Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 187226 January 28, 2015

CHERYLL SANTOS LEUS, Petitioner,

vs.
ST. SCHOLASTICA'S COLLEGE WESTGROVE and/or SR. EDNA QUIAMBAO,
OSB, Respondents.

DECISION

REYES, J.:

Cheryll Santos Leus (petitioner) was hired by St. Scholastica's College Westgrove
(SSCW), a Catholic educational institution, as a non-teaching personnel, engaged in
pre-marital sexual relations, got pregnant out of wedlock, married the father of her child,
and was dismissed by SSCW, in that order. The question that has to be resolved is
whether the petitioner's conduct constitutes a ground for her dismissal.

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to annul and set aside the Decision1 dated September 24, 2008 and
Resolution2 dated March 2, 2009 issued by the Court of Appeals (CA) in CA-G.R. SP
No. 100188, which affirmed the Resolutions dated February 28, 20073 and May 21,
20074 of the National Labor Relations Commission (NLRC)in NLRC CA No. 049222-06.

The Facts

SSCW is a catholic and sectarian educational institution in Silang, Cavite. In May 2001,
SSCW hired the petitioner as an Assistant to SSCWs Director of the Lay Apostolate
and Community Outreach Directorate.

Sometime in 2003, the petitioner and her boyfriend conceived a child out of wedlock.
When SSCW learned of the petitioners pregnancy, Sr. Edna Quiambao (Sr.
Quiambao), SSCWs Directress, advised her to file a resignation letter effective June 1,
2003. In response, the petitioner informed Sr. Quiambao that she would not resign from
her employment just because she got pregnant without the benefit of marriage.5

On May 28, 2003, Sr. Quiambao formally directed the petitioner to explain in writing why
she should not be dismissed for engaging in pre-marital sexual relations and getting
pregnant as a result thereof, which amounts to serious misconduct and conduct
unbecoming of an employee of a Catholic school.6

In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of
wedlock does not amount to serious misconduct or conduct unbecoming of an
employee. She averred that she is unaware of any school policy stating that being
pregnant out of wedlock is considered as a serious misconduct and, thus, a ground for
dismissal. Further, the petitioner requested a copy of SSCWs policy and guidelines so
that she may better respond to the charge against her. On June 2, 2003, Sr. Quiambao
informed the petitioner that, pending the promulgation of a "Support Staff Handbook,"
SSCW follows the 1992 Manual of Regulations for Private Schools (1992 MRPS) on the
causes for termination of employments; that Section 94(e) of the 1992 MRPS cites
"disgraceful or immoral conduct" as a ground for dismissal in addition to the just causes
for termination of employment provided under Article 282 of the Labor Code.8

Page 1 of 55
On June 4, 2003, the petitioner, through counsel, sent Sr. Quiambao a letter,9 which, in
part, reads:

To us, pre-marital sex between two consenting adults without legal impediment to marry
each other who later on married each other does not fall within the contemplation of
"disgraceful or immoral conduct" and "serious misconduct" of the Manual of Regulations
for Private Schools and the Labor Code of the Philippines.

Your argument that what happened to our client would set a bad example to the
students and other employees of your school is speculative and is more imaginary than
real. To dismiss her on that sole ground constitutes grave abuse of management
prerogatives.

Considering her untarnished service for two years, dismissing her with her present
condition would also mean depriving her to be more secure in terms of financial
capacity to sustain maternal needs.10

In a letter11 dated June 6, 2003, SSCW, through counsel, maintained that pre-marital
sexual relations, evenif between two consenting adults without legal impediment to
marry, is considered a disgraceful and immoral conduct or a serious misconduct, which
are grounds for the termination of employment under the 1992 MRPS and the Labor
Code. That SSCW, as a Catholic institution of learning, has the right to uphold the
teaching of the Catholic Church and expect its employees to abide by the same. They
further asserted that the petitioners indiscretion is further aggravated by the fact that
she is the Assistant to the Director of the Lay Apostolate and Community Outreach
Directorate, a position of responsibility that the students look up to as rolemodel. The
petitioner was again directed to submit a written explanation on why she should not be
dismissed.

On June 9, 2003, the petitioner informed Sr. Quiambao that she adopts her counsels
letter dated June 4, 2003 as her written explanation.12

Consequently, in her letter13 dated June 11, 2003, Sr. Quiambao informed the
petitioner that her employment with SSCW is terminated on the ground of serious
misconduct. She stressed that pre-marital sexual relations between two consenting
adults with no impediment to marry, even if they subsequently married, amounts to
immoral conduct. She further pointed out that SSCW finds unacceptable the scandal
brought about by the petitioners pregnancy out of wedlock as it ran counter to the moral
principles that SSCW stands for and teaches its students.

Thereupon, the petitioner filed a complaint for illegal dismissal with the Regional
Arbitration Branch of the NLRC in Quezon City against SSCW and Sr. Quiambao
(respondents). In her position paper,14 the petitioner claimed that SSCW gravely
abused its management prerogative as there was no just cause for her dismissal. She
maintained that her pregnancy out of wedlock cannot be considered as serious
misconduct since the same is a purely private affair and not connected in any way with
her duties as an employee of SSCW. Further, the petitioner averred that she and her
boyfriend eventually got married even prior to her dismissal.

For their part, SSCW claimed that there was just cause to terminate the petitioners
employment with SSCW and that the same is a valid exercise of SSCWs management
prerogative. They maintained that engaging in pre-marital sex, and getting pregnant as
a result thereof, amounts to a disgraceful or immoral conduct, which is a ground for the
dismissal of an employee under the 1992 MRPS.

Page 2 of 55
They pointed out that SSCW is a Catholic educational institution, which caters
exclusively to young girls; that SSCW would lose its credibility if it would maintain
employees who do not live up to the values and teachings it inculcates to its students.
SSCW further asserted that the petitioner, being an employee of a Catholic educational
institution, should have strived to maintain the honor, dignity and reputation of SSCW as
a Catholic school.15

The Ruling of the Labor Arbiter

On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case
No. 6-17657-03-C which dismissed the complaint filed by the petitioner. The LA found
that there was a valid ground for the petitioners dismissal; that her pregnancy out of
wedlock is considered as a "disgraceful and immoral conduct." The LA pointed out that,
as an employee of a Catholic educational institution, the petitioner is expected to live up
to the Catholic values taught by SSCW to its students. Likewise, the LA opined that:

Further, a deep analysis of the facts would lead us to disagree with the complainant that
she was dismissed simply because she violate[d] a Catholic [teaching]. It should not be
taken in isolation but rather it should be analyzed in the lightof the surrounding
circumstances as a whole. We must also take into [consideration] the nature of her work
and the nature of her employer-school. For us, it is not just an ordinary violation. It was
committed by the complainant in an environment where her strict adherence to the
same is called for and where the reputation of the school is at stake. x x x.17

The LA further held that teachers and school employees, both in their official and
personal conduct, must display exemplary behavior and act in a manner that is beyond
reproach.

The petitioner appealed to the NLRC, insisting that there was no valid ground for the
termination of her employment. She maintained that her pregnancy out of wedlock
cannot be considered as "serious misconduct" under Article 282 of the Labor Code
since the same was not of such a grave and aggravated character. She asserted that
SSCW did not present any evidence to establish that her pregnancy out of wedlock
indeed eroded the moral principles that it teaches its students.18

The Ruling of the NLRC

On February 28, 2007, the NLRC issued a Resolution,19 which affirmed the LA
Decision dated February 28, 2006. The NLRC pointed out that the termination of the
employment of the personnel of private schools is governed by the 1992 MRPS; that
Section 94(e) thereof cites "disgraceful or immoral conduct" as a just cause for
dismissal, in addition to the grounds for termination of employment provided for under
Article 282 of the Labor Code. The NLRC held that the petitioners pregnancy out of
wedlock is a "disgraceful or immoral conduct" within the contemplation of Section 94(e)
of the 1992 MRPS and, thus, SSCW had a valid reason to terminate her employment.

The petitioner sought reconsideration20 of the Resolution dated February 28, 2007 but
it was denied by the NLRC in its Resolution21 dated May 21, 2007.

Unperturbed, the petitioner filed a petition22 for certiorari with the CA, alleging that the
NLRC gravely abused its discretion in ruling that there was a valid ground for her
dismissal. She maintained that pregnancy out of wedlock cannot be considered as a
disgraceful or immoral conduct; that SSCW failed to prove that its students were indeed
gravely scandalized by her pregnancy out of wedlock. She likewise asserted that the
NLRC erred in applying Section 94(e) of the 1992 MRPS.

The Ruling of the CA

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On September 24, 2008, the CA rendered the herein assailed Decision,23 which denied
the petition for certiorari filed by the petitioner. The CA held that it is the provisions of
the 1992 MRPS and not the Labor Code which governs the termination of employment
of teaching and non-teaching personnel of private schools, explaining that:

It is a principle of statutory construction that where there are two statutes that apply to a
particular case, that which was specially intended for the said case must prevail.
Petitioner was employed by respondent private Catholic institution which undeniably
follows the precepts or norms of conduct set forth by the Catholic Church. Accordingly,
the Manual of Regulations for Private Schools followed by it must prevail over the Labor
Code, a general statute. The Manual constitutes the private schools Implementing
Rules and Regulations of Batas Pambansa Blg. 232 or the Education Act of 1982. x x
x.24

The CA further held that the petitioners dismissal was a valid exercise of SSCWs
management prerogative to discipline and impose penalties on erring employees
pursuant toits policies, rules and regulations. The CA upheld the NLRCs conclusion
that the petitioners pregnancy out of wedlock is considered as a "disgraceful and
immoral conduct" and, thus, a ground for dismissal under Section 94(e) of the 1992
MRPS. The CA likewise opined that the petitioners pregnancy out of wedlock is
scandalous per segiven the work environment and social milieu that she was in, viz:

Under Section 94 (e) of the [MRPS], and even under Article 282 (serious misconduct) of
the Labor Code, "disgraceful and immoral conduct" is a basis for termination of
employment.

xxxx

Petitioner contends that her pre-marital sexual relations with her boyfriend and her
pregnancy prior to marriage was not disgraceful or immoral conduct sufficient for her
dismissal because she was not a member of the schools faculty and there is no
evidence that her pregnancy scandalized the school community.

We are not persuaded. Petitioners pregnancy prior to marriage is scandalous in itself

given the work environment and social milieu she was in. Respondent school for young
ladies precisely seeks to prevent its students from situations like this, inculcating in
them strict moral values and standards. Being part of the institution, petitionersprivate
and public life could not be separated. Her admitted pre-marital sexual relations was a
violation of private respondents prescribed standards of conduct that views pre-marital
sex as immoral because sex between a man and a woman must only take place within
the bounds of marriage.

Finally, petitioners dismissal is a valid exercise of the employer-schools management

prerogative to discipline and impose penalties on erring employees pursuant to its
policies, rules and regulations. x x x.25 (Citations omitted)

The petitioner moved for reconsideration26 but it was denied by the CA in its
Resolution27 dated March 2, 2009.

Hence, the instant petition.

Issues

Essentially, the issues set forth by the petitioner for this Courts decision are the
following: first, whether the CA committed reversible error in ruling that it is the 1992
MRPS and not the Labor Code that governs the termination of employment of teaching

Page 4 of 55
and non-teaching personnel of private schools; and second, whether the
petitionerspregnancy out of wedlock constitutes a valid ground to terminate her
employment.

The Ruling of the Court

The Court grants the petition.

First Issue: Applicability of the 1992 MRPS

The petitioner contends that the CA, in ruling that there was a valid ground to dismiss
her, erred in applying Section 94 of the 1992 MRPS. Essentially, she claims that the
1992 MRPS was issued by the Secretary of Education as the revised implementing
rules and regulations of Batas Pambansa Bilang 232 (BP 232) or the "Education Act of
1982." That there is no provision in BP 232, which provides for the grounds for the
termination of employment of teaching and non-teaching personnel of private schools.
Thus, Section 94 of the 1992 MRPS, which provides for the causes of terminating an
employment, isinvalid as it "widened the scope and coverage" of BP 232.

The Court does not agree.

The Court notes that the argument against the validity of the 1992 MRPS, specifically
Section 94 thereof, is raised by the petitioner for the first time in the instant petition for
review. Nowhere in the proceedings before the LA, the NLRC or the CA did the
petitioner assail the validity of the provisions of the 1992 MRPS.

"It is well established that issues raised for the first time on appeal and not raised in the
proceedings in the lower court are barred by estoppel. Points of law, theories, issues,
and arguments not brought to the attention of the trial court ought not to be considered
by a reviewing court, as these cannot be raised for the first time on appeal. To consider
the alleged facts and arguments belatedly raised would amount to trampling on the
basic principles of fair play, justice, and due process."28

In any case, even if the Court were to disregard the petitioners belated claim of the
invalidity of the 1992 MRPS, the Court still finds the same untenable.

The 1992 MRPS, the regulation in force at the time of the instant controversy, was
issued by the Secretary of Education pursuant to BP 232. Section 7029 of BP 232 vests
the Secretary of Education with the authority to issue rules and regulations to implement
the provisions of BP 232. Concomitantly, Section 5730 specifically empowers the
Department of Education to promulgate rules and regulations necessary for the
administration, supervision and regulation of the educational system in accordance with
the declared policy of BP 232.

The qualifications of teaching and non-teaching personnel of private schools, as well as

the causes for the termination of their employment, are an integral aspect of the
educational system of private schools. Indubitably, ensuring that the teaching and non-
teaching personnel of private schools are not only qualified, but competent and efficient
as well goes hand in hand with the declared objective of BP 232 establishing and
maintaining relevant quality education.31 It is thus within the authority of the Secretary
of Education to issue a rule, which provides for the dismissal of teaching and non-
teaching personnel of private schools based on their incompetence, inefficiency, or
some other disqualification.

Moreover, Section 69 of BP 232 specifically authorizes the Secretary of Education to

"prescribe and impose such administrative sanction as he may deem reasonable and
appropriate in the implementing rules and regulations" for the "[g]ross inefficiency of the

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teaching or non-teaching personnel" of private schools.32 Accordingly, contrary to the
petitioners claim, the Court sees no reason to invalidate the provisions of the 1992
MRPS, specifically Section 94 thereof. Second Issue: Validity of the Petitioners
Dismissal

The validity of the petitioners dismissal hinges on the determination of whether

pregnancy out of wedlock by an employee of a catholic educational institution is a cause
for the termination of her employment.

In resolving the foregoing question,the Court will assess the matter from a strictly
neutral and secular point of view the relationship between SSCW as employer and the
petitioner as an employee, the causes provided for by law in the termination of
suchrelationship, and the evidence on record. The ground cited for the petitioners
dismissal, i.e., pre-marital sexual relations and, consequently, pregnancy outof wedlock,
will be assessed as to whether the same constitutes a valid ground for dismissal
pursuant to Section 94(e) of the 1992 MRPS.

The standard of review in a Rule 45

petition from the CA decision in
labor cases.

In a petition for review under Rule 45 of the Rules of Court, such as the instant petition,
where the CAs disposition in a labor case is sought to be calibrated, the Courts review
isquite limited. In ruling for legal correctness, the Court has to view the CA decision in
the same context that the petition for certiorari it ruled upon was presented to it; the
Court has to examine the CA decision from the prism of whether it correctly determined
the presence or absence of grave abuse of discretion in the NLRC decision before it,
not on the basis of whether the NLRC decision on the merits of the case was correct.33

The phrase "grave abuse of discretion" is well-defined in the Courts jurisprudence. It

exists where an act of a court or tribunal is performed with a capricious or whimsical
exercise ofjudgment equivalent to lack of jurisdiction.34 The determination of the
presence or absence of grave abuse of discretion does not include an inquiry into the
correctness of the evaluation of evidence, which was the basis of the labor agency in
reaching its conclusion.35

Nevertheless, while a certiorari proceeding does not strictly include an inquiry as to the
correctness of the evaluation of evidence (that was the basis of the labor tribunals in
determining their conclusion), the incorrectness of its evidentiary evaluation should not
result in negating the requirement of substantial evidence. Indeed, when there is a
showing that the findings or conclusions, drawn from the same pieces of evidence, were
arrived at arbitrarily or in disregard of the evidence on record, they may be reviewed by
the courts. In particular, the CA can grant the petition for certiorariif it finds that the
NLRC, in its assailed decision or resolution, made a factual finding not supported by
substantial evidence. A decision that is not supported by substantial evidence is
definitely a decision tainted with grave abuse of discretion.36

The labor tribunals respective

conclusions that the petitioners
pregnancy is a "disgraceful or
immoral conduct" were arrived at
arbitrarily.

The CA and the labor tribunals affirmed the validity of the petitioners dismissal pursuant
to Section 94(e) of the 1992 MRPS, which provides that:

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Sec. 94. Causes of Terminating Employment In addition to the just causes
enumerated in the Labor Code, the employment of school personnel, including faculty,
may be terminated for any of the following causes:

xxxx

e. Disgraceful or immoral conduct;

xxxx

The labor tribunals concluded that the petitioners pregnancy out of wedlock, per se, is
"disgraceful and immoral"considering that she is employed in a Catholic educational
institution. In arriving at such conclusion, the labor tribunals merely assessed the fact of
the petitioners pregnancy vis--visthe totality of the circumstances surrounding the
same.

However, the Court finds no substantial evidence to support the aforementioned

conclusion arrived at by the labor tribunals. The fact of the petitioners pregnancy out of
wedlock, without more, is not enough to characterize the petitioners conduct as
disgraceful or immoral. There must be substantial evidence to establish that pre-marital
sexual relations and, consequently, pregnancy outof wedlock, are indeed considered
disgraceful or immoral.

