FIRST DIVISION
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EQUITABLE BANKING CORPORATION (now
known as EQUITABLE-PCI BANK), petitioner, - versus - RICARDO SADAC, Respondent. |
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G.R. No. 164772 Present: PANGANIBAN,
C.J. Chairperson, YNARES-SANTIAGO,* AUSTRIA-MARTINEZ,** CALLEJO, SR., and CHICO-NAZARIO, JJ. Promulgated: |
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CHICO-NAZARIO, J.:
Before Us is a Petition for Review on
Certiorari with Motion to Refer the Petition
to the Court En Banc filed by
Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to
reverse the Decision[1] and Resolution[2] of
the Court of Appeals, dated 6 April 2004 and 28 July 2004, respectively, as
amended by the Supplemental Decision[3]
dated 26 October 2004 in CA-G.R. SP No. 75013, which reversed and set aside the
Resolutions of the National Labor Relations Commission (NLRC), dated 28 March
2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.
The Antecedents
As culled from the records, respondent
Sadac was appointed Vice President of the Legal Department of petitioner Bank
effective
In a Decision[5]
dated
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former position as bank Vice-President and General Counsel without loss of seniority rights and other privileges, and to pay him full backwages and other benefits from the time his compensation was withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages of P50,000.00, and attorney’s fees equivalent to Ten Percent (10%) of the monetary award. Should reinstatement be no longer possible due to strained relations, the respondents are ordered likewise jointly and severally to grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorney’s fees equal to Ten Percent (10%) of all the monetary award, or a grand total of P1,649,329.53.[7]
Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the NLRC Resolution
of
In our Decision[9] of
WHEREFORE,
the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from
termination of employment until turning sixty (60) years of age (in 1995) and,
thereupon, to retirement benefits in accordance with law; that private
respondent shall be paid an additional amount of P5,000.00; that the
award of moral and exemplary damages are
deleted; and that the liability herein pronounced shall be due from
petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.[11]
On
Pursuant thereto, respondent Sadac filed
with the Labor Arbiter a Motion for Execution[13]
thereof. Likewise, petitioner Bank filed a Manifestation and Motion[14]
praying that the award in favor of respondent Sadac be computed and that after
payment is made, petitioner Bank be ordered forever released from liability
under said judgment.
Per respondent Sadac’s computation,
the total amount of the monetary award is P6,030,456.59, representing
his backwages and other benefits, including the general increases which he
should have earned during the period of his illegal termination. Respondent Sadac theorized that he started
with a monthly compensation of P12,500.00 in August 1981, when he was
appointed as Vice President of petitioner Bank’s Legal Department and later as
its General Counsel in December 1981. As
of November 1989, when he was dismissed illegally, his monthly compensation
amounted to P29,365.00 or more than twice his original compensation. The difference, he posited, can be attributed
to the annual salary increases which he received equivalent to 15 percent (15%)
of his monthly salary.
Respondent Sadac anchored his claim
on Article 279 of the Labor Code of the
Petitioner Bank disputed respondent
Sadac’s computation. Per its
computation, the amount of monetary award due respondent Sadac is P2,981,442.98
only, to the exclusion of the latter’s general salary increases and other
claimed benefits which, it maintained, were unsubstantiated. The jurisprudential precedent relied upon by
petitioner Bank in assailing respondent Sadac’s computation is Evangelista v. National Labor Relations Commission,[18] citing Paramount Vinyl Products Corp. v. National Labor Relations Commission,[19] holding that an unqualified award of
backwages means that the employee is paid at the wage rate at the time of his
dismissal. Furthermore, petitioner Bank
argued before the Labor Arbiter that the award of salary differentials is not
allowed, the established rule being that upon reinstatement, illegally
dismissed employees are to be paid their backwages without deduction and
qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike.
