AMELIA J. DELOS SANTOS, G.R. No.

154185

Petitioner,  

  Present:

   

  PANGANIBAN, J., Chairman

  SANDOVAL-GUTIERREZ,

- versus - CORONA,

  CARPIO MORALES, and

  GARCIA, JJ.

   

  Promulgated:

JEBSEN MARITIME, INC.,  

Respondent. November 22, 2005

   

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

DECISION

GARCIA, J.:

 
Petitioner Amelia J. Delos Santos seeks in this petition for review
on certiorari  under Rule 45 of the Rules of Court to nullify and set
aside the decision and resolution dated 21 March 2002 [1] and 03 July
2002 [2], respectively, of the Court of Appeals in CA-G.R. SP No.
62229.

From the petition and its annexes, the respondent's comment thereto,
and the parties' respective memoranda, the Court gathers the
following factual antecedents:

On 10 August 1995, or thereabout, herein respondent Jebsen

Maritime, Inc., for and in behalf of Aboitiz Shipping Co. (Aboitiz
Shipping, for short), hired petitioner's husband, Gil R. Delos Santos
(hereinafter, Delos Santos) as third engineer of MV Wild Iris. The
corresponding contract of employment, as approved by the Philippine
Overseas Employment Administration (POEA), was for a fixed period
of one (1) month and for a specific undertaking of conducting said
vessel to and from Japan. It quoted Delos Santos' basic monthly
salary and other monetary benefits in US currency. Under POEA rules,
all employers and principals are required to adopt the POEA -
standard employment contract (POEA-SEC) without prejudice to their
adoption of terms and conditions over and above the minimum
prescribed by that agency. [3]

On the vessel's return to the Philippines a month after, Delos Santos

remained on board, respondent having opted to retain his services
while the vessel underwent repairs in Cebu. After its repair, MV Wild
Iris,  this time renamed/registered as MV Super RoRo 100, sailed
within domestic waters, having been meanwhile issued by the
Maritime Industry Authority a Certificate of Vessel Registry and a
permit to engage in coastwise trade on the Manila-Cebu-Manila-
Zamboanga-General Santos-Manila route. [4] During this period of
employment, Delos Santos was paid by and received from respondent
his salary in Philippine peso thru a payroll-deposit arrangement with
the Philippine Commercial & Industrial Bank. [5]
 

Some five months into the vessel's inter-island voyages, Delos Santos
experienced episodes of chest pain, numbness and body weakness
which eventually left him temporarily paralyzed. On 17 February 1996,
he was brought to the Manila Doctor's Hospital ' a duly accredited
hospital of respondent - where he underwent a spinal column
operation. Respondent shouldered all operation-related expenses,
inclusive of his post operation confinement.

As narrated in the assailed decision of the Court of Appeals, the

following events next transpired:

1. After his discharge from the Manila Doctor's ,

Delos Santos was made to undergo physical
therapy sessions at the same hospital, which
compelled the Batangas-based Delos Santoses to
rent a room near the hospital at P3,000.00 a
month;
2. Delos Santos underwent a second spinal
operation at the non-accredited Lourdes Hospital at
the cost of P119, 536.00; and
 
3. After Lourdes, Delos Santos was confined in a
clinic in San Juan, Batangas where P20,000.00 in
hospitalization expenses was incurred.

It would appear that the spouses Delos Santos paid all the expenses
attendant the second spinal operation as well as for the subsequent
medical treatment. Petitioner's demand for reimbursement of these
expenses was rejected by respondent for the reason that all the
sickness benefits of Delos Santos under the Social Security System
(SSS) Law had already been paid.

 
Thus, on 25 January 1997, petitioner filed a complaint [6] with the
Arbitration Branch of the National Labor Relations Commission (NLRC)
against respondent and Aboitiz Shipping for recovery of disability
benefits, and sick wage allowance and reimbursement of hospital and
medical expenses. She also sought payment of moral damages and
attorney's fees.

After due proceedings, the labor arbiter rendered, on 08 January

1999, [7] judgment finding for petitioner and ordering respondent and
Aboitiz Shipping to jointly and severally pay the former the following:

 
(1)               P119,536.01, representing
reimbursement of medical, surgical and hospital
expenses;
 
(2)               P9,000, representing reasonable cost
of board and lodging;
 
(3)               P500,000, representing moral
damages;
 
(4)               US$60,000, representing disability
benefits corresponding to Total Permanent
Disability;
 
(5)               US$2,452, representing Sick Wage
allowance;
 
(6)               P62,853.60, representing attorney's
fees; and,
 
(7)               US$6,245.20, also representing
attorney's fees.
 
 

On appeal, the NLRC, in a decision [8] dated 29 August 2000,

modified that of the labor arbiter, as follows:
 

WHEREFORE, the decision appealed from is

MODIFIED to the extent that respondents Jebsen
Maritime, Inc., and Aboitiz Shipping Company are
hereby ordered jointly and severally liable to pay
Gil delos Santos through Amelia delos Santos the
Philippine peso equivalent at the time of actual
payment of US DOLLARS SIXTY THOUSAND
(US$60,000.00) and US DOLLARS TWO THOUSAND
FOUR HUNDRD (sic) FIFTY TWO (US$2,452.00)
representing total disability compensation benefits
and sickness wages, and the amount of ONE
HUNDRED THREE THOUSAND EGHT (sic) HUNDRED
FOUR AND 87/100 PHILIPPINE PESOS
(P103,804.87) representing reimbursement of
surgical, medical and hospital expenses, plus the
equivalent of five percent (5%) of the aggregate
award as and for attorney's fees.
 
All other dispositions are SET ASIDE.
 
SO ORDERED.

Like the labor arbiter, the NLRC predicated its ruling mainly on the
theory that the POEA-approved contract of employment continued to
govern Delos Santos' employment when he contracted his illness. In
specific terms, the NLRC states that the same contract was still
effective when Delos Santos fell ill, thus entitling him to the payment
of disability and like benefits provided in and required under the
POEA-SEC.

Following the denial of its motion for reconsideration per NLRC

Resolution [9] of 31 October 2000, respondent went to the Court of
Appeals on a petition for certiorari, thereat docketed as CA-G.R. No.
62229, imputing on the NLRC grave abuse of discretion. 'In its
petition, respondent scored the NLRC for, among other things,
extending the application of the expired POEA-approved employment
contract beyond the one-month limit stipulated therein.

On 21 March 2002, the Court of Appeals rendered judgment [10],

modifying the NLRC's decision by deleting altogether the award of
disability compensation benefits, sickness wages and attorney's fees,
thus:

WHEREFORE, premises considered, the instant

petition for certiorari is hereby DENIED, finding no
grave abuse of discretion on the part of the NLRC.
The Decision of the National Labor Relations
Commission (NLRC) dated August 29, 2000 and the
Resolution of October 31, 2000 denying petitioner's
Motion for Reconsideration are hereby AFFIRMED
with MODIFICATION, that the disability
compensation benefits of US$60,000.00 and the
sickness wages of US$2,452.00 are hereby deleted,
without prejudice to claiming the same from the
proper government agency. The award of attorney's
fees is likewise deleted.
 
 
 

In time, petitioner moved for reconsideration, but the appellate court

denied the motion per its resolution of 03 July 2002. [11]

Hence, petitioner's present recourse on the grounds that the Court of

Appeals seriously erred: [12]

I
 
IN DELETING THE AWARD OF US$60,000.00
REPRESENTING THE MAXIMUM DISABILITY
 BENEFITS APPLYING THE PROVISIONS OF THE
POEA STANDARD EMPLOYMENT CONTRACT.
 
(A) PRIOR TO HIS ACCIDENT, THE
EMPLOYMENT CONTRACT OF SEAFARER DELOS
SANTOS HAS NOT YET BEEN TERMINATED, IN
RELATION TO SECTION 2, PARAGRAPHS (A) AND
(B) AND SECTION 18 (A), POEA STANDARD
EMPLOYMENT CONTRACT.
 
(B) THE CONTRACT OF EMPLOYMENT AT THE
TIME OF SEAFARER DELOS SANTOS' ACCIDENT
HAS NOT YET EXPIRED BECAUSE IT WAS
MUTUALLY EXTENDED BY THE PARTIES WHEN
DELOS SANTOS WAS NOT SIGNED OFF AND
REPATRIATED PRIOR TO SAID ACCIDENT.
 
II
 
IN CONCLUDING THAT NOTWITHSTANDING THE
CONTINUATION OF DELOS SANTOS' EMPLOYMENT
ON BOARD THE SAME VESSEL AND UNDER THE
SAME CONTRACT, IT IS THE PROVISIONS OF THE
LABOR CODE, AS AMENDED, THAT SHALL GOVERN
HIS EMPLOYMENT RELATIONS.
III
 
IN DELETING THE AWARD OF SICKNESS
ALLOWANCE IN THE AMOUNT OF US$2,452.00.
 
(A) THERE IS NO BASIS IN THE DELETION OF
THE AWARD OF SICKNESS ALOWANCE (sic) SINCE
PAYMENT OF SOCIAL SECURITY SYSTEM SICK
LEAVE BENEFIT IS INDEPENDENT, SEPARATE AND
DISTINCT FROM THE SICKNESS ALLOWANCE
PROVIDED FOR UNDER THE POEA STANDARD
EMPLOYMENT CONTRACT.

The petition is devoid of merit.

 

As a rule, stipulations in an employment contract not contrary to

statutes, public policy, public order or morals have the force of law
between the contracting parties. [13] An employment with a period is
generally valid, unless the term was purposely intended to circumvent
the employee's right to his security of tenure. [14] Absent a covering
specific agreement and unless otherwise provided by law, the terms
and conditions of employment of all employees in the private sector
shall be governed by the Labor Code [15] and such rules and
regulations as may be issued by the Department of Labor and
Employment and such agencies charged with the administration and
enforcement of the Code.

The differing conclusions' arrived at by the NLRC, finding for the

herein petitioner, and the Court of Appeals, siding in part with the
herein respondent, on Delos Santos' entitlement to disability benefits
and sickness allowance are veritably attributable to the question of
applicability, under the premises, of the POEA-SEC. The principal issue
to be resolved here, therefore, boils down to: which, between the
POEA-SEC and the Labor Code, governs the employer-employee
relationship between Delos Santos and respondent after MV Wild
Iris,  as later renamed Super RoRo 100, returned to the country from
its one-month conduction voyage to and from Japan.

The Court of Appeals ruled against the governing applicability of the

POEA-SEC and, on that basis, deleted the NLRC's award of
US$60,000.00 and US$2,452.00 by way of disability benefits and
sickness allowance, respectively. An excerpt of the appellate court's
explanation:

xxx Both parties do not dispute the existence of the

POEA approved contract signed by the parties. The
said contract is the law between the contracting
parties and absent any showing that its provisions
are wholly or in part contrary to law, morals, good
policy, it shall be enforced to the letter by the
 contracting parties (Metropolitan Bank and Trust
Co. vs. Wong, G.R. No. 120859, June 26, 2001).
The contract in question is for a duration of one (1)
month. Being a valid contract between Delos Santos
and the [respondent], the provisions thereof,
specifically with respect to the one (1) month
period of employment has the force of law between
them (D.M. Consunji vs. NLRC, G.R. No. 116572,
December 18, 2000). 'Perforce, the said contract
has already expired and is no longer in effect.
 
The fact that Delos Santos continued to work in the
same vessel which sailed within Philippine waters
does not mean that the POEA standard employment
contract continues to be enforced between the
parties. The employment of Delos Santos is within
the Philippines, and not on a foreign shore. As
correctly pointed out by [respondent], the
provisions of the Labor Code shall govern their
employer-employee relationship. xxx. (Words in
bracket added.)

The Court agrees with the conclusion of the Court of Appeals for two
(2) main reasons. First, we the start with something elementary, i.e.,
POEA was created primarily to undertake a systematic program for
overseas employment of Filipino workers and to protect their rights to
fair and equitable employment practices. [16] And to ensure that
overseas workers, including seafarers on board ocean-going vessels,
are amply protected, the POEA is authorized to formulate employment
standards in accordance with welfare objectives of the overseas
employment program. [17] Given this consideration, the Court is at a
loss to understand why the POEA-SEC should be made to continue to
apply to domestic employment, as here, involving a Filipino seaman
on board an inter-island vessel.

Just as basic as the first reason is the fact that Delos Santos' POEA-
approved employment contract was for a definite term of one (1)
month only, doubtless fixed to coincide with the pre-determined one-
month long Philippines-Japan-Philippines conduction-voyage run. After
the lapse of the said period, his employment under the POEA-
approved contract may be deemed as functus oficio  and Delos Santos'
employment pursuant thereto considered automatically terminated,
there being no mutually-agreed renewal or extension of the expired
contract. [18] This is as it should be. For, as we have held in the
landmark case of Millares v. National Labor Relations
Commission: [19]

From the foregoing cases, it is clear that seafarers

are considered contractual employees. ' Their
employment is governed by the contracts they
sign every time they are rehired and their
employment is terminated when the contract
expires. ' Their employment is contractually fixed
for a certain period of time. They fall under the
exception of Article 280 [of the Labor Code] whose
employment has been fixed for a specific project or
undertaking . . . We need not depart from the
rulings of the Court in the two aforementioned
cases which indeed constitute stare decisis with
respect to the employment status of seafarers.
(Underscoring and words in bracket added)

Petitioner's posture, citing Section 2 (A) [20] in relation to Section

18 [21] of the POEA-SEC about the POEA approved contract still
subsisting since Delos Santos was never signed off from the vessel
and repatriated to Manila, the point of hire, is untenable. With the
view we have of things, Delos Santos is deemed to have been signed
off when he acceded to a new employment arrangement offered by
the respondent. A seaman need not physically disembarked from a
vessel at the expiration of his employment contract to have such
contract considered terminated. And the repatriation aspect of the
contract assumes significance only where the vessel remains in a
foreign port. For, repatriation presupposes a return to one's country of
origin or citizenship. [22] In the case at bar, however, there can be
quibbling that MV Wild Iris returned to the port of Cebu with Delos
Santos on board. Parenthetically, while the parties are agreed that
their underlying contract was executed in the country, the records do
not indicate what city or province of the Philippines is the specific
point of hire. While petitioner says it is Manila, she did not bother to
attach to her petition a copy of the contract of employment in
question.

Petitioner next submits, echoing the NLRC's holding, that the POEA-
approved contract remained in full force and effect even after the
expiry thereof owing to the interplay of the following circumstances:
1) Delos Santos, after such contract expiration, did not conclude
another contract of employment with respondent, but was asked to
remain and work on board the same vessel just the same; and 2) If
the parties intended their employer-employee relationship to be under
the aegis of a new contract, such intention should have been
embodied in a new agreement.

Contract extension or continuation by mutual consent appears to be

petitioner's thesis.

We are not persuaded.

The fact that respondent retained Delos Santos and allowed him to
remain on board the vessel cannot plausibly be interpreted, in
context, as evidencing an intention on its part to continue with the
POEA-SEC. In the practical viewpoint, there could have been no sense
in consenting to renewal since the rationale for the execution of the
POEA-approved contract had already been served and achieved.

At any rate, factors obtain arguing against the notion that respondent
consented to contract extension under the same terms and conditions
prevailing when the original contract expired. Stated a bit differently,
there are compelling reasons to believe that respondent retained the
services of the acceding Delos Santos, as the Court of Appeals aptly
observed, but under domestic terms and conditions. We refer first to
the reduced salary of Delos Santos payable in Philippine
peso [23] which, significantly enough, he received without so much of
a protest. As respondent stated in its Comment,  without any
controverting response from petitioner, Delos Santos, for the period
ending October 31, 1995, was drawing a salary at the rate
of P8,475.00 a month, whereas the compensation package stipulated
under the POEA-approved contract provided for a US$613 basic
monthly salary and a US$184 fixed monthly overtime pay. And
secondly, MV Super RoRo 100  was no longer engaged in foreign
trading as it was no longer intended as an ocean-going ship.
Accordingly, it does not make sense why a seafarer of goodwill or a
manning agency of the same disposition would insist on being
regulated by an overseas employment agency under its standard
employment contract, which governs employment of Filipino seamen
on board ocean-going vessels. [24]

Petitioner's submission about the parties not having entered into

another employment contract after the expiration of the POEA-
approved employment contract, ergo, the extension of the expired
agreement, is flawed by the logic holding it together. For, it
presupposes that an agreement to do or to give does not bind, unless
it is embodied in a written instrument. It is elementary, however, that,
save in very rare instances where certain formal requisites go into its
validity, a contract, to be valid and binding between the parties, need
not be in writing. A contract is perfected when the contracting minds
agree on the object and cause thereof. [25] And, as earlier discussed,
several circumstantial indicia  tended to  prove that a new arrangement
under domestic terms was agreed upon by the principal players to
govern the employment of Delos Santos after the return of MV Wild
Iris to the country to engage in coastwise trading.

Given the foregoing perspective, the disallowance under the decision

subject of review of the petitioner's claim for maximum disability
benefits and sickness allowance is legally correct. As it were, Delos
Santos' right to such benefits is predicated on the continued
enforceability of POEA-SEC when he contracted his illness, which,
needless to stress, was not the case.

Likewise legally correct is the deletion of the award of attorney's fees,

the NLRC having failed to explain petitioner's entitlement thereto. As a
matter of sound policy, an award of attorney's fee remains the
exception rather than the rule. It must be stressed, as aptly observed
by the appellate court, that it is necessary for the trial court, the NLRC
in this case, to make express findings of facts and law that would
bring the case within the exception. In fine, the factual, legal or
equitable justification for the award must be set forth in the text of
the decision. [26] The matter of attorney's fees cannot be touched
once and only in the fallo of the decision, else, the award should be
thrown out for being speculative and conjectural. [27] In the absence
of a stipulation, attorney's fees are ordinarily not recoverable;
otherwise a premium shall be placed on the right to litigate. [28] They
are not awarded every time a party wins a suit.

WHEREFORE, the petition is DENIED and the assailed Decision and

Resolution of the Court of Appeals AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 82819 February 8, 1989

LUZ LUMANTA, ET AL., petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and FOOD
TERMINAL, INC., respondents.

J. S. Torregoza and Associates for petitioners.

The Solicitor General for public respondent.

The Government Corporate Counsel for Food Terminal, Inc.

RESOLUTION

FELICIANO, J.:

The present Petition for certiorari seeks to annul and set aside the
Decision of the National Labor Relations Commission rendered on 18
March 1988 in NLRC-NCR Case No. 00- 0301035-87, entitled "Luz
Lumanta, et al., versus Food Terminal Incorporated." The Decision
affirmed an order of the Labor Arbiter dated 31 August 1987
dismissing petitioners' complaint for lack of Jurisdiction.