The totality of the circumstances

surrounding the conduct alleged to
be disgraceful or immoral must be
assessed against the prevailing
norms of conduct.

In Chua-Qua v. Clave,37 the Court stressed that to constitute immorality, the

circumstances of each particular case must be holistically considered and evaluated in
light of the prevailing norms of conductand applicable laws.38 Otherwise stated, it is not
the totality of the circumstances surrounding the conduct per se that determines
whether the same is disgraceful or immoral, but the conduct that is generally accepted
by society as respectable or moral. If the conduct does not conform to what society
generally views as respectable or moral, then the conduct is considered as disgraceful
or immoral. Tersely put, substantial evidence must be presented, which would establish
that a particular conduct, viewed in light of the prevailing norms of conduct, is
considered disgraceful or immoral.

Thus, the determination of whether a conduct is disgraceful or immoral involves a two-

step process: first, a consideration of the totality of the circumstances surrounding the
conduct; and second, an assessment of the said circumstances vis--visthe prevailing
norms of conduct, i.e., what the society generally considers moral and respectable.

That the petitioner was employed by a Catholic educational institution per se does not
absolutely determine whether her pregnancy out of wedlock is disgraceful or immoral.
There is still a necessity to determine whether the petitioners pregnancy out of wedlock
is considered disgraceful or immoral in accordance with the prevailing norms of
conduct.

Public and secular morality should

determine the prevailing norms of
conduct, not religious morality.

However, determining what the prevailing norms of conduct are considered disgraceful
or immoral is not an easy task. An individuals perception of what is moral or

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respectable is a confluence of a myriad of influences, such as religion, family, social
status, and a cacophony of others. In this regard, the Courts ratiocination in Estrada v.
Escritor39 is instructive.

In Estrada, an administrative case against a court interpreter charged with disgraceful

and immoral conduct, the Court stressed that in determining whether a particular
conduct can be considered as disgraceful and immoral, the distinction between public
and secular morality on the one hand, and religious morality, on the other, should be
kept in mind.40 That the distinction between public and secular morality and religious
morality is important because the jurisdiction of the Court extends only to public and
secular morality.41 The Court further explained that:

The morality referred to in the law is public and necessarily secular, not religiousx x x.
"Religious teachings as expressed in public debate may influence the civil public order
but public moral disputes may be resolved only on grounds articulable in secular terms."
Otherwise, if government relies upon religious beliefs in formulating public policies and
morals, the resulting policies and morals would require conformity to what some might
regard as religious programs or agenda.The non-believers would therefore be
compelled to conform to a standard of conduct buttressed by a religious belief, i.e., to a
"compelled religion," anathema to religious freedom. Likewise, if government based its
actions upon religious beliefs, it would tacitly approve or endorse that belief and thereby
also tacitly disapprove contrary religious or non-religious views that would not support
the policy. As a result, government will not provide full religious freedom for all its
citizens, or even make it appear that those whose beliefs are disapproved are second-
class citizens. Expansive religious freedom therefore requires that government be
neutral in matters of religion; governmental reliance upon religious justification is
inconsistent with this policy of neutrality.

In other words, government action, including its proscription of immorality as expressed

in criminal law like concubinage, must have a secular purpose. That is, the government
proscribes this conduct because it is "detrimental (or dangerous) to those conditions
upon which depend the existence and progress of human society" and not because the
conduct is proscribed by the beliefs of one religion or the other. Although admittedly,
moral judgments based on religion might have a compelling influence on those engaged
in public deliberations over what actions would be considered a moral disapprobation
punishable by law. After all, they might also be adherents of a religion and thus have
religious opinions and moral codes with a compelling influence on them; the human
mind endeavors to regulate the temporal and spiritual institutions of society in a uniform
manner, harmonizing earth with heaven. Succinctly put, a law could be religious or
Kantian or Aquinian or utilitarian in its deepest roots, but it must have an articulable and
discernible secular purpose and justification to pass scrutiny of the religion clauses.x x
x.42 (Citations omitted and emphases ours)

Accordingly, when the law speaks of immoral or, necessarily, disgraceful conduct, it
pertains to public and secular morality; it refers to those conducts which are proscribed
because they are detrimental to conditions upon which depend the existence and
progress of human society. Thus, in Anonymous v. Radam,43 an administrative case
involving a court utility worker likewise charged with disgraceful and immoral conduct,
applying the doctrines laid down in Estrada, the Court held that:

For a particular conduct to constitute "disgraceful and immoral" behavior under civil
service laws, it must be regulated on account of the concerns of public and secular
morality. It cannot be judged based on personal bias, specifically those colored by
particular mores. Nor should it be grounded on "cultural" values not convincingly
demonstrated to have been recognized in the realm of public policy expressed in the
Constitution and the laws. At the same time, the constitutionally guaranteed rights (such

Page 8 of 55
as the right to privacy) should be observed to the extent that they protect behavior that
may be frowned upon by the majority.

Under these tests, two things may be concluded from the fact that an unmarried woman
gives birth out of wedlock:

(1) if the father of the child is himself unmarried, the woman is not ordinarily
administratively liable for disgraceful and immoral conduct.It may be a not-so-ideal
situation and may cause complications for both mother and child but it does not give
cause for administrative sanction. There is no law which penalizes an unmarried mother
under those circumstances by reason of her sexual conduct or proscribes the
consensual sexual activity between two unmarried persons. Neither does the situation
contravene any fundamental state policy as expressed in the Constitution, a document
that accommodates various belief systems irrespective of dogmatic origins.

(2) if the father of the child born out of wedlock is himself married to a woman other
thanthe mother, then there is a cause for administrative sanction against either the
father or the mother. In sucha case, the "disgraceful and immoral conduct" consists of
having extramarital relations with a married person. The sanctity of marriage is
constitutionally recognized and likewise affirmed by our statutes as a special contract of
permanent union. Accordingly, judicial employees have been sanctioned for their
dalliances with married persons or for their own betrayals of the marital vow of fidelity.

In this case, it was not disputed that, like respondent, the father of her child was
unmarried. Therefore, respondent cannot be held liable for disgraceful and immoral
conduct simply because she gave birth to the child Christian Jeon out of wedlock.44
(Citations omitted and emphases ours)

Both Estrada and Radamare administrative cases against employees in the civil
service. The Court, however, sees no reason not to apply the doctrines enunciated in
Estrada and Radamin the instant case. Estrada and Radamalso required the Court to
delineate what conducts are considered disgraceful and/or immoral as would constitute
a ground for dismissal. More importantly, as in the said administrative cases, the instant
case involves an employees security of tenure; this case likewise concerns
employment, which is not merely a specie of property right, but also the means by which
the employee and those who depend on him live.45

It bears stressing that the right of an employee to security of tenure is protected by the
Constitution. Perfunctorily, a regular employee may not be dismissed unless for cause
provided under the Labor Code and other relevant laws, in this case, the 1992 MRPS.
As stated above, when the law refers to morality, it necessarily pertains to public and
secular morality and not religious morality. Thus, the proscription against "disgraceful or
immoral conduct" under Section 94(e) of the 1992 MRPS, which is made as a cause for
dismissal, must necessarily refer to public and secular morality. Accordingly, in order for
a conduct tobe considered as disgraceful or immoral, it must be "detrimental (or
dangerous) to those conditions upon which depend the existence and progress of
human society and not because the conduct is proscribed by the beliefs of one religion
or the other."

Thus, in Santos v. NLRC,46 the Court upheld the dismissal of a teacher who had an
extra-marital affair with his co-teacher, who is likewise married, on the ground of
disgraceful and immoral conduct under Section 94(e) of the 1992 MRPS. The Court
pointed out that extra-marital affair is considered as a disgraceful and immoral conduct
is an afront to the sanctity of marriage, which is a basic institution of society, viz:

We cannot overemphasize that having an extra-marital affair is an afront to the sanctity

of marriage, which is a basic institution of society. Even our Family Code provides that

Page 9 of 55
husband and wife must live together, observe mutual love, respect and fidelity. This is
rooted in the fact that both our Constitution and our laws cherish the validity of marriage
and unity of the family. Our laws, in implementing this constitutional edict on marriage
and the family underscore their permanence, inviolability and solidarity.47

The petitioners pregnancy out of

wedlock is not a disgraceful or
immoral conduct since she and the
father of her child have no
impediment to marry each other.

In stark contrast to Santos, the Court does not find any circumstance in this case which
would lead the Court to conclude that the petitioner committed a disgraceful or immoral
conduct. It bears stressing that the petitioner and her boyfriend, at the time they
conceived a child, had no legal impediment to marry. Indeed, even prior to her
dismissal, the petitioner married her boyfriend, the father of her child. As the Court held
in Radam, there is no law which penalizes an unmarried mother by reason of her sexual
conduct or proscribes the consensual sexual activity between two unmarried persons;
that neither does such situation contravene any fundamental state policy enshrined in
the Constitution.

Admittedly, the petitioner is employed in an educational institution where the teachings

and doctrines of the Catholic Church, including that on pre-marital sexual relations, is
strictly upheld and taught to the students. That her indiscretion, which resulted in her
pregnancy out of wedlock, is anathema to the doctrines of the Catholic Church.
However, viewed against the prevailing norms of conduct, the petitioners conduct
cannot be considered as disgraceful or immoral; such conduct is not denounced by
public and secular morality. It may be an unusual arrangement, but it certainly is not
disgraceful or immoral within the contemplation of the law.

To stress, pre-marital sexual relations between two consenting adults who have no
impediment to marry each other, and, consequently, conceiving a child out of wedlock,
gauged from a purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS.

Accordingly, the labor tribunals erred in upholding the validity of the petitioners
dismissal. The labor tribunals arbitrarily relied solely on the circumstances surrounding
the petitioners pregnancy and its supposed effect on SSCW and its students without
evaluating whether the petitioners conduct is indeed considered disgraceful or immoral
in view of the prevailing norms of conduct. In this regard, the labor tribunals respective
haphazard evaluation of the evidence amounts to grave abuse of discretion, which the
Court will rectify.

The labor tribunals finding that the petitioners pregnancy out of wedlock despite the
absence of substantial evidence is not only arbitrary, but a grave abuse of discretion,
which should have been set right by the CA.

There is no substantial evidence to

prove that the petitioners pregnancy
out of wedlock caused grave scandal
to SSCW and its students.

SSCW claimed that the petitioner was primarily dismissed because her pregnancy out
of wedlock caused grave scandal to SSCW and its students. That the scandal brought
about by the petitioners indiscretion prompted them to dismiss her. The LA upheld the
respondents claim, stating that:

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In this particular case, an "objective" and "rational evaluation" of the facts and
circumstances obtaining in this case would lead us to focus our attention x x x on the
impact of the act committed by the complainant. The act of the complainant x x x eroded
the moral principles being taught and project[ed] by the respondent [C]atholic school to
their young lady students.48 (Emphasis in the original)

On the other hand, the NLRC opined that:

In the instant case, when the complainant-appellant was already conceiving a child
even before she got married, such is considered a shameful and scandalous behavior,
inimical to public welfare and policy. It eroded the moral doctrines which the respondent
Catholic school, an exclusive school for girls, is teaching the young girls. Thus, when
the respondent-appellee school terminated complainant-appellants services, it was a
valid exercise of its management prerogative. Whether or not she was a teacher is of no
moment. There is no separate set of rules for non-teaching personnel. Respondents-
appellees uphold the teachings of the Catholic Church on pre-marital sex and that the
complainant-appellant as an employee of the school was expected to abide by this
basic principle and to live up with the standards of their purely Catholic values. Her
subsequent marriage did not take away the fact that she had engaged in pre-marital sex
which the respondent-appellee school denounces as the same is opposed to the
teachings and doctrines it espouses.49 (Emphasis ours)

Contrary to the labor tribunals declarations, the Court finds that SSCW failed to adduce
substantial evidence to prove that the petitioners indiscretion indeed caused grave
scandal to SSCW and its students. Other than the SSCWs bare allegation, the records
are bereft of any evidence that would convincingly prove that the petitioners conduct
indeed adversely affected SSCW s integrity in teaching the moral doctrines, which it
stands for. The petitioner is only a non-teaching personnel; her interaction with SSCWs
students is very limited. Itis thus quite impossible that her pregnancy out of wedlock
caused such a grave scandal, as claimed by SSCW, as to warranther dismissal.

Settled is the rule that in termination cases, the burden of proving that the dismissal of
the employees was for a valid and authorized cause rests on the employer. It is
incumbent upon the employer to show by substantial evidence that the termination of
the employment of the employees was validly made and failure to discharge that duty
would mean that the dismissal is not justified and therefore illegal.50 "Substantial
evidence is more than a mere scintilla of evidence. It means such relevant evidence as
a reasonable mind might accept as adequateto support a conclusion, even if other
minds equally reasonable mightconceivably opine otherwise."51

Indubitably, bare allegations do not amount to substantial evidence. Considering that

the respondents failed to adduce substantial evidence to prove their asserted cause for
the petitioners dismissal, the labor tribunals should not have upheld their allegations
hook, line and sinker. The labor tribunals respective findings, which were arrived at
sans any substantial evidence, amounts to a grave abuse of discretion, which the CA
should have rectified. "Security of tenure is a right which may not be denied on mere
speculation of any unclearand nebulous basis."52

The petitioners dismissal is not a

valid exercise of SSCWs
management prerogative.

The CA be labored the management prerogative of SSCW to discipline its employees.

The CA opined that the petitioners dismissal is a valid exercise of management
prerogative to impose penalties on erring employees pursuant to its policies, rules and
regulations.

Page 11 of 55
The Court does not agree.

The Court has held that "management is free to regulate, according to its own discretion
and judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of
workers, working regulations, transfer of employees, work supervision, lay off of workers
and discipline, dismissal and recall of workers. The exercise of management
prerogative, however, is not absolute as it must beexercised in good faith and with due
regard to the rights of labor." Management cannot exercise its prerogative in a cruel,
repressive, or despotic manner.53

SSCW, as employer, undeniably has the right to discipline its employees and, if need
be, dismiss themif there is a valid cause to do so. However, as already explained, there
is no cause to dismiss the petitioner. Her conduct is not considered by law as
disgraceful or immoral. Further, the respondents themselves have admitted that SSCW,
at the time of the controversy, does not have any policy or rule against an employee
who engages in pre-marital sexual relations and conceives a child as a result thereof.
There being no valid basis in law or even in SSCWs policy and rules, SSCWs
dismissal of the petitioner is despotic and arbitrary and, thus, not a valid exercise of
management prerogative.

In sum, the Court finds that the petitioner was illegally dismissed as there was no just
cause for the termination of her employment. SSCW failed to adduce substantial
evidence to establish that the petitioners conduct, i.e., engaging in pre-marital sexual
relations and conceiving a child out of wedlock, assessed in light of the prevailing norms
of conduct, is considered disgraceful or immoral. The labor tribunals gravely abused
their discretion in upholding the validity of the petitioners dismissal as the charge
against the petitioner lay not on substantial evidence, but on the bare allegations of
SSCW. In turn, the CA committed reversible error in upholding the validity of the
petitioners dismissal, failing torecognize that the labor tribunals gravely abused their
discretion in ruling for the respondents.

The petitioner is entitled to

separation pay, in lieu of actual
reinstatement, full backwages and
attorneys fees, but not to moral and
exemplary damages.

Having established that the petitioner was illegally dismissed, the Court now determines
the reliefs thatshe is entitled to and their extent. Under the law and prevailing
jurisprudence, "an illegally dismissed employee is entitled to reinstatement as a matter
of right."54 Aside from the instances provided under Articles 28355 and 28456 of the
Labor Code, separation pay is, however, granted when reinstatement is no longer
feasible because of strained relations between the employer and the employee. In
cases of illegal dismissal, the accepted doctrine is that separation pay is available in lieu
of reinstatement when the latter recourse is no longer practical or in the best interest of
the parties.57

In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school
to pay the illegally dismissed high school teacher separation pay in lieu of actual
reinstatement since her continued presence as a teacher in the school "may well bemet
with antipathy and antagonism by some sectors in the school community."59

In view of the particular circumstances of this case, it would be more prudent to direct
SSCW to pay the petitioner separation pay inlieu of actual reinstatement. The continued
employment of the petitioner with SSCW would only serve to intensify the atmosphere
of antipathy and antagonism between the parties. Consequently, the Court awards

Page 12 of 55
separation pay to the petitioner equivalent to one (1) month pay for every year of
service, with a fraction of at least six (6) months considered as one (1) whole year, from
the time of her illegal dismissal up to the finality of this judgment, as an alternative to
reinstatement.

Also, "employees who are illegally dismissed are entitled to full backwages, inclusive of
allowances and other benefits or their monetary equivalent, computed from the time
their actual compensation was withheld from them up to the time of their actual
reinstatement but if reinstatement is no longer possible, the backwages shall be
computed from the time of their illegal termination up to the finality of the decision."60
Accordingly, the petitioner is entitled to an award of full backwages from the time she
was illegally dismissed up to the finality of this decision.