On
P6,030,456.59 representing his backwages
inclusive of allowances and other claimed benefits, namely check-up benefit,
clothing allowance, and cash conversion of vacation leave plus 12 percent (12%)
interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total of P7,398,047.48. However, considering that respondent Sadac
had already received the amount of P1,055,740.48 by virtue of a Writ of
Execution[22]
earlier issued on P6,342,307.00. The Labor
Arbiter also granted an award of attorney’s fees equivalent to ten percent
(10%) of all monetary awards, and imposed a 12 percent (12%) interest per annum
reckoned from the finality of the judgment until the satisfaction thereof.
The Labor Arbiter decreed, thus:
WHEREFORE,
in view of al (sic) the foregoing, let an “ALIAS” Writ of Execution be issued
commanding the Sheriff, this Branch, to collect from respondent Bank the amount
of Ph6,342,307.00 representing the backwages with 12% interest per annum due
complainant.[23]
Petitioner
Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,[24]
promulgated on
The dispositive portion of the
Resolution states:
WHEREFORE,
the instant appeal is considered meritorious and accordingly, the computation
prepared by respondent Equitable Banking Corporation on the award of backwages
in favor of complainant Ricardo Sadac under the decision promulgated by the
Supreme Court on June 13, 1997 in G.R. No. 102476 in the aggregate amount of
P2,981,442.98 is hereby ordered.[25]
Respondent
Sadac’s Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,[26]
promulgated on
Aggrieved,
respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking nullification of the twin
resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as well as
praying for the reinstatement of the 2 August 1999 Order of the Labor Arbiter.
For the resolution of the Court of Appeals
were the following issues, viz.:
(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance, and cash conversion of vacation leave are included in the computation of full backwages for illegally dismissed employees;
(2) Whether respondent is entitled to attorney’s fees; and
(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all accounts outstanding until full payment thereof.
Finding for respondent Sadac (therein
petitioner), the Court of Appeals rendered a Decision on
WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions of the National Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999 Order of the Labor Arbiter is REVIVED to the effect that private respondent is DIRECTED TO PAY petitioner the sum of PhP6,342,307.00, representing full back wages (sic) which sum includes annual general increases in basic salary, check-up benefit, clothing allowance, cash conversion of vacation leave and other sundry benefits plus 12% per annum interest on outstanding balance from July 28, 1997 until full payment.
Costs against private respondent.[27]
The
Court of Appeals, citing East Asiatic held
that respondent Sadac’s general increases should be added as part of his
backwages. According to the appellate
court, respondent Sadac’s entitlement to the annual general increases has been
duly proven by substantial evidence that the latter, in fact, enjoyed an annual
increase of more or less 15 percent (15%).
Respondent Sadac’s check-up benefit, clothing allowance, and cash
conversion of vacation leave were similarly ordered added in the computation of
respondent Sadac’s basic wage.
Anent the matter of attorney’s fees,
the Court of Appeals sustained the NLRC.
It ruled that our Decision[28]
of 13 June 1997 did not award attorney’s fees in respondent Sadac’s favor as
there was nothing in the aforesaid Decision, either in the dispositive portion
or the body thereof that supported the grant of attorney’s fees. Resolving the final issue, the Court of Appeals
imposed a 12 percent (12%) interest per annum on the total monetary award to be
computed from
On
Assignment of Errors
Hence,
the instant Petition for Review by petitioner Bank on the following assignment
of errors, to wit:
(a) The Hon. Court of Appeals erred
in ruling that general salary increases should be included in the computation
of full backwages.
(b)
The Hon. Court of Appeals erred in ruling that the applicable authorities in
this case are: (i) East Asiatic, Ltd. v.
CIR, 40 SCRA 521 (1971); (ii) St.
Louis College of Tuguegarao v. NLRC, 177 SCRA 151 (1989); (iii) Sigma Personnel Services v. NLRC, 224
SCRA 181 (1993); and (iv) Millares v.
NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor Code;
(ii) Paramount Vinyl Corp. v. NLRC, 190
SCRA 525 (1990); (iii) Evangelista v.
