleadings submitted by petitioner from the Labor Arbiter up to this Court, including the evidence appended thereon, we find that no

evidence, substantial or otherwise, was ever submitted by petitioner to buttress the very premise of his position that there was discrimination. Discrimination has been defined as the failure to treat all persons equally when no reasonable distinction can be found between those favored and those not favored.32 Thus, before a claim for discrimination can prosper, it must be established that, first, there is no reasonable distinction or classification that can be obtained between persons belonging to the same class, and second, persons belonging to the same class have not been treated alike.33 Apropos thereto, petitioner failed to establish that he possessed the same skills, competencies and expertise as those of the newly hired bank officers so as to eliminate any possibility of substantial distinction that may warrant the unequal treatment between them. No proof was likewise presented by petitioner to show that the functions, duties and responsibilities he was performing are the same as those of the newly hired bank officers. Petitioner likewise failed to present any proof tending to show that he was discriminated against by the respondent bank. While he vigorously cried that the newly hired bank officers were afforded higher salaries and benefits compared to what he was earning, petitioner, however, miserably failed to substantiate his claim. No evidence was ever offered by petitioner to prove the amount of salaries and bonuses actually enjoyed by the newly hired bank officers, except for his bare allegations contained in his demand letter34 dated 20 February 2001, to wit: Mr. Portuguez has reliably learned that Bank records could show that your newly hired officers are being paid the basic salaries in the range of P25,000 to P30,000.35 Such bare and sweeping statement contains nothing but empty imputation of a fact that could hardly be given any evidentiary weight by this Court. It is indeed true that the demand letter made reference to bank records upon which petitioner purportedly derived his allegation but no such bank records were ever presented as evidence at any stage of the proceedings. Indubitably, such self-serving and unsubstantiated declaration is insufficient to establish a case before quasi-judicial bodies. Well-entrenched is the rule that the quantum of evidence required to establish a fact in quasi-judicial bodies is substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as adequate to support a conclusion, even if other equally reasonable minds might opine otherwise.36 It is beyond question that the evidence presented by petitioner cannot be considered as substantial evidence. Verily, petitioners case is devoid of substance to convince even the unreasonable minds, for evidently the records are stripped of supporting proofs to, at the very least, even just verify his claim. In addition, petitioner asseverates that in cases of constructive dismissal, the burden of proof rests on the employer to show that the employee was dismissed on a valid and just cause. 37 And failing to discharge such presumption, as in the case at bar, respondent bank should be adjudged guilty of illegal dismissal. Again, we are not persuaded. We are not unaware of the statutory rule that in illegal dismissal cases, the employer has the onus probandi to show that the employees separation from employment is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause.38 It bears stressing, however, that this legal principle presupposes that there is indeed an involuntary separation from employment and the facts attendant to such forced separation was clearly established.

This legal principle has no application in the instant controversy for as we have succinctly pointed above, petitioner failed to establish that indeed he was discriminated against and on account of such discrimination, he was forced to sever his employment from the respondent bank. What is undisputed is the fact that petitioner availed himself of respondent banks early voluntary retirement program and accordingly received his retirement pay in the amount of P1.324 Million under such program. Consequently, the burden of proof will not vest on respondent bank to prove the legality of petitioners separation from employment but aptly remains with the petitioner to prove his allegation that his availment of the early voluntary retirement program was, in fact, done involuntarily. As we have explicitly ruled in Machica v. Roosevelt Service Center, Inc.39: The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were burdened to prove their allegation that respondents dismissed them from their employment. It must be stressed that the evidence to prove this fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in illegal dismissal cases finds no application here because the respondents deny having dismissed the petitioners. (Emphases supplied.) Verily, petitioner did not present any clear, positive or convincing evidence in the present case to support his claims. Indeed, he never presented any evidence at all other than his own self-serving declarations. We must bear in mind the legal dictum that, "he who asserts, not he who denies, must prove."40 In the same breath, we are constrained to deny petitioners claim for salary differentials. We are not unmindful that the amount of P19,000 a month may not be commensurate compensation to the position of Acting Assistant Vice-President, but in the case at bar, the facts and the evidence did not establish even at least a rational basis for how much the standard compensation for the said position must be. It is not enough that petitioner perceived that he was receiving a very low salary in the absence of a comparative standard upon which he can peg his supposed commensurate compensation. Petitioners incessant reliance on the findings of the Labor Arbiter and the NLRC is equally unavailing. At the outset, we have already laid down that findings of fact of quasi-judicial bodies are conclusive and are not subject to review by the Court. However, this rule does not apply if such findings are tainted with mistake or not supported by evidence. 41 In finding that respondent bank is guilty of constructive dismissal, the Labor Arbiter mainly hinges its ruling on the Constitutional dogma that due to the lopsided power of capital over labor, the State shall intervene as an equalizer consistent with the social justice policy affording protection to labor.42 While we agree with the Labor Arbiter that in light of this Constitutional mandate, we must be vigilant in striking down any attempt of the management to exploit or oppress the working class, it does not mean, however, that we are but bound to uphold the working class in every labor dispute brought before this Court for our resolution. While our laws endeavor to give life to the constitutional policy on social justice and on the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.43 It should be remembered that the Philippine Constitution, while inexorably committed towards the protection of the working class from exploitation and unfair treatment, nevertheless mandates the policy of social justice so as to strike a balance between an avowed predilection for labor, on the one hand, and