Nevertheless, the petitioner is not entitled to moral and exemplary damages. "A
dismissed employee isentitled to moral damages when the dismissal is attended by bad
faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary
to good morals, good customs or public policy. Exemplary damages may be awarded if
the dismissal is effected in a wanton, oppressive or malevolent manner."61

"Bad faith, under the law, does not simply connote bad judgment or negligence.1wphi1
It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong,
or a breach of a known duty through some motive or interest or ill will that partakes of
the nature of fraud."62

"It must be noted that the burden of proving bad faith rests on the one alleging it"63
since basic is the principle that good faith is presumed and he who alleges bad faith has
the duty to prove the same.64 "Allegations of bad faith and fraud must be proved by
clear and convincing evidence."65

The records of this case are bereft of any clear and convincing evidence showing that
the respondents acted in bad faith or in a wanton or fraudulent manner in dismissing the
petitioner. That the petitioner was illegally dismissed is insufficient to prove bad faith. A
dismissal may be contrary to law but by itself alone, it does not establish bad faith to
entitle the dismissed employee to moral damages. The award of moral and exemplary
damages cannot be justified solely upon the premise that the employer dismissed his
employee without cause.66

However, the petitioner is entitled to attorneys fees in the amount of 10% of the total
monetary award pursuant to Article 11167 of the Labor Code. "It is settled that where an
employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorneys fees is legally and morally justifiable."68

Finally, legal interest shall be imposed on the monetary awards herein granted at the
rate of six percent (6%) per annumfrom the finality of this judgment until fully paid.69

WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED.

The Decision dated September 24, 2008 and Resolution dated March 2, 2009 of the
Court of Appeals in CA-G.R. SP No. 100188 are hereby REVERSED and SET ASIDE.

The respondent, St. Scholasticas College Westgrove, is hereby declared guilty of illegal
dismissal and is hereby ORDERED to pay the petitioner, Cheryll Santos Leus, the
following: (a) separation pay in lieu of actual reinstatement equivalent to one (1) month
pay for every year of service, with a fraction of at least six (6) months considered as one
(1) whole year from the time of her dismissal up to the finality of this Decision; (b) full
backwages from the time of her illegal dismissal up to the finality of this Decision; and
(c) attorneys fees equivalent to ten percent (10%) of the total monetary award. The
monetary awards herein granted shall earn legal interest at the rate of six percent (6%)

Page 13 of 55
per annumfrom the date of the finality of this Decision untilfully paid. The case is
REMANDED to the Labor Arbiter for the computation of petitioners monetary awards.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDADO M. PERALTA
Associate Justice MARTIN S. VILLARAMA, JR.
Associate Justice
FRANCIS H. JARDELEZA
Associate Justice

Page 14 of 55
SECOND DIVISION

G.R. No. 198587, January 14, 2015

SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA.

JOPETTE M. REBESENCIO, MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A.
CRISTOBAL AND LORAINE S. SCHNEIDER-CRUZ, Respondents.

DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a
temporary restraining order and/or writ of preliminary injunction under Rule 45 of the
1997 Rules of Civil Procedure praying that judgment be rendered reversing and setting
aside the June 16, 2011 Decision1 and September 13, 2011 Resolution2 of the Court of
Appeals in CA-G.R. SP. No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and

existing under the laws of Jeddah, Kingdom of Saudi Arabia. It has a Philippine office
located at 4/F, Metro House Building, Sen. Gil J. Puyat Avenue, Makati City.3 In its
Petition filed with this court, Saudia identified itself as follows:chanroblesvirtuallawlibrary

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal
Decree No. M/24 of 18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia
("KSA"). Its Philippine Office is located at 4/F Metro House Building, Sen, Gil J. Puyat
Avenue, Makati City (Philippine Office). It may be served with orders of this Honorable
Court through undersigned counsel at 4th and 6th Floors, Citibank Center Bldg., 8741
Paseo de Roxas, Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by
Saudia as Temporary Flight Attendants with the accreditation and approval of the
Philippine Overseas Employment Administration.5 After undergoing seminars required
by the Philippine Overseas Employment Administration for deployment overseas, as
well as training modules offered by Saudia (e.g., initial flight attendant/training course
and transition training), and after working as Temporary Flight Attendants, respondents
became Permanent Flight Attendants. They then entered into Cabin Attendant contracts
with Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16, 1990;6 Montassah
B. Sacar-Adiong (Montassah) and Rouen Ruth A. Cristobal (Rouen Ruth) on May 22,
1993;7 and Loraine Schneider-Cruz (Loraine) on August 27, 1995.8

Respondents continued their employment with Saudia until they were separated from
service on various dates in 2006.9

Respondents contended that the termination of their employment was illegal. They
alleged that the termination was made solely because they were pregnant.10

As respondents alleged, they had informed Saudia of their respective pregnancies and
had gone through the necessary procedures to process their maternity leaves. Initially,
Saudia had given its approval but later on informed respondents that its management in
Jeddah, Saudi Arabia had disapproved their maternity leaves. In addition, it required
respondents to file their resignation letters.11

Respondents were told that if they did not resign, Saudia would terminate them all the
same. The threat of termination entailed the loss of benefits, such as separation pay
and ticket discount entitlements.12

Page 15 of 55
Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base
Manager, Abdulmalik Saddik (Abdulmalik).13 Montassah was informed personally by
Abdulmalik and a certain Faisal Hussein on October 20, 2006 after being required to
report to the office one (1) month into her maternity leave.14 Rouen Ruth was also
personally informed by Abdulmalik on October 17, 2006 after being required to report to
the office by her Group Supervisor.15 Loraine received a call on October 12, 2006 from
her Group Supervisor, Dakila Salvador.16

Saudia anchored its disapproval of respondents' maternity leaves and demand for their
resignation on its "Unified Employment Contract for Female Cabin Attendants" (Unified
Contract).17 Under the Unified Contract, the employment of a Flight Attendant who
becomes pregnant is rendered void. It provides:chanroblesvirtuallawlibrary
(H) Due to the essential nature of the Air Hostess functions to be physically fit on board
to provide various services required in normal or emergency cases on both
domestic/international flights beside her role in maintaining continuous safety and
security of passengers, and since she will not be able to maintain the required medical
fitness while at work in case of pregnancy, accordingly, if the Air Hostess becomes
pregnant at any time during the term of this contract, this shall render her employment
contract as void and she will be terminated due to lack of medical fitness.18 (Emphasis
supplied)
In their Comment on the present Petition,19 respondents emphasized that the Unified
Contract took effect on September 23, 2006 (the first day of Ramadan),20 well after
they had filed and had their maternity leaves approved. Ma. Jopette filed her maternity
leave application on September 5, 2006.21 Montassah filed her maternity leave
application on August 29, 2006, and its approval was already indicated in Saudia's
computer system by August 30, 2006.22 Rouen Ruth filed her maternity leave
application on September 13, 2006,23 and Loraine filed her maternity leave application
on August 22, 2006.24

Rather than comply and tender resignation letters, respondents filed separate appeal
letters that were all rejected.25

Despite these initial rejections, respondents each received calls on the morning of
November 6, 2006 from Saudia's office secretary informing them that their maternity
leaves had been approved. Saudia, however, was quick to renege on its approval. On
the evening of November 6, 2006, respondents again received calls informing them that
it had received notification from Jeddah, Saudi Arabia that their maternity leaves had
been disapproved.26

Faced with the dilemma of resigning or totally losing their benefits, respondents
executed handwritten resignation letters. In Montassah's and Rouen Ruth's cases, their
resignations were executed on Saudia's blank letterheads that Saudia had provided.
These letterheads already had the word "RESIGNATION" typed on the subject portions
of their headings when these were handed to respondents.27

On November 8, 2007, respondents filed a Complaint against Saudia and its officers for
illegal dismissal and for underpayment of salary, overtime pay, premium pay for holiday,
rest day, premium, service incentive leave pay, 13th month pay, separation pay, night
shift differentials, medical expense reimbursements, retirement benefits, illegal
deduction, lay-over expense and allowances, moral and exemplary damages, and
attorney's fees.28 The case was initially assigned to Labor Arbiter Hermino V. Suelo
and docketed as NLRC NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter.29 It claimed that all the determining
points of contact referred to foreign law and insisted that the Complaint ought to be

Page 16 of 55
dismissed on the ground of forum non conveniens.30 It added that respondents had no
cause of action as they resigned voluntarily.31

On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the
Decision32 dismissing respondents' Complaint. The dispositive portion of this Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the
instant complaint for lack of jurisdiction/merit.33cralawlawlibrary
On respondents' appeal, the National Labor Relations Commission's Sixth Division
reversed the ruling of Executive Labor Arbiter Jambaro-Franco. It explained that
"[considering that complainants-appellants are OFWs, the Labor Arbiters and the NLRC
has [sic] jurisdiction to hear and decide their complaint for illegal termination."34 On the
matter of forum non conveniens, it noted that there were no special circumstances that
warranted its abstention from exercising jurisdiction.35 On the issue of whether
respondents were validly dismissed, it held that there was nothing on record to support
Saudia's claim that respondents resigned voluntarily.

The dispositive portion of the November 19, 2009 National Labor Relations Commission
Decision36 reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal
impressed with merit. The respondents-appellees are hereby directed to pay
complainants-appellants the aggregate amount of SR614,001.24 corresponding to their
backwages and separation pay plus ten (10%) percent thereof as attorney's fees. The
decision of the Labor Arbiter dated December 12, 2008 is hereby VACATED and SET
ASIDE. Attached is the computation prepared by this Commission and made an integral
part of this Decision.37cralawlawlibrary
In the Resolution dated February 11, 2010,38 the National Labor Relations Commission
denied petitioners' Motion for Reconsideration.

In the June 16, 2011 Decision,39 the Court of Appeals denied petitioners' Rule 65
Petition and modified the Decision of the National Labor Relations Commission with
respect to the award of separation pay and backwages.

The dispositive portion of the Court of Appeals Decision

reads:chanroblesvirtuallawlibrary
WHEREFORE, the instant petition is hereby DENIED. The Decision dated November
19, 2009 issued by public respondent, Sixth Division of the National Labor Relations
Commission - National Capital Region is MODIFIED only insofar as the computation of
the award of separation pay and backwages. For greater clarity, petitioners are ordered
to pay private respondents separation pay which shall be computed from private
respondents' first day of employment up to the finality of this decision, at the rate of one
month per year of service and backwages which shall be computed from the date the
private respondents were illegally terminated until finality of this decision. Consequently,
the ten percent (10%) attorney's fees shall be based on the total amount of the award.
The assailed Decision is affirmed in all other respects.

The labor arbiter is hereby DIRECTED to make a recomputation based on the

foregoing.40cralawlawlibrary
In the Resolution dated September 13, 2011,41 the Court of Appeals denied petitioners'
Motion for Reconsideration.

Hence, this Appeal was filed.

The issues for resolution are the following:

Page 17 of 55
First, whether the Labor Arbiter and the National Labor Relations Commission may
exercise jurisdiction over Saudi Arabian Airlines and apply Philippine law in adjudicating
the present dispute;

Second, whether respondents' voluntarily resigned or were illegally terminated; and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian
Airlines.chanRoblesvirtualLawlibrary

Summons were validly served on Saudia and jurisdiction over it validly acquired.

There is no doubt that the pleadings and summons were served on Saudia through its
counsel.42 Saudia, however, claims that the Labor Arbiter and the National Labor
Relations Commission had no jurisdiction over it because summons were never served
on it but on "Saudia Manila."43 Referring to itself as "Saudia Jeddah," it claims that
"Saudia Jeddah" and not "Saudia Manila" was the employer of respondents because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into
by respondents;

Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries
and benefits; and

Lastly, it was with "Saudia Jeddah" that respondents filed their resignations.44

Saudia posits that respondents' Complaint was brought against the wrong party
because "Saudia Manila," upon which summons was served, was never the employer of
respondents.45

Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare
allegation, there is no basis for concluding that "Saudia Jeddah" is distinct from "Saudia
Manila."

What is clear is Saudia's statement in its own Petition that what it has is a "Philippine
Office . . . located at 4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati
City."46 Even in the position paper that Saudia submitted to the Labor Arbiter,47 what
Saudia now refers to as "Saudia Jeddah" was then only referred to as "Saudia Head
Office at Jeddah, KSA,"48 while what Saudia now refers to as "Saudia Manila" was then
only referred to as "Saudia's office in Manila."49

By its own admission, Saudia, while a foreign corporation, has a Philippine office.

Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments
Act of 1991, provides the following:chanroblesvirtuallawlibrary
The phrase "doing business" shall include . . . opening offices, whether called "liaison"
offices or branches; . . . and any other act or acts that imply a continuity of commercial
dealings or arrangements and contemplate to that extent the performance of acts or
works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of commercial gain or of the purpose and object of the business
organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other
conclusion than that Saudia is a foreign corporation doing business in the Philippines.
As such, Saudia may be sued in the Philippines and is subject to the jurisdiction of
Philippine tribunals.

Page 18 of 55
Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia
Manila" the latter being nothing more than Saudia's local office service of
summons to Saudia's office in Manila sufficed to vest jurisdiction over Saudia's person
in Philippine tribunals.chanRoblesvirtualLawlibrary

II

Saudia asserts that Philippine courts and/or tribunals are not in a position to make an
intelligent decision as to the law and the facts. This is because respondents' Cabin
Attendant contracts require the application of the laws of Saudi Arabia, rather than
those of the Philippines.50 It claims that the difficulty of ascertaining foreign law calls
into operation the principle of forum non conveniens, thereby rendering improper the
exercise of jurisdiction by Philippine tribunals.51

A choice of law governing the validity of contracts or the interpretation of its provisions
dees not necessarily imply forum non conveniens. Choice of law and forum non
conveniens are entirely different matters.

Choice of law provisions are an offshoot of the fundamental principle of autonomy of

contracts. Article 1306 of the Civil Code firmly ensconces
this:chanroblesvirtuallawlibrary
Article 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It
is designed to frustrate illicit means for securing advantages and vexing litigants that
would otherwise be possible if the venue of litigation (or dispute resolution) were left
entirely to the whim of either party.

Contractual choice of law provisions factor into transnational litigation and dispute
resolution in one of or in a combination of four ways: (1) procedures for settling
disputes, e.g., arbitration; (2) forum, i.e., venue; (3) governing law; and (4) basis for
interpretation. Forum non conveniens relates to, but is not subsumed by, the second of
these.

Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the

laws of a given jurisdiction as the governing law of a contract does not preclude the
exercise of jurisdiction by tribunals elsewhere. The reverse is equally true: The
assumption of jurisdiction by tribunals does not ipso facto mean that it cannot apply and
rule on the basis of the parties' stipulation. In Hasegawa v.
Kitamura:52ChanRoblesVirtualawlibrary
Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction
considers whether it is fair to cause a defendant to travel to this state; choice of law
asks the further question whether the application of a substantive law V'hich will
determine the merits of the case is fair to both parties. The power to exercise jurisdiction
does not automatically give a state constitutional authority to apply forum law. While
jurisdiction and the choice of the lex fori will often, coincide, the "minimum contacts" for
one do not always provide the necessary "significant contacts" for the other. The
question of whether the law of a state can be applied to a transaction is different from
the question of whether the courts of that state have jurisdiction to enter a
judgment.53cralawlawlibrary
As various dealings, commercial or otherwise, are facilitated by the progressive ease of
communication and travel, persons from various jurisdictions find themselves
transacting with each other. Contracts involving foreign elements are, however, nothing
new. Conflict of laws situations precipitated by disputes and litigation anchored on these
contracts are not totally novel.

Page 19 of 55
Transnational transactions entail differing laws on the requirements Q for the validity of
the formalities and substantive provisions of contracts and their interpretation. These
transactions inevitably lend themselves to the possibility of various fora for litigation and
dispute resolution. As observed by an eminent expert on transnational
law:chanroblesvirtuallawlibrary
The more jurisdictions having an interest in, or merely even a point of contact with, a
transaction or relationship, the greater the number of potential fora for the resolution of
disputes arising out of or related to that transaction or relationship. In a world of
increased mobility, where business and personal transactions transcend national
boundaries, the jurisdiction of a number of different fora may easily be invoked in a
single or a set of related disputes.54cralawlawlibrary
Philippine law is definite as to what governs the formal or extrinsic validity of contracts.
The first paragraph of Article 17 of the Civil Code provides that "[t]he forms and
solemnities of contracts . . . shall be governed by the laws of the country in which they
are executed"55 (i.e., lex loci celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws situations

on matters pertaining to substantive content of contracts. It has been noted that three
(3) modes have emerged: (1) lex loci contractus or the law of the place of the making;
(2) lex loci solutionis or the law of the place of performance; and (3) lex loci intentionis
or the law intended by the parties.56

Given Saudia's assertions, of particular relevance to resolving the present dispute is lex
loci intentionis.

An author observed that Spanish jurists and commentators "favor lex loci intentionis."57
These jurists and commentators proceed from the Civil Code of Spain, which, like our
Civil Code, is silent on what governs the intrinsic validity of contracts, and the same civil
law traditions from which we draw ours.

In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P.
Eusebio Construction, Inc.,58 manifested preference for allowing the parties to select
the law applicable to their contract":chanroblesvirtuallawlibrary
No conflicts rule on essential validity of contracts is expressly provided for in our laws.
The rule followed by most legal systems, however, is that the intrinsic validity of a
contract must be governed by the lex contractus or "proper law of the contract." This is
the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law
intended by them either expressly or implicitly (the lex loci intentionis). The law selected
may be implied from such factors as substantial connection with the transaction, or the
nationality or domicile of the parties. Philippine courts would do well to adopt the first
and most basic rule in most legal systems, namely, to allow the parties to select the law
applicable to their contract, subject to the limitation that it is not against the law, morals,
or public policy of the forum and that the chosen law must bear a substantive
relationship to the transaction.59 (Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the
application of the laws of Saudi Arabia. It insists that the need to comply with these
stipulations calls into operation the doctrine of forum non conveniens and, in turn,
makes it necessary for Philippine tribunals to refrain from exercising jurisdiction.

As mentioned, contractual choice of laws factors into transnational litigation in any or a

combination of four (4) ways. Moreover, forum non conveniens relates to one of these:
choosing between multiple possible fora.