NLRC, 249 SCRA 194 (1995); and (iv) Espejo
v. NLRC, 255 SCRA 430 (1996).
(c) The Hon. Court of Appeals erred
in ruling that respondent is entitled to check-up benefit, clothing allowance
and cash conversion of vacation leaves notwithstanding that respondent did not
present any evidence to prove entitlement to these claims.
(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal interest even if the principal amount due him has not yet been correctly and finally determined.[31]
Meanwhile, on
WHEREFORE, premises considered, the
March 24 (sic), 2001 and the September 24, 2002 Resolutions of the National
Labor Relations Commission are hereby REVERSED and SET ASIDE and the August 2,
1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of P6,342,307.00,
representing full backwages which sum includes annual general increases in basic salary, check-up benefit,
clothing allowance, cash conversion of vacation leave and other sundry benefits
“and attorney’s fees equal to TEN PERCENT (10%) of all the monetary award”
plus 12% per annum interest on all outstanding balance from July 28, 1997 until
full payment.
Costs against private respondent.[32]
On
22 November 2004, petitioner Bank filed a Supplement to Petition for Review[33] contending
in the main that the Court of Appeals erred in issuing the Supplemental
Decision by directing petitioner Bank to pay an additional amount to respondent
Sadac representing attorney’s fees equal to ten
percent (10%) of all the monetary award.
The Court’s Ruling
I.
We are called to write finis to a controversy that comes to us
for the second time. At the core of the
instant case are the divergent contentions of the parties on the manner of
computation of backwages.
Petitioner Bank asseverates that Article
279 of the Labor Code of the
Petitioner Bank posits that even
granting that East Asiatic allowed general
salary increases in the computation of backwages, it was because the inclusion
was purposely to cushion the blow of the deduction of earnings derived
elsewhere; with the amendment of Article 279 and the consequent elimination of the
rule on the deduction of earnings derived elsewhere, the rationale for
including salary increases in the computation of backwages no longer exists. On the references of salary increases in the
aforementioned cases of (i)
For his part, respondent Sadac
submits that the Court of Appeals was correct when it ruled that his backwages
should include the general increases on the basis of the following cases, to
wit: (i) East Asiatic; (ii)
Resolving the protracted litigation
between the parties necessitates us to revisit our pronouncements on the interpretation
of the term backwages. We said that backwages in general are granted
on grounds of equity for earnings which a worker or employee has lost due to
his illegal dismissal.[37] It is not private compensation or damages but
is awarded in furtherance and effectuation of the public objective of the Labor
Code. Nor is it a redress of a private
right but rather in the nature of a command to the employer to make public
reparation for dismissing an employee either due to the former’s unlawful act
or bad faith.[38] The Court, in the landmark case of Bustamante v. National Labor Relations
Commission,[39]
had the occasion to explicate on the meaning of full backwages as contemplated by Article 279[40] of the Labor Code of the Philippines, as amended by Section 34 of Rep. Act
No. 6715. The Court in Bustamante said, thus:
The Court deems it
appropriate, however, to reconsider such earlier ruling on the computation of backwages as enunciated in said Pines City Educational Center
case, by now holding that conformably with the evident legislative intent as
expressed in Rep. Act No. 6715,
above-quoted, backwages to be awarded to an illegally
dismissed employee, should not, as a
general rule, be diminished or reduced by the earnings derived by him elsewhere
during the period of his illegal dismissal. The underlying reason for this ruling is that the
employee, while litigating the legality (illegality) of his dismissal, must
still earn a living to support himself and family, while full backwages have to be paid by the employer as part of the
price or penalty he has to pay for illegally dismissing his employee. The
clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously
given them under the Mercury Drug rule or the “deduction of earnings
elsewhere” rule. Thus, a closer adherence to the legislative policy
behind Rep. Act No. 6715 points to “full backwages” as meaning exactly that, i.e.,
without deducting from backwages the earnings derived
elsewhere by the concerned employee during the period of his illegal
dismissal. In other words, the provision calling for “full backwages” to illegally dismissed employees is clear,
plain and free from ambiguity and, therefore, must be applied without attempted
or strained interpretation. Index
animi sermo est.[41]
Verily, jurisprudence has shown that the definition of full
backwages has forcefully evolved. In Mercury Drug Co., Inc. v. Court of
Industrial Relations,[42]
the rule was that backwages were granted for a period of three years without
qualification and without deduction, meaning, the award of backwages was not
reduced by earnings actually earned by the dismissed employee during the
interim period of the separation. This came to be known as the Mercury Drug
rule.[43] Prior to
the Mercury Drug ruling in 1974, the total amount of backwages
was reduced by earnings obtained by the employee elsewhere from the time of the
dismissal to his reinstatement. The Mercury Drug rule was subsequently modified in Ferrer v. National
Labor Relations Commission[44] and Pines City Educational Center v.