On 20 March 1987, petitioner Luz Lumanta, joined by fifty-four (54)

other retrenched employees, filed a complaint for unpaid 'd
retrenchment or separation pay against private respondent Food
Terminal, Inc. ("FTI") with the Department of Labor and Employment.
The complaint was later amended to include charges of underpayment
of wages and non-payment of emergency cost of living allowances
(ECOLA).

Private respondent FTI moved to dismiss the complaint on the ground

of lack of jurisdiction. It argued that being a government-owned and
controlled corporation, its employees are governed by the Civil
Service Law not by the Labor Code, and that claims arising from
employment fall within the jurisdiction of the Civil Service Commission
and not the Department of Labor and Employment.

The petitioners opposed the Motion to Dismiss contending that

although FTI is a corporation owned and controlled by the
government, it has still the marks of a private corporation: it directly
hires its employees without seeking approval from the Civil Service
Commission and its personnel are covered by the Social Security
System and not the Government Service Insurance System.
Petitioners also argued that being a government-owned and controlled
corporation without original charter, private respondent FTl clearly falls
outside the scope of the civil service as marked out in Section 2 (1),
Article IX of the 1987 Constitution.

On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued an

Order, 1 the dispositive part of which read:

On account of the above findings the instant case is

governed by the Civil Service Law. The case at bar lies
outside the jurisdictional competence of this Office.

WHEREFORE, premises considered this case is hereby

directed to be DISMISSED for lack of jurisdiction of this
Office to hear and decide the case.

SO ORDERED.

On 18 March 1988, the public respondent National Labor Relations

Commission affirmed on appeal the order of the Labor Arbiter and
dismissed the petitioners' appeal for lack of merit.

Hence this Petition for Certiorari.

The only question raised in the present Petition is whether or not a

labor law claim against a government-owned and controlled
corporation, such as private respondent FTI, falls within the jurisdiction
of the Department of Labor and Employment.

In refusing to take cognizance of petitioners' complaint against private

respondent, the Labor Arbiter and the National Labor Relations
Commission relied chiefly on this Court's ruling in National Housing
Authority v. Juco,  2 which held that "there should no longer be any
question at this time that employees of government-owned or
controlled corporations are governed by the civil service law and civil
service rules and regulations.

Juco was decided under the 1973 Constitution, Article II-B, Section 1
(1) of which provided:

The civil service embraces every branch, agency,

subdivision, and instrumentality of the Government,
including every government-owned or controlled
corporation.

The 1987 Constitution which took effect on 2 February 1987, has on

this point a notably different provision which reads:
 The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charter. (Article IX-B, Section 2
[1]).

The Court, in National Service Corporation (NASECO) v. National

Labor Relations Commission, G.R. No. 69870, promulgated on 29
November 1988, 3 quoting extensively from the deliberations 4 of the
1986 Constitutional Commission in respect of the intent and meaning
of the new phrase "with original charter," in effect held that
government-owned and controlled corporations with original
charter refer to corporations chartered by special law as distinguished
from corporations organized under our general incorporation statute-
the Corporation Code. In NASECO, the company involved had been
organized under the general incorporation statute and was a
subsidiary of the National Investment Development Corporation
(NIDC) which in turn was a subsidiary of the Philippine National Bank,
a bank chartered by a special statute. Thus, government-owned or
controlled corporations like NASECO are effectively excluded from the
scope of the Civil Service.

It is the 1987 Constitution, and not the case law embodied

in Juco, 5 which applies in the case at bar, under the principle that
jurisdiction is determined as of the time of the filing of the
complaint. 6 At the time the complaint against private respondent FTI
was filed (i.e., 20 March 1987), and at the time the decisions of the
respondent Labor Arbiter and National Labor Relations Commission
were rendered (i.e., 31 August 1987 and 18 March 1988,
respectively), the 1987 Constitution had already come into effect.
latter of Instruction No. 1013, dated 19 April 1980, included Food
Terminal, Inc. in the category of "government-owned or controlled
corporations." 7 Since then, FTI served as the marketing arm of the
National Grains Authority (now known as the National Food Authority).
The pleadings show that FTI was previously a privately owned
enterprise, created and organized under the general incorporation law,
with the corporate name "Greater Manila Food Terminal Market,
Inc." 8 The record does not indicate the precise amount of the capital
stock of FM that is owned by the government; the petitioners' claim,
and this has not been disputed, that FTl is not hundred percent
(100%) government-owned and that it has some private shareholders.

We conclude that because respondent FTI is government-owned and

controlled corporation without original charter, it is the Department of
Labor and Employment, and not the Civil Service Commission, which
has jurisdiction over the dispute arising from employment of the
petitioners with private respondent FTI, and that consequently, the
terms and conditions of such employment are governed by the Labor
Code and not by the Civil Service Rules and Regulations.

Public respondent National Labor Relations Commission acted without

or in excess of its jurisdiction in dismissing petitioners complaint.

ACCORDINGLY, the Petition for certiorari is hereby GRANTED and

the Decision of public respondent Labor Arbiter dated 31 August 1987
and the Decision of public respondent Commission dated 18 March
1988, both in NLRC-NCR Case No. 00-03-01035-87 are hereby SET
ASIDE. The case is hereby REMANDED to the Labor Arbiter for
further appropriate proceedings.
 [G.R. NO. 148415 : July 14, 2008]

RICARDO G. PALOMA, Petitioner, v. PHILIPPINE
AIRLINES, INC. and THE NATIONAL LABOR RELATIONS
COMMISSION, Respondents.

[G.R. NO. 156764]

PHILIPPINE AIRLINES, INC., Petitioner, v. RICARDO G.

PALOMA, Respondent.

DECISION

VELASCO, JR., J.:

The Case

Before us are these two consolidated petitions for review

under Rule 45 separately interposed by Ricardo G. Paloma
and Philippine Airlines, Inc. (PAL) to nullify and set aside the
Amended Decision1 dated May 31, 2001 of the Court of
Appeals (CA) in CA-G.R. SP No. 56429, as effectively
reiterated in its Resolution2 of January 14, 2003.

The Facts

Paloma worked with PAL from September 1957, rising from

the ranks to retire, after 35 years of continuous service, as
senior vice president for finance. In March 1992, or some
nine (9) months before Paloma retired on November 30,
1992, PAL was privatized.

By way of post-employment benefits, PAL paid Paloma the

total amount of PhP 5,163,325.64 which represented his
separation/retirement gratuity and accrued vacation leave
pay. For the benefits thus received, Paloma signed a
document denominated Release and Quitclaim 3 but inscribed
the following reservation therein: "Without prejudice to my
claim for further leave benefits embodied in my aide
memoire transmitted to Mr. Roberto Anonas covered by my
27 Nov. 1992 letter x x x."

The leave benefits Paloma claimed being entitled to refer to

his 450-day accrued sick leave credits which PAL allegedly
only paid the equivalent of 18 days. He anchored his
entitlement on Executive Order No. (EO) 1077 4 dated
January 9, 1986, and his having accumulated a certain
number of days of sick leave credits, as acknowledged in a
letter of Alvia R. Leaño, then an administrative assistant in
PAL. Leaño's letter dated November 12, 1992 pertinently
reads:

At your request, we are pleased to confirm herewith the

balance of your sick leave credits as they appear in our
records: 230 days.

According to our existing policy, an employee is entitled to

accumulate sick leave with pay only up to a maximum of 230
days.

Had there been no ceiling as mandated by Company policy,

your sick leave credits would have totaled 450 days to date. 5

Answering Paloma's written demands for conversion to cash

of his accrued sick leave credits, PAL asserted having paid all
of Paloma's commutable sick leave credits due him pursuant
to company policy made applicable to PAL officers starting
1990.

The company leave policy adverted to grants PAL's regular

ground personnel a graduated sick leave benefits, those
having rendered at least 25 years of service being entitled to
20 days of sick leave for every year of service. An employee,
under the policy, may accumulate sick leaves with pay up to
230 days. Subject to defined qualifications, sick leave credits
in excess of 230 days shall be commutable to cash at the
employee's option and shall be paid in lump sum on or before
May 31st of the following year they were earned. 6 Per PAL's
records, Paloma appears to have, for the period from 1990 to
1992, commuted 58 days of his sick leave credits, broken
down as follows: 20 days each in 1990 and 1991 and 18 days
in 1992.

Subsequently, Paloma filed before the Arbitration Branch of

the National Labor Relations Commission (NLRC) a
Complaint7 for Commutation of Accrued Sick Leaves Totaling
392 days.  In the complaint, docketed as NLRC-NCR-Case No.
00-08-05792-94, Paloma alleged having accrued sick leave
credits of 450 days commutable upon his retirement
pursuant to EO 1077 which allows retiring government
employees to commute, without limit, all his accrued
vacation and sick leave credits. And of the 450-day credit,
Paloma added, he had commuted only 58 days, leaving him a
balance of 392 days of accrued sick leave credits for
commutation.

Ruling of the Labor Arbiter

Issues having been joined with the filing by the parties of

their respective position papers,8 the labor arbiter rendered
on June 30, 1995 a Decision9 dispositively reading:

WHEREFORE, premises considered, respondent PHILIPPINE

AIRLINE[S], INC. is hereby ordered to pay within ten (10)
days from receipt hereof herein complainant Ricardo G.
Paloma, the sum of Six Hundred Seventy Five Thousand
Pesos (P675,000.00) representing his one Hundred sixty two
days [162] accumulated sick leave credits, plus ten (10%)
percent attorney's fees of P67,500.00, or a total sum of
P742,500.00.

SO ORDERED.

The labor arbiter held that PAL is not covered by the civil
service system and, accordingly, its employees, like Paloma,
cannot avail themselves of the beneficent provision of EO
1077. This executive issuance, per the labor arbiter's
decision, applies only to government officers and employees
covered by the civil service, exclusive of the members of the
judiciary whose leave and retirement system is covered by a
special law.

However, the labor arbiter ruled that Paloma is entitled to a

commutation of his alternative claim for 202 accrued sick
leave credits less 40 days for 1990 and 1991. Thus, the grant
of commutation for 162 accrued leave credits.

Both parties appealed10 the decision of the labor arbiter to

the NLRC.

Ruling of the NLRC in NLRC NCR CA No. 009652-95

(NLRC-NCR-Case No. 00-08-05792-94)
On November 26, 1997, the First Division of the NLRC
rendered a Decision affirming that of the labor arbiter, thus:

WHEREFORE, as recommended, both appeals are

DISMISSED. The decision of Labor Arbiter Felipe T. Garduque
II dated June 30, 1995 is AFFIRMED.

SO ORDERED.11

Both parties moved for reconsideration. In its Resolution of

November 10, 1999, the NLRC, finding Paloma to have, upon
his retirement, commutable accumulated sick leave credits of
230 days, modified its earlier decision, disposing as follows:

In view of all the foregoing, our decision dated November 26,

1997, be modified by increasing the sick leave benefits of
complainant to be commuted to cash from 162 days to 230
days.

SO ORDERED.12

From the above modificatory resolution of the NLRC, PAL

went to the CA on a petition for certiorari under Rule 65, the
recourse docketed as CA-G.R. SP No. 56429.

Ruling of the CA in its April 28, 2000 Decision

By a Decision dated April 28, 2000, the CA found for PAL,

thus:

WHEREFORE, the petition is granted. Public respondent's

November 10, 1999 Resolution is set aside. And the
complaint of Ricardo Paloma is hereby DISMISSED. Without
costs.

SO ORDERED.13

In time, Paloma sought reconsideration. 14

The May 31, 2001 Amended Decision

On May 31, 2001, the CA issued the assailed Amended

Decision reversing its April 28, 2000 Decision. The fallo of the
Amended Decision reads:
WHEREFORE, premises considered, our Judgment, dated 28
April 2000 is hereby vacated and, set aside, and another one
entered reinstating the Resolution, dated 10 November 1999,
issued by the public respondent National Labor Relations
Commission in NLRC NCR Case No. 00-08-05792-94 [NLRC
NCR CA No. 009652-95], entitled Ricardo G. Paloma v.
Philippine Airlines, Incorporated, with the only modification
that the total sums granted by Labor Arbiter Felipe T.
Garduque II (P742,500.00, inclusive of the ten percent
(10%) attorney's fees), as affirmed by public respondent
National Labor Relations Commission, First Division, in said
NLRC Case No. 00-08-05792-94, shall earn legal interest
from the date of the institution of the complaint until fully
paid/discharged. (Art. 2212, New Civil Code).

SO ORDERED.15

Justifying its amendatory action, the CA stated that EO 1077

applies to PAL and necessarily to Paloma on the following
rationale: Section 2(1) of Article IX(B) of the 1987
Constitution applies prospectively and, thus, the expressed
limitation therein on the applicability of the civil service law
only to government-owned and controlled corporations
(GOCCs) with original charters does not preclude the
applicability of EO 1077 to PAL and its then employees. This
conclusion, the CA added, becomes all the more pressing
considering that PAL, at the time of the issuance of EO 1077,
was still a GOCC and that Paloma had already 29 years of
service at that time. The appellate court also stated that
since PAL had then no existing retirement program, the
provisions of EO 1077 shall serve as a retirement program
for Paloma who had meanwhile acquired vested rights under
the EO pursuant to Arts. 10016 and 28717 of the Labor Code.

Significantly, despite affirmatively positing the applicability of

EO 1077, the Amended Decision still deferred to PAL's
existing policy on the 230-day limit for accrued sick leave
with pay that may be credited to its employees.
Incongruously, while the CA reinstated the November 10,
1999 Resolution of the NLRC, it decreed the implementation
of the labor arbiter's Decision dated June 30, 1995. As may
be recalled, the NLRC, in its November 10, 1999 Resolution,
allowed a 230-day sick leave commutation, up from the 162
days granted under the June 30, 1995 Decision of the labor
arbiter.

Paloma immediately appealed the CA's Amended Decision via

a Petition for Review on Certiorari under Rule 45, docketed
as G.R. No. 148415.On the other hand, PAL first sought
reconsideration of the Amended Decision, coming to us after
the CA, per its January 14, 2003 Resolution, denied the
desired reconsideration. In net effect then, PAL's Petition for
Review on Certiorari, docketed as G.R. No. 156764, assails
both the Amended Decision and Resolution of the CA.

The Issues

In G.R. No. 148415, Paloma raises the sole issue of:

WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO.

1077 IS APPLICABLE TO PETITIONER AND YET APPLYING
COMPANY POLICY BY AWARDING THE CASH EQUIVALENT OF
ONLY 162 DAYS SICK LEAVE CREDITS INSTEAD OF THE 450
DAYS SICK LEAVE CREDITS PETITIONER IS ENTITLED TO
UNDER E.O. NO. 1077, DECIDED A QUESTION OF
SUBSTANCE IN A MANNER CONTRARY TO LAW AND
APPLICABLE JURISPRUDENCE.18

In G.R. No. 156764, PAL raises the following issues for our
consideration:

1. May an employee of a non-government corporation

[invoke EO] 1077 which the then President Ferdinand E.
Marcos issued on January 9, 1986, solely for the benefit of
government officers and employees covered by the civil
service?cralawred

2. Can a judicial body modify or alter a company policy by

ordering the commutation of sick leave credits which, under
company policy is non-commutable?19

The issues submitted boil down to the question of whether or

not EO 1077, before PAL's privatization, applies to its
employees, and corollarily, whether or not Paloma is entitled
to a commutation of his accrued sick leave credits.
Subsumed to the main issue because EO 1077 applies only to
government employees subject to civil service law is the
question of whether or not PAL which, as early as 1960 until
its privatization, had been considered as a government-
controlled corporation is covered by and subject to the
limitations peculiar under the civil service system.

There can be no quibbling, as a preliminary consideration,

about PAL having been incorporated as a private corporation
whose controlling stocks were later acquired by the GSIS,
which is wholly owned by the government. Through the years
before GSIS divested itself of its controlling interests over the
airline, PAL was considered a government-controlled
corporation, as we said as much in Phil. Air Lines Employees'
Assn. v. Phil. Air Lines, Inc.,20 a case commenced in August
1958 and finally resolved by the Court in 1964. The late Blas
Ople, former Labor Secretary and a member of the 1986
Constitutional Commission, described PAL and other like
entities spun off from the GSIS as "second generation
corporations functioning as private subsidiaries." 21 Before the
coming into force of the 1973 Constitution, a subsidiary of a
wholly government-owned corporation or a government
corporation with original charter was covered by the Labor
Code. Following the ratification of the 1973 Constitution,
these subsidiaries theoretically came within the pale of the
civil service on the strength of this provision: "[T]he civil
service embraces every branch, agency, subdivision and
instrumentality of the Government, including every [GOCC] x
x x."22 Then came the 1987 Constitution which contextually
delimited the coverage of the civil service only to a GOCC
"with original charter."23

The Court's Ruling

Considering the applicable law and jurisprudence in the light

of the undisputed factual milieu of the instant case, the
setting aside of the assailed amended decision and resolution
of the CA is indicated.

Core Issue: Applicability of EO 1077

Insofar as relevant, EO 1077 dated January 9, 1986, entitled

Revising the Computation of Creditable Vacation and Sick
Leaves of Government Officers and Employees, provides:
WHEREAS, under existing law and civil service regulations,
the number of days of vacation and sick leaves creditable to
a government officer or employee is limited to 300 days;

WHEREAS, by special law, members of the judiciary are not

subject to such restriction;

WHEREAS, it is the continuing policy of the government to

institute to the extent possible a uniform and equitable
system of compensation and benefits and to enhance the
morale and performance in the civil service.

xxx

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of

the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby order and direct the following:

Section 1. Any officer [or] employee of the government who

retires or voluntary resigns or is separated from the service
through no fault of his own and whose leave benefits are not
covered by special law, shall be entitled to the commutation
of all the accumulated vacation and/or sick leaves to his
credit, exclusive of Saturdays, Sundays, and holidays,
without limitation as to the number of days of vacation and
sick leaves that he may accumulate. (Emphasis supplied.)

Paloma maintains that he comes within the coverage of EO

1077, the same having been issued in 1986, before he
severed official relations with PAL, and at a time when the
applicable constitutional provision on the coverage of the civil
service made no distinction between GOCCs with original
charters and those without, like PAL which was incorporated
under the Corporation Code. Implicit in Paloma's contention
is the submission that he earned the bulk of his sick leave
credits under the aegis of the 1973 Constitution when PAL,
being then a government-controlled corporation, was under
civil service coverage.

The contention is without merit.