Nevertheless, the possibility of parallel litigation in multiple fora along with the host of
difficulties it poses is not unique to transnational litigation. It is a difficulty that
similarly arises in disputes well within the bounds of a singe jurisdiction.

Page 20 of 55
When parallel litigation arises strictly within the context of a single jurisdiction, such
rules as those on forum shopping, litis pendentia, and res judicata come into operation.
Thus, in the Philippines, the 1997 Rules on Civil Procedure provide for willful and
deliberate forum shopping as a ground not only for summary dismissal with prejudice
but also for citing parties and counsels in direct contempt, as well as for the imposition
of administrative sanctions.60 Likewise, the same rules expressly provide that a party
may seek the dismissal of a Complaint or another pleading asserting a claim on the
ground "[t]hat there is another action pending between the same parties for the same
cause," i.e., litis pendentia, or "[t]hat the cause of action is barred by a prior
judgment,"61 i.e., res judicata.

Forum non conveniens, like the rules of forum shopping, litis pendentia, and res
judicata, is a means of addressing the problem of parallel litigation. While the rules of
forum shopping, litis pendentia, and res judicata are designed to address the problem of
parallel litigation within a single jurisdiction, forum non conveniens is a means devised
to address parallel litigation arising in multiple jurisdictions.

Forum non conveniens literally translates to "the forum is inconvenient."62 It is a

concept in private international law and was devised to combat the "less than
honorable" reasons and excuses that litigants use to secure procedural advantages,
annoy and harass defendants, avoid overcrowded dockets, and select a "friendlier"
venue.63 Thus, the doctrine of forum non conveniens addresses the same rationale that
the rule against forum shopping does, albeit on a multijurisdictional scale.

Forum non conveniens, like res judicata,64 is a concept originating in common law.65
However, unlike the rule on res judicata, as well as those on litis pendentia and forum
shopping, forum non conveniens finds no textual anchor, whether in statute or in
procedural rules, in our civil law system. Nevertheless, jurisprudence has applied forum
non conveniens as basis for a court to decline its exercise of jurisdiction.66

Forum non conveniens is soundly applied not only to address parallel litigation and
undermine a litigant's capacity to vex and secure undue advantages by engaging in
forum shopping on an international scale. It is also grounded on principles of comity and
judicial efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction

on account of forum non conveniens is a deferential gesture to the tribunals of another
sovereign. It is a measure that prevents the former's having to interfere in affairs which
are better and more competently addressed by the latter. Further, forum non
conveniens entails a recognition not only that tribunals elsewhere are better suited to
rule on and resolve a controversy, but also, that these tribunals are better positioned to
enforce judgments and, ultimately, to dispense justice. Forum non conveniens prevents
the embarrassment of an awkward situation where a tribunal is rendered incompetent in
the face of the greater capability both analytical and practical of a tribunal in
another jurisdiction.

The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of

efficiency and economy as it is a matter of international courtesy. A court would
effectively be neutering itself if it insists on adjudicating a controversy when it knows full
well that it is in no position to enforce its judgment. Doing so is not only an exercise in
futility; it is an act of frivolity. It clogs the dockets of a.tribunal and leaves it to waste its
efforts on affairs, which, given transnational exigencies, will be reduced to mere
academic, if not trivial, exercises.

Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law
cases, may refuse impositions on its jurisdiction where it is not the most 'convenient' or
available forum and the parties are not precluded from seeking remedies elsewhere."67

Page 21 of 55
In Puyat v. Zabarte,68 this court recognized the following situations as among those
that may warrant a court's desistance from exercising
jurisdiction:chanroblesvirtuallawlibrary
1)
The belief that the matter can be better tried and decided elsewhere, either because the
main aspects of the case transpired in a foreign jurisdiction or the material witnesses
have their residence there;
2)
The belief that the non-resident plaintiff sought the forum[,] a practice known as forum
shopping[,] merely to secure procedural advantages or to convey or harass the
defendant;
3)
The unwillingness to extend local judicial facilities to non- residents or aliens when the
docket may already be overcrowded;
4)
The inadequacy of the local judicial machinery for effectuating the right sought to be
maintained; and
5)
The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,70
this court underscored that a Philippine court may properly assume jurisdiction over a
case if it chooses to do so to the extent: "(1) that the Philippine Court is one to which the
parties may conveniently resort to; (2) that the Philippine Court is in a position to make
an intelligent decision as to the law and the facts; and (3) that the Philippine Court has
or is likely to have power to enforce its decision."71

The use of the word "may" (i.e., "may refuse impositions on its jurisdiction"72) in the
decisions shows that the matter of jurisdiction rests on the sound discretion of a court.
Neither the mere invocation of forum non conveniens nor the averment of foreign
elements operates to automatically divest a court of jurisdiction. Rather, a court should
renounce jurisdiction only "after 'vital facts are established, to determine whether special
circumstances' require the court's desistance."73 As the propriety of applying forum non
conveniens is contingent on a factual determination, it is, therefore, a matter of
defense.74

The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is
exclusive in its recital of the grounds for dismissal that are exempt from the omnibus
motion rule: (1) lack of jurisdiction over the subject matter; (2) litis pendentia; (3) res
judicata; and (4) prescription. Moreover, dismissal on account offorum non conveniens
is a fundamentally discretionary matter. It is, therefore, not a matter for a defendant to
foist upon the court at his or her own convenience; rather, it must be pleaded at the
earliest possible opportunity.

On the matter of pleading forum non conveniens, we state the rule, thus: Forum non
conveniens must not only be clearly pleaded as a ground for dismissal; it must be
pleaded as such at the earliest possible opportunity. Otherwise, it shall be deemed
waived.

This court notes that in Hasegawa,76 this court stated that forum non conveniens is not
a ground for a motion to dismiss. The factual ambience of this case however does not
squarely raise the viability of this doctrine. Until the opportunity comes to review the use
of motions to dismiss for parallel litigation, Hasegawa remains existing doctrine.

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative

that it proceed from & factually established basis. It would be improper to dismiss an
action pursuant to forum non conveniens based merely on a perceived, likely, or

Page 22 of 55
hypothetical multiplicity of fora. Thus, a defendant must also plead and show that a prior
suit has, in fact, been brought in another jurisdiction.

The existence of a prior suit makes real the vexation engendered by duplicitous
litigation, the embarrassment of intruding into the affairs of another sovereign, and the
squandering of judicial efforts in resolving a dispute already lodged and better resolved
elsewhere. As has been noted:chanroblesvirtuallawlibrary
A case will not be stayed o dismissed on [forum] non conveniens grounds unless the
plaintiff is shown to have an available alternative forum elsewhere. On this, the moving
party bears the burden of proof.

A number of factors affect the assessment of an alternative forum's adequacy. The

statute of limitations abroad may have run, of the foreign court may lack either subject
matter or personal jurisdiction over the defendant. . . . Occasionally, doubts will be
raised as to the integrity or impartiality of the foreign court (based, for example, on
suspicions of corruption or bias in favor of local nationals), as to the fairness of its
judicial procedures, or as to is operational efficiency (due, for example, to lack of
resources, congestion and delay, or interfering circumstances such as a civil unrest). In
one noted case, [it was found] that delays of 'up to a quarter of a century' rendered the
foreign forum... inadequate for these purposes.77cralawlawlibrary
We deem it more appropriate and in the greater interest of prudence that a defendant
not only allege supposed dangerous tendencies in litigating in this jurisdiction; the
defendant must also show that such danger is real and present in that litigation or
dispute resolution has commenced in another jurisdiction and that a foreign tribunal has
chosen to exercise jurisdiction.

III

Forum non conveniens finds no application and does not operate to divest Philippine
tribunals of jurisdiction and to require the application of foreign law.

Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the
Cabin Attendant contracts that require the application of the laws of Saudi Arabia.

Forum non conveniens relates to forum, not to the choice of governing law. Thai forum
non conveniens may ultimately result in the application of foreign law is merely an
incident of its application. In this strict sense, forum non conveniens is not applicable. It
is not the primarily pivotal consideration in this case.

In any case, even a further consideration of the applicability of forum non conveniens on
the incidental matter of the law governing respondents' relation with Saudia leads to the
conclusion that it is improper for Philippine tribunals to divest themselves of jurisdiction.

Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents
must grapple with two (2) considerations: first, the availability and adequacy of recourse
to a foreign tribunal; and second, the question of where, as between the forum court
and a foreign court, the balance of interests inhering in a dispute weighs more heavily.

The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign
tribunal and can be resolved by juxtaposing the competencies and practical
circumstances of the tribunals in alternative fora. Exigencies, like the statute of
limitations, capacity to enforce orders and judgments, access to records, requirements
for the acquisition of jurisdiction, and even questions relating to the integrity of foreign
courts, may render undesirable or even totally unfeasible recourse to a foreign court. As
mentioned, we consider it in the greater interest of prudence that a defendant show, in
pleading forum non conveniens, that litigation has commenced in another jurisdiction
and that a foieign tribunal has, in fact, chosen to exercise jurisdiction.

Page 23 of 55
Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a
dispute: first, the vinculum which the parties and their relation have to a given
jurisdiction; and second, the public interest that must animate a tribunal, in its capacity
as an agent of the sovereign, in choosing to assume or decline jurisdiction. The first is
more concerned with the parties, their personal circumstances, and private interests;
the second concerns itself with the state and the greater social order.

In considering the vinculum, a court must look into the preponderance of linkages which
the parties and their transaction may have to either jurisdiction. In this respect, factors,
such as the parties' respective nationalities and places of negotiation, execution,
performance, engagement or deployment, come into play.

In considering public interest, a court proceeds with a consciousness that it is an organ

of the state. It must, thus, determine if the interests of the sovereign (which acts through
it) are outweighed by those of the alternative jurisdiction. In this respect, the court
delves into a consideration of public policy. Should it find that public interest weighs
more heavily in favor of its assumption of jurisdiction, it should proceed in adjudicating
the dispute, any doubt or .contrary view arising from the preponderance of linkages
notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law provisions.
Where such provisions exist, Philippine tribunals, acting as the forum court, generally
defer to the parties' articulated choice.

This is consistent with the fundamental principle of autonomy of contracts. Article 1306
of the Civ:l Code expressly provides that "[t]he contracting parties may establish 'such
stipulations, clauses, terms and conditions as they may deem convenient."78
Nevertheless, while a Philippine tribunal (acting as the forum court) is called upon to
respect the parties' choice of governing law, such respect must not be so permissive as
to lose sight of considerations of law, morals, good customs, public order, or public
policy that underlie the contract central to the controversy.

Specifically with respect to public policy, in Pakistan International Airlines Corporation v.

Ople,79 this court explained that:chanroblesvirtuallawlibrary
counter-balancing the principle of autonomy of contracting parties is the equally general
rule that provisions of applicable law, especially provisions relating to matters affected
with public policy, are deemed written inta the contract. Put a little differently, the
governing principle is that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily impressed with public
interest.80 (Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure
the fundamental equality before the law of women and men." Contrasted with Article II,
Section 1 of the 1987 Constitution's statement that "[n]o person shall ... be denied the
equal protection of the laws," Article II, Section 14 exhorts the State to "ensure." This
does not only mean that the Philippines shall not countenance nor lend legal recognition
and approbation to measures that discriminate on the basis of one's being male or
female. It imposes an obligation to actively engage in securing the fundamental equality
of men and women.

The Convention on the Elimination of all Forms of Discrimination against Women

(CEDAW), signed and ratified by the Philippines on July 15, 1980, and on August 5,
1981, respectively,81 is part of the law of the land. In view of the widespread signing
and ratification of, as well as adherence (in practice) to it by states, it may even be said
that many provisions of the CEDAW may have become customary international law.
The CEDAW gives effect to the Constitution's policy statement in Article II, Section 14.

Page 24 of 55
Article I of the CEDAW defines "discrimination against women"
as:chanroblesvirtuallawlibrary
any distinction, exclusion or restriction made on the basis of sex which has the effect or
purpose of impairing or nullifying the recognition, enjoyment or exercise by women,
irrespective of their marital status, on a basis of equality of men and women, of human
rights and fundamental freedoms in the political, economic, social, cultural, civil or any
other field.82cralawlawlibrary
The constitutional exhortation to ensure fundamental equality, as illumined by its
enabling law, the CEDAW, must inform and animate all the actions of all personalities
acting on behalf of the State. It is, therefore, the bounden duty of this court, in rendering
judgment on the disputes brought before it, to ensure that no discrimination is heaped
upon women on the mere basis of their being women. This is a point so basic and
central that all our discussions and pronouncements regardless of whatever
averments there may be of foreign law must proceed from this premise.

So informed and animated, we emphasize the glaringly discriminatory nature of

Saudia's policy. As argued by respondents, Saudia's policy entails the termination of
employment of flight attendants who become pregnant. At the risk of stating the
obvious, pregnancy is an occurrence that pertains specifically to women. Saudia's policy
excludes from and restricts employment on the basis of no other consideration but sex.

We do not lose sight of the reality that pregnancy does present physical limitations that
may render difficult the performance of functions associated with being a flight
attendant. Nevertheless, it would be the height of iniquity to view pregnancy as a
disability so permanent and immutable that, it must entail the termination of one's
employment. It is clear to us that any individual, regardless of gender, may be subject to
exigencies that limit the performance of functions. However, we fail to appreciate how
pregnancy could be such an impairing occurrence that it leaves no other recourse but
the complete termination of the means through which a woman earns a living.

Apart from the constitutional policy on the fundamental equality before the law of men
and women, it is settled that contracts relating to labor and employment are impressed
with public interest. Article 1700 of the Civil Code provides that "[t]he relation between
capital and labor are not merely contractual. They are so impressed with public interest
that labor contracts must yield to the common good."

Consistent with this, this court's pronouncements in Pakistan International Airlines

Corporation83 are clear and unmistakable:chanroblesvirtuallawlibrary
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement, and,
secondly, lays the venue for settlement of any dispute arising out of or in connection
with the agreement "only [in] courts of Karachi, Pakistan". The first clause of paragraph
10 cannot be invoked to prevent the application of Philippine labor laws and'regulations
to the subject matter of this case, i.e., the employer-employee relationship between
petitioner PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by the parties agreeing
upon some other law to govern their relationship. . . . Under these circumstances,
paragraph 10 of the employment agreement cannot be given effect so as to oust
Philippine agencies and courts of the jurisdiction vested upon them by Philippine law.84
(Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal
termination of respondents' employment, this case is immutably a matter of public
interest and public policy. Consistent with clear pronouncements in law and
jurisprudence, Philippine laws properly find application in and govern this case.
'Moreover, as this premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals may properly assume

Page 25 of 55
jurisdiction over the present controversy. Philippine jurisprudence provides ample
illustrations of when a court's renunciation of jurisdiction on account of forum non
conveniens is proper or improper.'

In Philsec Investment Corporation v. Court of Appeals,85 this court noted that the trial
court failed to consider that one of the plaintiffs was a domestic corporation, that one of
the defendants was a Filipino, and that it was the extinguishment of the latter's debt that
was the object of the transaction subject of the litigation. Thus, this court held, among
others, that the trial court's refusal to assume jurisdiction was not justified by forum non
conveniens and remanded the case to the trial court.

In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial court's
assumption of jurisdiction considering that the trial court could properly enforce
judgment on the petitioner which was a foreign corporation licensed to do business in
the Philippines.

In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to disturb the
trial court's assumption of jurisdiction over a case in which, as noted by the trial court, "it
is more convenient to hear and decide the case in the Philippines because Todaro [the
plaintiff] resides in the Philippines and the contract allegedly breached involve[d]
employment in the Philippines."88

In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held that the fact
that the complainant in an illegal dismissal case was a Canadian citizen and a repatriate
did not warrant the application of forum non conveniens considering that: (1) the Labor
Code does not include forum non conveniens as a ground for the dismissal of a
complaint for illegal dismissal; (2) the propriety of dismissing a case based on forum
non conveniens requires a factual determination; and (3) the requisites for assumption
of jurisdiction as laid out in Bank of America, NT&SA90 were all satisfied.

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations
Commission91 that the National Labor Relations Q Commission was a seriously
inconvenient forum. In that case, private respondent Marcelo G. Santos was working in
the Sultanate of Oman when he received a letter from Palace Hotel recruiting him for
employment in Beijing, China. Santos accepted the offer. Subsequently, however, he
was released from employment supposedly due to business reverses arising from
political upheavals in China (i.e., the Tiananmen Square incidents of 1989). Santos later
filed a Complaint for illegal dismissal impleading Palace Hotel's General Manager, Mr.
Gerhard Schmidt, the Manila Hotel International Company Ltd. (which was, responsible
for training Palace Hotel's personnel and staff), and the Manila Hotel Corporation (which
owned 50% of Manila Hotel International Company Ltd.'s capital stock).

In ruling against the National Labor Relations Commission's exercise of jurisdiction, this
court noted that the main aspects of the case transpired in two (2) foreign jurisdictions,
Oman and China, and that the case involved purely foreign elements. Specifically,
Santos was directly hired by a foreign employer through correspondence sent to Oman.
Also, the proper defendants were neither Philippine nationals nor engaged in business
in the Philippines, while the main witnesses were not residents of the Philippines.
Likewise, this court noted that the National Labor Relations Commission was in no
position to conduct the following: first, determine the law governing the employment
contract, as it was entered into in foreign soil; second, determine the facts, as Santos'
employment was terminated in Beijing; and third, enforce its judgment, since Santos'
employer, Palace Hotel, was incorporated under the laws of China and was not even
served with summons.