National Labor Relations Commission,[45] where we allowed the recovery of backwages for the duration of the
illegal dismissal minus the total amount of earnings which the employee derived
elsewhere from the date of dismissal up to the date of reinstatement, if any. In Ferrer
and in Pines, the three-year
period was deleted, and instead, the dismissed employee was paid backwages for
the entire period that he was without
work subject to the deductions, as mentioned. Finally came our ruling in Bustamante which superseded Pines City Educational Center and allowed
full recovery of backwages without deduction and without qualification pursuant
to the express provisions of Article 279 of the Labor Code, as amended by Rep. Act No. 6715, i.e., without any
deduction of income the employee may have derived from employment elsewhere
from the date of his dismissal up to his reinstatement, that is, covering the
entirety of the period of
the dismissal.
The first issue for our resolution
involves another aspect in the computation of full backwages, mainly, the basis
of the computation thereof. Otherwise
stated, whether general salary increases should be included in the base figure
to be used in the computation of backwages.
In so concluding that general
salary increases should be made a component in the computation of backwages,
the Court of Appeals ratiocinated, thus:
The
Supreme Court held in East Asiatic, Ltd.
v. Court of Industrial Relations, 40 SCRA 521 (1971) that “general
increases” should be added as a part of full backwages, to wit:
In
other words, the just and equitable rule regarding the point under discussion
is this: It is the obligation of the
employer to pay an illegally dismissed employee or worker the whole amount of
the salaries or wages, plus all other benefits and bonuses and general
increases, to which he would have been normally entitled had he not been
dismissed and had not stopped working, but it is the right, on the other
hand of the employer to deduct from the total of these, the amount equivalent
to the salaries or wages the employee or worker would have earned in his old
employment on the corresponding days he was actually gainfully employed
elsewhere with an equal or higher salary or wage, such that if his salary or
wage in his other employment was less, the employer may deduct only what has
been actually earned.
The
doctrine in East Asiatic was
subsequently reiterated, in the cases of St.
Louis College of Tugueg[a]rao v.
NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v. National Labor Relations
Commission, 305 SCRA 500 (1999).
Private
respondent, in opposing the petitioner’s contention, alleged in his Memorandum
that only the wage rate at the time of the employee’s illegal dismissal should
be considered – private respondent citing the following decisions of the
Supreme Court: Paramount Vinyl Corp. v.
NLRC 190 SCRA 525 (1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v.
NLRC, 255 SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic, Ltd. v. Court of Industrial
Relations, 40 SCRA 521 (1971).
We
are not convinced.
The
Supreme Court had consistently held that payment of full backwages is the price
or penalty that the employer must pay for having illegally dismissed an
employee.
In
Ala Mode Garments, Inc. v. NLRC 268 SCRA
497 (1997) and Bustamante v. NLRC and
Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held that the
clear legislative intent in the amendment in Republic Act 6715 was to give more benefits to workers than was
previously given them under the Mercury
Drug rule or the “deductions of earnings elsewhere” rule.