PAL never ceased to be operated as a private

corporation, and was not subjected to the Civil Service
Law
The Court can allow that PAL, during the period material, was
a government-controlled corporation in the sense that the
GSIS owned a controlling interest over its stocks. One
stubborn fact, however, remains: Through the years, PAL
functioned as a private corporation and managed as such for
profit. Their personnel were never considered government
employees. It may perhaps not be amiss for the Court to
take judicial notice of the fact that the civil service law and
rules and regulations have not actually been made to apply
to PAL and its employees. Of governing application to them
was the Labor Code. Consider: (a) Even during the effectivity
of the 1973 Constitution but prior to the promulgation on
January 17, 1985 of the decision in No. L-64313 entitled
National Housing Corporation v. Juco,24 the Court no less
recognized the applicability of the Labor Code to, and the
authority of the NLRC to exercise jurisdiction over, disputes
involving discipline, personnel movements, and dismissal in
GOCCs, among them PAL;25 (b) Company policy and
collective bargaining agreements (CBAs), instead of the civil
service law and rules, govern the terms and conditions of
employment in PAL. In fact, Ople rhetorically asked how PAL
can be covered by the civil service law when, at one time,
there were three (3) CBAs in PAL, one for the ground crew,
one for the flight attendants, and one for the pilots; 26 and (c)
When public sector unionism was just an abstract concept,
labor unions in PAL with the right to engage in strike and
other concerted activities were already active.27

Not to be overlooked of course is the 1964 case of Phil. Air

Lines Employees' Assn., wherein the Court stated that "the
Civil Service Law has not been actually applied to PAL." 28

Given the foregoing considerations, Paloma cannot plausibly

be accorded the benefits of EO 1077 which, to stress, was
issued to narrow the gap between the leave privileges
between the members of the judiciary, on one hand, and
other government officers and employees in the civil service,
on the other. That PAL and Paloma may have, at a time,
come within the embrace of the civil service by virtue of the
1973 Constitution is of little moment at this juncture. As held
in National Service Corporation v. National Labor Relations
Commission (NASECO),29 the issue of whether or not a given
GOCC falls within the ambit of the civil service subject, vis -
à-vis disputes respecting terms and conditions of
employment, to the jurisdiction of the Civil Service
Commission or the NLRC, as the case may be, resolves itself
into the question of which between the 1973 Constitution,
which does not distinguish between a GOCC with or without
an original charter, and the 1987 Constitution, which does, is
in place. To borrow from the 1988 NASECO ruling, it is the
1987 Constitution, which delimits the coverage of the civil
service, that should govern this case because it is the
Constitution in place at the time the case was decided, even
if, incidentally, the cause of action accrued during the
effectivity of the 1973 Constitution. This has been the
consistent holding of the Court in subsequent cases involving
GOCCs without original charters.30

It cannot be overemphasized that when Paloma filed his

complaint for commutation of sick leave credits, private
interests already controlled, if not owned, PAL. Be this as it
may, Paloma, when he filed said complaint, cannot even
assert being covered by the civil service and, hence, entitled
to the benefits attached to civil service employment, such as
the right under EO 1077 to accumulate and commute leave
credits without limit. In all, then, Paloma, while with PAL,
was never a government employee covered by the civil
service law. As such, he did not acquire any vested rights on
the retirement benefits accorded by EO 1077.

Paloma not entitled to the benefits granted in EO 1077;

existing company policy on the matter applies

What governs Paloma's entitlement to sick leave benefits and

the computation and commutation of creditable benefits is
not EO 1077, as the labor arbiter and originally the NLRC
correctly held, but PAL's company policy on the matter
which, as found below, took effect in 1990. The text of the
policy is reproduced in the CA's April 28, 2000 Decision and
sets out the following pertinent rules:

POLICY

Regular employees shall be entitled to a yearly period of sick

leave with pay, the exact number of days to be determined
on the basis of the employee's category and length of service
in the company.
 RULES

A. For ground personnel

2. Sick leave shall be granted only upon certification by a

company physician that an employee is incapable of
discharging his duties due to illness or injury x x x.

xxx

3. Sick leave entitlement accrues from the date of an

employee's regular employment x x x.

In case of direct conversion from

temporary/daily/project/contract to regular status, regular
employment shall be deemed to have begun on the date of
the employee's conversion as a regular employee.

xxx

4. An employee may accumulate sick leave with pay up

to Two Hundred Thirty (230) days;

An employee who has accumulated seventy-five (75) days

sick leave credit at the end of each year may, at his option,
commute seventy-five percent (75%) of his current sick
leave entitlement to cash and the other twenty-five percent
(25%) to be added to his accrued sick leave credits up to two
hundred thirty (230) calendar days.

The seventy-five percent (75%) commutable to cash as

above provided, shall be paid up in lump sum on or before
May 31st of the following year.

Sick leave credits in excess of two hundred thirty

(230) days shall be commutable to cash at the
employee's option, and shall be paid in lump sum on or
before May 31st of the following year it was
earned.31 (Emphasis ours.)

As may be gathered from the records, accrued sick leave

credits in excess of 230 days were not, if earned before 1990
when the above policy took effect, commutable to cash; they
were simply forfeited. Those earned after 1990, but still
subject to the 230-day threshold rule, were commutable to
cash to the extent of 75% of the employee's current
entitlement, and payable on or before May 31st of the
following year, necessarily implying that the privilege to
commute is time-bound.

It appears that Paloma had, as of 1990, more than 230 days

of accrued sick leave credits. Following company policy,
Paloma was deemed to have forfeited the monetary value of
his leave credits in excess of the 230-day ceiling. Now, then,
it is undisputed that he earned additional accrued sick leave
credits of 20 days in 1990 and 1991 and 18 days in 1992,
which he duly commuted pursuant to company policy and
received with the corresponding cash value. Therefore, PAL is
correct in contending that Paloma had received whatever was
due on the commutation of his accrued sick leave credits in
excess of the 230 days limit, specifically the 58 days
commutation for 1990, 1991, and 1992.

No commutation of 230 days accrued sick leave credits

The query that comes next is how the 230 days accrued sick
leave credits Paloma undoubtedly had when he retired are to
be treated. Is this otherwise earned credits commutable to
cash? These should be answered in the negative.

The labor arbiter granted 162 days commutation, while the

NLRC allowed the commutation of the maximum 230 days.
The CA, while seemingly affirming the NLRC's grant of 230
days commutation, actually decreed a 162-day commutation.
We cannot sustain any of the dispositions thus reached for
lack of legal basis, for PAL's company policy upon which
either disposition was predicated did not provide for a
commutation of the first 230 days accrued sick leave credits
employees may have upon their retirement. Hence, the NLRC
and the CA, by their act of allowing commutation to cash,
erred as they virtually read in the policy something not
written or intended therein. Indeed, no law provides for
commutation of unused or accrued sick leave credits in the
private sector. Commutation is allowed by way of voluntary
endowment by an employer through a company policy or by
a CBA. None of such medium presently obtains and it would
be incongruous if the Court fills up the vacuum.
Confronted with a similar situation as depicted above, the
Court, in Baltazar v. San Miguel Brewery, Inc., declared as
follows:

In connection with the question of whether or not appellee is

entitled to the cash value of six months accumulated sick
leave, it appears that while under the last paragraph of
Article 5 of appellant's Rules and Regulations of the Health,
Welfare and Retirement Plan (Exhibit 3), unused sick leave
may be accumulated up to a maximum of six months, the
same is not commutable or payable in cash upon the
employee's option.

In our view, the only meaning and import of said rule and
regulation is that if an employee does not choose to enjoy his
yearly sick leave of thirty days, he may accumulate such sick
leave up to a maximum of six months and enjoy this six
months sick leave at the end of the sixth year but may not
commute it to cash.32 chanrobles virtual law library

In fine, absent any provision in the applicable company policy

authorizing the commutation of the 230 days accrued sick
leave credits existing upon retirement, Paloma may not, as a
matter of enforceable right, insist on the commutation of his
sick leave credits to cash.

As PAL's senior vice-president for finance upon his

retirement, Paloma knew or at least ought to have known the
company policy on accrued sick leave credits and how it was
being implemented. Had he acted on that knowledge in
utmost good faith, these proceedings would have not come
to pass.

WHEREFORE, the petition under G.R. No. 148415 is hereby

DISMISSED for lack of merit, while the petition under G.R.
No. 156764 is hereby GIVEN DUE COURSE. The Amended
Decision dated May 31, 2001 of the CA in CA-G.R. SP No.
56429 and its Resolution of January 14, 2003 are hereby
ANNULLED and SET ASIDE, and the CA Decision dated April
28, 2000 is accordingly REINSTATED.

Costs against Ricardo G. Paloma.

SO ORDERED.
G.R. No. 85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION

COMMISSION, petitioner
vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE
BUREAU OF LABOR RELATIONS AND TRADE UNIONS OF THE
PHILIPPINES AND ALLIED SERVICES (TUPAS)
WFTU respondents.

G.R. No. 89331 September 28, 1990

KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED

LABOR ASSOCIATION IN LINE INDUSTRIES AND
AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND
INTERNATIONAL RICE RESEARCH INSTITUTE, INC., respondents.

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.

Dominguez, Armamento, Cabana & Associates for petitioner in G.R.

No. 89331.

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the

validity of the claim of immunity by the International Catholic Migration
Commission (ICMC) and the International Rice Research Institute, Inc.
(IRRI) from the application of Philippine labor laws.

Facts and Issues

A. G.R. No. 85750 — the International Catholic Migration

Commission (ICMC) Case.

As an aftermath of the Vietnam War, the plight of Vietnamese

refugees fleeing from South Vietnam's communist rule confronted the
international community.
In response to this crisis, on 23 February 1981, an Agreement was
forged between the Philippine Government and the United Nations
High Commissioner for Refugees whereby an operating center for
processing Indo-Chinese refugees for eventual resettlement to other
countries was to be established in Bataan (Annex "A", Rollo, pp. 22-
32).

ICMC was one of those accredited by the Philippine Government to

operate the refugee processing center in Morong, Bataan. It was
incorporated in New York, USA, at the request of the Holy See, as a
non-profit agency involved in international humanitarian and voluntary
work. It is duly registered with the United Nations Economic and
Social Council (ECOSOC) and enjoys Consultative Status, Category
II. As an international organization rendering voluntary and
humanitarian services in the Philippines, its activities are parallel to
those of the International Committee for Migration (ICM) and the
International Committee of the Red Cross (ICRC) [DOLE Records of
BLR Case No. A-2-62-87, ICMC v. Calleja, Vol. 1].

On 14 July 1986, Trade Unions of the Philippines and Allied Services

(TUPAS) filed with the then Ministry of Labor and Employment a
Petition for Certification Election among the rank and file members
employed by ICMC The latter opposed the petition on the ground that
it is an international organization registered with the United Nations
and, hence, enjoys diplomatic immunity.

On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC

and dismissed the petition for lack of jurisdiction.

On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor

Relations (BLR), reversed the Med-Arbiter's Decision and ordered the
immediate conduct of a certification election. At that time, ICMC's
request for recognition as a specialized agency was still pending with
the Department of Foreign Affairs (DEFORAF).

Subsequently, however, on 15 July 1988, the Philippine Government,

through the DEFORAF, granted ICMC the status of a specialized
agency with corresponding diplomatic privileges and immunities, as
evidenced by a Memorandum of Agreement between the Government
and ICMC (Annex "E", Petition, Rollo, pp. 41-43), infra.

ICMC then sought the immediate dismissal of the TUPAS Petition for
Certification Election invoking the immunity expressly granted but the
same was denied by respondent BLR Director who, again, ordered the
immediate conduct of a pre-election conference. ICMC's two Motions
for Reconsideration were denied despite an opinion rendered by
DEFORAF on 17 October 1988 that said BLR Order violated ICMC's
diplomatic immunity.

Thus, on 24 November 1988, ICMC filed the present Petition for

Certiorari with Preliminary Injunction assailing the BLR Order.

On 28 November 1988, the Court issued a Temporary Restraining

Order enjoining the holding of the certification election.

On 10 January 1989, the DEFORAF, through its Legal Adviser, retired

Justice Jorge C. Coquia of the Court of Appeals, filed a Motion for
Intervention alleging that, as the highest executive department with
the competence and authority to act on matters involving diplomatic
immunity and privileges, and tasked with the conduct of Philippine
diplomatic and consular relations with foreign governments and UN
organizations, it has a legal interest in the outcome of this case.

Over the opposition of the Solicitor General, the Court allowed

DEFORAF intervention.

On 12 July 1989, the Second Division gave due course to the ICMC
Petition and required the submittal of memoranda by the parties,
which has been complied with.

As initially stated, the issue is whether or not the grant of diplomatic

privileges and immunites to ICMC extends to immunity from the
application of Philippine labor laws.

ICMC sustains the affirmative of the proposition citing (1) its

Memorandum of Agreement with the Philippine Government giving it
the status of a specialized agency, (infra); (2) the Convention on the
Privileges and Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by the
Philippine Senate through Resolution No. 91 on 17 May 1949 (the
Philippine Instrument of Ratification was signed by the President on
30 August 1949 and deposited with the UN on 20 March 1950) infra;
and (3) Article II, Section 2 of the 1987 Constitution, which declares
that the Philippines adopts the generally accepted principles of
international law as part of the law of the land.

Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity

and seeks an affirmance of the DEFORAF determination that the BLR
Order for a certification election among the ICMC employees is
violative of the diplomatic immunity of said organization.

Respondent BLR Director, on the other hand, with whom the Solicitor
General agrees, cites State policy and Philippine labor laws to justify
its assailed Order, particularly, Article II, Section 18 and Article III,
Section 8 of the 1987 Constitution, infra; and Articles 243 and 246 of
the Labor Code, as amended, ibid. In addition, she contends that a
certification election is not a litigation but a mere investigation of a
non-adversary, fact-finding character. It is not a suit against ICMC its
property, funds or assets, but is the sole concern of the workers
themselves.

B. G.R. No. 89331 — (The International Rice Research Institute [IRRI]

Case).

Before a Decision could be rendered in the ICMC Case, the Third

Division, on 11 December 1989, resolved to consolidate G.R. No.
89331 pending before it with G.R. No. 85750, the lower-numbered
case pending with the Second Division, upon manifestation by the
Solicitor General that both cases involve similar issues.

The facts disclose that on 9 December 1959, the Philippine

Government and the Ford and Rockefeller Foundations signed a
Memorandum of Understanding establishing the International Rice
Research Institute (IRRI) at Los Baños, Laguna. It was intended to be
an autonomous, philanthropic, tax-free, non-profit, non-stock
organization designed to carry out the principal objective of conducting
"basic research on the rice plant, on all phases of rice production,
management, distribution and utilization with a view to attaining
nutritive and economic advantage or benefit for the people of Asia and
other major rice-growing areas through improvement in quality and
quantity of rice."

Initially, IRRI was organized and registered with the Securities and
Exchange Commission as a private corporation subject to all laws and
regulations. However, by virtue of Pres. Decree No. 1620,
promulgated on 19 April 1979, IRRI was granted the status,
prerogatives, privileges and immunities of an international
organization.

The Organized Labor Association in Line Industries and Agriculture

(OLALIA), is a legitimate labor organization with an existing local
union, the Kapisanan ng Manggagawa at TAC sa IRRI (Kapisanan, for
short) in respondent IRRI.

On 20 April 1987, the Kapisanan filed a Petition for Direct Certification

Election with Region IV, Regional Office of the Department of Labor
and Employment (DOLE).

IRRI opposed the petition invoking Pres. Decree No. 1620 conferring
upon it the status of an international organization and granting it
immunity from all civil, criminal and administrative proceedings under
Philippine laws.

On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the

opposition on the basis of Pres. Decree No. 1620 and dismissed the
Petition for Direct Certification.

On appeal, the BLR Director, who is the public respondent in the

ICMC Case, set aside the Med-Arbiter's Order and authorized the
calling of a certification election among the rank-and-file employees of
IRRI. Said Director relied on Article 243 of the Labor Code, as
amended, infra and Article XIII, Section 3 of the 1987
Constitution, 1 and held that "the immunities and privileges granted to
IRRI do not include exemption from coverage of our Labor Laws."
Reconsideration sought by IRRI was denied.

On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set

aside the BLR Director's Order, dismissed the Petition for Certification
Election, and held that the grant of specialized agency status by the
Philippine Government to the IRRI bars DOLE from assuming and
exercising jurisdiction over IRRI Said Resolution reads in part as
follows:

Presidential Decree No. 1620 which grants to the IRRI the

status, prerogatives, privileges and immunities of an
international organization is clear and explicit. It provides in
categorical terms that:

Art. 3 — The Institute shall enjoy immunity from any penal,

civil and administrative proceedings, except insofar as
immunity has been expressly waived by the Director-
General of the Institution or his authorized representative.

Verily, unless and until the Institute expressly waives its

immunity, no summons, subpoena, orders, decisions or
proceedings ordered by any court or administrative
or quasi-judicial agency are enforceable as against the
Institute. In the case at bar there was no such waiver made
by the Director-General of the Institute. Indeed, the
Institute, at the very first opportunity already vehemently
questioned the jurisdiction of this Department by filing an
ex-parte motion to dismiss the case.

Hence, the present Petition for Certiorari filed by Kapisanan alleging

grave abuse of discretion by respondent Secretary of Labor in
upholding IRRI's diplomatic immunity.
The Third Division, to which the case was originally assigned, required
the respondents to comment on the petition. In a Manifestation filed on
4 August 1990, the Secretary of Labor declared that it was "not
adopting as his own" the decision of the BLR Director in the ICMC
Case as well as the Comment of the Solicitor General sustaining said
Director. The last pleading was filed by IRRI on 14 August 1990.

Instead of a Comment, the Solicitor General filed a Manifestation and

Motion praying that he be excused from filing a comment "it appearing
that in the earlier case of International Catholic Migration Commission
v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor
General had sustained the stand of Director Calleja on the very same
issue now before it, which position has been superseded by
respondent Secretary of Labor in G.R. No. 89331," the present case.
The Court acceded to the Solicitor General's prayer.

The Court is now asked to rule upon whether or not the Secretary of
Labor committed grave abuse of discretion in dismissing the Petition
for Certification Election filed by Kapisanan.

Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting

IRRI the status, privileges, prerogatives and immunities of an
international organization, invoked by the Secretary of Labor, is
unconstitutional in so far as it deprives the Filipino workers of their
fundamental and constitutional right to form trade unions for the
purpose of collective bargaining as enshrined in the 1987 Constitution.

A procedural issue is also raised. Kapisanan faults respondent

Secretary of Labor for entertaining IRRI'S appeal from the Order of the
Director of the Bureau of Labor Relations directing the holding of a
certification election. Kapisanan contends that pursuant to Sections 7,
8, 9 and 10 of Rule V 2 of the Omnibus Rules Implementing the Labor
Code, the Order of the BLR Director had become final and
unappeable and that, therefore, the Secretary of Labor had no more
jurisdiction over the said appeal.

On the other hand, in entertaining the appeal, the Secretary of Labor

relied on Section 25 of Rep. Act. No. 6715, which took effect on 21
March 1989, providing for the direct filing of appeal from the Med-
Arbiter to the Office of the Secretary of Labor and Employment instead
of to the Director of the Bureau of Labor Relations in cases involving
certification election orders.