Contrary to Manila Hotel, the case now before us does not entail a preponderance of
linkages that favor a foreign jurisdiction.

Page 26 of 55
Here, the circumstances of the parties and their relation do not approximate the
circumstances enumerated in Puyat,92 which this court recognized as possibly
justifying the desistance of Philippine tribunals from exercising jurisdiction.

First, there is no basis for concluding that the case can be more conveniently tried
elsewhere. As established earlier, Saudia is doing business in the Philippines. For their
part, all four (4) respondents are Filipino citizens maintaining residence in the
Philippines and, apart from their previous employment with Saudia, have no other
connection to the Kingdom of Saudi Arabia. It would even be to respondents'
inconvenience if this case were to be tried elsewhere.

Second, the records are bereft of any indication that respondents filed their Complaint in
an effort to engage in forum shopping or to vex and inconvenience Saudia.

Third, there is no indication of "unwillingness to extend local judicial facilities to non-

residents or aliens."93 That Saudia has managed to bring the present controversy all
the way to this court proves this.

Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating
the right sought to be maintained. Summons was properly served on Saudia and
jurisdiction over its person was validly acquired.

Lastly, there is not even room for considering foreign law. Philippine law properly
governs the present dispute.

As the question of applicable law has been settled, the supposed difficulty of
ascertaining foreign law (which requires the application of forum non conveniens)
provides no insurmountable inconvenience or special circumstance that will justify
depriving Philippine tribunals of jurisdiction.

Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia
which should apply, it does not follow that Philippine tribunals should refrain from
exercising jurisdiction. To. recall our pronouncements in Puyat,94 as well as in Bank of
America, NT&SA,95 it is not so much the mere applicability of foreign law which calls
into operation forum non conveniens. Rather, what justifies a court's desistance from
exercising jurisdiction is "[t]he difficulty of ascertaining foreign law"96 or the inability of a
"Philippine Court to make an intelligent decision as to the law[.]"97

Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to
make an intelligent decision"98), Philippine tribunals may apply the foreign law selected
by the parties. In fact, (albeit without meaning to make a pronouncement on the
accuracy and reliability of respondents' citation) in this case, respondents themselves
have made averments as to the laws of Saudi Arabia. In their Comment, respondents
write:chanroblesvirtuallawlibrary
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to
terminate the employment of any woman by virtue of pregnancy. The law in Saudi
Arabia is even more harsh and strict [sic] in that no employer can terminate the
employment of a female worker or give her a warning of the same while on Maternity
Leave, the specific provision of Saudi Labor Laws on the matter is hereto quoted as
follows:chanroblesvirtuallawlibrary
"An employer may not terminate the employment of a female worker or give her a
warning of the same while on maternity leave." (Article 155, Labor Law of the Kingdom
of Saudi Arabia, Royal Decree No. M/51.)99cralawlawlibrary
All told, the considerations for assumption of jurisdiction by Philippine tribunals as
outlined in Bank of America, NT&SA100 have been satisfied. First, all the parties are
based in the Philippines and all the material incidents transpired in this jurisdiction.

Page 27 of 55
Thus, the parties may conveniently seek relief from Philippine tribunals. Second,
Philippine tribunals are in a position to make an intelligent decision as to the law and the
facts. Third, Philippine tribunals are in a position to enforce their decisions. There is no
compelling basis for ceding jurisdiction to a foreign tribunal. Quite the contrary, the
immense public policy considerations attendant to this case behoove Philippine
tribunals to not shy away from their duty to rule on the case.chanRoblesvirtualLawlibrary

IV

Respondents were illegally terminated.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation as "the
voluntary act of an employee who is in a situation where one believes that personal
reasons cannot be sacrificed in favor of the exigency of the service, and one has no
other choice but to dissociate oneself from employment. It is a formal pronouncement or
relinquishment of an office, with the intention of relinquishing the office accompanied by
the act of relinquishment."102 Thus, essential to the act of resignation is voluntariness.
It must be the result of an employee's exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an
employee resigned voluntarily:chanroblesvirtuallawlibrary
As the intent to relinquish must concur with the overt act of relinquishment, the acts of
the employee before and after the alleged resignation must be considered in
determining whether he or she, in fact, intended, to sever his or her employment.103
(Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work
because 'continued employment is rendered impossible, unreasonable or unlikely, as an
offer involving a demotion in rank or a diminution in pay' and other benefits."104

In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive dismissal

has been described as tantamount to "involuntarily [sic] resignation due to the harsh,
hostile, and unfavorable conditions set by the employer."106 In the same case, it was
noted that "[t]he gauge for constructive dismissal is whether a reasonable person in the
employee's position would feel compelled to give up his employment under the
prevailing circumstances."107

Applying the cited standards on resignation and constructive dismissal, it is clear that
respondents were constructively dismissed. Hence, their termination was illegal.

The termination of respondents' employment happened when they were pregnant and
expecting to incur costs on account of child delivery and infant rearing. As noted by the
Court of Appeals, pregnancy is a time when they need employment to sustain their
families.108 Indeed, it goes against normal and reasonable human behavior to abandon
one's livelihood in a time of great financial need.

It is clear that respondents intended to remain employed with Saudia. All they did was
avail of their maternity leaves. Evidently, the very nature of a maternity leave means
that a pregnant employee will not report for work only temporarily and that she will
resume the performance of her duties as soon as the leave allowance expires.

It is also clear that respondents exerted all efforts to' remain employed with Saudia.
Each of them repeatedly filed appeal letters (as much as five [5] letters in the case of
Rebesencio109) asking Saudia to reconsider the ultimatum that they resign or be
terminated along with the forfeiture of their benefits. Some of them even went to
Saudia's office to personally seek reconsideration.110

Page 28 of 55
Respondents also adduced a copy of the "Unified Employment Contract for Female
Cabin Attendants."111 This contract deemed void the employment of a flight attendant
who becomes pregnant and threatened termination due to lack of medical fitness.112
The threat of termination (and the forfeiture of benefits that it entailed) is enough to
compel a reasonable person in respondents' position to give up his or her employment.

Saudia draws attention to how respondents' resignation letters were supposedly made
in their own handwriting. This minutia fails to surmount all the other indications negating
any voluntariness on respondents' part. If at all, these same resignation letters are proof
of how any supposed resignation did not arise from respondents' own initiative. As
earlier pointed out, respondents' resignations were executed on Saudia's blank
letterheads that Saudia had provided. These letterheads already had the word
"RESIGNATION" typed on the subject portion of their respective headings when these
were handed to respondents.113ChanRoblesVirtualawlibrary

"In termination cases, the burden of proving just or valid cause for dismissing an
employee rests on the employer."114 In this case, Saudia makes much of how
respondents supposedly completed their exit interviews, executed quitclaims, received
their separation pay, and took more than a year to file their Complaint.115 If at all,
however, these circumstances prove only the fact of their occurrence, nothing more.
The voluntariness of respondents' departure from Saudia is non sequitur.

Mere compliance with standard procedures or processes, such as the completion of

their exit interviews, neither negates compulsion nor indicates voluntariness.

As with respondent's resignation letters, their exit interview forms even support their
claim of illegal dismissal and militates against Saudia's arguments. These exit interview
forms, as reproduced by Saudia in its own Petition, confirms the unfavorable conditions
as regards respondents' maternity leaves. Ma. Jopette's and Loraine's exit interview
forms are particularly telling:chanroblesvirtuallawlibrary
a. From Ma. Jopette's exit interview form:

3. In what respects has the job met or failed to meet your expectations?

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE.116

b. From Loraine's exit interview form:

1. What are your main reasons for leaving Saudia? What company are you joining?

xxx xxx xxx

Others

CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)117

As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v.
Paramio,118 this court noted that "[i]f (a) there is clear proof that the waiver was
wangled from an unsuspecting or gullible person; or (b) the terms of the settlement are
unconscionable, and on their face invalid, such quitclaims must be struck down as
invalid or illegal."119 Respondents executed their quitclaims after having been unfairly
given an ultimatum to resign or be terminated (and forfeit their
benefits).chanRoblesvirtualLawlibrary

Having been illegally and unjustly dismissed, respondents are entitled to full backwages
and benefits from the time of their termination until the finality of this Decision. They are

Page 29 of 55
likewise entitled to separation pay in the amount of one (1) month's salary for every year
of service until the fmality of this Decision, with a fraction of a year of at least six (6)
months being counted as one (1) whole year.

Moreover, "[m]oral damages are awarded in termination cases where the employee's
dismissal was attended by bad faith, malice or fraud, or where it constitutes an act
oppressive to labor, or where it was done in a manner contrary to morals, good customs
or public policy."120 In this case, Saudia terminated respondents' employment in a
manner that is patently discriminatory and running afoul of the public interest that
underlies employer-employee relationships. As such, respondents are entitled to moral
damages.

To provide an "example or correction for the public good"121 as against such

discriminatory and callous schemes, respondents are likewise entitled to exemplary
damages.

In a long line of cases, this court awarded exemplary damages to illegally dismissed
employees whose "dismissal[s were] effected in a wanton, oppressive or malevolent
manner."122 This court has awarded exemplary damages to employees who were
terminated on such frivolous, arbitrary, and unjust grounds as membership in or
involvement with labor unions,123 injuries sustained in the course of employment,124
development of a medical condition due to the employer's own violation of the
employment contract,125 and lodging of a Complaint against the employer.126
Exemplary damages were also awarded to employees who were deemed illegally
dismissed by an employer in an attempt to evade compliance with statutorily
established employee benefits.127 Likewise, employees dismissed for supposedly just
causes, but in violation of due process requirements, were awarded exemplary
damages.128

These examples pale in comparison to the present controversy. Stripped of all

unnecessary complexities, respondents were dismissed for no other reason than simply
that they were pregnant. This is as wanton, oppressive, and tainted with bad faith as
any reason for termination of employment can be. This is no ordinary case of illegal
dismissal. This is a case of manifest gender discrimination. It is an affront not only to our
statutes and policies on employees' security of tenure, but more so, to the Constitution's
dictum of fundamental equality between men and women.129

The award of exemplary damages is, therefore, warranted, not only to remind
employers of the need to adhere to the requirements of procedural and substantive due
process in termination of employment, but more importantly, to demonstrate that gender
discrimination should in no case be countenanced.

Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal,
respondents are likewise entitled to attorney's fees in the amount of 10% of the total
monetary award.130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the persons
composing it. Thus, as a rule, corporate directors and officers are not liable for the
illegal termination of a corporation's employees. It is only when they acted in bad faith or
with malice that they become solidarity liable with the corporation.131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever

Electrical,132 this court clarified that "[b]ad faith does not connote bad judgment or

Page 30 of 55
negligence; it imports a dishonest purpose or some moral obliquity and conscious doing
of wrong; it means breach of a known duty through some motive or interest or ill will; it
partakes of the nature of fraud."133

Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or
with malice as regards their termination. Thus, she may not be held solidarity liable with
Saudia.cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not
solidarity liable with petitioner Saudi Arabian Airlines, and second, that petitioner Saudi
Arabian Airlines is liable for moral and exemplary damages. The June 16, 2011
Decision and the September 13, 2011 Resolution of the Court of Appeals in CA-G.R.
SP. No. 113006 are hereby AFFIRMED in all other respects. Accordingly, petitioner
Saudi Arabian Airlines is ordered to pay respondents:

(1)
Full backwages and all other benefits computed from the respective dates in which each
of the respondents were illegally terminated until the finality of this Decision;
(2)
Separation pay computed from the respective dates in which each of the respondents
commenced employment until the finality of this Decision at the rate of one (1) month's
salary for every year of service, with a fraction of a year of at least six (6) months being
counted as one (1) whole year;
(3)
Moral damages in the amount of P100,000.00 per respondent;
(4)
Exemplary damages in the amount of P200,000.00 per respondent; and
(5)
Attorney's fees equivalent to 10% of the total award.

Interest of 6% per annum shall likewise be imposed on the total judgment award from
the finality of this Decision until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the
amounts due to respondents which petitioner Saudi Arabian Airlines should pay without
delay.

SO ORDERED.chanroblesvirtuallawlibrary

Carpio, (Chairperson), Velasco, Jr.,*Del Castillo, and Mendoza, JJ., concur.

Page 31 of 55
G.R. No. 156367. May 16, 2005]

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, vs. ANTONIO BAUTISTA,

respondent.
DECISION
CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision[1] and

Resolution[2] of the Court of Appeals affirming the Decision[3] of the National Labor
Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor
Arbiter (finding respondent entitled to the award of 13th month pay and service incentive
leave pay) by deleting the award of 13th month pay to respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto
Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-
Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio.
Respondent was paid on commission basis, seven percent (7%) of the total gross
income per travel, on a twice a month basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe,
Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus
No. 124, as the latter vehicle suddenly stopped at a sharp curve without giving any
warning.

Respondent averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost twenty-
four (24) hours, as he had just arrived in Manila from Roxas, Isabela. Respondent
further alleged that he was not allowed to work until he fully paid the amount of
P75,551.50, representing thirty percent (30%) of the cost of repair of the damaged
buses and that despite respondents pleas for reconsideration, the same was ignored by
management. After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with
Money Claims for nonpayment of 13th month pay and service incentive leave pay
against Autobus.

Petitioner, on the other hand, maintained that respondents employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty. To support
its claim, petitioner presented copies of letters, memos, irregularity reports, and
warrants of arrest pertaining to several incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative,

respondents employment was terminated only after the latter was provided with an
opportunity to explain his side regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by

the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,[4] the
dispositive portion of which reads:

WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal
Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby
DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the
complainant the following:

Page 32 of 55
a. his 13th month pay from the date of his hiring to the date of his dismissal, presently
computed at P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of
merit.[5]

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to
the NLRC which rendered its decision on 28 September 2001, the decretal portion of
which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly
Sec. 3 provides:

Section 3. Employers covered. The Decree shall apply to all employers except to:

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task basis,
performing a specific work, irrespective of the time consumed in the performance
thereof. xxx.

Records show that complainant, in his position paper, admitted that he was paid on a
commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision
by deleting the award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the

award of 13th month pay. The other findings are AFFIRMED.[6]

In other words, the award of service incentive leave pay was maintained. Petitioner thus
sought a reconsideration of this aspect, which was subsequently denied in a Resolution
by the NLRC dated 31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the
review of said decision with the Court of Appeals which was subsequently denied by the
appellate court in a Decision dated 06 May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and
the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is
hereby AFFIRMED in toto. No costs.[7]

Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the
Labor Code, as amended, is applicable to respondents claim of service incentive leave
pay.

RULING OF THE COURT

Page 33 of 55
The disposition of the first issue revolves around the proper interpretation of Article 95
of the Labor Code vis--vis Section 1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of
service incentive leave has been delimited by the Implementing Rules and Regulations
of the Labor Code to apply only to those employees not explicitly excluded by Section 1
of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply
to employees classified as field personnel. The phrase other employees whose
performance is unsupervised by the employer must not be understood as a separate
classification of employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those whose actual hours of work in the field cannot
be determined with reasonable certainty.[8]

The same is true with respect to the phrase those who are engaged on task or contract
basis, purely commission basis. Said phrase should be related with field personnel,
applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow.[9] Hence, employees engaged on
task or contract basis or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless, they fall under the
classification of field personnel.

Therefore, petitioners contention that respondent is not entitled to the grant of service
incentive leave just because he was paid on purely commission basis is misplaced.
What must be ascertained in order to resolve the issue of propriety of the grant of
service incentive leave to respondent is whether or not he is a field personnel.

According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business
or branch office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. This definition is further elaborated in the Bureau
of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical
Commercial Employees Association[10] which states that:

As a general rule, [field personnel] are those whose performance of their job/service is
not supervised by the employer or his representative, the workplace being away from
the principal office and whose hours and days of work cannot be determined with
reasonable certainty; hence, they are paid specific amount for rendering specific service
or performing specific work. If required to be at specific places at specific times,
employees including drivers cannot be said to be field personnel despite the fact that

Page 34 of 55
they are performing work away from the principal office of the employee. [Emphasis
ours]

To this discussion by the BWC, the petitioner differs and postulates that under said
advisory opinion, no employee would ever be considered a field personnel because
every employer, in one way or another, exercises control over his employees. Petitioner
further argues that the only criterion that should be considered is the nature of work of
the employee in that, if the employees job requires that he works away from the
principal office like that of a messenger or a bus driver, then he is inevitably a field
personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a field
personnel is not merely concerned with the location where the employee regularly
performs his duties but also with the fact that the employees performance is
unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the employer
and whose actual hours of work in the field cannot be determined with reasonable
certainty. Thus, in order to conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made as to
whether or not the employees time and performance are constantly supervised by the
employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there
are its inspectors assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductors reports. There is also the
mandatory once-a-week car barn or shop day, where the bus is regularly checked as to
its mechanical, electrical, and hydraulic aspects, whether or not there are problems
thereon as reported by the driver and/or conductor. They too, must be at specific place
as [sic] specified time, as they generally observe prompt departure and arrival from their
point of origin to their point of destination. In each and every depot, there is always the
Dispatcher whose function is precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper time. These, are present in
the case at bar. The driver, the complainant herein, was therefore under constant
supervision while in the performance of this work. He cannot be considered a field
personnel.[11]

We agree in the above disquisition. Therefore, as correctly concluded by the appellate

court, respondent is not a field personnel but a regular employee who performs tasks
usually necessary and desirable to the usual trade of petitioners business. Accordingly,
respondent is entitled to the grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive
leave pay respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not
the three (3)-year prescriptive period under Article 291 of the Labor Code is applicable
to respondents claim of service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-
employee relationship shall be filed within three (3) years from the time the cause of
action accrued; otherwise, they shall be forever barred.