the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the deserving, to be dispensed with in light of established facts, the applicable law, and existing jurisprudence.44 The presumption in favor of labor cannot defeat the very purpose for which our labor laws exist: to balance the conflicting interest of labor and management and to guaranty that labor and management stand on equal footing when bargaining in good faith with each other, not to tilt the scale to favor one over the other. WHEREFORE, in view of the foregoing, the instant petition is DENIED. The Decision dated 25 April 2005, and the Resolution dated 25 August 2005, both rendered by the Court of Appeals in CA-G.R. SP No. 85723, are hereby AFFIRMED. No costs. SO ORDERED.

G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner, vs.Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents. AUSTRIA-MARTINEZ, J.: For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their earnings have built houses, provided health care, equipped schools and planted the seeds of businesses. They have woven together the world by transmitting ideas and knowledge from country to country. They have provided the dynamic human link between cultures, societies and economies. Yet, only recently have we begun to understand not only how much international migration impacts development, but how smart public policies can magnify this effect. United Nations Secretary-General Ban Ki-MoonGlobal Forum on Migration and DevelopmentBrussels, July 10, 20071 For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act (R.A.) No. 8042,2 to wit: Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. x x x x (Emphasis and underscoring supplied) does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary either for the unexpired portion of their employment contract "or for three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of equal protection and denies them due process. By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause, entreating this Court to declare the subject clause unconstitutional. Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following terms and conditions: Duration of contract 12 months Position Chief Officer Basic monthly salary US$1,400.00 Hours of work 48.0 hours per week Overtime US$700.00 per month Vacation leave with pay 7.00 days per month5 On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded

employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation of respondents that he would be made Chief Officer by the end of April 1998.6 Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8 Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days. Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down as follows: May 27/31, 1998 (5 days) incl. Leave pay June 01/30, 1998 July 01/31, 1998 August 01/31, 1998 Sept. 01/30, 1998 Oct. 01/31, 1998 Nov. 01/30, 1998 Dec. 01/31, 1998 Jan. 01/31, 1999 Feb. 01/28, 1999 Mar. 1/19, 1999 (19 days) incl. leave pay US$ 413.90 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 1,640.00 ------------------------------------------------------------------------------25,382.23

Amount adjusted to chief mate's salary (March 19/31, 1998 to April 1/30, 1998) +

1,060.5010 --------------------------------------------------------------------------------------------TOTAL CLAIM US$ 26,442.7311 as well as moral and exemplary damages and attorney's fees. The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him monetary benefits, to wit: WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3) months of the unexpired portion of the aforesaid contract of employment.1avvphi1 The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten percent (10%) of the tota l amount awarded to the aforesaid employee under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit. All other claims are hereby DISMISSED. SO ORDERED.13 (Emphasis supplied)

applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25 His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the following grounds: I

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of three months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's employment contract - applying the subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay = US$2,590.00/compensation per month."14 Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA that petitioner was illegally dismissed. Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.18 In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to the unexpired portion of his contract of employment instead of limiting it to three (3) months II In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3) months. III

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of payment the following: 1. Three (3) months salary $1,400 x 3 2. Salary differential US$4,245.00 3. 10% Attorneys fees TOTAL The other findings are affirmed. SO ORDERED.19 The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the award of overtime pay, which should be proven to have been actually performed, and for vacation leave pay."20 Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject clause.21 The NLRC denied the motion.22 Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner. In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the

Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay provided in his contract since under the contract they form part of his salary.28 On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he intends to make use of the monetary award for his medical treatment and medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and, at the same time, praying that the constitutional question be resolved.30 Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the petition mindful of the extreme importance of the constitutional question raised therein. On the first and second issues The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal. Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his employment contract or a total of US$4,200.00. Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his employment

US$4,200.00 45.00 424.50 US$4,669.50

contract, computed at the monthly rate of US$2,590.00.31 The Arguments of Petitioner Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared illegal; that the disparate treatment is not reasonable as there is no substantial distinction between the two groups;33 and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights and welfare of all Filipino workers, whether deployed locally or overseas.35 Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected OFWs.36 Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum, viz.: Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis supplied) Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off than local employers because in cases involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only three months of the unexpired employment contract while local employers are liable for the full lump-sum salaries of their employees. As petitioner puts it: In terms of practical application, the local employers are not limited to the amount of backwages they have to give their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more than three (3) months.38 Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and other emoluments he is entitled to under his fixed-period employment contract.39 The Arguments of Respondents In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which was when he filed an appeal before the NLRC.40