III

Findings in Both Cases.

There can be no question that diplomatic immunity has, in fact, been
granted ICMC and IRRI.

Article II of the Memorandum of Agreement between the Philippine

Government and ICMC provides that ICMC shall have a status "similar
to that of a specialized agency." Article III, Sections 4 and 5 of the
Convention on the Privileges and Immunities of Specialized Agencies,
adopted by the UN General Assembly on 21 November 1947 and
concurred in by the Philippine Senate through Resolution No. 19 on
17 May 1949, explicitly provides:

Art. III, Section 4. The specialized agencies, their property

and assets, wherever located and by whomsoever held,
shall enjoy immunity from every form of legal
process except insofar as in any particular case they have
expressly waived their immunity. It is, however, understood
that no waiver of immunity shall extend to any measure of
execution.

Sec. 5. — The premises of the specialized agencies shall

be inviolable. The property and assets of the specialized
agencies, wherever located and by whomsoever held shall
be immune from search, requisition, confiscation,
expropriation and any other form of interference, whether
by executive, administrative, judicial or legislative action.
(Emphasis supplied).

IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit

in its grant of immunity, thus:

Art. 3. Immunity from Legal Process. — The Institute shall

enjoy immunity from any penal, civil and administrative
proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or
his authorized representatives.

Thus it is that the DEFORAF, through its Legal Adviser, sustained

ICMC'S invocation of immunity when in a Memorandum, dated 17
October 1988, it expressed the view that "the Order of the Director of
the Bureau of Labor Relations dated 21 September 1988 for the
conduct of Certification Election within ICMC violates the diplomatic
immunity of the organization." Similarly, in respect of IRRI, the
DEFORAF speaking through The Acting Secretary of Foreign Affairs,
Jose D. Ingles, in a letter, dated 17 June 1987, to the Secretary of
Labor, maintained that "IRRI enjoys immunity from the jurisdiction of
DOLE in this particular instance."
The foregoing opinions constitute a categorical recognition by the
Executive Branch of the Government that ICMC and IRRI enjoy
immunities accorded to international organizations, which
determination has been held to be a political question conclusive upon
the Courts in order not to embarrass a political department of
Government.

It is a recognized principle of international law and under

our system of separation of powers that diplomatic
immunity is essentially a political question and courts
should refuse to look beyond a determination by the
executive branch of the government, and where the plea of
diplomatic immunity is recognized and affirmed by the
executive branch of the government as in the case at bar, it
is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law
officer of the government . . . or other officer acting under
his direction. Hence, in adherence to the settled principle
that courts may not so exercise their jurisdiction . . . as to
embarrass the executive arm of the government in
conducting foreign relations, it is accepted doctrine that in
such cases the judicial department of (this) government
follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic
jurisdiction. 3

A brief look into the nature of international organizations and

specialized agencies is in order. The term "international organization"
is generally used to describe an organization set up by agreement
between two or more states. 4 Under contemporary international law,
such organizations are endowed with some degree of international
legal personality 5 such that they are capable of exercising specific
rights, duties and powers. 6 They are organized mainly as a means for
conducting general international business in which the member states
have an interest. 7 The United Nations, for instance, is an international
organization dedicated to the propagation of world peace.

"Specialized agencies" are international organizations having

functions in particular fields. The term appears in Articles 57 8 and
63 9 of the Charter of the United Nations:

The Charter, while it invests the United Nations with the

general task of promoting progress and international
cooperation in economic, social, health, cultural,
educational and related matters, contemplates that these
tasks will be mainly fulfilled not by organs of the United
 Nations itself but by autonomous international
organizations established by inter-governmental
agreements outside the United Nations. There are now
many such international agencies having functions in many
different fields, e.g. in posts, telecommunications, railways,
canals, rivers, sea transport, civil aviation, meteorology,
atomic energy, finance, trade, education and culture, health
and refugees. Some are virtually world-wide in their
membership, some are regional or otherwise limited in their
membership. The Charter provides that those agencies
which have "wide international responsibilities" are to be
brought into relationship with the United Nations by
agreements entered into between them and the Economic
and Social Council, are then to be known as "specialized
agencies." 10

The rapid growth of international organizations under contemporary

international law has paved the way for the development of the
concept of international immunities.

It is now usual for the constitutions of international

organizations to contain provisions conferring certain
immunities on the organizations themselves,
representatives of their member states and persons acting
on behalf of the organizations. A series of conventions,
agreements and protocols defining the immunities of
various international organizations in relation to their
members generally are now widely in force; . . . 11

There are basically three propositions underlying the grant of

international immunities to international organizations. These
principles, contained in the ILO Memorandum are stated thus: 1)
international institutions should have a status which protects them
against control or interference by any one government in the
performance of functions for the effective discharge of which they are
responsible to democratically constituted international bodies in which
all the nations concerned are represented; 2) no country should derive
any national financial advantage by levying fiscal charges on common
international funds; and 3) the international organization should, as a
collectivity of States members, be accorded the facilities for the
conduct of its official business customarily extended to each other by
its individual member States. 12 The theory behind all three
propositions is said to be essentially institutional in character. "It is not
concerned with the status, dignity or privileges of individuals, but with
the elements of functional independence necessary to free
international institutions from national control and to enable them to
discharge their responsibilities impartially on behalf of all their
members. 13 The raison d'etre for these immunities is the assurance of
unimpeded performance of their functions by the agencies concerned.

The grant of immunity from local jurisdiction to ICMC and IRRI is

clearly necessitated by their international character and respective
purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The
exercise of jurisdiction by the Department of Labor in these instances
would defeat the very purpose of immunity, which is to shield the
affairs of international organizations, in accordance with international
practice, from political pressure or control by the host country to the
prejudice of member States of the organization, and to ensure the
unhampered performance of their functions.

ICMC's and IRRI's immunity from local jurisdiction by no means

deprives labor of its basic rights, which are guaranteed by Article II,
Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3
(supra), of the 1987 Constitution; and implemented by Articles 243
and 246 of the Labor Code, 16 relied on by the BLR Director and by
Kapisanan.

For, ICMC employees are not without recourse whenever there are
disputes to be settled. Section 31 of the Convention on the Privileges
and Immunities of the Specialized Agencies of the United
Nations 17 provides that "each specialized agency shall make provision
for appropriate modes of settlement of: (a) disputes arising out of
contracts or other disputes of private character to which the
specialized agency is a party." Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC the the Philippine
Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities
accorded. Thus:

Art. IV. Cooperation with Government Authorities. — 1. The

Commission shall cooperate at all times with the
appropriate authorities of the Government to ensure the
observance of Philippine laws, rules and regulations,
facilitate the proper administration of justice and prevent
the occurrences of any abuse of the privileges and
immunities granted its officials and alien employees in
Article III of this Agreement to the Commission.

2. In the event that the Government determines that there

has been an abuse of the privileges and immunities
granted under this Agreement, consultations shall be held
 between the Government and the Commission to
determine whether any such abuse has occurred and, if so,
the Government shall withdraw the privileges and
immunities granted the Commission and its officials.

Neither are the employees of IRRI without remedy in case of dispute

with management as, in fact, there had been organized a forum for
better management-employee relationship as evidenced by the
formation of the Council of IRRI Employees and Management (CIEM)
wherein "both management and employees were and still are
represented for purposes of maintaining mutual and beneficial
cooperation between IRRI and its employees." The existence of this
Union factually and tellingly belies the argument that Pres. Decree No.
1620, which grants to IRRI the status, privileges and immunities of an
international organization, deprives its employees of the right to self-
organization.

The immunity granted being "from every form of legal process except
in so far as in any particular case they have expressly waived their
immunity," it is inaccurate to state that a certification election is
beyond the scope of that immunity for the reason that it is not a suit
against ICMC. A certification election cannot be viewed as an
independent or isolated process. It could tugger off a series of events
in the collective bargaining process together with related incidents
and/or concerted activities, which could inevitably involve ICMC in the
"legal process," which includes "any penal, civil and administrative
proceedings." The eventuality of Court litigation is neither remote and
from which international organizations are precisely shielded to
safeguard them from the disruption of their functions. Clauses on
jurisdictional immunity are said to be standard provisions in the
constitutions of international Organizations. "The immunity covers the
organization concerned, its property and its assets. It is equally
applicable to proceedings in personam and proceedings in rem." 18

We take note of a Manifestation, dated 28 September 1989, in the

ICMC Case (p. 161, Rollo), wherein TUPAS calls attention to the case
entitled "International Catholic Migration Commission v. NLRC, et als.,
(G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that,
having taken cognizance of that dispute (on the issue of payment of
salary for the unexpired portion of a six-month probationary
employment), the Court is now estopped from passing upon the
question of DOLE jurisdiction petition over ICMC.

We find no merit to said submission. Not only did the facts of said
controversy occur between 1983-1985, or before the grant to ICMC on
15 July 1988 of the status of a specialized agency with corresponding
immunities, but also because ICMC in that case did not invoke its
immunity and, therefore, may be deemed to have waived it, assuming
that during that period (1983-1985) it was tacitly recognized as
enjoying such immunity.

Anent the procedural issue raised in the IRRI Case, suffice it to state
that the Decision of the BLR Director, dated 15 February 1989, had
not become final because of a Motion for Reconsideration filed by
IRRI Said Motion was acted upon only on 30 March 1989 when Rep.
Act No. 6715, which provides for direct appeals from the Orders of the
Med-Arbiter to the Secretary of Labor in certification election cases
either from the order or the results of the election itself, was already in
effect, specifically since 21 March 1989. Hence, no grave abuse of
discretion may be imputed to respondent Secretary of Labor in his
assumption of appellate jurisdiction, contrary to Kapisanan's
allegations. The pertinent portion of that law provides:

Art. 259. — Any party to an election may appeal the order

or results of the election as determined by the Med-
Arbiter directly to the Secretary of Labor and Employment
on the ground that the rules and regulations or parts
thereof established by the Secretary of Labor and
Employment for the conduct of the election have been
violated. Such appeal shall be decided within 15 calendar
days (Emphasis supplied).

En passant, the Court is gratified to note that the heretofore

antagonistic positions assumed by two departments of the executive
branch of government have been rectified and the resultant
embarrassment to the Philippine Government in the eyes of the
international community now, hopefully, effaced.

WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is

GRANTED, the Order of the Bureau of Labor Relations for certification
election is SET ASIDE, and the Temporary Restraining Order earlier
issued is made PERMANENT.

In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave
abuse of discretion having been committed by the Secretary of Labor
and Employment in dismissing the Petition for Certification Election.

No pronouncement as to costs.

SO ORDERED.
 [G.R. No. L-65428. February 20, 1984.]

BAGUIO WATER DISTRICT, Petitioner, v. HON.

CRESENCIANO B. TRAJANO in his official capacity as
the Director of the Bureau of Labor Relations of the
Ministry of Labor and Employment, and BAGUIO
WATER DISTRICT EMPLOYEES LABOR
UNION, Respondents.

Antonino Espiritu & Severino Z. Beltran, Jr.

for Petitioner.

The Solicitor General for Respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATIONS; LABOR CODE;

JURISDICTION OF THE NATIONAL LABOR RELATIONS
COMMISSION; OFFICERS AND EMPLOYEES OF QUASI-PUBLIC
CORPORATIONS NOT SUBJECT THERETO; CASE AT BAR. —
Baguio Water District is a corporation created pursuant to a
special law, P.D. No. 198, as amended. After P.D. No. 198
was amended by P.D. No. 1479, its officers and employees
became part of the Civil Service (Sec. 1, Art. XII-B,
Constitution, P.D. No. 868). Any controversy arising from
their employment status is removed from the jurisdiction of
the Labor Arbiter and the NLRC pursuant to Art. 277 of the
Labor Code, as amended.

DECISION

ABAD SANTOS, J.:

This is a petition to review the decision of the public

respondent which affirmed that of a Med-Arbiter calling for a
certification election among the regular rank and file
employees of the Baguio Water District (BWD).chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
The Baguio Water District was formed pursuant to Title II —
Local Water District Law — of P.D. No. 198, as amended. The
BWD is by Sec. 6 of that decree "a quasi-public corporation
performing public service and supplying public wants."cralaw
virtua1aw library

A part of the public respondent’s decision rendered in

September, 1983, reads in part.

"We find the appeal [of the BWD] to be devoid of merit. The
records show that the operation and administration of BWD is
governed and regulated by special laws, that is, Presidential
Decrees Nos. 198 and 1497 which created local water
districts throughout the country. Section 25 of Presidential
Decree (PD) 198 clearly provides that the district and its
employees shall be exempt from the provisions of the Civil
Service Law and that its personnel below supervisory level
shall have the right to collectively bargain. Contrary to
appellant’s claim, said provision has not been amended much
more abrogated expressly or impliedly by PD 1497 which
does not make mention of any matter on Civil Service Law or
collective bargaining." (Rollo, p. 59.)

We grant the petition for the following reasons:chanrob1es

virtual 1aw library

1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D.

No. 1479; Sec. 26 of P.D. NO. 198 was amended to read as
Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree
took effect on June 11, 1978.

Sec. 25 of P.D. NO 198 was originally written as

follows:jgc:chanrobles.com.ph

"Sec. 25. Exemption from Civil Service. — The district and its
employees, being engaged in a proprietary function, are
hereby exempt from the provisions of the Civil Service Law.
Collective bargaining shall be available only to personnel
below supervisory levels: Provided, however, That the total
of all salaries, wages, emoluments, benefits or other
compensation paid to all employees in any month shall not
exceed fifty percent (50%) of average net monthly revenue,
said net revenue representing income from water sales and
sewerage service charges, less pro-rata share of debt service
and expenses for fuel or energy for pumping during the
preceding fiscal year."cralaw virtua1aw library

After P.D. No. 198 was amended by P.D. No. 1479, Sec. 25
now reads:jgc:chanrobles.com.ph

"Sec. 25. Authorization. — The district may exercise all the

powers which are expressly granted by this Title or which are
necessarily implied from or incidental to the powers and
purposes herein stated. For the purpose of carrying out the
objectives of this Act, a district is hereby granted the power
of eminent domain, the exercise thereof shall, however, be
subject to review by the Administration."cralaw virtua1aw
library

It is obvious that the public respondent erred when he said:

"Contrary to appellant’s claim, said provision has not been
amended much more abrogated expressly or impliedly by PD
1497 which does not make mention of any matter on Civil
Service Law or collective bargaining."cralaw virtua1aw library

2. The agencies of the Ministry of Labor and Employment do

not compare notes.

In NLRC Case No. RAB-I-0053-82, Beneco Employees Labor

Union, Et. Al. v. Baguio Water District, the Second Division of
the NLRC held:jgc:chanrobles.com.ph

"Upon absorption of herein complainant by BWD by virtue of

the terms of the aforementioned agreement, he
automatically became a government employee. As such, his
terms and conditions of employment are governed by the
Civil Service law, rules and regulations and therefore any
dispute or controversy arising from such employment status
is removed from the jurisdiction of the Labor Arbiter and this
Commission pursuant to Article 277 of the Labor Code, as
amended, which We hereby reproduce below:chanrob1es
virtual 1aw library

‘ART. 277. Government employees. — The terms and

conditions of employment of all government employees,
including employees of government-owned and controlled
corporations, shall be governed by the Civil Service Law,
rules and regulations. Their salaries shall be standardized by
the National Assembly as provided for in the New
Constitution. However, there shall be no reduction of existing
wages, benefits and other terms and conditions of
employment being enjoyed by them at the time of the
adoption of the Code.’

"As one of the issues raised before Us in this appeal is one of

jurisdiction, We rule to dismiss the above entitled case based
on the ground of lack of jurisdiction.

"WHEREFORE, the appealed Decision is hereby Reversed.

Case dismissed for lack of jurisdiction." (Rollo, p. 64.)

The Union appealed to this Court but in G.R No. 63184 a

resolution dated April 24, 1983, dismissed its appeal for lack
of merit.

3. The BWD is a corporation created pursuant to a special law

— P.D. No. 198, as amended. As such its officers and
employees are part of the Civil Service. (Sec. 1, Art. XII-B,
Constitution; P.D. No. 868.).

WHEREFORE, the petition is granted and the questioned

decision of the public respondent is hereby set aside. No
costs.

SO ORDERED.
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
LOMA GOCE y OLALIA, DAN GOCE and NELLY D. AGUSTIN,
accused. NELLY D. AGUSTIN, accused-appellant.

REGALADO, J.:

On January 12, 1988, an information for illegal recruitment committed

by a syndicate and in large scale, punishable under Articles 38 and 39
of the Labor Code (Presidential Decree No. 442) as amended by
Section 1(b) of Presidential Decree No. 2018, was filed against
spouses Dan and Loma Goce and herein accused-appellant Nelly
Agustin in the Regional Trial Court of Manila, Branch 5, alleging —

That in or about and during the period comprised between

May 1986 and June 25, 1987, both dates inclusive, in the
City of Manila, Philippines, the said accused, conspiring
and confederating together and helping one another,
representing themselves to have the capacity to contract,
enlist and transport Filipino workers for employment
abroad, did then and there willfully and unlawfully, for a fee,
recruit and promise employment/job placement abroad, to
(1) Rolando Dalida y Piernas, (2) Ernesto Alvarez y
Lubangco, (3) Rogelio Salado y Savillo, (4) Ramona
Salado y Alvarez, (5) Dionisio Masaya y de Guzman, (6)
Dave Rivera y de Leon, (7) Lorenzo Alvarez y Velayo, and
(8) Nelson Trinidad y Santos, without first having secured
the required license or authority from the Department of
Labor.1

On January 21, 1987, a warrant of arrest was issued against the three
accused but not one of them was arrested. 2 Hence, on February 2,
1989, the trial court ordered the case archived but it issued a standing
warrant of arrest against the accused. 3

Thereafter, on learning of the whereabouts of the accused, one of the

offended parties, Rogelio Salado, requested on March 17, 1989 for a
copy of the warrant of arrest.4 Eventually, at around midday of
February 26, 1993, Nelly Agustin was apprehended by the Parañaque
police.5 On March 8, 1993, her counsel filed a motion to revive the
case and requested that it be set for hearing "for purposes of due
process and for the accused to immediately have her day in
court" 6 Thus, on April 15, 1993, the trial court reinstated the case and
set the arraignment for May 3, 1993,7 on which date of Agustin
pleaded not guilty8 and the case subsequently went to trial.