Page 35 of 55
In the application of this section of the Labor Code, the pivotal question to be answered
is when does the cause of action for money claims accrue in order to determine the
reckoning date of the three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in
favor of the plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant violative of the right of
the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff.[12]

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time
when the third element of a cause of action transpired. Stated differently, in the
computation of the three-year prescriptive period, a determination must be made as to
the period when the act constituting a violation of the workers right to the benefits being
claimed was committed. For if the cause of action accrued more than three (3) years
before the filing of the money claim, said cause of action has already prescribed in
accordance with Article 291.[13]

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it

is established that the benefits being claimed have been withheld from the employee for
a period longer than three (3) years, the amount pertaining to the period beyond the
three-year prescriptive period is therefore barred by prescription. The amount that can
only be demanded by the aggrieved employee shall be limited to the amount of the
benefits withheld within three (3) years before the filing of the complaint.[14]

It is essential at this point, however, to recognize that the service incentive leave is a
curious animal in relation to other benefits granted by the law to every employee. In the
case of service incentive leave, the employee may choose to either use his leave
credits or commute it to its monetary equivalent if not exhausted at the end of the
year.[15] Furthermore, if the employee entitled to service incentive leave does not use
or commute the same, he is entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave. As enunciated by the Court in
Fernandez v. NLRC:[16]

The clear policy of the Labor Code is to grant service incentive leave pay to workers in
all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that [e]very employee who has rendered
at least one year of service shall be entitled to a yearly service incentive leave of five
days with pay. Service incentive leave is a right which accrues to every employee who
has served within 12 months, whether continuous or broken reckoned from the date the
employee started working, including authorized absences and paid regular holidays
unless the working days in the establishment as a matter of practice or policy, or that
provided in the employment contracts, is less than 12 months, in which case said period
shall be considered as one year. It is also commutable to its money equivalent if not
used or exhausted at the end of the year. In other words, an employee who has served
for one year is entitled to it. He may use it as leave days or he may collect its monetary
value. To limit the award to three years, as the solicitor general recommends, is to
unduly restrict such right.[17] [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an

entitled employee to claim his service incentive leave pay accrues from the moment the
employer refuses to remunerate its monetary equivalent if the employee did not make
use of said leave credits but instead chose to avail of its commutation. Accordingly, if
the employee wishes to accumulate his leave credits and opts for its commutation upon
his resignation or separation from employment, his cause of action to claim the whole
amount of his accumulated service incentive leave shall arise when the employer fails to
pay such amount at the time of his resignation or separation from employment.

Page 36 of 55
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive
leave, we can conclude that the three (3)-year prescriptive period commences, not at
the end of the year when the employee becomes entitled to the commutation of his
service incentive leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the
employees services, as the case may be.

The above construal of Art. 291, vis--vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and interpretation of
the provisions of the Labor Code and its implementing regulations, the workingmans
welfare should be the primordial and paramount consideration.[18] The policy is to
extend the applicability of the decree to a greater number of employees who can avail of
the benefits under the law, which is in consonance with the avowed policy of the State
to give maximum aid and protection to labor.[19]

In the case at bar, respondent had not made use of his service incentive leave nor
demanded for its commutation until his employment was terminated by petitioner.
Neither did petitioner compensate his accumulated service incentive leave pay at the
time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one
month from the time of his dismissal, that respondent demanded from his former
employer commutation of his accumulated leave credits. His cause of action to claim
the payment of his accumulated service incentive leave thus accrued from the time
when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave
pay only commenced from the time the employer failed to compensate his accumulated
service incentive leave pay at the time of his dismissal. Since respondent had filed his
money claim after only one month from the time of his dismissal, necessarily, his money
claim was filed within the prescriptive period provided for by Article 291 of the Labor
Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The

assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby
AFFIRMED. No Costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Page 37 of 55
Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

ANTONIO P. SALENGA and

NATIONAL LABOR RELATIONS COMMISSION,
Petitioners,

- versus -

COURT OF APPEALS and

CLARK DEVELOPMENT
CORPORATION,
Respondents.
G.R. Nos. 174941

Present:

CARPIO, Chairperson,
BRION,
PORTUGAL PEREZ,
SERENO, and
REYES, JJ.

Promulgated:

February 1, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

SERENO, J.:

The present Petition for Certiorari under Rule 65 assails the Decision[1] of the Court of
Appeals (CA) promulgated on 13 September 2005, dismissing the Complaint for illegal
dismissal filed by petitioner Antonio F. Salenga against respondent Clark Development
Corporation (CDC). The dispositive portion of the assailed Decision states:

WHEREFORE, premises considered, the original and supplemental petitions are

GRANTED. The assailed resolutions of the National Labor Relations Commission dated
September 10, 2003 and January 21, 2004 are ANNULLED and SET ASIDE. The
complaint filed by Antonio B. Salenga against Clark Development is DISMISSED.
Consequently, Antonio B. Salenga is ordered to restitute to Clark Development
Corporation the amount of P3,222,400.00, which was received by him as a
consequence of the immediate execution of said resolutions, plus interest thereon at the
rate of 6% per annum from date of

such receipt until finality of this judgment, after which the interest shall be at the rate of
12% per annum until said amount is fully restituted.

Page 38 of 55
SO ORDERED.[2]

The undisputed facts are as follows:

On 22 September 1998, President/Chief Executive Officer (CEO) Rufo Colayco issued
an Order informing petitioner that, pursuant to the decision of the board of directors of
respondent CDC, the position of head executive assistant the position held by petitioner
was declared redundant. Petitioner received a copy of the Order on the same day and
immediately went to see Colayco. The latter informed him that the Order had been
issued as part of the reorganization scheme approved by the board of directors. Thus,
petitioners employment was to be terminated thirty (30) days from notice of the Order.
On 17 September 1999, petitioner filed a Complaint for illegal dismissal with a claim for
reinstatement and payment of back wages, benefits, and moral and exemplary
damages against respondent CDC and Colayco. The Complaint was filed with the
National Labor Relations Commission-Regional Arbitration Branch (NLRC-RAB) III in
San Fernando, Pampanga. In defense, respondents, represented by the Office of the
Government Corporate Counsel (OGCC), alleged that the NLRC had no jurisdiction to
entertain the case on the ground that petitioner was a corporate officer and, thus, his
dismissal was an intra-corporate matter falling properly within the jurisdiction of the
Securities and Exchange Commission (SEC).

On 29 February 2000, labor arbiter (LA) Florentino R. Darlucio issued a Decision[3] in

favor of petitioner Salenga. First, the LA held that the NLRC had jurisdiction over the
Complaint, considering that petitioner was not a corporate officer but a managerial
employee. He held the position of head executive assistant, categorized as a Job Level
12 position, not subject to election or appointment by the board of directors.

Second, the LA pointed out that respondent CDC and Colayco failed to establish a valid
cause for the termination of petitioners employment. The evidence presented by
respondent CDC failed to show that the position of petitioner was superfluous as to be
classified redundant. The LA further pointed out that respondent corporation had not
disputed the argument of petitioner Salenga that his position was that of a regular
employee. Moreover, the LA found that petitioner had not been accorded the right to
due process. Instead, the latter was dismissed without the benefit of an explanation of
the grounds for his termination, or an opportunity to be heard and to defend himself.

Finally, considering petitioners reputation and contribution as a government employee

for 40 years, the LA awarded moral damages amounting to P2,000,000 and exemplary
damages of P500,000. The dispositive portion of the LAs Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring

respondent Clark Development Corporation and Rufo Colayco guilty of illegal dismissal
and for which they are ordered, as follows:

1. To reinstate complainant to his former or equivalent position without loss of

seniority rights and privileges;

2. To pay complainant his backwages reckoned from the date of his dismissal on
September 22, 1998 until actual reinstatement or merely reinstatement in the payroll
which as of this date is in the amount of P722,400.00;

3. To pay complainant moral damages in the amount of P2,000,000.00; and,

4. To pay complainant exemplary damages in the amount of P500,000.00.

SO ORDERED.[4]

Page 39 of 55
At the time the above Decision was rendered, respondent CDC was already under the
leadership of Sergio T. Naguiat. When he received the Decision on 10 March 2000, he
subsequently instructed Atty. Monina C. Pineda, manager of the Corporate and Legal
Services Department and concurrent corporate board secretary, not to appeal the
Decision and to so inform the OGCC.[5]

Despite these instructions, two separate appeals were filed before LA Darlucio on 20
March 2000. One appeal[6] was from the OGCC on behalf of respondent CDC and Rufo
Colayco. The OGCC reiterated its allegation that petitioner was a corporate officer, and
that the termination of his employment was an intra-corporate matter. The
Memorandum of Appeal was verified and certified by Hilana Timbol-Roman, the
executive vice president of respondent CDC. The Memorandum was accompanied by a
UCPB General Insurance Co., Inc. supersedeas bond covering the amount due to
petitioner as adjudged by LA Darlucio. Timbol-Roman and OGCC lawyer Roy Christian
Mallari also executed on 17 March 2000 a Joint Affidavit of Declaration wherein they
swore that they were the respective authorized representative and counsel of
respondent corporation. However, the Memorandum of Appeal and the Joint Affidavit of
Declaration were not accompanied by a board resolution from respondents board of
directors authorizing either Timbol-Roman or Atty. Mallari, or both, to pursue the case or
to file the appeal on behalf of respondent.

It is noteworthy that Naguiat, who was president/CEO of respondent CDC from 3

February 2000 to 5 July 2000, executed an Affidavit on 20 March 2002,[7] wherein he
stated that without his knowledge, consent or approval, Timbol-Roman and Atty. Mallari
filed the above-mentioned appeal. He further alleged that their statements were false.

The second appeal, meanwhile, was filed by former CDC President/CEO Rufo Colayco.
Colayco alleged that petitioner was dismissed not on 22 September 1998, but twice on
9 March 1999 and 23 March 1999. The dismissal was allegedly approved by
respondents CDC board of directors pursuant to a new organizational structure.
Colayco likewise stated that he had posted a supersedeas bond the same bond taken
out by Timbol-Roman issued by the UCPB General Insurance Co. dated 17 March 2000
in order to secure the monetary award, exclusive of moral and exemplary damages.

Petitioner thereafter opposed the two appeals on the grounds that both appellants,
respondent CDC as allegedly represented by Timbol-Roman and Atty. Mallari and Rufo
Colayco had failed to observe Rule VI, Sections 4 to 6 of the NLRC Rules of Procedure;
and that appellants had not been authorized by respondents board of directors to
represent the corporation and, thus, they were not the employer whom the Rules
referred to. Petitioner also alleged that appellants failed to refute the findings of LA
Darlucio in the previous Decision.

In the meantime, while the appeal was pending, on 19 October 2000, respondents
board chairperson and concurrent President/CEO Rogelio L. Singson ordered the
reinstatement of petitioner to the latters former position as head executive assistant,
effective 24 October 2000.[8]

On 28 May 2001, respondent CDCs new President/CEO Emmanuel Y. Angeles issued

a Memorandum, which offered all managers of respondent corporation an early
separation/redundancy program. Those who wished to avail themselves of the program
were to be given the equivalent of their 1.25-month basic salary for every year of
service and leave credits computed on the basis of the same 1.25-month equivalent of
their basic salary.[9]

In August 2001, respondent CDC offered another retirement plan granting higher
benefits to the managerial employees. Thus, on 12 September 2001, petitioner filed an

Page 40 of 55
application for the early retirement program, which Angeles approved on 3 December
2001.

Meanwhile, in the proceedings of the NLRC, petitioner received on 12 September 2001

its 30 July 2001 Decision[10] on the appeal filed by Timbol-Roman and Colayco. It is
worthy to note that the said Decision referred to the reports of reviewer arbiters Cristeta
D. Tamayo and Thelma M. Concepcion, who in turn found that petitioner Salenga was a
corporate officer of CDC. Nevertheless, the First Division of the NLRC upheld LA
Darlucios ruling that petitioner Salenga was indeed a regular employee. It also found
that redundancy, as an authorized cause for dismissal, has not been sufficiently proven,
rendering the dismissal illegal. However, the NLRC held that the award of exemplary
and moral damages were unsubstantiated. Moreover, it also dropped Colayco as a
respondent to the case, since LA Darlucio had failed to provide any ground on which to
anchor the formers solidary liability.

Petitioner Salenga thereafter moved for a partial reconsideration of the above-

mentioned Decision. He sought the reinstatement of the award of exemplary and moral
damages. He likewise insisted that the NLRC should not have entertained the appeal on
the following grounds: (1) respondent CDC did not file an appeal and did not post the
required cash or surety bond; (2) both Timbol-Roman and Colayco were admittedly not
real parties-in-interest; (3) they were not the employer or the employers authorized
representative and, thus, had no right to appeal; and (4) both appeals had not been
perfected for failure to post the required cash or surety bond. In other words, petitioners
theory revolved on the fact that neither Timbol-Roman nor Colayco was authorized to
represent the corporation, so the corporation itself did not appeal LA Darlucios Decision.
As a result, that Decision should be considered as final and executory.
For its part, the OGCC also filed a Motion for Reconsideration[11] of the NLRCs 30 July
2001 Decision insofar as the finding of illegal dismissal was concerned. It no longer
questioned the commissions finding that petitioner was a regular employee, but instead
insisted that he had been dismissed as a consequence of his redundant position. The
motion, however, was not verified by the duly authorized representative of respondent
CDC.
On 5 December 2002, the NLRC denied petitioner Salengas Motion for Partial
Reconsideration and dismissed the Complaint. The dispositive portion of the
Resolution[12] reads as follows:

WHEREFORE, complainants partial motion for reconsideration is denied. As

recommended by Reviewer Arbiters Cristeta D. Tamayo in her August 2, 2000 report
and Thelma M. Concepcion in her November 25, 2002 report, the decision of Labor
Arbiter Florentino R. Darlucio dated 29 February 2000 is set aside.

The complaint below is dismissed for being without merit.

SO ORDERED.[13]

Meanwhile, pending the Motions for Reconsideration of the NLRCs 30 July 2001
Decision, another issue arose with regard to the computation of the retirement benefits
of petitioner. Respondent CDC did not immediately give his requested retirement
benefits, pending clarification of the computation of these benefits. He claimed that the
computation of his retirement benefits should also include the forty (40) years he had
been in government service in accordance with Republic Act No. (R.A.) 8291, or the
GSIS Act, and should not be limited to the length of his employment with respondent
corporation only, as the latter insisted.

In a letter dated 14 March 2003, petitioner Salengas counsel wrote to the board of
directors of respondent to follow up the payment of the retirement benefits allegedly due
to petitioner.[14]

Page 41 of 55
Pursuant to the NLRCs dismissal of the Complaint of petitioner Salenga, Angeles
subsequently denied the formers request for his retirement benefits, to wit:[15]

Please be informed that we cannot favorably grant your clients claim for retirement
benefits considering that Clark Development Corporation's dismissal of Mr. Antonio B.
Salenga had been upheld by the National Labor Relations Commission through a
Resolution dated December 5, 2002...

xxx xxx xxx

As it is, the said Resolution dismissed the Complaint filed by Mr. Salenga for being
without merit. Consequently, he is not entitled to receive any retirement pay from the
corporation.

Meanwhile, petitioner Salenga filed a second Motion for Reconsideration of the 5

December 2002 Resolution of the NLRC, reiterating his claim that it should not have
entertained the imperfect appeal, absent a proper verification and certification against
forum-shopping from the duly authorized representative of respondent CDC. Without
that authority, neither could the OGCC act on behalf of the corporation.

The OGCC, meanwhile, resurrected its old defense that the NLRC had no jurisdiction
over the case, because petitioner Salenga was a corporate officer.

The parties underwent several hearings before the NLRC First Division. During these
times, petitioner Salenga demanded from the OGCC to present a board resolution
authorizing it or any other person to represent the corporation in the proceedings. This,
the OGCC failed to do.

After giving due course to the Motion for Reconsideration filed by petitioner Salenga, the
NLRC issued a Resolution[16] on 10 September 2003, partially granting the motion.
This time, the First Division of the NLRC held that, absent a board resolution authorizing
Timbol-Roman to file the appeal on behalf of respondent CDC, the appeal was not
perfected and was thus a mere scrap of paper. In other words, the NLRC had no
jurisdiction over the appeal filed before it.

The NLRC further held that respondent CDC had failed to show that petitioner Salengas
dismissal was pursuant to a valid corporate reorganization or board resolution. It also
deemed respondent estopped from claiming that there was indeed a redundancy,
considering that petitioner Salenga had been reinstated to his position as head
executive assistant. While it granted the award of moral damages, it nevertheless
denied exemplary damages. Thus, the dispositive portion of its Decision reads:

WHEREFORE, premises considered, the complainants Motion for Reconsideration is

GRANTED and We set aside our Resolution of December 5, 2002. The Decision of the
Labor Arbiter dated February 29, 2000 is REINSTATED with the MODIFICATION that:

1.) Being a nominal party, respondent Rufo Colayco is declared to be not jointly and
severally liable with respondent Clark Development Corporation;

2.) Respondent Clark Development Corporation is ordered to pay the complainant his
full backwages and other monetary claims to which he is entitled under the decision of
the Labor Arbiter;

3.) Respondent CDC is likewise ordered to pay the complainant moral and exemplary
damages as provided under the Labor Arbiters Decision; and

Page 42 of 55
4.) All other money claims are DENIED for lack of merit.

In the meantime, respondent CDC is ordered to pay the complainant his retirement
benefits without further delay.