The Arguments of the Solicitor General The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of money claims, as this was not stipulated upon by the parties.42 Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never acquire regular employment status, unlike local workers who are or can become regular employees. Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II of the Constitution.45 Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and humane conditions."46 The Court's Ruling The Court sustains petitioner on the first and second issues. When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the case,50 otherwise the Court will dismiss the case or decide the same on some other ground.51 Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three months only as provided under the subject clause. The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the pleadings before a competent court, such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition for Certiorari before the CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its function in the present case is limited to determining questions of fact to which the legislative policy of

R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid down by the law itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare unconstitutional a law or a provision thereof, such as the subject clause.56 Petitioner's interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its decision. The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment contract, and not just for a period of three months, strikes at the very core of the subject clause. Thus, the stage is all set for the determination of the constitutionality of the subject clause. Does the subject clause violate Section 10,Article III of the Constitution on non-impairmentof contracts? The answer is in the negative. Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his employment and the fixed salary package he will receive57 is not tenable. Section 10, Article III of the Constitution provides: No law impairing the obligation of contracts shall be passed. The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation,58 and cannot affect acts or contracts already perfected;59 however, as to laws already in existence, their provisions are read into contracts and deemed a part thereof. 60 Thus, the nonimpairment clause under Section 10, Article II is limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto. As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998 employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042. But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.61 Police power legislations adopted by the State to promote the health, morals, peace, education, good order, safety, and general welfare of the people are generally applicable not only to future contracts but even to those already in existence, for all private contracts must yield to the superior and legitimate measures taken by the State to promote public welfare.62 Does the subject clause violate Section 1,Article III of the Constitution, and Section 18,Article II and Section 3, Article XIII on laboras a protected sector?

The answer is in the affirmative. Section 1, Article III of the Constitution guarantees: No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the equal protection of the law. Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to place of deployment, full protection of their rights and welfare. To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like circumstances.65 Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system of classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.66 There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be rationally related to serving a legitimate state interest;67 b) the middle-tier or intermediate scrutiny in which the government must show that the challenged classification serves an important state interest and that the classification is at least substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a legislative classification which impermissibly interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a suspect class71 is presumed unconstitutional, and the burden is upon the government to prove that the classification is necessary to achieve a compelling state interest and that it is the least restrictive means to protect such interest.72 Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based on race74 or gender75 but not when the classification is drawn along income categories.76 It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the rankand-file employees of other GFIs had been exempted from the SSL by their respective charters. Finding that the disputed provision contained a suspect classification based on salary grade, the Court deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit: Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops where the classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not suffice.

Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support many of our decisions. We should not place undue and fawning reliance upon them and regard them as indispensable mental crutches without which we cannot come to our own decisions through the employment of our own endowments. We live in a different ambience and must decide our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. Our laws must be construed in accordance with the intention of our own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others. xxxx Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective judicial intervention. Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are clear commands to the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality. Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. xxxx Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be given deferential treatment. But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the actor. xxxx

In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing higher and better education and opportunities for career advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees consist of people whose status and rank in life are less and limited, especially in terms of job marketability, it is they - and not the officers - who have the real economic and financial need for the adjustment . This is in accord with the policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a decent standard of living, and improve the quality of life for all." Any act of Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied) Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to OFWs. Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at two levels: First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more; Second, among OFWs with employment contracts of more than one year; and Third, OFWs vis--vis local workers with fixed-period employment; OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit: A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when the employment contract concerned has a term of at least one (1) year or more. This is evident from the words "for every year of the unexpired term" which follows the words "salaries x x x for three months." To follow petitioners thinking that private respondent is entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook some words used in the statute while giving effect to some. This is contrary to the wellestablished rule in legal hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be given effect since the law-making body is presumed to know the meaning of the words employed in the statue and to have used them advisedly. Ut res magis valeat quam pereat. 80 (Emphasis supplied) In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was

awarded his salaries for the remaining 8 months and 6 days of his contract. Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5). One was Asian Center for Career and Employment System and Services v. National Labor Relations Commission (Second Division, October 1998),81 which involved an OFW who was awarded a two-year employment contract, but was dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit: Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600.82 Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-month contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of four and one-half months of her contract. The Marsaman interpretation of Section 10(5) has since been adopted in the following cases: Case Title Contract Period 6 months 9 months 9 months Period of Service Unexpired Period 4 months 4 months 5 months Period Applied in the Computation of the Monetary Award 4 months 4 months 5 months

Athenna Manpower v. Villanos 96

1 year, 10 1 month 1 year, 9 6 months or 3 months months months and 28 for each year of and 28 days days contract As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the unexpired portion of their contracts. The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being illegally dismissed were awarded their salaries for only 3 months. To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the same employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount. The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the period of their employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix below speaks for itself: Case Title Contract Period Period of Service Unexpired Period Period Applied in the Computation of the Monetary Award 22 months