Four of the complainants testified for the prosecution. Rogelio Salado

was the first to take the witness stand and he declared that sometime
in March or April, 1987, he was introduced by Lorenzo Alvarez, his
brother-in-law and a co-applicant, to Nelly Agustin in the latter's
residence at Factor, Dongalo, Parañaque, Metro Manila. Representing
herself as the manager of the Clover Placement Agency, Agustin
showed him a job order as proof that he could readily be deployed for
overseas employment. Salado learned that he had to pay P5,000.00
as processing fee, which amount he gave sometime in April or May of
the same year. He was issued the corresponding receipt. 9

Also in April or May, 1987, Salado, accompanied by five other

applicants who were his relatives, went to the office of the placement
agency at Nakpil Street, Ermita, Manila where he saw Agustin and
met the spouses Dan and Loma Goce, owners of the agency. He
submitted his bio-data and learned from Loma Goce that he had to
give P12,000.00, instead of the original amount of P5,000.00 for the
placement fee. Although surprised at the new and higher sum, they
subsequently agreed as long as there was an assurance that they
could leave for abroad.10

Thereafter, a receipt was issued in the name of the Clover Placement

Agency showing that Salado and his aforesaid co-applicants each
paid P2,000.00, instead of the P5,000.00 which each of them actually
paid. Several months passed but Salado failed to leave for the
promised overseas employment. Hence, in October, 1987, along with
the other recruits, he decided to go to the Philippine Overseas
Employment Administration (POEA) to verify the real status of Clover
Placement Agency. They discovered that said agency was not duly
licensed to recruit job applicants. Later, upon learning that Agustin had
been arrested, Salado decided to see her and to demand the return of
the money he had paid, but Agustin could only give him P500.00. 11

Ramona Salado, the wife of Rogelio Salado, came to know through

her brother, Lorenzo Alvarez, about Nelly Agustin. Accompanied by
her husband, Rogelio, Ramona went to see Agustin at the latter's
residence. Agustin persuaded her to apply as a cutter/sewer in Oman
so that she could join her husband. Encouraged by Agustin's promise
that she and her husband could live together while working in Oman,
she instructed her husband to give Agustin P2,000.00 for each of
them as placement fee, or the total sum of P4,000.00. 12
Much later, the Salado couple received a telegram from the placement
agency requiring them to report to its office because the "NOC" (visa)
had allegedly arrived. Again, around February, or March, 1987,
Rogelio gave P2,000.00 as payment for his and his wife's passports.
Despite follow-up of their papers twice a week from February to June,
1987, he and his wife failed to leave for abroad. 13

Complainant Dionisio Masaya, accompanied by his brother-in-law,

Aquiles Ortega, applied for a job in Oman with the Clover Placement
Agency at Parañaque, the agency's former office address. There,
Masaya met Nelly Agustin, who introduced herself as the manager of
the agency, and the Goce spouses, Dan and Loma, as well as the
latter's daughter. He submitted several pertinent documents, such as
his bio-data and school credentials. 14

In May, 1986, Masaya gave Dan Goce P1,900.00 as an initial

downpayment for the placement fee, and in September of that same
year, he gave an additional P10,000.00. He was issued receipts for
said amounts and was advised to go to the placement office once in a
while to follow up his application, which he faithfully did. Much to his
dismay and chagrin, he failed to leave for abroad as promised.
Accordingly, he was forced to demand that his money be refunded but
Loma Goce could give him back only P4,000.00 in installments. 15

As the prosecution's fourth and last witness, Ernesto Alvarez took the
witness stand on June 7, 1993. He testified that in February, 1987, he
met appellant Agustin through his cousin, Larry Alvarez, at her
residence in Parañaque. She informed him that "madalas siyang
nagpapalakad sa Oman" and offered him a job as an ambulance
driver at the Royal Hospital in Oman with a monthly salary of about
$600.00 to $700.00. 16

On March 10, 1987, Alvarez gave an initial amount of P3,000.00 as

processing fee to Agustin at the latter's residence. In the same month,
he gave another P3,000.00, this time in the office of the placement
agency. Agustin assured him that he could leave for abroad before the
end of 1987. He returned several times to the placement agency's
office to follow up his application but to no avail. Frustrated, he
demanded the return of the money he had paid, but Agustin could only
give back P500.00. Thereafter, he looked for Agustin about eight
times, but he could no longer find her. 17

Only herein appellant Agustin testified for the defense. She asserted
that Dan and Loma Goce were her neighbors at Tambo, Parañaque
and that they were licensed recruiters and owners of the Clover
Placement Agency. Previously, the Goce couple was able to send her
son, Reynaldo Agustin, to Saudi Arabia. Agustin met the
aforementioned complainants through Lorenzo Alvarez who requested
her to introduce them to the Goce couple, to which request she
acceded. 18

Denying any participation in the illegal recruitment and maintaining

that the recruitment was perpetrated only by the Goce couple, Agustin
denied any knowledge of the receipts presented by the prosecution.
She insisted that the complainants included her in the complaint
thinking that this would compel her to reveal the whereabouts of the
Goce spouses. She failed to do so because in truth, so she claims,
she does not know the present address of the couple. All she knew
was that they had left their residence in 1987. 19

Although she admitted having given P500.00 each to Rogelio Salado

and Alvarez, she explained that it was entirely for different reasons.
Salado had supposedly asked for a loan, while Alvarez needed money
because he was sick at that time. 20

On November 19, 1993, the trial court rendered judgment finding

herein appellant guilty as a principal in the crime of illegal recruitment
in large scale, and sentencing her to serve the penalty of life
imprisonment, as well as to pay a fine of P100,000.00. 21

In her present appeal, appellant Agustin raises the following

arguments: (1) her act of introducing complainants to the Goce couple
does not fall within the meaning of illegal recruitment and placement
under Article 13(b) in relation to Article 34 of the Labor Code; (2) there
is no proof of conspiracy to commit illegal recruitment among
appellant and the Goce spouses; and (3) there is no proof that
appellant offered or promised overseas employment to the
complainants. 22 These three arguments being interrelated, they will
be discussed together.

Herein appellant is accused of violating Articles 38 and 39 of the

Labor Code. Article 38 of the Labor Code, as amended by Presidential
Decree No. 2018, provides that any recruitment activity, including the
prohibited practices enumerated in Article 34 of said Code,
undertaken by non-licensees or non-holders of authority shall be
deemed illegal and punishable under Article 39 thereof. The same
article further provides that illegal recruitment shall be considered an
offense involving economic sabotage if any of these qualifying
circumstances exist, namely, (a) when illegal recruitment is committed
by a syndicate, i.e., if it is carried out by a group of three or more
persons conspiring and/or confederating with one another; or (b) when
illegal recruitment is committed in large scale, i.e., if it is committed
against three or more persons individually or as a group.

At the outset, it should be made clear that all the accused in this case
were not authorized to engage in any recruitment activity, as
evidenced by a certification issued by Cecilia E. Curso, Chief of the
Licensing and Regulation Office of the Philippine Overseas
Employment Administration, on November 10, 1987. Said certification
states that Dan and Loma Goce and Nelly Agustin are neither licensed
nor authorized to recruit workers for overseas
employment. 23 Appellant does not dispute this. As a matter of fact her
counsel agreed to stipulate that she was neither licensed nor
authorized to recruit applicants for overseas employment. Appellant,
however, denies that she was in any way guilty of illegal
recruitment. 24

It is appellant's defensive theory that all she did was to introduce

complainants to the Goce spouses. Being a neighbor of said couple,
and owing to the fact that her son's overseas job application was
processed and facilitated by them, the complainants asked her to
introduce them to said spouses. Allegedly out of the goodness of her
heart, she complied with their request. Such an act, appellant argues,
does not fall within the meaning of "referral" under the Labor Code to
make her liable for illegal recruitment.

Under said Code, recruitment and placement refers to any act of

canvassing, enlisting, contracting, transporting, utilizing, hiring or
procuring workers, and includes referrals, contract services, promising
or advertising for employment, locally or abroad, whether for profit or
not; provided, that any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be
deemed engaged in recruitment and placement. 25 On the other hand,
referral is the act of passing along or forwarding of an applicant for
employment after an initial interview of a selected applicant for
employment to a selected employer, placement officer or bureau. 26

Hence, the inevitable query is whether or not appellant Agustin merely

introduced complainants to the Goce couple or her actions went
beyond that. The testimonial evidence hereon show that she indeed
further committed acts constitutive of illegal recruitment. All four
prosecution witnesses testified that it was Agustin whom they initially
approached regarding their plans of working overseas. It was from her
that they learned about the fees they had to pay, as well as the papers
that they had to submit. It was after they had talked to her that they
met the accused spouses who owned the placement agency.
As correctly held by the trial court, being an employee of the Goces, it
was therefore logical for appellant to introduce the applicants to said
spouses, they being the owners of the agency. As such, appellant was
actually making referrals to the agency of which she was a part. She
was therefore engaging in recruitment activity. 27

Despite Agustin's pretensions that she was but a neighbor of the Goce
couple, the testimonies of the prosecution witnesses paint a different
picture. Rogelio Salado and Dionisio Masaya testified that appellant
represented herself as the manager of the Clover Placement Agency.
Ramona Salado was offered a job as a cutter/sewer by Agustin the
first time they met, while Ernesto Alvarez remembered that when he
first met Agustin, the latter represented herself as "nagpapaalis
papunta sa Oman." 28 Indeed, Agustin played a pivotal role in the
operations of the recruitment agency, working together with the Goce
couple.

There is illegal recruitment when one gives the impression of having

the ability to send a worker abroad." 29 It is undisputed that appellant
gave complainants the distinct impression that she had the power or
ability to send people abroad for work such that the latter were
convinced to give her the money she demanded in order to be so
employed. 30

It cannot be denied that Agustin received from complainants various

sums for purpose of their applications. Her act of collecting from each
of the complainants payment for their respective passports, training
fees, placement fees, medical tests and other sundry expenses
unquestionably constitutes an act of recruitment within the meaning of
the law. In fact, appellant demanded and received from complainants
amounts beyond the allowable limit of P5,000.00 under government
regulations. It is true that the mere act of a cashier in receiving money
far exceeding the amount allowed by law was not considered per
se as "recruitment and placement" in contemplation of law, but that
was because the recipient had no other participation in the
transactions and did not conspire with her co-accused in defrauding
the victims. 31 That is not the case here.

Appellant further argues that "there is no evidence of receipts of

collections/payments from complainants to appellant." On the
contrary, xerox copies of said receipts/vouchers were presented by
the prosecution. For instance, a cash voucher marked as Exhibit
D, 32 showing the receipt of P10,000.00 for placement fee and duly
signed by appellant, was presented by the prosecution. Another
receipt, identified as Exhibit E, 33 was issued and signed by appellant
on February 5, 1987 to acknowledge receipt of P4,000.00 from
Rogelio and Ramona Salado for "processing of documents for Oman."
Still another receipt dated March 10, 1987 and presented in evidence
as Exhibit F, shows that appellant received from Ernesto Alvarez
P2,000.00 for "processing of documents for Oman." 34

Apparently, the original copies of said receipts/vouchers were lost,

hence only xerox copies thereof were presented and which, under the
circumstances, were admissible in evidence. When the original writing
has been lost or destroyed or cannot be produced in court, upon proof
of its execution and loss or destruction, or unavailability, its contents
may be proved by a copy or a recital of its contents in some authentic
document, or by the recollection of witnesses. 35

Even assuming arguendo that the xerox copies presented by the

prosecution as secondary evidence are not allowable in court, still the
absence thereof does not warrant the acquittal of appellant. In People
vs. Comia, 36 where this particular issue was involved, the Court held
that the complainants' failure to ask for receipts for the fees they paid
to the accused therein, as well as their consequent failure to present
receipts before the trial court as proof of the said payments, is not fatal
to their case. The complainants duly proved by their respective
testimonies that said accused was involved in the entire recruitment
process. Their testimonies in this regard, being clear and positive,
were declared sufficient to establish that factum probandum.

Indeed, the trial court was justified and correct in accepting the version
of the prosecution witnesses, their statements being positive and
affirmative in nature. This is more worthy of credit than the mere
uncorroborated and self-serving denials of appellant. The lame
defense consisting of such bare denials by appellant cannot overcome
the evidence presented by the prosecution proving her guilt beyond
reasonable doubt. 37

The presence of documentary evidence notwithstanding, this case

essentially involves the credibility of witnesses which is best left to the
judgment of the trial court, in the absence of abuse of discretion
therein. The findings of fact of a trial court, arrived at only after a
hearing and evaluation of what can usually be expected to be
conflicting testimonies of witnesses, certainly deserve respect by an
appellate court. 38 Generally, the findings of fact of the trial court on
the matter of credibility of witnesses will not be disturbed on appeal. 39

In a last-ditch effort to exculpate herself from conviction, appellant

argues that there is no proof of conspiracy between her and the Goce
couple as to make her liable for illegal recruitment. We do not agree.
The evidence presented by the prosecution clearly establish that
appellant confabulated with the Goces in their plan to deceive the
complainants. Although said accused couple have not been tried and
convicted, nonetheless there is sufficient basis for appellant's
conviction as discussed above.

In People vs. Sendon, 40 we held that the non-prosecution of another

suspect therein provided no ground for the appellant concerned to
fault the decision of the trial court convicting her. The prosecution of
other persons, equally or more culpable than herein appellant, may
come later after their true identities and addresses shall have been
ascertained and said malefactors duly taken into custody. We see no
reason why the same doctrinal rule and course of procedure should
not apply in this case.

WHEREFORE, the appealed judgment of the court a quo is hereby

AFFIRMED in toto, with costs against accused-appellant Nelly D.
Agustin.

SO ORDERED.
 G.R. No. 170139, August 05, 2014

SAMEER OVERSEAS PLACEMENT AGENCY,

INC., Petitioner, v. JOY C. CABILES, Respondent.

DECISION

LEONEN, J.:

This case involves an overseas Filipino worker with shattered

dreams. It is our duty, given the facts and the law, to
approximate justice for her.

We are asked to decide a petition for review1 on certiorari

assailing the Court of Appeals’ decision2 dated June 27, 2005.
This decision partially affirmed the National Labor Relations
Commission’s resolution dated March 31, 2004,3 declaring
respondent’s dismissal illegal, directing petitioner to pay
respondent’s three-month salary equivalent to New Taiwan
Dollar (NT$) 46,080.00, and ordering it to reimburse the
NT$3,000.00 withheld from respondent, and pay her
NT$300.00 attorney’s fees.4cralawred

Petitioner, Sameer Overseas Placement Agency, Inc., is a

recruitment and placement agency.5 Responding to an ad it
published, respondent, Joy C. Cabiles, submitted her
application for a quality control job in Taiwan.6cralawred

Joy’s application was accepted.7 Joy was later asked to sign a

one-year employment contract for a monthly salary of
NT$15,360.00.8 She alleged that Sameer Overseas Agency
required her to pay a placement fee of P70,000.00 when she
signed the employment contract.9cralawred

Joy was deployed to work for Taiwan Wacoal, Co. Ltd.

(Wacoal) on June 26, 1997.10 She alleged that in her
employment contract, she agreed to work as quality control
for one year.11 In Taiwan, she was asked to work as a
cutter.12cralawred

Sameer Overseas Placement Agency claims that on July 14,

1997, a certain Mr. Huwang from Wacoal informed Joy,
without prior notice, that she was terminated and that “she
should immediately report to their office to get her salary
and passport.”13 She was asked to “prepare for immediate
repatriation.”14cralawred

Joy claims that she was told that from June 26 to July 14,
1997, she only earned a total of NT$9,000. 15 According to
her, Wacoal deducted NT$3,000 to cover her plane ticket to
Manila.16cralawred

On October 15, 1997, Joy filed a complaint 17 with the

National Labor Relations Commission against petitioner and
Wacoal. She claimed that she was illegally dismissed. 18 She
asked for the return of her placement fee, the withheld
amount for repatriation costs, payment of her salary for 23
months as well as moral and exemplary damages. 19 She
identified Wacoal as Sameer Overseas Placement Agency’s
foreign principal.20cralawred

Sameer Overseas Placement Agency alleged that

respondent's termination was due to her inefficiency,
negligence in her duties, and her “failure to comply with the
work requirements [of] her foreign [employer].” 21 The agency
also claimed that it did not ask for a placement fee of ?
70,000.00.22 As evidence, it showed Official Receipt No.
14860 dated June 10, 1997, bearing the amount of ?
20,360.00.23 Petitioner added that Wacoal's accreditation
with petitioner had already been transferred to the Pacific
Manpower & Management Services, Inc. (Pacific) as of
August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25cralawred

Pacific Manpower moved for the dismissal of petitioner’s

claims against it.26 It alleged that there was no employer-
employee relationship between them.27 Therefore, the claims
against it were outside the jurisdiction of the Labor
Arbiter.28 Pacific Manpower argued that the employment
contract should first be presented so that the employer’s
contractual obligations might be identified. 29 It further denied
that it assumed liability for petitioner’s illegal acts.30cralawred

On July 29, 1998, the Labor Arbiter dismissed Joy’s

complaint.31 Acting Executive Labor Arbiter Pedro C. Ramos
ruled that her complaint was based on mere
allegations.32 The Labor Arbiter found that there was no
excess payment of placement fees, based on the official
receipt presented by petitioner.33 The Labor Arbiter found
unnecessary a discussion on petitioner’s transfer of
obligations to Pacific34 and considered the matter immaterial
in view of the dismissal of respondent’s complaint. 35cralawred

Joy appealed36 to the National Labor Relations Commission.

In a resolution37 dated March 31, 2004, the National Labor

Relations Commission declared that Joy was illegally
dismissed.38 It reiterated the doctrine that the burden of
proof to show that the dismissal was based on a just or valid
cause belongs to the employer.39 It found that Sameer
Overseas Placement Agency failed to prove that there were
just causes for termination.40 There was no sufficient proof to
show that respondent was inefficient in her work and that
she failed to comply with company
requirements.41 Furthermore, procedural due process was not
observed in terminating respondent.42cralawred

The National Labor Relations Commission did not rule on the

issue of reimbursement of placement fees for lack of
jurisdiction.43 It refused to entertain the issue of the alleged
transfer of obligations to Pacific.44 It did not acquire
jurisdiction over that issue because Sameer Overseas
Placement Agency failed to appeal the Labor Arbiter’s
decision not to rule on the matter.45cralawred

The National Labor Relations Commission awarded

respondent only three (3) months worth of salary in the
amount of NT$46,080, the reimbursement of the NT$3,000
withheld from her, and attorney’s fees of NT$300. 46cralawred

The Commission denied the agency’s motion for

reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.