SO ORDERED.[17]

On 3 October 2003, the OGCC filed a Motion for Reconsideration[18] despite the
absence of a verification and the certification against forum shopping.

On 21 January 2004, the motion was denied by the NLRC for lack of merit.[19]

On 5 February 2004, the executive clerk of the NLRC First Division entered the
judgment on the foregoing case. Thereafter, on 9 February 2004, the NLRC forwarded
the entire records of the case to the NLRC-RAB III Office in San Fernando, Pampanga
for appropriate action.

On 4 March 2004, petitioner Salenga filed a Motion for Issuance of Writ of Execution
before the NLRC-RAB III, Office of LA Henry D. Isorena. The OGCC opposed the
motion on the ground that it had filed with the CA a Petition for Certiorari seeking the
reversal of the NLRC Decision dated 30 July 2001 and the Resolutions dated 10
September 2003 and 21 January 2004, respectively. It is noteworthy that, again, there
was no board resolution attached to the Petition authorizing its filing.

Despite the pending Petition with the CA, LA Isorena issued a Writ of Execution
enforcing the 10 September 2003 Resolution of the NLRC. On 1 April 2004, the LA
issued an Order[20] to the manager of the Philippine National Bank, Clark Branch,
Angeles City, Pampanga, to immediately release in the name of NLRC-RAB III the
amount of P3,222,400 representing partial satisfaction of the judgment award, including
the execution fee of P31,720.

Respondent CDC filed with the CA in February 2004 a Petition for Certiorari with a
prayer for the issuance of a temporary restraining order and/or a writ of preliminary
injunction. However, the Petition still lacked a board resolution from the board of
directors of respondent corporation authorizing its then President Angeles to verify and
certify the Petition on behalf of the board. It was only on 16 March 2004 that counsel for
respondent filed a Manifestation/Motion[21] with an attached Secretarys Certificate
containing the boards Resolution No. 86, Series of 2001. The Resolution authorized
Angeles to represent respondent corporation in prosecuting, maintaining, or
compromising any lawsuit in connection with its business.

Meanwhile, in the proceedings before LA Isorena, both respondent CDCs legal

department and the OGCC on 6 April 2004 filed their respective Motions to Quash Writ
of Execution.[22] They both cited the failure to afford to respondent due process in the
issuance of the writ. They claimed that the pre-conference hearing on the execution of
the judgment had not pushed through. They also reiterated that the Petition for
Certiorari dated 11 February 2004 was still pending with the CA.

Both motions were denied by LA Isorena for lack of factual and legal bases.

On 6 May 2004, respondent filed with LA Isorena another Motion to Quash Writ of
Execution, again reiterating the pending Petition with the CA.

This active exchange of pleadings and motions and the delay in the payment of his
money claims eventually led petitioner Salenga to file an Omnibus Motion[23] before LA
Isorena. In his motion, he recomputed the amount due him representing back wages,
other benefits or allowances, legal interests and attorneys fees. He also prayed for the

Page 43 of 55
computation of his retirement benefits plus interests in accordance with R.A. 8291[24]
and R.A. 1616.[25] He insisted that since respondent CDC was a government-owned
and -controlled corporation (GOCC), his previous government service totalling 40 years
must also be credited in the computation of his retirement pay. Thus, he demanded the
payment of the total amount of P23,920,772.30, broken down as follows:

From the illegal dismissal suit: (In Philippine peso)

Recomputed award 3,758,786
Legal interest 5,089,342.58
Attorneys fees 1,196,052.80
Litigation expenses 250,000
Retirement pay
Retirement gratuity 6,987,944
Unused vacation and sick leave 1,440,328
Legal interest 4,050,544.96
Attorneys fees 1,147,781.90
On 11 May 2004, the CA issued a Resolution[26] ordering petitioner Salenga to
comment on the Petition and holding in abeyance the issuance of a temporary
restraining order.

The parties thereafter filed their respective pleadings.

On 19 July 2004, the CA temporarily restrained the NLRC from enforcing the Decision
dated 29 February 2000 for a period of 60 days.[27] After the lapse of the 60 days, LA
Isorena issued a Notice of Hearing/Conference scheduled for 1 October 2004 on
petitioners Omnibus Motion dated 7 May 2004.

Meanwhile, on 24 September 2004, the CA issued another Resolution,[28] this time

denying the application for the issuance of a writ of preliminary injunction, after finding
that the requisites for the issuance of the writ had not been met.

Respondent CDC subsequently filed a Supplemental Petition[29] with the CA,

challenging the computation petitioner Salenga made in his Omnibus Motion filed with
the NLRC. Respondent alleged that the examiner had erred in including the other years
of government service in the computation of retirement benefits. It claimed that, since
respondent corporation was created under the Corporation Code, petitioner Salenga
was not covered by civil service laws. Hence, his retirement benefits should only be
limited to the number of years he had been employed by respondent.

Subsequently, respondent CDC filed an Omnibus Motion[30] to admit the Supplemental

Petition and to reconsider the CAs Resolution denying the issuance of a writ of
preliminary injunction. In the motion, respondent alleged that petitioner Salenga had
been more than sufficiently paid the amounts allegedly due him, including the award
made by LA Darlucio. On 12 March 2002, respondent CDC had issued a check
amounting to P852,916.29, representing petitioners retirement pay and terminal pay.
Meanwhile, on 2 April 2004, P3,254,120 representing the initial award was debited from
the account of respondent CDC.

On 7 February 2005, respondent CDC filed a Motion[31] once again asking the CA to
issue a writ of preliminary injunction in the light of a scheduled 14 February 2005
conference called by LA Mariano Bactin, who had taken over the case from LA Isorena.

At the 14 February 2005 hearing, the parties failed to reach an amicable settlement and
were thus required to submit their relevant pleadings and documents in support of their
respective cases.

Page 44 of 55
On 16 February 2005, the CA issued a Resolution[32] admitting the Supplemental
Petition filed by respondent, but denying the prayer for the issuance of an injunctive writ.

Thereafter, on 8 March 2005, LA Bactin issued an Order[33] resolving the Omnibus

Motion filed by petitioner Salenga for the recomputation of the monetary claims due him.
In the Order, LA Bactin denied petitioners Motion for the recomputation of the award of
back wages, benefits, allowances and privileges based on the 29 February 2000
Decision of LA Darlucio. LA Bactin held that since the Decision had become final and
executory, he no longer had jurisdiction to amend or to alter the judgment.

Anent the second issue of the computation of retirement benefits, LA Bactin also denied
the claim of petitioner Salenga, considering that the latters retirement benefits had
already been paid. The LA, however, did not rule on whether petitioner was entitled to
retirement benefits, either under the Government Service Insurance System (GSIS) or
under the Social Security System (SSS), and held that this issue was beyond the
expertise and jurisdiction of a LA.

Petitioner Salenga thereafter appealed to the NLRC, which granted the appeal in a
Resolution[34] dated 22 July 2005. First, it was asked to resolve the issue of the
propriety of having the Laguesma Law Office represent respondent CDC in the
proceedings before the LA. The said law firm entered its appearance as counsel for
respondent during the pre-execution conference/hearing on 1 October 2004. On this
issue, the NLRC held that respondent corporations legal department, which had
previously been representing the corporation, was not validly substituted by the
Laguesma Law Office. In addition, the NLRC held that respondent had failed to comply
with Memorandum Circular No. 9, Series of 1998, which strictly prohibits the hiring of
lawyers of private law firms by GOCCs without the prior written conformity and
acquiescence of the Office of Solicitor General, as the case may be, and the prior
written concurrence of the Commission on Audit (COA). Thus, the NLRC held that all
actions and submissions undertaken by the Laguesma Law Office on behalf of
respondent were null and void.

The second issue raised before the NLRC was whether LA Bactin acted without
jurisdiction in annulling and setting aside the formers final and executory judgment
contained in its 10 September 2003 Resolution, wherein it held that the appeal had not
been perfected, absent the necessary board resolution allowing or authorizing Timbol-
Roman and Atty. Mallari to file the appeal. On this issue, the NLRC stated:

The final and executory judgment in this case is clearly indicated in the dispositive
portion of Our Resolution promulgated on September 10, 2003 GRANTING
complainants motion for reconsideration, SETTING ASIDE Our Resolution of December
5, 2002, and REINSTATING the Decision of the Labor Arbiter dated February 29, 2000
with the following modification[s]: (1) declaring respondent Rufo Colayco not jointly and
severally liable with respondent Clark Development Corporation; (2) ordering
respondent CDC to pay the complainant his full backwages and other monetary claims
to which he is entitled under the decision of the Labor Arbiter; (3) ordering respondent
CDC to pay complainant moral and exemplary damages as provided under the Labor
Arbiters Decision; and (4) ordering respondent CDC to pay the complainant his
retirement benefits without further delay. This was entered in the Book of Entry of
Judgment as final and executory effective as of February 2, 2004.

Implementing this final and executory judgment, Arbiter Isorena issued an Order dated
May 24, 2004, DENYING respondents Motion to Quash the Writ of Execution dated
March 22, 2004, correctly stating thusly:

Let it be stressed that once a decision has become final and executory, it becomes the
ministerial duty of this Office to issue the corresponding writ of execution. The rationale

Page 45 of 55
behind it is based on the fact that the winning party has suffered enough and it is the
time for him to enjoy the fruits of his labor with dispatch. The very purpose of the pre-
execution conference is to explore the possibility for the parties to arrive at an amicable
settlement to satisfy the judgment award speedily, not to delay or prolong its
implementation.

Thus, when Arbiter Bactin, who took over from Arbiter Isorena upon the latters filing for
leave of absence due to poor health in January 2005, issued the appealed Order
nullifying, instead of implementing, the final and executory judgment of this
Commission, the labor arbiter a quo acted WITHOUT JURISDICTION.[35]

xxx xxx xxx

WHEREFORE, premises considered, the appeal of herein complainant is hereby

GRANTED, and We declare NULL AND VOID the appealed Order of March 8, 2005
and SET ASIDE said Order; We direct the immediate issuance of the corresponding
Alias Writ of Execution to enforce the final and executory judgment of this Commission
as contained in Our September 10, 2003 Resolution.

SO ORDERED.[36]

Unwilling to accept the above Resolution of the NLRC, the Laguesma Law Office filed a
Motion for Reconsideration dated 29 August 2005 with the NLRC. Again, the motion
lacked proper verification and certification against non-forum shopping.

In the meantime, the OGCC also filed with the CA a Motion for the Issuance of a Writ of
Preliminary Injunction dated 30 August 2005[37] against the NLRCs 22 July 2005
Resolution. The OGCC alleged that the issues in the Resolution addressed monetary
claims that were raised by petitioner Salenga only in his Omnibus Motion dated 7 May
2004 or after the issuance of the 10 September 2003 Decision of LA Darlucio. Thus, the
OGCC insisted that the NLRC had no jurisdiction over the issue, for the matter was still
pending with the CA.

The OGCC likewise filed another Motion for Reconsideration[38] dated 31 August 2005
with the NLRC. The OGCC maintained that it was only acting in a collaborative manner
with the legal department of respondent CDC, for which the former remained the lead
counsel. The OGCC reiterated that, as the statutory counsel of GOCCs, it did not need
authorization from them to maintain a case, and thus, LA Bactin had jurisdiction over
that case. Finally, it insisted that petitioner Salenga was not covered by civil service
laws on retirement, the CDC having been created under the Corporation Code.

On 13 September 2005, the CA promulgated the assailed Decision. Relying heavily on

the reports of Reviewer Arbiters Cristeta D. Tamayo and Thelma M. Concepcion, it held
that petitioner Salenga was a corporate officer. Thus, the issue before the NLRC was an
intra-corporate dispute, which should have been lodged with the Securities and
Exchange Commission (SEC), which had jurisdiction over the case at the time the issue
arose. The CA likewise held that the NLRC committed grave abuse of discretion when it
allowed and granted petitioner Salengas second Motion for Reconsideration, which was
a prohibited pleading.

Petitioner subsequently filed a Motion for Reconsideration on 7 October 2005, alleging

that the CA committed grave abuse of discretion in reconsidering the findings of fact,
which had already been found to be conclusive against respondent; and in taking
cognizance of the latters Petition which had not been properly verified.

The CA, finding no merit in petitioners allegations, denied the motion in its 17 August
2006 Resolution.

Page 46 of 55
On 4 September 2006, petitioner Salenga filed a Motion for Extension of Time to File a
Petition for Review on Certiorari under Rule 45, praying for an extension of fifteen (15)
days within which to file the Petition. The motion was granted through this Courts
Resolution dated 13 September 2006. The case was docketed as G.R. No. 174159.

On 25 September 2006, however, petitioner filed a Manifestation[39] withdrawing the

motion. He manifested before us that he would instead file a Petition for Certiorari under
Rule 65, which was eventually docketed as G.R. No. 174941. On 7 July 2008, this
Court, through a Resolution, considered the Petition for Review in G.R. No. 174159
closed and terminated.

Petitioner raises the following issues for our resolution:

I.

The Court of Appeals acted without jurisdiction in reviving and re-litigating the factual
issues and matters of petitioners illegal dismissal and retirement benefits.

II.

The Court of Appeals had no jurisdiction to entertain the original Petition as a remedy
for an appeal that had actually not been filed, absent a board resolution allowing the
appeal.

III.

The Court of Appeals acted with grave abuse of discretion when it did the following:

a. It failed to dismiss the original and supplemental Petitions despite the lack of a
board resolution authorizing the filing thereof.

b. It failed to dismiss the Petitions despite the absence of a proper verification and
certification against non-forum shopping.

c. It failed to dismiss the Petitions despite respondents failure to inform it of the

pending proceedings before the NLRC involving the same issues.

d. It failed to dismiss the Petitions on the ground of forum shopping.

e. It did not dismiss the Petition when respondent failed to attach to it certified true
copies of the assailed NLRC 30 July 2001 Decision; 10 September 2003 Resolution; 21
January 2004 Resolution; copies of material portions of the record as are referred to
therein; and copies of pleadings and documents relevant and pertinent thereto.

f. It did not act on respondents failure to serve on the Office of the Solicitor General
a copy of the pleadings, motions and manifestations the latter had filed before the Court
of Appeals, as well as copies of pertinent court resolutions and decisions, despite the
NLRC being a party to the present case.

g. It disregarded the findings of fact and conclusions of law arrived at by LA Darlucio,

subjecting them to a second analysis and evaluation and supplanting them with its own
findings.

h. It granted the Petition despite respondents failure to show that the NLRC
committed grave abuse of discretion in rendering the latters 30 July 2001 Decision, 10
September 2003 Resolution and 21 January 2004 Resolution.

Page 47 of 55
i. It dismissed the complaint for illegal dismissal and ordered the restitution of the
P3,222,400 already awarded to petitioner, plus interest thereon.

In its defense, private respondent insists that the present Petition for Certiorari under
Rule 65 is an improper remedy to question the Decision of the CA, and thus, the case
should be dismissed outright. Nevertheless, it reiterates that private petitioner was a
corporate officer whose employment was dependent on board action. As such, private
petitioners employment was an intra-corporate controversy cognizable by the SEC, not
the NLRC. Private respondent also asserts that it has persistently sought the reversal of
LA Darlucios Decision by referring to the letters sent to the OGCC, as well as
Verification and Certificate against forum-shopping. However, these documents were
signed only during Angeles time as private respondents president/CEO, and not of the
former presidents. Moreover, private respondent contends that private petitioner is not
covered by civil service laws, thus, his years in government service are not creditable
for the purpose of determining the total amount of retirement benefits due him. In
relation to this, private respondent enumerates the amounts already paid to private
petitioner.

The Courts Ruling

The Petition has merit.

This Court deigns it proper to collapse the issues in this Petition to simplify the matters
raised in what appears to be a convoluted case. First, we need to determine whether
the NLRC and the CA committed grave abuse of discretion amounting to lack or excess
of jurisdiction, when they entertained respondents so-called appeal of the 29 February
2000 Decision rendered by LA Darlucio.

Second, because of the turn of events, a second issue the computation of retirement
benefits cropped up while the first case for illegal dismissal was still pending. Although
the second issue may be considered as separate and distinct from the illegal dismissal
case, the issue of the proper computation of the retirement benefits was nevertheless
considered by the relevant administrative bodies, adding more confusion to what should
have been a simple case to begin with.

The NLRC had no jurisdiction

to entertain the appeal filed by
Timbol-Roman and former
CDC CEO Colayco.

To recall, on 29 February 2000, LA Darlucio rendered a Decision in favor of petitioner,

stating as follows:

xxxComplainant cannot be considered as a corporate officer because at the time of his

termination, he was holding the position of Head Executive Assistant which is
categorized as a Job Level 12 position that is not subject to the election or appointment
by the Board of Directors. The approval of Board Resolution Nos. 200 and 214 by the
Board of Directors in its meeting held on February 11, 1998 and March 25, 1998 clearly
refers to the New CDC Salary Structure where the pay adjustment was based and not
to complainants relief as Vice-President, Joint Ventures and Special Projects. While it is
true that his previous positions are classified as Job Level 13 which are subject to board
confirmation, the status of his appointment was permanent in nature. In fact, he had
undergone a six-month probationary period before having acquired the permanency of
his appointment. However, due to the refusal of the board under then Chairman
Victorino Basco to confirm his appointment, he was demoted to the position of Head

Page 48 of 55
Executive Assistant. Thus, complainant correctly postulated that he was not elected to
his position and his tenure is not dependent upon the whim of the boardxxx

xxx xxx xxx

Anent the second issue, this Office finds and so holds that respondents have miserably
failed to show or establish the valid cause in terminating the services of complainant.