Skippers v. Maguad84 Bahia Shipping v. Reynaldo Chua 85 Centennial Transmarine v. dela Cruz l86 Talidano v. Falcon87 Univan v. CA 88 Oriental v. CA 89 PCL v. NLRC90 Olarte v. Nayona91 JSS v.Ferrer92 Pentagon v. Adelantar93 Phil. Employ v. Paramio, et al.94 Flourish Maritime v. Almanzor 95

2 months 8 months 4 months

12 months 12 months 12 months 12 months 12 months 12 months 12 months 12 months 2 years

3 months 3 months more than 2 months more than 2 months 21 days 16 days 9 months and 7 days 10 months 26 days

9 months 9 months 10 months more or less 9 months 11 months and 9 days 11 months and 24 days 2 months and 23 days 2 months 23 months and 4 days

3 months 3 months 3 months 3 months 3 months 3 months 2 months and 23 days Unexpired portion 6 months or 3 months for each year of contract

ATCI v. CA, et 2 years 2 months 22 months al.98 Phil. Integrated 2 years 7 days 23 months 23 months and 23 days v. NLRC99 and 23 days JGB v. NLC100 2 years 9 months 15 months 15 months Agoy v. NLRC101 2 years 2 months 22 months 22 months EDI v. NLRC, et 2 years 5 months 19 months 19 months al.102 Barros v. NLRC, 12 months 4 months 8 months 8 months et al.103 Philippine 12 months 6 months and 5 months 5 months and 18 days Transmarine v. 22 days and 18 days Carilla104 It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is less, but all the while sparing the other category from such prejudice, simply because the latter's unexpired contracts fall short of one year. Among OFWs With Employment Contracts of More Than One Year Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the accuracy of the Marsaman interpretation. The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at least one year, for if it were any shorter, there would be no occasion for such unexpired term to be measured by every year; and second, the original term must be more than one year, for otherwise, whatever would be the unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the determination of when the subject clause "for three (3) months for every year of the unexpired term, whichever is less" shall apply is not the length of the original contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in cases when the unexpired portion of the contract period is at least one year, which arithmetically requires that the original contract period be more than one year. Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries for three months only. To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired portion. OFWs vis--vis Local WorkersWith Fixed-Period Employment As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term employment.107 The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce (1888),108 to wit:

Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of a fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of said contract until the termination of the period agreed upon. Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the provisions contained in the following articles. In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the liability of a shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term employment. The Court therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-term employment. There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which provides: Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence. Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally dismissed employees for the entire unexpired portion of their employment contracts. While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit: Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.) Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so as to apply the provision to local workers who are employed for a time certain although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company.113 And in both Lemoine and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on Article 1586, local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay114 held: The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other employment of the same kind in the same community, for the purpose of reducing the damages resulting from such wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is the amount which he would be entitled to had he continued in such employment until the termination of the period . (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.)115 (Emphasis supplied)

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies available to a fixed-term worker who is illegally discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the new Civil Code was already in effect.118 More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-period employment contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the same ruling in Anderson v. National Labor Relations Commission,121 which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine months on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a security officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was illegally cut short in the second month was declared entitled to his salaries for the remaining 10 months of his contract. In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term employment. The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage. There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest through the least restrictive means. What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution and calibrated by history.124 It is akin to the paramount interest of the state125 for which some individual liberties must give way, such as the public interest in safeguarding health or maintaining medical standards,126 or in maintaining access to information on matters of public concern.127 In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause may possibly serve. The OSG defends the subject clause as a police power measure "designed to protect the employment of

Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of getting hired by foreign employers." The limitation also protects the interest of local placement agencies, which otherwise may be made to shoulder millions of pesos in "termination pay."128 The OSG explained further: Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042. This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and humane conditions.129 (Emphasis supplied) However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state interest sought to be served by the subject clause. The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference to the underlying reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause. On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit: Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of the complaint, the claim arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino workers for overseas employment including claims for actual, moral, exemplary and other forms of damages. The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be joint and several. Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any compromise/voluntary agreement in violation of this paragraph shall be null and void. Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the responsible officials to any or all of the following penalties: (1) (2) The salary of any such official who fails to render his decision or resolution within the prescribed period shall be, or caused to be, withheld until the said official complies therewith; Suspension for not more than ninety (90) days; or

(3)

Dismissal from the service with disqualification to hold any appointive public office for five (5) years.

this Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor Relations Commission,134 has described to be not self-actuating: Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as selfexecuting in the sense that these are automatically acknowledged and observed without need for any enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies an unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution. Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative enactments for their enforceability.135 (Emphasis added) Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor. It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges protection through executive or legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and legislative departments, but for the judiciary as well, to protect the welfare of the working class. And it was in fact consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice against persons favored by the Constitution with special protection -- such as the working class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same to strict judicial scrutiny. The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal protection clause, has no life or force of its own as elucidated in Agabon. Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid governmental purpose.136 The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better

Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such official may have incurred under other existing laws or rules and regulations as a consequence of violating the provisions of this paragraph. But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims. A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible state interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of the subject clause. In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that would justify the perpetuation of the discrimination against OFWs under the subject clause. Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected. There can never be a justification for any form of government action that alleviates the burden of one sector, but imposes the same burden on another sector, especially when the favored sector is composed of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the Constitution commands. The idea that private business interest can be elevated to the level of a compelling state interest is odious. Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose without infringing on the constitutional rights of OFWs. The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on their contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range from temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring foreign employers. Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement agencies in enforcing the solidary liability of their foreign principals. Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and other OFWs to equal protection.1avvphi1 Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the subject clause from the lone perspective that the clause directly violates state policy on labor under Section 3,131 Article XIII of the Constitution. While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which

chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the deliberations leading to its enactment or the pleadings of respondent that would indicate that there is an existing governmental purpose for the subject clause, or even just a pretext of one. The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that the clause violates not just petitioner's right to equal protection, but also her right to substantive due process under Section 1,137 Article III of the Constitution. The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A. No. 8042. On the Third Issue Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his monetary award, because these are fixed benefits that have been stipulated into his contract. Petitioner is mistaken. The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any work "performed" on designated rest days and holidays. By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the computation of petitioner's monetary award, unless there is evidence that he performed work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138 However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v. National Labor Relations Commission, to wit: The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to such benefit must first be established. In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the same is given during the actual service of the seamen. WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month. No costs.

SO ORDERED.

G.R. No. 175558

February 8, 2012

SKIPPERS UNITED PACIFIC, INC. and SKIPPERS MARITIME SERVICES, INC., LTD., Petitioners, vs.NATHANIEL DOZA, NAPOLEON DE GRACIA, ISIDRO L. LATA, and CHARLIE APROSTA, Respondents. CARPIO, J.: The Case This is a Petition for Review under Rule 45 assailing the 5 July 2006 Decision and 7 November 2006 Resolution2 of the Court of Appeals in CA-G.R. SP No. 88148.3 This arose from consolidated labor case4 filed by seafarers Napoleon De Gracia (De Gracia), Isidro L. Lata (Lata), Charlie Aprosta (Aprosta), and Nathaniel Doza (Doza) against local manning agency Skippers United Pacific, Inc. and its foreign principal, Skippers Maritime Services, Inc., Ltd. (Skippers) for unremitted home allotment for the month of December 1998, salaries for the unexpired portion of their employment contracts, moral damages, exemplary damages, and attorneys fees. Skippers, on the other hand, answered with a claim for reimbursement of De Gracia, Aprosta and Latas repatriation expenses, as well as award of moral damages and attorneys fees. De Gracia, Lata, Aprosta and Dozas (De Gracia, et al.) claims were dismissed by the Labor Arbiter for lack of merit.5 The Labor Arbiter also dismissed Skippers claims.6 De Gracia, et al. appealed7 the Labor Arbiters decision with the National Labor Relations Commission (NLRC), but the First Division of the NLRC dismissed the appeal for lack of merit.8 Doza, et al.s Motion for Reconsideration was likewise denied by the NLRC,9 so they filed a Petition for Certiorari with the Court of Appeals (CA).10 The CA granted the petition, reversed the Labor Arbiter and NLRC Decisions, and awarded to De Gracia, Lata and Aprosta their unremitted home allotment, three months salary each representing the unexpired portion of their employment contracts and attorneys fees.11 No award was given to Doza for lack of factual basis.12 The CA denied Skippers Motion for Partial Reconsideration.13 Hence, this Petition. The Facts Skippers United Pacific, Inc. deployed, in behalf of Skippers, De Gracia, Lata, and Aprosta to work on board the vessel MV Wisdom Star, under the following terms and conditions:
1