Aggrieved by the ruling, Sameer Overseas Placement Agency

caused the filing of a petition49 for certiorari with the Court of
Appeals assailing the National Labor Relations Commission’s
resolutions dated March 31, 2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National
Labor Relations Commission with respect to the finding of
illegal dismissal, Joy’s entitlement to the equivalent of three
months worth of salary, reimbursement of withheld
repatriation expense, and attorney’s fees.51 The Court of
Appeals remanded the case to the National Labor Relations
Commission to address the validity of petitioner's allegations
against Pacific.52 The Court of Appeals held,
thus:chanRoblesvirtualLawlibrary

Although the public respondent found the dismissal of the

complainant-respondent illegal, we should point out that the
NLRC merely awarded her three (3) months backwages or
the amount of NT$46,080.00, which was based upon its
finding that she was dismissed without due process, a finding
that we uphold, given petitioner’s lack of worthwhile
discussion upon the same in the proceedings below or before
us. Likewise we sustain NLRC’s finding in regard to the
reimbursement of her fare, which is squarely based on the
law; as well as the award of attorney’s fees.

But we do find it necessary to remand the instant case to the

public respondent for further proceedings, for the purpose of
addressing the validity or propriety of petitioner’s third-party
complaint against the transferee agent or the Pacific
Manpower & Management Services, Inc. and Lea G. Manabat.
We should emphasize that as far as the decision of the NLRC
on the claims of Joy Cabiles, is concerned, the same is
hereby affirmed with finality, and we hold petitioner liable
thereon, but without prejudice to further hearings on its third
party complaint against Pacific for reimbursement.

WHEREFORE, premises considered, the assailed Resolutions

are hereby partly AFFIRMED in accordance with the
foregoing discussion, but subject to the caveat embodied in
the last sentence. No costs.

SO ORDERED.53

Dissatisfied, Sameer Overseas Placement Agency filed this

petition.54cralawred

We are asked to determine whether the Court of Appeals

erred when it affirmed the ruling of the National Labor
Relations Commission finding respondent illegally dismissed
and awarding her three months’ worth of salary, the
reimbursement of the cost of her repatriation, and attorney’s
fees despite the alleged existence of just causes of
termination.

Petitioner reiterates that there was just cause for termination

because there was a finding of Wacoal that respondent was
inefficient in her work.55 Therefore, it claims that
respondent’s dismissal was valid.56cralawred

Petitioner also reiterates that since Wacoal’s accreditation

was validly transferred to Pacific at the time respondent filed
her complaint, it should be Pacific that should now assume
responsibility for Wacoal’s contractual obligations to the
workers originally recruited by petitioner. 57cralawred

Sameer Overseas Placement Agency’s petition is without

merit. We find for respondent.

Sameer Overseas Placement Agency failed to show that there

was just cause for causing Joy’s dismissal. The employer,
Wacoal, also failed to accord her due process of law.

Indeed, employers have the prerogative to impose

productivity and quality standards at work.58 They may also
impose reasonable rules to ensure that the employees
comply with these standards.59 Failure to comply may be a
just cause for their dismissal.60 Certainly, employers cannot
be compelled to retain the services of an employee who is
guilty of acts that are inimical to the interest of the
employer.61 While the law acknowledges the plight and
vulnerability of workers, it does not “authorize the oppression
or self-destruction of the employer.”62 Management
prerogative is recognized in law and in our jurisprudence.

This prerogative, however, should not be abused. It is

“tempered with the employee’s right to security of
tenure.”63 Workers are entitled to substantive and procedural
due process before termination. They may not be removed
from employment without a valid or just cause as determined
by law and without going through the proper procedure.

Security of tenure for labor is guaranteed by our

Constitution.64cralawred

Employees are not stripped of their security of tenure when

they move to work in a different jurisdiction. With respect to
the rights of overseas Filipino workers, we follow the principle
of lex loci contractus.

Thus, in Triple Eight Integrated Services, Inc. v. NLRC, 65 this

court noted:chanRoblesvirtualLawlibrary

Petitioner likewise attempts to sidestep the medical

certificate requirement by contending that since Osdana was
working in Saudi Arabia, her employment was subject to the
laws of the host country. Apparently, petitioner hopes to
make it appear that the labor laws of Saudi Arabia do not
require any certification by a competent public health
authority in the dismissal of employees due to illness.

Again, petitioner’s argument is without merit.

First, established is the rule that lex loci contractus (the

law of the place where the contract is made) governs
in this jurisdiction. There is no question that the
contract of employment in this case was perfected
here in the Philippines. Therefore, the Labor Code, its
implementing rules and regulations, and other laws
affecting labor apply in this case. Furthermore, settled is
the rule that the courts of the forum will not enforce any
foreign claim obnoxious to the forum’s public policy. Here in
the Philippines, employment agreements are more than
contractual in nature. The Constitution itself, in Article XIII,
Section 3, guarantees the special protection of workers, to
wit:chanRoblesvirtualLawlibrary

The State shall afford full protection to labor, local and

overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for
all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

. . . .chanrobleslaw

This public policy should be borne in mind in this case

because to allow foreign employers to determine for and by
themselves whether an overseas contract worker may be
dismissed on the ground of illness would encourage illegal or
arbitrary pre-termination of employment
contracts.66 (Emphasis supplied, citation omitted)

Even with respect to fundamental procedural rights, this

court emphasized in PCL Shipping Philippines, Inc. v.
NLRC,67 to wit:chanRoblesvirtualLawlibrary

Petitioners admit that they did not inform private respondent

in writing of the charges against him and that they failed to
conduct a formal investigation to give him opportunity to air
his side. However, petitioners contend that the twin
requirements of notice and hearing applies strictly only when
the employment is within the Philippines and that these need
not be strictly observed in cases of international maritime or
overseas employment.

The Court does not agree. The provisions of the

Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees
whether working within the Philippines or abroad.
Moreover, the principle of lex loci contractus (the law
of the place where the contract is made) governs in
this jurisdiction. In the present case, it is not disputed that
the Contract of Employment entered into by and between
petitioners and private respondent was executed here in the
Philippines with the approval of the Philippine Overseas
Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and
other laws affecting labor apply in this case.68 (Emphasis
supplied, citations omitted)

By our laws, overseas Filipino workers (OFWs) may only be

terminated for a just or authorized cause and after
compliance with procedural due process requirements.

Article 282 of the Labor Code enumerates the just causes of

termination by the employer.
Thus:chanRoblesvirtualLawlibrary

Art. 282. Termination by employer. An employer may

terminate an employment for any of the following
causes:cralawlawlibrary

(a) Serious misconduct or willful disobedience by the

employee of the lawful orders of his employer or
representative in connection with his
work;chanroblesvirtuallawlibrary

(b) Gross and habitual neglect by the employee of his

duties;chanroblesvirtuallawlibrary

(c) Fraud or willful breach by the employee of the trust

reposed in him by his employer or duly authorized
representative;chanroblesvirtuallawlibrary

(d) Commission of a crime or offense by the employee

against the person of his employer or any immediate
member of his family or his duly authorized representatives;
andChanRoblesVirtualawlibrary

(e) Other causes analogous to the foregoing.

Petitioner’s allegation that respondent was inefficient in her

work and negligent in her duties69 may, therefore, constitute
a just cause for termination under Article 282(b), but only if
petitioner was able to prove it.

The burden of proving that there is just cause for termination

is on the employer. “The employer must affirmatively show
rationally adequate evidence that the dismissal was for a
justifiable cause.”70 Failure to show that there was valid or
just cause for termination would necessarily mean that the
dismissal was illegal.71cralawred

To show that dismissal resulting from inefficiency in work is

valid, it must be shown that: 1) the employer has set
standards of conduct and workmanship against which the
employee will be judged; 2) the standards of conduct and
workmanship must have been communicated to the
employee; and 3) the communication was made at a
reasonable time prior to the employee’s performance
assessment.

This is similar to the law and jurisprudence on probationary

employees, which allow termination of the employee only
when there is “just cause or when [the probationary
employee] fails to qualify as a regular employee in
accordance with reasonable standards made known by the
employer to the employee at the time of his [or her]
engagement.”72cralawred

However, we do not see why the application of that ruling

should be limited to probationary employment. That rule is
basic to the idea of security of tenure and due process, which
are guaranteed to all employees, whether their employment
is probationary or regular.

The pre-determined standards that the employer sets are the

bases for determining the probationary employee’s fitness,
propriety, efficiency, and qualifications as a regular
employee. Due process requires that the probationary
employee be informed of such standards at the time of his or
her engagement so he or she can adjust his or her character
or workmanship accordingly. Proper adjustment to fit the
standards upon which the employee’s qualifications will be
evaluated will increase one’s chances of being positively
assessed for regularization by his or her employer.

Assessing an employee’s work performance does not stop

after regularization. The employer, on a regular basis,
determines if an employee is still qualified and efficient,
based on work standards. Based on that determination, and
after complying with the due process requirements of notice
and hearing, the employer may exercise its management
prerogative of terminating the employee found unqualified.

The regular employee must constantly attempt to prove to

his or her employer that he or she meets all the standards
for employment. This time, however, the standards to be met
are set for the purpose of retaining employment or
promotion. The employee cannot be expected to meet any
standard of character or workmanship if such standards were
not communicated to him or her. Courts should remain
vigilant on allegations of the employer’s failure to
communicate work standards that would govern one’s
employment “if [these are] to discharge in good faith [their]
duty to adjudicate.”73cralawred

In this case, petitioner merely alleged that respondent failed

to comply with her foreign employer’s work requirements and
was inefficient in her work.74No evidence was shown to
support such allegations. Petitioner did not even bother to
specify what requirements were not met, what efficiency
standards were violated, or what particular acts of
respondent constituted inefficiency.

There was also no showing that respondent was sufficiently

informed of the standards against which her work efficiency
and performance were judged.  The parties’ conflict as to
the position held by respondent showed that even the
matter as basic as the job title was not clear.

The bare allegations of petitioner are not sufficient to support

a claim that there is just cause for termination. There is no
proof that respondent was legally terminated.

Petitioner failed to comply with

the due process requirements

Respondent’s dismissal less than one year from hiring and

her repatriation on the same day show not only failure on the
part of petitioner to comply with the requirement of the
existence of just cause for termination. They patently show
that the employers did not comply with the due process
requirement.

A valid dismissal requires both a valid cause and adherence

to the valid procedure of dismissal.75 The employer is
required to give the charged employee at least two written
notices before termination.76 One of the written notices must
inform the employee of the particular acts that may cause his
or her dismissal.77 The other notice must “[inform] the
employee of the employer’s decision.” 78 Aside from the notice
requirement, the employee must also be given “an
opportunity to be heard.”79cralawred

Petitioner failed to comply with the twin notices and hearing

requirements. Respondent started working on June 26, 1997.
She was told that she was terminated on July 14, 1997
effective on the same day and barely a month from her first
workday. She was also repatriated on the same day that she
was informed of her termination. The abruptness of the
termination negated any finding that she was properly
notified and given the opportunity to be heard. Her
constitutional right to due process of law was violated.

II

Respondent Joy Cabiles, having been illegally dismissed, is

entitled to her salary for the unexpired portion of the
employment contract that was violated together with
attorney’s fees and reimbursement of amounts withheld from
her salary.

Section 10 of Republic Act No. 8042, otherwise known as the

Migrant Workers and Overseas Filipinos Act of 1995, states
that overseas workers who were terminated without just,
valid, or authorized cause “shall be entitled to the full
reimbursement of his placement fee with interest of twelve
(12%) per annum, plus his salaries for the unexpired portion
of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.”

Sec. 10. MONEY CLAIMS. – Notwithstanding any provision of

law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of any
law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damages.

The liability of the principal/employer and the

recruitment/placement agency for any and all claims under
this section shall be joint and several. This provisions [sic]
shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its
approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement
agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves
be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or

duration of the employment contract and shall not be
affected by any substitution, amendment or modification
made locally or in a foreign country of the said contract.

Any compromise/amicable settlement or voluntary

agreement on money claims inclusive of damages under this
section shall be paid within four (4) months from the
approval of the settlement by the appropriate authority.

In case of termination of overseas employment without just,

valid or authorized cause as defined by law or contract, the
workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve (12%) per annum, plus
his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the
unexpired term, whichever is less.

....

(Emphasis supplied)chanrobleslaw

Section 15 of Republic Act No. 8042 states that “repatriation

of the worker and the transport of his [or her] personal
belongings shall be the primary responsibility of the agency
which recruited or deployed the worker overseas.” The
exception is when “termination of employment is due solely
to the fault of the worker,”80 which as we have established, is
not the case. It reads:chanRoblesvirtualLawlibrary

SEC. 15. REPATRIATION OF WORKERS; EMERGENCY

REPATRIATION FUND. – The repatriation of the worker and
the transport of his personal belongings shall be the primary
responsibility of the agency which recruited or deployed the
worker overseas. All costs attendant to repatriation shall be
borne by or charged to the agency concerned and/or its
principal. Likewise, the repatriation of remains and transport
of the personal belongings of a deceased worker and all costs
attendant thereto shall be borne by the principal and/or local
agency. However, in cases where the termination of
employment is due solely to the fault of the worker, the
principal/employer or agency shall not in any manner be
responsible for the repatriation of the former and/or his
belongings.

....

The Labor Code81 also entitles the employee to 10% of the

amount of withheld wages as attorney’s fees when the
withholding is unlawful.

The Court of Appeals affirmed the National Labor Relations

Commission’s decision to award respondent NT$46,080.00 or
the three-month equivalent of her salary, attorney’s fees of
NT$300.00, and the reimbursement of the withheld
NT$3,000.00 salary, which answered for her repatriation.

We uphold the finding that respondent is entitled to all of

these awards. The award of the three-month equivalent
of respondent’s salary should, however, be increased
to the amount equivalent to the unexpired term of the
employment contract.

In Serrano v. Gallant Maritime Services, Inc. and Marlow

Navigation Co., Inc.,82 this court ruled that the clause “or for
three (3) months for every year of the unexpired term,
whichever is less”83 is unconstitutional for violating the equal
protection clause and substantive due process. 84cralawred

A statute or provision which was declared unconstitutional is

not a law. It “confers no rights; it imposes no duties; it
affords no protection; it creates no office; it is inoperative as
if it has not been passed at all.”85cralawred

We are aware that the clause  “or for three (3) months for
every year of the unexpired term, whichever is less” was
reinstated in Republic Act No. 8042 upon promulgation of
Republic Act No. 10022 in 2010. Section 7 of Republic Act
No. 10022 provides:chanRoblesvirtualLawlibrary

Section 7. Section 10 of Republic Act No. 8042, as

amended, is hereby amended to read as
follows:chanRoblesvirtualLawlibrary

SEC. 10. Money Claims. – Notwithstanding any provision of

law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damage. Consistent with this mandate, the
NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.

The liability of the principal/employer and the

recruitment/placement agency for any and all claims under
this section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and
shall be a condition precedent for its approval. The
performance bond to de [sic] filed by the
recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement
agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves
be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or

duration of the employment contract and shall not be
affected by any substitution, amendment or modification
made locally or in a foreign country of the said contract.
Any compromise/amicable settlement or voluntary
agreement on money claims inclusive of damages under this
section shall be paid within thirty (30) days from approval of
the settlement by the appropriate authority.

In case of termination of overseas employment without just,

valid or authorized cause as defined by law or contract, or
any unauthorized deductions from the migrant worker’s
salary, the worker shall be entitled to the full reimbursement
if [sic] his placement fee and the deductions made with
interest at twelve percent (12%) per annum, plus his salaries
for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term,
whichever is less.

In case of a final and executory judgement against a foreign

employer/principal, it shall be automatically disqualified,
without further proceedings, from participating in the
Philippine Overseas Employment Program and from recruiting
and hiring Filipino workers until and unless it fully satisfies
the judgement award.

Noncompliance with the mandatory periods for resolutions of

case provided under this section shall subject the responsible
officials to any or all of the following
penalties:cralawlawlibrary

(a) The salary of any such official who fails to render his
decision or resolution within the prescribed period shall be, or
caused to be, withheld until the said official complies
therewith;chanroblesvirtuallawlibrary

(b) Suspension for not more than ninety (90) days; or

(c) Dismissal from the service with disqualification to hold

any appointive public office for five (5) years.

Provided, however, That the penalties herein provided shall

be without prejudice to any liability which any such official
may have incured [sic] under other existing laws or rules and
regulations as a consequence of violating the provisions of
this paragraph. (Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010.
This means that the reinstatement of the clause in Republic
Act No. 8042 was not yet in effect at the time of
respondent’s termination from work in 1997. 86 Republic Act
No. 8042 before it was amended by Republic Act No. 10022
governs this case.

When a law is passed, this court awaits an actual case that

clearly raises adversarial positions in their proper context
before considering a prayer to declare it as unconstitutional.

However, we are confronted with a unique situation. The law

passed incorporates the exact clause already declared as
unconstitutional, without any perceived substantial change in
the circumstances.

This may cause confusion on the part of the National Labor

Relations Commission and the Court of Appeals. At minimum,
the existence of Republic Act No. 10022 may delay the
execution of the judgment in this case, further frustrating
remedies to assuage the wrong done to petitioner. Hence,
there is a necessity to decide this constitutional issue.

Moreover, this court is possessed with the constitutional duty

to “[p]romulgate rules concerning the protection and
enforcement of constitutional rights.”87 When cases become
moot and academic, we do not hesitate to provide for
guidance to bench and bar in situations where the same
violations are capable of repetition but will evade review. This
is analogous to cases where there are millions of Filipinos
working abroad who are bound to suffer from the lack of
protection because of the restoration of an identical clause in
a provision previously declared as unconstitutional.

In the hierarchy of laws, the Constitution is supreme. No

branch or office of the government may exercise its powers
in any manner inconsistent with the Constitution, regardless
of the existence of any law that supports such exercise. The
Constitution cannot be trumped by any other law. All laws
must be read in light of the Constitution. Any law that is
inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is
inconsistent with the Constitution, the nullity cannot be cured
by reincorporation or reenactment of the same or a similar
law or provision. A law or provision of law that was already
declared unconstitutional remains as such unless
circumstances have so changed as to warrant a reverse
conclusion.

We are not convinced by the pleadings submitted by the

parties that the situation has so changed so as to cause us to
reverse binding precedent.

Likewise, there are special reasons of judicial efficiency and

economy that attend to these cases.

The new law puts our overseas workers in the same

vulnerable position as they were prior to Serrano. Failure to
reiterate the very ratio decidendi of that case will result in
the same untold economic hardships that our reading of the
Constitution intended to avoid. Obviously, we cannot
countenance added expenses for further litigation that will
reduce their hard-earned wages as well as add to the
indignity of having been deprived of the protection of our
laws simply because our precedents have not been followed.
There is no constitutional doctrine that causes injustice in the
face of empty procedural niceties. Constitutional
interpretation is complex, but it is never unreasonable.

Thus, in a resolution88 dated October 22, 2013, we ordered

the parties and the Office of the Solicitor General to comment
on the constitutionality of the reinstated clause in Republic
Act No. 10022.