Xxx xxx xxx

In the case at bar, respondents failed to adduce any evidence showing that the position
of Head Executive Assistant is superfluous. In fact, they never disputed the argument
advanced by complainant that the position of Head Executive Assistant was classified
as a regular position in the Position Classification Study which is an essential
component of the Organizational Study that had been approved by the CDC board of
directors in 1995 and still remains intact as of the end of 1998. Likewise, studies made
since 1994 by various management consultancy groups have determined the need for
the said position in the Office of the President/CEO in relation to the vision, mission,
plans, programs and overall corporate goals and objectives of respondent CDC. There
is no evidence on record to show that the position of Head Executive Assistant was
abolished by the Board of Directors in its meeting held in the morning of September 22,
1998. The minutes of the meeting of the board on said date, as well as its other three
meetings held in the month of September 1998 (Annexes B, C, D and E, Complainants
Reply), clearly reveal that no abolition or reorganization plan was discussed by the
board. Hence, the ground of redundancy is merely a device made by respondent
Colayco in order to ease out the complainant from the respondent corporation.

Moreover, the other ground for complainants dismissal is unclear and unknown to him
as respondent did not specify nor inform the complainant of the alleged recent
developmentsxxx

This Office is also of the view that complainant was not accorded his right to due
process prior to his termination. The law requires that the employer must furnish the
worker sought to be dismissed with two (2) written notices before termination may be
validly effected: first, a notice apprising the employee of the particular acts or omissions
for which his dismissal is sought and, second, a subsequent notice informing the
employee of the decision to dismiss him. In the case at bar, complainant was not
apprised of the grounds of his termination. He was not given the opportunity to be heard
and defend himselfxxx[40]

The OGCC, representing respondent CDC and former CEO Colayco separately
appealed from the above Decision. Both alleged that they had filed the proper bond to
cover the award granted by LA Darlucio.

It is clear from the NLRC Rules of Procedure that appeals must be verified and certified
against forum-shopping by the parties-in-interest themselves. In the case at bar, the
parties-in-interest are petitioner Salenga, as the employee, and respondent Clark
Development Corporation as the employer.

A corporation can only exercise its powers and transact its business through its board of
directors and through its officers and agents when authorized by a board resolution or
its bylaws. The power of a corporation to sue and be sued is exercised by the board of
directors. The physical acts of the corporation, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate bylaws
or by a specific act of the board. The purpose of verification is to secure an assurance
that the allegations in the pleading are true and correct and have been filed in good
faith.[41]

Page 49 of 55
Thus, we agree with petitioner that, absent the requisite board resolution, neither
Timbol-Roman nor Atty. Mallari, who signed the Memorandum of Appeal and Joint
Affidavit of Declaration allegedly on behalf of respondent corporation, may be
considered as the appellant and employer referred to by Rule VI, Sections 4 to 6 of the
NLRC Rules of Procedure, which state:

SECTION 4. REQUISITES FOR PERFECTION OF APPEAL. - (a) The Appeal shall be

filed within the reglementary period as provided in Section 1 of this Rule; shall be
verified by appellant himself in accordance with Section 4, Rule 7 of the Rules of Court,
with proof of payment of the required appeal fee and the posting of a cash or surety
bond as provided in Section 6 of this Rule; shall be accompanied by memorandum of
appeal in three (3) legibly typewritten copies which shall state the grounds relied upon
and the arguments in support thereof; the relief prayed for; and a statement of the date
when the appellant received the appealed decision, resolution or order and a certificate
of non-forum shopping with proof of service on the other party of such appeal. A mere
notice of appeal without complying with the other requisites aforestated shall not stop
the running of the period for perfecting an appeal.

(b) The appellee may file with the Regional Arbitration Branch or Regional Office where
the appeal was filed, his answer or reply to appellant's memorandum of appeal, not later
than ten (10) calendar days from receipt thereof. Failure on the part of the appellee who
was properly furnished with a copy of the appeal to file his answer or reply within the
said period may be construed as a waiver on his part to file the same.
(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance
with these Rules, the Commission shall limit itself to reviewing and deciding specific
issues that were elevated on appeal.
SECTION 5. APPEAL FEE. -The appellant shall pay an appeal fee of one
hundred fifty pesos (P150.00) to the Regional Arbitration Branch or Regional Office, and
the official receipt of such payment shall be attached to the records of the case.
SECTION 6. BOND. - In case the decision of the Labor Arbiter or the Regional Director
involves a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond. The appeal bond shall either be in cash or surety in an
amount equivalent to the monetary award, exclusive of damages and attorneys fees.
In case of surety bond, the same shall be issued by a reputable bonding company duly
accredited by the Commission or the Supreme Court, and shall be accompanied by:
(a) a joint declaration under oath by the employer, his counsel, and the bonding
company, attesting that the bond posted is genuine, and shall be in effect until final
disposition of the case.
(b) a copy of the indemnity agreement between the employer-appellant and bonding
company; and
(c) a copy of security deposit or collateral securing the bond.
A certified true copy of the bond shall be furnished by the appellant to the appellee who
shall verify the regularity and genuineness thereof and immediately report to the
Commission any irregularity.
Upon verification by the Commission that the bond is irregular or not genuine, the
Commission shall cause the immediate dismissal of the appeal.
No motion to reduce bond shall be entertained except on meritorious grounds and upon
the posting of a bond in a reasonable amount in relation to the monetary award.
The filing of the motion to reduce bond without compliance with the requisites in the
preceding paragraph shall not stop the running of the period to perfect an appeal.
(Emphasis supplied)

The OGCC failed to produce any valid authorization from the board of directors despite
petitioner Salengas repeated demands. It had been given more than enough
opportunity and time to produce the appropriate board resolution, and yet it failed to do

Page 50 of 55
so. In fact, many of its pleadings, representations, and submissions lacked board
authorization.

We cannot agree with the OGCCs attempt to downplay this procedural flaw by claiming
that, as the statutorily assigned counsel for GOCCs, it does not need such
authorization. In Constantino-David v. Pangandaman-Gania,[42] we exhaustively
explained why it was necessary for government agencies or instrumentalities to execute
the verification and the certification against forum-shopping through their duly
authorized representatives. We ruled thereon as follows:

But the rule is different where the OSG is acting as counsel of record for a government
agency. For in such a case it becomes necessary to determine whether the petitioning
government body has authorized the filing of the petition and is espousing the same
stand propounded by the OSG. Verily, it is not improbable for government agencies to
adopt a stand different from the position of the OSG since they weigh not just legal
considerations but policy repercussions as well. They have their respective mandates
for which they are to be held accountable, and the prerogative to determine whether
further resort to a higher court is desirable and indispensable under the circumstances.

The verification of a pleading, if signed by the proper officials of the client agency itself,
would fittingly serve the purpose of attesting that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of speculation, and that
the pleading is filed in good faith. Of course, the OSG may opt to file its own petition as
a People's Tribune but the representation would not be for a client office but for its own
perceived best interest of the State.

The case of Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., is not
also a precedent that may be invoked at all times to allow the OSG to sign the certificate
of non-forum shopping in place of the real party-in-interest. The ruling therein mentions
merely that the certification of non-forum shopping executed by the OSG constitutes
substantial compliance with the rule since the OSG is the only lawyer for the petitioner,
which is a government agency mandated under Section 35, Chapter 12, Title III, Book
IV, of the 1987 Administrative Code (Reiterated under Memorandum Circular No. 152
dated May 17, 1992) to be represented only by the Solicitor General.

By its very nature, substantial compliance is actually inadequate observance of the

requirements of a rule or regulation which are waived under equitable circumstances to
facilitate the administration of justice there being no damage or injury caused by such
flawed compliance. This concept is expressed in the statement the rigidity of a previous
doctrine was thus subjected to an inroad under the concept of substantial compliance.
In every inquiry on whether to accept substantial compliance, the focus is always on the
presence of equitable conditions to administer justice effectively and efficiently without
damage or injury to the spirit of the legal obligation.

xxx xxx xxx

The fact that the OSG under the 1987 Administrative Code is the only lawyer for a
government agency wanting to file a petition, or complaint for that matter, does not
operate per se to vest the OSG with the authority to execute in its name the certificate
of non-forum shopping for a client office. For, in many instances, client agencies of the
OSG have legal departments which at times inadvertently take legal matters requiring
court representation into their own hands without the intervention of the OSG.
Consequently, the OSG would have no personal knowledge of the history of a particular
case so as to adequately execute the certificate of non-forum shopping; and even if the
OSG does have the relevant information, the courts on the other hand would have no
way of ascertaining the accuracy of the OSG's assertion without precise references in
the record of the case. Thus, unless equitable circumstances which are manifest from

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the record of a case prevail, it becomes necessary for the concerned government
agency or its authorized representatives to certify for non-forum shopping if only to be
sure that no other similar case or incident is pending before any other court.

We recognize the occasions when the OSG has difficulty in securing the attention and
signatures of officials in charge of government offices for the verification and certificate
of non-forum shopping of an initiatory pleading. This predicament is especially true
where the period for filing such pleading is non-extendible or can no longer be further
extended for reasons of public interest such as in applications for the writ of habeas
corpus, in election cases or where sensitive issues are involved. This quandary is more
pronounced where public officials have stations outside Metro Manila.

But this difficult fact of life within the OSG, equitable as it may seem, does not excuse it
from wantonly executing by itself the verification and certificate of non-forum shopping.
If the OSG is compelled by circumstances to verify and certify the pleading in behalf of a
client agency, the OSG should at least endeavor to inform the courts of its reasons for
doing so, beyond instinctively citing City Warden of the Manila City Jail v. Estrella and
Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc.

Henceforth, to be able to verify and certify an initiatory pleading for non-forum shopping
when acting as counsel of record for a client agency, the OSG must (a) allege under
oath the circumstances that make signatures of the concerned officials impossible to
obtain within the period for filing the initiatory pleading; (b) append to the petition or
complaint such authentic document to prove that the party-petitioner or complainant
authorized the filing of the petition or complaint and understood and adopted the
allegations set forth therein, and an affirmation that no action or claim involving the
same issues has been filed or commenced in any court, tribunal or quasi-judicial
agency; and, (c) undertake to inform the court promptly and reasonably of any change
in the stance of the client agency.

Anent the document that may be annexed to a petition or complaint under letter (b)
hereof, the letter-endorsement of the client agency to the OSG, or other
correspondence to prove that the subject-matter of the initiatory pleading had been
previously discussed between the OSG and its client, is satisfactory evidence of the
facts under letter (b) above. In this exceptional situation where the OSG signs the
verification and certificate of non-forum shopping, the court reserves the authority to
determine the sufficiency of the OSG's action as measured by the equitable
considerations discussed herein. (Emphasis ours, italics provided)

The ruling cited above may have pertained only to the Office of the Solicitor Generals
representation of government agencies and instrumentalities, but we see no reason why
this doctrine cannot be applied to the case at bar insofar as the OGCC is concerned.

While in previous decisions we have excused transgressions of these rules, it has

always been in the context of upholding justice and fairness under exceptional
circumstances. In this case, though, respondent failed to provide any iota of rhyme or
reason to compel us to relax these requirements. Instead, what is clear to us is that the
so-called appeal was done against the instructions of then President/CEO Naguiat not
to file an appeal. Timbol-Roman, who signed the Verification and the Certification
against forum-shopping, was not even an authorized representative of the corporation.
The OGCC was equally remiss in its duty. It ought to have advised respondent
corporation, the proper procedure for pursuing an appeal. Instead, it maintained the
appeal and failed to present any valid authorization from respondent corporation even
after petitioner had questioned OGCCs authority all throughout the proceedings. Thus, it
is evident that the appeal was made in bad faith.

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The unauthorized and overzealous acts of officials of respondent CDC and the OGCC
have led to a waste of the governments time and resources. More alarmingly, they have
contributed to the injustice done to petitioner Salenga. By taking matters into their own
hands, these officials let the case drag on for years, depriving him of the enjoyment of
property rightfully his. What should have been a simple case of illegal dismissal became
an endless stream of motions and pleadings.

Time and again, we have said that the perfection of an appeal within the period
prescribed by law is jurisdictional, and the lapse of the appeal period deprives the courts
of jurisdiction to alter the final judgment.[43] Thus, there is no other recourse but to
respect the findings and ruling of the labor arbiter. Clearly, therefore, the CA committed
grave abuse of discretion in entertaining the Petition filed before it after the NLRC had
dismissed the case based on lack of jurisdiction. The assailed CA Decision did not even
resolve petitioner Salengas consistent and persistent claim that the NLRC should not
have taken cognizance of the appeal in the first place, absent a board resolution. Thus,
LA Darlucios Decision with respect to the liability of the corporation still stands.

However, we note from that Decision that Rufo Colayco was made solidarily liable with
respondent corporation. Colayco thereafter filed his separate appeal. As to him, the
NLRC correctly held in its 30 July 2001 Decision that he may not be held solidarily
responsible to petitioner. As a result, it dropped him as respondent. Notably, in the case
at bar, petitioner does not question that ruling.

Based on the foregoing, all other subsequent proceedings regarding the issue of
petitioners dismissal are null and void for having been conducted without jurisdiction.
Thus, it is no longer incumbent upon us to rule on the other errors assigned in the
matter of petitioner Salengas dismissal.

CDC is not under the civil service laws on retirement.

While the case was still persistently being pursued by the OGCC, a new issue arose
when petitioner Salenga reached retirement age: whether his retirement benefits should
be computed according to civil service laws.

To recall, the issue of how to compute the retirement benefits of petitioner was raised in
his Omnibus Motion dated 7 May 2004 filed before the NLRC after it had reinstated LA
Darlucios original Decision. The issue was not covered by petitioners Complaint for
illegal dismissal, but was a different issue altogether and should have been properly
addressed in a separate Complaint. We cannot fault petitioner, though, for raising the
issue while the case was still pending with the NLRC. If it were not for the appeal
undertaken by Timbol-Roman and the OGCC through Atty. Mallari, the issue would
have taken its proper course and would have been raised in a more appropriate time
and manner. Thus, we deem it proper to resolve the matter at hand to put it to rest after
a decade of litigation.

Petitioner Salenga contends that respondent CDC is covered by the GSIS Law. Thus,
he says, the computation of his retirement benefits should include all the years of actual
government service, starting from the original appointment forty (40) years ago up to his
retirement.

Respondent CDC owes its existence to Executive Order No. 80 issued by then
President Fidel V. Ramos. It was meant to be the implementing and operating arm of
the Bases Conversion and Development Authority (BCDA) tasked to manage the Clark

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Special Economic Zone (CSEZ). Expressly, respondent was formed in accordance with
Philippine corporation laws and existing rules and regulations promulgated by the SEC
pursuant to Section 16 of Republic Act (R.A.) 7227.[44] CDC, a government-owned or -
controlled corporation without an original charter, was incorporated under the
Corporation Code. Pursuant to Article IX-B, Sec. 2(1), the civil service embraces only
those government-owned or -controlled corporations with original charter. As such,
respondent CDC and its employees are covered by the Labor Code and not by the Civil
Service Law, consistent with our ruling in NASECO v. NLRC,[45] in which we
established this distinction. Thus, in Gamogamo v. PNOC Shipping and Transport
Corp.,[46] we held:

Retirement results from a voluntary agreement between the employer and the employee
whereby the latter after reaching a certain age agrees to sever his employment with the
former.
Since the retirement pay solely comes from Respondent's funds, it is but natural that
Respondent shall disregard petitioner's length of service in another company for the
computation of his retirement benefits.
Petitioner was absorbed by Respondent from LUSTEVECO on 1 August 1979.
Ordinarily, his creditable service shall be reckoned from such date. However, since
Respondent took over the shipping business of LUSTEVECO and agreed to assume
without interruption all the service credits of petitioner with LUSTEVECO, petitioner's
creditable service must start from 9 November 1977 when he started working with
LUSTEVECO until his day of retirement on 1 April 1995. Thus, petitioner's creditable
service is 17.3333 years.
We cannot uphold petitioner's contention that his fourteen years of service with the DOH
should be considered because his last two employers were government-owned and
controlled corporations, and fall under the Civil Service Law. Article IX(B), Section 2
paragraph 1 of the 1987 Constitution states
Sec. 2. (1)The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled corporations
with original charters.
It is not at all disputed that while Respondent and LUSTEVECO are government-owned
and controlled corporations, they have no original charters; hence they are not under
the Civil Service Law. In Philippine National Oil Company-Energy Development
Corporation v. National Labor Relations Commission, we ruled:
xxx Thus under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law are [sic]
the manner of its creation, such that government corporations created by special
charter(s) are subject to its provisions while those incorporated under the General
Corporation Law are not within its coverage. (Emphasis supplied)
Hence, petitioner Salenga is entitled to receive only his retirement benefits based only
on the number of years he was employed with the corporation under the conditions
provided under its retirement plan, as well as other benefits given to him by existing
laws.

WHEREFORE, in view of the foregoing, the Petition in G.R. No. 174941 is partially
GRANTED. The Decision of LA Darlucio is REINSTATED insofar as respondent
corporations liability is concerned. Considering that petitioner did not maintain the action
against Rufo Colayco, the latter is not solidarily liable with respondent Clark
Development Corporation.

The case is REMANDED to the labor arbiter for the computation of petitioners
retirement benefits in accordance with the Social Security Act of 1997 otherwise known
as Republic Act No. 8282, deducting therefrom the sums already paid by respondent
CDC. If any, the remaining amount shall be subject to the legal interest of 6% per
annum from the filing date of petitioners Omnibus Motion on 11 May 2004 up to the time

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this judgment becomes final and executory. Henceforth, the rate of legal interest shall
be 12% until the satisfaction of judgment.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

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