Position : Third Officer Contract Duration : 12 months Basic Monthly Salary : US$600.00 Contract Date : 17 April 199816 Paragraph 2 of all the employment contracts stated that: "The terms and conditions of the Revised Employment Contract Governing the Employment of All Seafarers approved per Department Order No. 33 and Memorandum Circular No. 55, both series of 1996 shall be strictly and faithfully observed."17 No employment contract was submitted for Nathaniel Doza. De Gracia, et al. claimed that Skippers failed to remit their respective allotments for almost five months, compelling them to air their grievances with the Romanian Seafarers Free Union.18 On 16 December 1998, ITF Inspector Adrian Mihalcioiu of the Romanian Seafarers Union sent Captain Savvas of Cosmos Shipping a fax letter, relaying the complaints of his crew, namely: home allotment delay, unpaid salaries (only advances), late provisions, lack of laundry services (only one washing machine), and lack of maintenance of the vessel (perforated and unrepaired deck).19 To date, however, Skippers only failed to remit the home allotment for the month of December 1998.20 On 28 January 1999, De Gracia, et al. were unceremoniously discharged from MV Wisdom Stars and immediately repatriated.21 Upon arrival in the Philippines, De Gracia, et al. filed a complaint for illegal dismissal with the Labor Arbiter on 4 April 1999 and prayed for payment of their home allotment for the month of December 1998, salaries for the unexpired portion of their contracts, moral damages, exemplary damages, and attorneys fees.22 Skippers, on the other hand, claims that at around 2:00 a.m. on 3 December 1998, De Gracia, smelling strongly of alcohol, went to the cabin of Gabriel Oleszek, Master of MV Wisdom Stars, and was rude, shouting noisily to the master.23 De Gracia left the masters cabin after a few minutes and was heard shouting very loudly somewhere down the corridors.24 This incident was evidenced by the Captains Report sent via telex to Skippers on said date.25 Skippers also claims that at 12:00 noon on 22 January 1999, four Filipino seafarers, namely Aprosta, De Gracia, Lata and Doza, arrived in the masters cabin and demanded immediate repatriation because they were not satisfied with the ship.26 De Gracia, et al. threatened that they may become crazy any moment and demanded for all outstanding payments due to them.27 This is evidenced by a telex of Cosmoship MV Wisdom to Skippers, which however bears conflicting dates of 22 January 1998 and 22 January 1999.28 Skippers also claims that, due to the disembarkation of De Gracia, et al., 17 other seafarers disembarked under abnormal circumstsances.29 For this reason, it was suggested that Polish seafarers be utilized instead of Filipino seamen.30 This is again evidenced by a fax of Cosmoship MV Wisdom to Skippers, which bears conflicting dates of 24 January 1998 and 24 January 1999.31 Skippers, in its Position Paper, admitted non-payment of home allotment for the month of December 1998, but prayed for the offsetting of such amount with the repatriation expenses in the following manner:32 Repatriation Home Balance Expense Allotment De Gracia US$1,340.00 US$900.00 US$440.00 Aprosta US$1,340.00 US$600.00 US$740.00 Lata US$1,340.00 US$600.00 US$740.00 Since De Gracia, et al. pre-terminated their contracts, Skippers claims they are liable for their repatriation expenses33 in accordance with Section 19(G) of Philippine Overseas Employment Administration (POEA) Memorandum Circular No. 55, series of 1996 which states: Seafarer

Name Position Contract Duration Basic Monthly Salary Contract Date Name Position Contract Duration Basic Monthly Salary Contract Date Name

: : : : : : : : : : :

Napoleon O. De Gracia 3rd Engineer 10 months US$800.00 17 July 199814 Isidro L. Lata 4th Engineer 12 months US$600.00 17 April 199815 Charlie A. Aprosta

G. A seaman who requests for early termination of his contract shall be liable for his repatriation cost as well as the transportation cost of his replacement. The employer may, in case of compassionate grounds, assume the transportation cost of the seafarers replacement. Skippers also prayed for payment of moral damages and attorneys fees.34

WHEREFORE, the instant petition for certiorari is GRANTED. The Resolution dated October 28, 2002 and the Order dated August 31, 2004 rendered by the public respondent NLRC are ANNULLED and SET ASIDE. Let another judgment be entered holding private respondents jointly and severally liable to petitioners for the payment of: 1. Unremitted home allotment pay for the month of December, 1998 or the equivalent thereof in Philippine pesos: a. De Gracia = US$900.00 b. Lata = US$600.00 c. Aprosta = US$600.00 Salary for the unexpired portion of the employment contract or for 3 months for every year of the unexpired term, whichever is less, or the equivalent thereof in Philippine pesos: a. De Gracia = US$2,400.00 b. Lata = US$1,800.00 c. Aprosta = US$1,800.00 Attorneys fees and litigation expenses equivalent to 10% of the total claims.

The Decision of the Labor Arbiter The Labor Arbiter rendered his Decision on 18 February 2002, with its dispositive portion declaring: 2. WHEREFORE, judgment is hereby rendered dismissing herein action for lack of merit. Respondents claim for reimbursement of the expenses they incurred in the repatriation of complainant Nathaniel Doza is likewise dismissed. SO ORDERED.35 The Labor Arbiter dismissed De Gracia, et al.s complaint for illegal dismissal because the seafarers voluntarily pre-terminated their employment contracts by demanding for immediate repatriation due to dissatisfaction with the ship.36 The Labor Arbiter held that such voluntary pre-termination of employment contract is akin to resignation,37 a form of termination by employee of his employment contract under Article 285 of the Labor Code. The Labor Arbiter gave weight and credibility to the telex of the master of the vessel to Skippers, claiming that De Gracia, et al. demanded for immediate repatriation.38 Due to the absence of illegal dismissal, De Gracia, et. al.s claim for salaries representing the unexpired portion of their employment contracts was dismissed.39 The Labor Arbiter also dismissed De Gracia et al.s claim for home allotment for December 1998. 40 The Labor Arbiter explained that payment for home allotment is "in the nature of extraordinary money where the burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit."41 Since De Gracia, et al. were not able to prove their entitlement to home allotment, such claim was dismissed.42 Lastly, Skippers claim for reimbursement of repatriation expenses was likewise denied, since Article 19(G) of POEA Memorandum Circular No. 55, Series of 1996 allows the employer, in case the seafarer voluntarily pre-terminates his contract, to assume the repatriation cost of the seafarer on compassionate grounds.43 The Decision of the NLRC The NLRC, on 28 October 2002, dismissed De Gracia, et al.s appeal for lack of merit and affirmed the Labor Arbiters decision.44 The NLRC considered De Gracia, et al.s claim for home allotment for December 1998 unsubstantiated, since home allotment is a benefit which De Gracia, et al. must prove their entitlement to.45 The NLRC also denied the claim for illegal dismissal because De Gracia, et al. were not able to refute the telex received by Skippers from the vessels master that De Gracia, et al. voluntarily pre-terminated their contracts and demanded immediate repatriation due to their dissatisfaction with the ships operations.46 The Decision of the Court of Appeals The CA, on 5 July 2006, granted De Gracia, et al.s petition and reversed the decisions of the Labor Arbiter and NLRC, its dispositive portion reading as follows: 3.