In its comment,89 petitioner argued that the clause was

constitutional.90 The legislators intended a balance between
the employers’ and the employees’ rights by not unduly
burdening the local recruitment agency.91 Petitioner is also of
the view that the clause was already declared as
constitutional in Serrano.92cralawred

The Office of the Solicitor General also argued that the clause
was valid and constitutional.93 However, since the parties
never raised the issue of the constitutionality of the clause as
reinstated in Republic Act No. 10022, its contention is that it
is beyond judicial review.94cralawred

On the other hand, respondent argued that the clause was

unconstitutional because it infringed on workers’ right to
contract.95cralawred

We observe that the reinstated clause, this time as provided

in Republic Act. No. 10022, violates the constitutional rights
to equal protection and due process.96 Petitioner as well as
the Solicitor General have failed to show any compelling
change in the circumstances that would warrant us to revisit
the precedent.

We reiterate our finding in Serrano v. Gallant Maritime

that limiting wages that should be recovered by an
illegally dismissed overseas worker to three months is
both a violation of due process and the equal
protection clauses of the Constitution.

Equal protection of the law is a guarantee that persons under

like circumstances and falling within the same class are
treated alike, in terms of “privileges conferred and liabilities
enforced.”97 It is a guarantee against “undue favor and
individual or class privilege, as well as hostile discrimination
or the oppression of inequality.”98cralawred

In creating laws, the legislature has the power “to make

distinctions and classifications.”99 In exercising such power, it
has a wide discretion.100cralawred

The equal protection clause does not infringe on this

legislative power.101 A law is void on this basis, only if
classifications are made arbitrarily.102 There is no violation of
the equal protection clause if the law applies equally to
persons within the same class and if there are reasonable
grounds for distinguishing between those falling within the
class and those who do not fall within the class. 103 A law that
does not violate the equal protection clause prescribes a
reasonable classification.104cralawred

A reasonable classification “(1) must rest on substantial

distinctions; (2) must be germane to the purposes of the
law; (3) must not be limited to existing conditions only; and
(4) must apply equally to all members of the same
class.”105cralawred

The reinstated clause does not satisfy the requirement of

reasonable classification.

In Serrano, we identified the classifications made by the

reinstated clause. It distinguished between fixed-period
overseas workers and fixed-period local workers. 106 It also
distinguished between overseas workers with employment
contracts of less than one year and overseas workers with
employment contracts of at least one year.107 Within the class
of overseas workers with at least one-year employment
contracts, there was a distinction between those with at least
a year left in their contracts and those with less than a year
left in their contracts when they were illegally
dismissed.108cralawred

The Congress’ classification may be subjected to judicial

review. In Serrano, there is a “legislative classification which
impermissibly interferes with the exercise of a fundamental
right or operates to the peculiar disadvantage of a suspect
class.”109cralawred

Under the Constitution, labor is afforded special

protection.110 Thus, this court in Serrano, “[i]mbued with the
same sense of ‘obligation to afford protection to labor,’ . . .
employ[ed] the standard of strict judicial scrutiny, for it
perceive[d] in the subject clause a suspect classification
prejudicial to OFWs.”111cralawred

We also noted in Serrano that before the passage of Republic

Act No. 8042, the money claims of illegally terminated
overseas and local workers with fixed-term employment were
computed in the same manner.112 Their money claims were
computed based on the “unexpired portions of their
contracts.”113 The adoption of the reinstated clause in
Republic Act No. 8042 subjected the money claims of illegally
dismissed overseas workers with an unexpired term of at
least a year to a cap of three months worth of their
salary.114 There was no such limitation on the money claims
of illegally terminated local workers with fixed-term
employment.115cralawred

We observed that illegally dismissed overseas workers whose

employment contracts had a term of less than one year were
granted the amount equivalent to the unexpired portion of
their employment contracts.116 Meanwhile, illegally dismissed
overseas workers with employment terms of at least a year
were granted a cap equivalent to three months of their salary
for the unexpired portions of their contracts. 117cralawred

Observing the terminologies used in the clause, we also

found that “the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for
more than one year: those who are illegally dismissed with
less than one year left in their contracts shall be entitled to
their salaries for the entire unexpired portion thereof, while
those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the
reinstated clause, and their monetary benefits limited to their
salaries for three months only.”118cralawred

We do not need strict scrutiny to conclude that these

classifications do not rest on any real or substantial
distinctions that would justify different treatments in terms of
the computation of money claims resulting from illegal
termination.

Overseas workers regardless of their classifications are

entitled to security of tenure, at least for the period agreed
upon in their contracts. This means that they cannot be
dismissed before the end of their contract terms without due
process. If they were illegally dismissed, the workers’ right to
security of tenure is violated.

The rights violated when, say, a fixed-period local worker is

illegally terminated are neither greater than nor less than the
rights violated when a fixed-period overseas worker is
illegally terminated. It is state policy to protect the rights of
workers without qualification as to the place of
employment.119 In both cases, the workers are deprived of
their expected salary, which they could have earned had they
not been illegally dismissed. For both workers, this
deprivation translates to economic insecurity and
disparity.120 The same is true for the distinctions between
overseas workers with an employment contract of less than
one year and overseas workers with at least one year of
employment contract, and between overseas workers with at
least a year left in their contracts and overseas workers with
less than a year left in their contracts when they were
illegally dismissed.

For this reason, we cannot subscribe to the argument that

“[overseas workers] are contractual employees who can
never acquire regular employment status, unlike local
workers”121 because it already justifies differentiated
treatment in terms of the computation of money
claims.122cralawred

Likewise, the jurisdictional and enforcement issues on

overseas workers’ money claims do not justify a
differentiated treatment in the computation of their money
claims.123 If anything, these issues justify an equal, if not
greater protection and assistance to overseas workers who
generally are more prone to exploitation given their physical
distance from our government.

We also find that the classifications are not relevant to the

purpose of the law, which is to “establish a higher standard
of protection and promotion of the welfare of migrant
workers, their families and overseas Filipinos in distress, and
for other purposes.”124 Further, we find specious the
argument that reducing the liability of placement agencies
“redounds to the benefit of the [overseas]
workers.”125cralawred

Putting a cap on the money claims of certain overseas

workers does not increase the standard of protection
afforded to them. On the other hand, foreign employers are
more incentivized by the reinstated clause to enter into
contracts of at least a year because it gives them more
flexibility to violate our overseas workers’ rights. Their
liability for arbitrarily terminating overseas workers is
decreased at the expense of the workers whose rights they
violated. Meanwhile, these overseas workers who are
impressed with an expectation of a stable job overseas for
the longer contract period disregard other opportunities only
to be terminated earlier. They are left with claims that are
less than what others in the same situation would receive.
The reinstated clause, therefore, creates a situation where
the law meant to protect them makes violation of rights
easier and simply benign to the violator.

As Justice Brion said in his concurring opinion in

Serrano:chanRoblesvirtualLawlibrary

Section 10 of R.A. No. 8042 affects these well-laid rules and

measures, and in fact provides a hidden twist affecting the
principal/employer’s liability. While intended as an incentive
accruing to recruitment/manning agencies, the law, as
worded, simply limits the OFWs’ recovery in wrongful
dismissal situations. Thus, it redounds to the benefit of
whoever may be liable, including the principal/employer –
the direct employer primarily liable for the wrongful
dismissal. In this sense, Section 10 – read as a grant of
incentives to recruitment/manning agencies – oversteps what
it aims to do by effectively limiting what is otherwise the full
liability of the foreign principals/employers. Section 10, in
short, really operates to benefit the wrong party and allows
that party, without justifiable reason, to mitigate its liability
for wrongful dismissals. Because of this hidden twist, the
limitation of liability under Section 10 cannot be an
“appropriate” incentive, to borrow the term that R.A. No.
8042 itself uses to describe the incentive it envisions under
its purpose clause.

What worsens the situation is the chosen mode of granting

the incentive: instead of a grant that, to encourage greater
efforts at recruitment, is directly related to extra efforts
undertaken, the law simply limits their liability for the
wrongful dismissals of already deployed OFWs. This is
effectively a legally-imposed partial condonation of their
liability to OFWs, justified solely by the law’s intent to
encourage greater deployment efforts. Thus, the incentive,
from a more practical and realistic view, is really part of a
scheme to sell Filipino overseas labor at a bargain for
purposes solely of attracting the market. . . .

The so-called incentive is rendered particularly odious by its

effect on the OFWs — the benefits accruing to the
recruitment/manning agencies and their principals are taken
from the pockets of the OFWs to whom the full salaries for
the unexpired portion of the contract rightfully belong. Thus,
the principals/employers and the recruitment/manning
agencies even profit from their violation of the security of
tenure that an employment contract embodies. Conversely,
lesser protection is afforded the OFW, not only because of
the lessened recovery afforded him or her by operation of
law, but also because this same lessened recovery renders a
wrongful dismissal easier and less onerous to undertake; the
lesser cost of dismissing a Filipino will always be a
consideration a foreign employer will take into account in
termination of employment decisions. . . . 126

Further, “[t]here can never be a justification for any form of

government action that alleviates the burden of one sector,
but imposes the same burden on another sector, especially
when the favored sector is composed of private businesses
such as placement agencies, while the disadvantaged sector
is composed of OFWs whose protection no less than the
Constitution commands. The idea that private business
interest can be elevated to the level of a compelling state
interest is odious.”127cralawred

Along the same line, we held that the reinstated clause

violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any
discernable valid purpose.128cralawred

Respondent Joy Cabiles is entitled to her salary for the

unexpired portion of her contract, in accordance with Section
10 of Republic Act No. 8042. The award of the three-month
equivalence of respondent’s salary must be modified
accordingly. Since she started working on June 26, 1997 and
was terminated on July 14, 1997, respondent is entitled to
her salary from July 15, 1997 to June 25, 1998. “To rule
otherwise would be iniquitous to petitioner and other OFWs,
and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may
violate an OFW’s security of tenure which an employment
contract embodies and actually profit from such violation
based on an unconstitutional provision of law.” 129cralawred
 III

On the interest rate, the Bangko Sentral ng Pilipinas Circular

No. 799 of June 21, 2013, which revised the interest rate for
loan or forbearance from 12% to 6% in the absence of
stipulation, applies in this case. The pertinent portions of
Circular No. 799, Series of 2013,
read:chanRoblesvirtualLawlibrary

The Monetary Board, in its Resolution No. 796 dated 16 May

2013, approved the following revisions governing the rate of
interest in the absence of stipulation in loan contracts,
thereby amending Section 2 of Circular No. 905, Series of
1982:cralawlawlibrary

Section 1. The rate of interest for the loan or forbearance of

any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such
rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the

Manual of Regulations for Banks and Sections 4305Q.1,
4305S.3 and 4303P.1 of the Manual of Regulations for Non-
Bank Financial Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Through the able ponencia of Justice Diosdado Peralta, we

laid down the guidelines in computing legal interest in Nacar
v. Gallery Frames:130cralawred

II. With regard particularly to an award of interest in the

concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:chanRoblesvirtualLawlibrary

1. When the obligation is breached, and it consists in the

payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from the time
it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial
 demand under and subject to the provisions of Article
1169 of the Civil Code.

2. When an obligation, not constituting a loan or

forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at
the discretion of the court at the rate of 6%  per annum.
No interest, however, shall be adjudged on unliquidated
claims or damages, except when or until the demand
can be established with reasonable certainty.
Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code), but when such certainty cannot
be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on
the amount finally adjudged.

3. When the judgment of the court awarding a sum of

money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum  from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit.

And, in addition to the above, judgments that have become

final and executory prior to July 1, 2013, shall not be
disturbed and shall continue to be implemented applying the
rate of interest fixed therein.131

Circular No. 799 is applicable only in loans and forbearance

of money, goods, or credits, and in judgments when there is
no stipulation on the applicable interest rate. Further, it is
only applicable if the judgment did not become final and
executory before July 1, 2013.132cralawred

We add that Circular No. 799 is not applicable when there is

a law that states otherwise. While the Bangko Sentral ng
Pilipinas has the power to set or limit interest rates, 133 these
interest rates do not apply when the law provides that a
different interest rate shall be applied. “[A] Central Bank
Circular cannot repeal a law. Only a law can repeal another
law.”134cralawred

For example, Section 10 of Republic Act No. 8042 provides

that unlawfully terminated overseas workers are entitled to
the reimbursement of his or her placement fee with an
interest of 12% per annum. Since Bangko Sentral ng Pilipinas
circulars cannot repeal Republic Act No. 8042, the issuance
of Circular No. 799 does not have the effect of changing the
interest on awards for reimbursement of placement fees from
12% to 6%. This is despite Section 1 of Circular No. 799,
which provides that the 6% interest rate applies even to
judgments.

Moreover, laws are deemed incorporated in contracts. “The

contracting parties need not repeat them. They do not even
have to be referred to. Every contract, thus, contains not
only what has been explicitly stipulated, but the statutory
provisions that have any bearing on the matter.” 135 There is,
therefore, an implied stipulation in contracts between the
placement agency and the overseas worker that in case the
overseas worker is adjudged as entitled to reimbursement of
his or her placement fees, the amount shall be subject to a
12% interest per annum. This implied stipulation has the
effect of removing awards for reimbursement of placement
fees from Circular No. 799’s coverage.

The same cannot be said for awards of salary for the

unexpired portion of the employment contract under Republic
Act No. 8042. These awards are covered by Circular No. 799
because the law does not provide for a specific interest rate
that should apply.

In sum, if judgment did not become final and executory

before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money
claims under Section 10 of Republic Act No. 8042 shall be
subject to the 6% interest per annum in accordance with
Circular No. 799.
This means that respondent is also entitled to an interest of
6% per annum on her money claims from the finality of this
judgment.

IV

Finally, we clarify the liabilities of Wacoal as principal and

petitioner as the employment agency that facilitated
respondent’s overseas employment.

Section 10 of the Migrant Workers and Overseas Filipinos Act

of 1995 provides that the foreign employer and the local
employment agency are jointly and severally liable for money
claims including claims arising out of an employer-employee
relationship and/or damages. This section also provides that
the performance bond filed by the local agency shall be
answerable for such money claims or damages if they were
awarded to the employee.

This provision is in line with the state’s policy of affording

protection to labor and alleviating workers’ plight. 136cralawred

In overseas employment, the filing of money claims against

the foreign employer is attended by practical and legal
complications. The distance of the foreign employer alone
makes it difficult for an overseas worker to reach it and make
it liable for violations of the Labor Code. There are also
possible conflict of laws, jurisdictional issues, and procedural
rules that may be raised to frustrate an overseas worker’s
attempt to advance his or her claims.

It may be argued, for instance, that the foreign employer

must be impleaded in the complaint as an indispensable
party without which no final determination can be had of an
action.137cralawred

The provision on joint and several liability in the Migrant

Workers and Overseas Filipinos Act of 1995 assures overseas
workers that their rights will not be frustrated with these
complications.

The fundamental effect of joint and several liability is that

“each of the debtors is liable for the entire obligation.” 138 A
final determination may, therefore, be achieved even if only
one of the joint and several debtors are impleaded in an
action. Hence, in the case of overseas employment, either
the local agency or the foreign employer may be sued for all
claims arising from the foreign employer’s labor law
violations. This way, the overseas workers are assured that
someone — the foreign employer’s local agent — may be
made to answer for violations that the foreign employer may
have committed.

The Migrant Workers and Overseas Filipinos Act of 1995

ensures that overseas workers have recourse in law despite
the circumstances of their employment. By providing that the
liability of the foreign employer may be “enforced to the full
extent”139 against the local agent, the overseas worker is
assured of immediate and sufficient payment of what is due
them.140cralawred

Corollary to the assurance of immediate recourse in law, the

provision on joint and several liability in the Migrant Workers
and Overseas Filipinos Act of 1995 shifts the burden of going
after the foreign employer from the overseas worker to the
local employment agency. However, it must be emphasized
that the local agency that is held to answer for the overseas
worker’s money claims is not left without remedy. The law
does not preclude it from going after the foreign employer for
reimbursement of whatever payment it has made to the
employee to answer for the money claims against the foreign
employer.

A further implication of making local agencies jointly and

severally liable with the foreign employer is that an additional
layer of protection is afforded to overseas workers. Local
agencies, which are businesses by nature, are inoculated
with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their
reputation or finances, local agencies must already have
mechanisms for guarding against unscrupulous foreign
employers even at the level prior to overseas employment
applications.

With the present state of the pleadings, it is not possible to

determine whether there was indeed a transfer of obligations
from petitioner to Pacific. This should not be an obstacle for
the respondent overseas worker to proceed with the
enforcement of this judgment. Petitioner is possessed with
the resources to determine the proper legal remedies to
enforce its rights against Pacific, if any.

Many times, this court has spoken on what Filipinos may

encounter as they travel into the farthest and most difficult
reaches of our planet to provide for their families. In  Prieto
v. NLRC:141cralawred

The Court is not unaware of the many abuses suffered by our

overseas workers in the foreign land where they have
ventured, usually with heavy hearts, in pursuit of a more
fulfilling future. Breach of contract, maltreatment, rape,
insufficient nourishment, sub-human lodgings, insults and
other forms of debasement, are only a few of the inhumane
acts to which they are subjected by their foreign employers,
who probably feel they can do as they please in their own
country. While these workers may indeed have relatively
little defense against exploitation while they are abroad, that
disadvantage must not continue to burden them when they
return to their own territory to voice their muted complaint.
There is no reason why, in their very own land, the
protection of our own laws cannot be extended to them in full
measure for the redress of their grievances. 142chanrobleslaw

But it seems that we have not said enough.

We face a diaspora of Filipinos. Their travails and their

heroism can be told a million times over; each of their stories
as real as any other. Overseas Filipino workers brave alien
cultures and the heartbreak of families left behind daily. They
would count the minutes, hours, days, months, and years
yearning to see their sons and daughters. We all know of the
joy and sadness when they come home to see them all
grown up and, being so, they remember what their work has
cost them. Twitter accounts, Facetime, and many other
gadgets and online applications will never substitute for their
lost physical presence.

Unknown to them, they keep our economy afloat through the

ebb and flow of political and economic crises. They are our
true diplomats, they who show the world the resilience,
patience, and creativity of our people. Indeed, we are a
people who contribute much to the provision of material
creations of this world.

This government loses its soul if we fail to ensure decent

treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when
their contracts are breached by the foreign employers. While
we sit, this court will ensure that our laws will reward our
overseas workers with what they deserve: their dignity.

Inevitably, their dignity is ours as well.

WHEREFORE, the petition is DENIED. The decision of the

Court of Appeals is AFFIRMED with modification. Petitioner
Sameer Overseas Placement Agency is ORDERED to pay
respondent Joy C. Cabiles the amount equivalent to her
salary for the unexpired portion of her employment contract
at an interest of 6% per annum from the finality of this
judgment. Petitioner is also ORDERED to reimburse
respondent the withheld NT$3,000.00 salary and pay
respondent attorney’s fees of NT$300.00 at an interest of 6%
per annum from the finality of this judgment.

The clause, “or for three (3) months for every year of the
unexpired term, whichever is less” in Section 7 of Republic
Act No. 10022 amending Section 10 of Republic Act No. 8042
is declared unconstitutional and, therefore, null and void.

SO ORDERED.
 [G.R. NO. 148893 : July 12, 2006]

SKIPPERS UNITED PACIFIC,

INC., Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION, GERVACIO ROSAROSO, and COURT OF
APPEALS, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Respondent Gervacio Rosaroso* was signed up as a Third

Engineer with Nicolakis Shipping, S.A., a foreign firm,
through its recruitment and manning agency, herein
petitioner Skippers United Pacific, Inc. The term of the
contract was for one year, starting July 10, 1997 to July 8,
1998, and with a salary of US$800.00 and other benefits.
Barely a month after boarding the vessel M/V Naval Gent on
July 15, 1997, respondent was ordered to disembark in
Varna, Bulgaria, on August 7, 1997, and repatriated to the
Philippines. Immediately after arriving in the Philippines,
respondent filed a complaint for illegal dismissal and
monetary claims on August 18, 1997. 1

In a Decision dated August 11, 1998, the Labor Arbiter found

that respondent was illegally dismissed:

WHEREFORE, in the light of the foregoing, judgment is

rendered finding the dismissal of complainant illegal. An
order is issued directing the respondents to pay complainant
the amount of US$2,400.00 or its Philippine peso equivalent
of P100,000.00 as separation pay plus the amount of
US$186.69 representing complainant's unpaid salary for
seven (7) days or in the Philippine peso equivalent
of P7,840.98 or the total amount of P108,640.98. On top of
said amount, attorney's fees of P5,000.00 is also awarded.

SO ORDERED.2

On appeal, the National Labor Relations Commission (NLRC)

affirmed the Labor Arbiter's Decision and dismissed
petitioner's appeal per its Decision dated February 26,
1999.3 Petitioner sought reconsideration thereof but its
motion was denied by the NLRC in its Resolution dated May
27, 1999.4

Thus, petitioner filed with the Court of Appeals (CA) a special

civil action for certiorari under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 53490.

On May 7, 2001, the CA5 dismissed the petition and affirmed

in toto the NLRC Decision dated February 26,
1999.6 Petitioner filed a motion for reconsideration which was
denied by the CA in its Resolution dated July 3, 2001. 7

Hence, the present Petition for Review under Rule 45 of the

Rules of Court with the following assignment of errors:

FIRST ASSIGNMENT OF ERROR

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT

PETITIONER ILLEGALLY DISMISSED THE PRIVATE
RESPONDENT.

SECOND ASSIGNMENT OF ERROR

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN

AWARDING PRIVATE RESPONDENT BACKWAGES
EQUIVALENT TO HIS THREE (3) MONTHS SALARY. 8

Petitioner's main contention is that the CA, the NLRC and the
Labor Arbiter erred in not giving "full evidentiary value" to
the telexed Chief Engineer's Report dated September 10,
1997, which specified the causes of respondent's dismissal,
quoted as follows:

TO: SKIPPERS MNL

CC: SKIPPERS PIRAEUS
FM: MV NAVAL GENT
DT: SEPT. 10, 1997

DURING SHIP REPAIR AT PERAMA DD. 18/07-31/07/97 OUR

ATTENDING SUPT. ENGINEERS CONSTANTLY OBSERVING
ALL PERSONNELS ABILITY AND ATTITUDE WITH REGARDS
TO OUR TECHNICAL CAPABILITY AND BEHAVIOURS WITH
EMPHASY [SIC] ON DISCIPLINE. IT IS ONLY UNFORTUNATE
THAT THEY NOTICED 3/E G. ROSAROSO AS BEING SLACK
AND NOT CARING OF HIS JOB AND DUTIES BEING HIRED AS
THIRD ENGR OFFICER, TO THE FULLEST BEYOND THEIR
EXPECTATION. AFTER TOO MUCH OF CONSIDERATION AND
DELIBERATION HAVING HIM CONSTANTLY ADVISED BY 2/E
F. DIAMOS ASKING FOR HIS COOPERATION TO WORK AND
HELP IN THE ONGOING ENORMOUS REPAIRS. BUT FAILED
TO HEED AND REFUSED TO BE MOTIVATED. WE HAVE
SEEKED [SIC] ADVISE FROM YOUR OFFICE VIA PHONE,
SKIPPERS PIRAEUS THRU CAPT. KAMPANIS AND THE PORT
CAPT OF NICOLAKIS SHIPPING CAPT. PAPASTILIANOS, OF
WHAT TO BE DONE. THE OWNERS RECOMMENDATION WAS
TO REPLACED [SIC] HIM ON THE FOLLOWING REASONS:

1) LACK OF DISCIPLINE - HE RESENTED DISCIPLINE. HE IS

SEEN BY SUPT. ENGRS. ON SEVERAL OCCASION DURING
WORKING HOURS STAYING ON PORTSIDE DECK SMOKING
AND HAVING SNACKS. MANY TIMES HE IS INSIDE THE
GALLEY CHATTING WITH CHIEF COOK DURING WORKING
HOURS AND HAVING SNACKS. HE TENDS TO BE
FREQUENTLY LATE FOR DUTY/WORK AND IS GENERALLY
UNRELIABLE.

2) IRRESPONSIBLE - HE HAS NOT SHOWN A HIGH SENSE OF

RESPONSIBILITY AS 3/ENGR. HE IS CAREFREE IN
DISCHARGING HIS DUTIES IN MAINTAINING THE ASSIGNED
MACHINERIES, SUCH AS BOILER, DIESEL GENERATORS,
STARTING AIR COMPRESSORS AND VARIOUS PUMPS. HE
CANNOT BE TRUSTED TO DO HIS JOB UNLESS SUPERVISED
PERPETUALLY.

3) LACK OF DILIGENCE - HE REQUIRES CONSTANT PUSHING

AND HAS TO BE WATCHED MOST OF THE TIME. LACK OF
INITIATIVE REGARDLESS OF CONSTANT MOTIVATION.

SGD. JEROME A. RETARDO

        CHIEF ENGR9

According to petitioner, the foregoing Report established that

respondent was dismissed for just cause. The CA, the NLRC,
and the Labor Arbiter, however, refused to give credence to
the Report. They are one in ruling that the Report cannot be
given any probative value as it is uncorroborated by other
evidence and that it is merely hearsay, having come from a
source, the Chief Engineer, who did not have any personal
knowledge of the events reported therein.
The Labor Arbiter ruled that the charges against respondent
are bare allegations, unsupported by corroborating evidence.
The Labor Arbiter stated that if respondent indeed committed
the alleged infractions, then these should have, at the very
least, been entered into the seaman's book, or that a copy of
the vessel's logbook presented to prove the same. 10 The
Labor Arbiter's findings were sustained by the NLRC. 11

The CA upheld these findings, succinctly stating as follows:

Verily, the report of Chief Engineer Retardo is utterly bereft

of probative value. It is not verified by an oath and,
therefore, lacks any guarantee of trustworthiness. It is
furthermore - and this is crucial - not sourced from the
personal knowledge of Chief Engineer Retardo. It is rather
based on the perception of "ATTENDING SUPT. ENGINEERS
CONSTANTLY OBSERVING ALL PERSONNELS ABILITY AND
ATTITUDE WITH REGARDS TO OUR TECHNICAL CAPABILITY
AND BEHAVIOURS WITH EMPHASY (sic) ON DISCIPLINE"
who "NOTICED 3/E ROSAROSO AS BEING SLACK AND NOT
CARING OF HIS JOB AND DUTIES X X X ." Accordingly, the
report is plain hearsay. It is not backed up by the affidavit of
any of the "Supt." Engineers who purportedly had first-hand
knowledge of private respondent's supposed "lack of
discipline," "irresponsibility" and "lack of diligence" which
caused him to lose his job. x x x 12

The Court finds no reason to reverse the foregoing findings.

To begin with, the question of whether respondent was

dismissed for just cause is a question of fact which is beyond
the province of a Petition for Review on Certiorari . It is
fundamental that the scope of the Supreme Court's judicial
review under Rule 45 of the Rules of Court is confined only to
errors of law. It does not extend to questions of fact. More so
in labor cases where the doctrine applies with greater force. 13

The Labor Arbiter and the NLRC have already determined the
factual issues, and these were affirmed by the CA. Thus, they
are accorded not only great respect but also finality, 14 and
are deemed binding upon this Court so long as they are
supported by substantial evidence.15 A heavy burden rests
upon petitioner to convince the Court that it should take
exception from such a settled rule.16
More importantly, the finding that respondent was illegally
dismissed is supported, not only by the evidence on record,
but by jurisprudence as well.

The rule in labor cases is that the employer has the burden of
proving that the dismissal was for a just cause; failure to
show this would necessarily mean that the dismissal was
unjustified and, therefore, illegal.17 The two-fold
requirements for a valid dismissal are as follows: (1)
dismissal must be for a cause provided for in the Labor Code,
which is substantive; and (2) the observance of notice and
hearing prior to the employee's dismissal, which is
procedural.18

The only evidence relied upon by petitioner in justifying

respondent's dismissal is the Chief Engineer's Report dated
September 10, 1997. The question that arises, therefore, is
whether the Report constitutes substantial evidence proving
that respondent's dismissal was for cause.

Substantial evidence is defined as that amount of relevant

evidence which a reasonable mind might accept as adequate
to justify a conclusion.19 As all three tribunals found, the
Report cannot be given any weight or credibility because it is
uncorroborated, based purely on hearsay, and obviously
merely an afterthought. While rules of evidence are not
strictly observed in proceedings before administrative
bodies,20 petitioner should have offered additional proof to
corroborate the statements described therein. Thus,
in Ranises v. National Labor Relations
Commission,21 involving a seafarer who was repatriated to
the Philippines for allegedly committing illegal acts
amounting to a breach of trust, as based on a telex dispatch
by the Master of the M/V Southern Laurel, the Court rejected
the weight given by the NLRC on the telex, to wit:

Unfortunately, the veracity of the allegations contained in the

aforecited telex was never proven by respondent employer.
Neither was it shown that respondent employer exerted any
effort to even verify the truthfulness of Capt. Sonoda's report
and establish petitioner's culpability for his alleged illegal
acts. Worse, no other evidence was submitted to corroborate
the charges against petitioner.
Similarly in this case, petitioner should have presented other
evidence to corroborate its claim that respondent's acts or
omissions aboard the vessel M/V Naval Gent warrant his
immediate repatriation. Moreover, the fact that the Report
was accomplished on September 10, 1999, or more than a
month after respondent was repatriated, makes it all the
more suspect, and was obviously made to make it appear
that there were valid reasons for respondent's dismissal.

Another analogous case worth citing is Pacific Maritime

Services, Inc. v. Ranay.22 This case involved two seafarers
repatriated to the Philippines for committing acts on board
the vessel M/V Star Princess, which acts amounted to serious
misconduct, insubordination, non-observance of proper hours
of work and damage to the laundry of the vessel's crew and
passengers. In support of its claim that the respondents were
validly dismissed, the petitioners presented its lone evidence,
a telefax transmission purportedly executed and signed by a
certain Armando Villegas, detailing the incidents which
prompted the termination of private respondents' services.
The Court, however, ruled that the telefax transmission is not
sufficient evidence, viz.:

Petitioners' reliance on the telefax transmission signed by

Armando Villegas is woefully inadequate in meeting the
required quantum of proof which is substantial evidence. For
one thing, the same is uncorroborated. Although substantial
evidence is not a function of quantity but rather of quality,
the peculiar environmental circumstances of the instant case
demand that something more should have been proffered.
According to the account of Villegas, it appears that the
incidents he was referring to transpired with the knowledge
of some crew members. The alleged assault by Gerardo
Ranay on Villegas, for instance, was supposedly witnessed by
at least four other crew members. Surprisingly, none of them
was called upon to testify, either in person or through sworn
statements. Worse, Villegas himself who omitted some vital
details in his report, such as the time and date of the
incidents referred to, was not even presented as witness so
that private respondents and the POEA hearing officer could
have been given an opportunity to cross-examine and
propound clarificatory questions regarding matters averred
by him in the telefax transmission. Moreover, although
signed, the same was not under oath and, therefore, of
dubious veracity and reliability although admissible. Likewise,
the motive is suspect and the account of the incidents
dangerously susceptible to bias since it came from a person
with whom private respondents were at odds. All told,
petitioners failed to make up for the weakness of the
evidence upon which they confidently anchored the merits of
their case.

Likewise, the belated submission of the report by Villegas,

long after the incidents referred to had taken place and after
the complaint had been lodged by private respondents,
weighs heavily against its credibility. Petitioners did not show
any convincing reason why said report was only
accomplished on September 22, 1989. They merely argued
that as in criminal cases, the witness is usually reluctant to
report an incident. At any rate, with present technology, a
ship out at sea is not so isolated that its captain cannot
instantly communicate with its office. It would appear that
the report, filed several months later, is but an afterthought.

Therefore, the CA was correct in affirming the findings and

conclusions of both the Labor Arbiter and the NLRC.

Petitioner maintains that it complied with the requisites of

procedural due process. According to petitioner, respondent
was constantly reprimanded and rebuked for his acts.
Petitioner also contends that the ship's Master is allowed to
dismiss an erring seafarer without hearing under Section 17,
paragraph D of the Philippine Overseas Employment
Administration (POEA) Standard Employment Conditions
Governing the Employment of Filipino Seafarers on Board
Ocean-Going Vessels. Paragraph D, Section 17, however, is
not applicable in respondent's case.

Section 17 sets forth the disciplinary procedures against

erring seafarers, to wit:

Section 17. DISCIPLINARY PROCEDURES

The Master shall comply with the following disciplinary

procedures against an erring seafarer:

A. The Master shall furnish the seafarer with a written notice

containing the following:
1. Grounds for the charges as listed in Section 31 of this
Contract.

2. Date, time and place for a formal investigation of the

charges against the seafarer concerned.

B. The Master or his authorized representative shall conduct

the investigation or hearing, giving the seafarer the
opportunity to explain or defend himself against the charges.
An entry on the investigation shall be entered into the ship's
logbook.

C. If, after the investigation or hearing, the Master is

convinced that imposition of a penalty is justified, the Master
shall issue a written notice of penalty and the reasons for it
to the seafarer, with copies furnished to the Philippine agent.

D. Dismissal for just cause may be effected by the Master

without furnishing the seafarer with a notice of dismissal if
doing so will prejudice the safety of the crew or the vessel.
This information shall be entered in the ship's logbook. The
Master shall send a complete report to the manning agency
substantiated by witnesses, testimonies and any other
documents in support thereof.

The foregoing provision was explained in Skippers Pacific,

Inc. v. Mira,23 as follows:

Note that under Section 17 of what is termed the Standard

Format, the "two - notice rule" is indicated. An erring seaman
is given a written notice of the charge against him and is
afforded an opportunity to explain or defend himself. Should
sanctions be imposed, then a written notice of penalty and
the reasons for it shall be furnished the erring seafarer. It is
only in the exceptional case of clear and existing
danger to the safety of the crew or vessel that the
required notices are dispensed with; but just the same,
a complete report should be sent to the manning
agency, supported by substantial evidence of the
findings. (Emphasis supplied)cralawlibrary

There is nothing on record that shows that furnishing

respondent with a notice of dismissal will pose a clear and
present danger to the vessel and its crew. And even if the
Master was justified in dispensing with the required notice,
still, it was essential that a complete report, substantiated by
witnesses, testimonies and any other documents in support
thereof, was sent to the manning agency. The record of this
case is bereft of any such report and supporting documents.
Instead, respondent was verbally ordered to disembark the
vessel and repatriated to the Philippines without being told of
the reasons why.24 Clearly, respondent was not accorded due
process.

Finally, petitioner laments the award of backwages

equivalent to three months salary in favor of respondent.
Petitioner argues that there is no basis for such award. The
Court is not persuaded.

A seafarer is not a regular employee as defined in Article 280

of the Labor Code. Hence, he is not entitled to full backwages
and separation pay in lieu of reinstatement as provided in
Article 279 of the Labor Code.25 Seafarers are contractual
employees whose rights and obligations are governed
primarily by the POEA Standard Employment Contract for
Filipino Seamen, the Rules and Regulations Governing
Overseas Employment, and, more importantly, by Republic
Act (R.A.) No. 8042, or the Migrant Workers and Overseas
Filipinos Act of 1995.26 While the POEA Standard Employment
Contract for Filipino Seamen and the Rules and Regulations
Governing Overseas Employment do not provide for the
award of separation or termination pay,27 Section 10 of R.A.
8042 provides for the award of money claims in cases of
illegal dismissals, thus:

Section 10. Money Claims. - x x x

xxx

In case of termination of overseas employment without just,

valid or authorized cause as defined by law or contract, the
worker shall be entitled to the full reimbursement of his
placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

xxx
The award of salaries for the unexpired portion of his
employment contract or for three (3) months for every year
of the unexpired term, whichever is less, is not an award of
backwages or separation pay, but a form of indemnity for the
worker who was illegally dismissed. The Labor Arbiter may
have mislabeled it as separation pay, nonetheless, the award
was made in conformity with law.

However, in the interest of substantial justice and to avoid

further litigation on the matter,28 it must be stressed that the
peso amounts equivalent to the dollar awards of the Labor
Arbiter can not be enforced for being contrary to law. The
peso equivalent of the monetary award should be computed
at the peso to dollar exchange rate prevailing at the time of
payment,29 as provided in Republic Act No. 8183, entitled "An
Act Repealing Republic Act Numbered Five Hundred Twenty-
Nine, As Amended, Entitled 'An Act to Assure the Uniform
Value of Philippine Coin and Currency', " which provides:

SECTION 1. All monetary obligations shall be settled in the

Philippine currency which is legal tender in the Philippines.
However, the parties may agree that the obligation or
transaction shall be settled in any other currency at the time
of payment.

Except for the foregoing clarification, the Court finds no

cogent reason to grant this petition.

WHEREFORE, the petition is DENIED. The Decision dated

May 7, 2001 and Resolution dated July 3, 2001 rendered by
the Court of Appeals in CA-G.R. SP No. 53490
are AFFIRMED with the MODIFICATION that the monetary
awards of US$2,400.00 and US$186.69 made by the Labor
Arbiter in its Decision dated August 11, 1998, should be
payable in its equivalent in Philippine currency computed at
the prevailing rate of exchange at the time of payment.

Let the heirs of deceased respondent represented by his

surviving wife, Carmen M. Rosaroso, residing at Hills View,
Mohon II, Tisa, Cebu City, who are hereby deemed
substituted as respondents, be sent a copy of herein
Decision.

SO ORDERED.