SO ORDERED.47 The CA declared the Labor Arbiter and NLRC to have committed grave abuse of discretion when they relied upon the telex message of the captain of the vessel stating that De Gracia, et al. voluntarily preterminated their contracts and demanded immediate repatriation.48 The telex message was "a selfserving document that does not satisfy the requirement of substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify the conclusion that petitioners indeed voluntarily demanded their immediate repatriation."49 For this reason, the repatriation of De Gracia, et al. prior to the expiration of their contracts showed they were illegally dismissed from employment.50 In addition, the failure to remit home allotment pay was effectively admitted by Skippers, and prayed to be offset from the repatriation expenses.51 Since there is no proof that De Gracia, et al. voluntarily preterminated their contracts, the repatriation expenses are for the account of Skippers, and cannot be offset with the home allotment pay for December 1998.52 No relief was granted to Doza due to lack of factual basis to support his petition.53 Attorneys fees equivalent to 10% of the total claims was granted since it involved an action for recovery of wages or where the employee was forced to litigate and incur expenses to protect his rights and interest.54 The Issues Skippers, in its Petition for Review on Certiorari, assigned the following errors in the CA Decision: a) b) The Court of Appeals seriously erred in not giving due credence to the masters telex message showing that the respondents voluntarily requested to be repatriated. The Court of Appeals seriously erred in finding petitioners liable to pay backwages and the alleged unremitted home allotment pay despite the finding of the Labor Arbiter and the NLRC that the claims are baseless. The Court of Appeals seriously erred in awarding attorneys fees in favor of respondents despite its findings that the facts attending in this case do not support the claim for moral and exemplary damages.55 The Ruling of this Court

c)

We deny the petition and affirm the CA Decision, but modify the award. For a workers dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive due process.56 Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee of the employers decision to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted.57 Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause under Articles 282 to 284 of the Labor Code. In this case, there was no written notice furnished to De Gracia, et al. regarding the cause of their dismissal. Cosmoship furnished a written notice (telex) to Skippers, the local manning agency, claiming that De Gracia, et al. were repatriated because the latter voluntarily pre-terminated their contracts. This telex was given credibility and weight by the Labor Arbiter and NLRC in deciding that there was pretermination of the employment contract "akin to resignation" and no illegal dismissal. However, as correctly ruled by the CA, the telex message is "a biased and self-serving document that does not satisfy the requirement of substantial evidence." If, indeed, De Gracia, et al. voluntarily pre-terminated their contracts, then De Gracia, et al. should have submitted their written resignations. Article 285 of the Labor Code recognizes termination by the employee of the employment contract by "serving written notice on the employer at least one (1) month in advance." Given that provision, the law contemplates the requirement of a written notice of resignation. In the absence of a written resignation, it is safe to presume that the employer terminated the seafarers. In addition, the telex message relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22 January 1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998, De Gracia, et al. were not even employed yet by the foreign principal. For these reasons, the dismissal of De Gracia, et al. was illegal. On the issue of home allotment pay, Skippers effectively admitted non-remittance of home allotment pay for the month of December 1998 in its Position Paper. Skippers sought the repatriation expenses to be offset with the home allotment pay. However, since De Gracia, et al.s dismissal was illegal, their repatriation expenses were for the account of Skippers and could not be offset with the home allotment pay. Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay is in "the nature of extraordinary money where the burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit," Section 8 of POEA Memorandum Circular No. 55, series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of the seafarers salary: The seafarer is required to make an allotment which is payable once a month to his designated allottee in the Philippines through any authorized Philippine bank. The master/employer/agency shall provide the seafarer with facilities to do so at no expense to the seafarer. The allotment shall be at least eighty percent (80%) of the seafarers monthly basic salary including backwages, if any. (Emphasis supplied)

Paragraph 2 of the employment contracts of De Gracia, Lata and Aprosta incorporated the provisions of above Memorandum Circular No. 55, series of 1996, in the employment contracts. Since said memorandum states that home allotment of seafarers actually constitutes at least eighty percent (80%) of their salary, home allotment pay is not in the nature of an extraordinary money or benefit, but should actually be considered as salary which should be paid for services rendered. For this reason, such nonremittance of home allotment pay should be considered as unpaid salaries, and Skippers shall be liable to pay the home allotment pay of De Gracia, et al. for the month of December 1998. Seafarer De Gracia Aprosta Lata Damages As admitted by Skippers in its Position Paper, the home allotment pay for December 1998 due to De Gracia, Lata and Aprosta is: The monthly salary of De Gracia, according to his employment contract, is only US$800.00. However, since Skippers admitted in its Position Paper a higher home allotment pay for De Gracia, we award the higher amount of home allotment pay for De Gracia in the amount of US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso equivalent of the dollar amount should be computed using the prevailing rate at the time of termination since it was due and demandable to De Gracia, et al. on 28 January 1999. Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases of unjust termination of employment contracts: In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. The Migrant Workers Act provides that salaries for the unexpired portion of the employent contract or three (3) months for every year of the unexpired term, whichever is less, shall be awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in 24 March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc.,58 the Court, in an En Banc Decision, declared unconstitutional the clause "or for three months for every year of the unexpired term, whichever is less" and awarded the entire unexpired portion of the employment contract to the overseas Filipino worker. On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended Section 10 of the Migrant Workers Act, and once again reiterated the provision of awarding the unexpired portion of the employent contract or three (3) months for every year of the unexpired term, whichever is less. Nevertheless, since the termination occurred on January 1999 before the passage of the amendatory RA 10022, we shall apply RA 8042, as unamended, without touching on the constitutionality of Section 7 of RA 10022. The declaration in March 2009 of the unconstitutionality of the clause "or for three months for every year of the unexpired term, whichever is less" in RA 8042 shall be given retroactive effect to the termination that occurred in January 1999 because an unconstitutional clause in the law confers no Home Allotment Pay US$900.00 US$600.00 US$600.00

rights, imposes no duties and affords no protection. The unconstitutional provision is inoperative, as if it was not passed into law at all.59 As such, we compute the claims as follows: Contract Contract Repatriation Unexpired Monthly Total Term Date Date Term Salary Claims De 10 17 Jul. 28 Jan. 1999 3 months & US$800 US$2933. Gracia months 1998 20 days 34 Lata 12 17 Apr. 28 Jan. 1999 2 months & US$600 US$1600 months 1998 20 days Aprosta 12 17 Apr. 28 Jan. 1999 2 months & US$600 US$1600 months 1998 20 days Given the above computation, we modify the CAs imposition of award, and grant to De Gracia, et al. salaries representing the unexpired portion of their contracts, instead of salaries for three (3) months. Seafarer Article 2219 of the Civil Code of the Philippines provides for recovery of moral damages in certain cases: Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) (2)

When exemplary damages are awarded; When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmens compensation and employers liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable. Article 111 of the Labor Code provides for a maximum award of attorneys fees in cases of recovery of wages: Art. 111. Attorneys fees.

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

A criminal offense resulting in physical injuries; Quasi-delicts causing physical injuries; Seduction, abduction, rape, or other lascivious acts; Adultery or concubinage; Illegal or arbitrary detention or arrest; Illegal search; Libel, slander or any other form of defamation; Malicious prosecution; Acts mentioned in Article 309; Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

a. b.

In cases of unlawful withholding of wages, the culpable party may be assessed attorneys fees equivalent to ten percent of the amount of wages recovered. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of wages, attorneys fees which exceed ten percent of the amount of wages recovered.

Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid salaries and protect their interest, we agree with the CAs imposition of attorneys fees in the amount of ten percent (10%) of the total claims.1wphi1 WHEREFORE, we AFFIRM the Decision of the Court of Appeals dated 5 July 2006 with MODIFICATION. Petitioners Skippers United Pacific, Inc. and Skippers Maritime Services Inc., Ltd. are jointly and severally liable for payment of the following: 1) Unremitted home allotment pay for the month of December 1998 in its equivalent rate in Philippine Pesos at the time of termination on 28 January 1999: a. De Gracia = US$900.00 b. Lata = US$600.00 c. Aprosta = US$600.00 Salary for the unexpired portion of the employment contract or its current equivalent in Philippine Pesos: a. De Gracia = US$2,933.34 b. Lata = US$1,600.00 c. Aprosta = US$1,600.00 Attorneys fees and litigation expenses equivalent to 10% of the total claims.

The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named. Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary damages: Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. In this case, we agree with the CA in not awarding moral and exemplary damages for lack of factual basis. Lastly, Article 2208 of the Civil Code provides for recovery of attorneys fees and expenses of litigation: Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

2)

3)

SO ORDERED.