The
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694
(1974), it had been the intent of the Supreme Court to increase the
backwages due an illegally dismissed employee.
In the Mercury Drug case, full
backwages was to be recovered even though a three-year limitation on recovery
of full backwages was imposed in the name of equity. Then in Bustamante,
full backwages was interpreted to mean absolutely no deductions regardless of
the duration of the illegal dismissal.
In Bustamante, the Supreme
Court no longer regarded equity as a basis when dealing with illegal dismissal
cases because it is not equity at play in illegal dismissals but rather, it is employer’s
obligation to pay full back wages (sic).
It is an obligation of the employer because it is “the price or penalty
the employer has to pay for illegally dismissing his employee.”
The
applicable modern definition of full backwages is now found in Millares v. National Labor Relations
Commission 305 SCRA 500 (1999), where although the issue in Millares concerned separation pay –
separation pay and backwages both have employee’s wage rate at their
foundation.
x x x The rationale is not difficult to
discern. It is the obligation of the employer to pay an
illegally dismissed employee the whole amount of his salaries plus all other
benefits, bonuses and general increases to which he would have been normally
entitled had he not been dismissed and had not stopped working. The same
holds true in case of retrenched employees. x x x
x x x x
x x x Annual general increases are akin to
“allowances” or “other benefits.” [46] (Italics ours.)
We do not agree.
Attention must be called to Article 279 of
the Labor Code of the Philippines, as
amended by Section 34 of Rep. Act No. 6715. The law provides as follows:
ART. 279. Security
of Tenure. – In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement. (Emphasis supplied.)
Article 279 mandates that an
employee’s full backwages shall be inclusive of allowances and other benefits
or their monetary equivalent. Contrary
to the ruling of the Court of Appeals, we do not see that a salary
increase can be interpreted as either an allowance
or a benefit. Salary increases are not akin to
allowances or benefits, and cannot be confused with either. The term “allowances” is sometimes used
synonymously with “emoluments,” as indirect or contingent remuneration, which
may or may not be earned, but which is sometimes in the nature of compensation,
and sometimes in the nature of reimbursement.[47] Allowances and benefits are granted to the
employee apart or separate from, and in addition to the wage or salary. In contrast, salary increases are amounts
which are added to the employee’s salary as an increment thereto for varied
reasons deemed appropriate by the employer.
Salary increases are not separate grants by themselves but once granted,
they are deemed part of the employee’s salary.
To extend the coverage of an allowance or a benefit to include salary
increases would be to strain both the imagination of the Court and the language
of law. As aptly observed by the NLRC,
“to otherwise give the meaning other than what the law speaks for by itself,
will open the floodgates to various interpretations.”[48] Indeed, if the intent were to include salary
increases as basis in the computation of backwages, the same should have been
explicitly stated in the same manner that the law used clear and unambiguous
terms in expressly providing for the inclusion of allowances and other benefits.
Moreover, we find East Asiatic inapplicable to the case at
bar. In East Asiatic, therein petitioner East Asiatic Company, Ltd. was
found guilty of unfair labor practices against therein respondent, Soledad A.
Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of backwages,
the Court granted the dismissed employee the whole amount of the salaries plus
all general increases and bonuses she would have received during the period of
her lay-off with the corresponding right of the employer to deduct from the
total amounts, all the earnings earned by the employee during her lay-off. The emphasis in East Asiatic is the duty of both the employer and the employee
to disclose the material facts and
competent evidence within their peculiar knowledge relative to the proper
determination of backwages, especially as the earnings derived by the employee
elsewhere are deductions to which the employer are entitled. However, East
Asiatic does not find relevance in the resolution of the issue before us. First, the
material date to consider is
A full discernment of the pertinent
portion of the judgment sought to be executed in East Asiatic Co., Ltd. would
reveal as follows:
“x x x to reinstate Soledad A. Dizon
immediately to her former position with backwages from September 1, 1958 until
actually reinstated with all the rights and privileges acquired and due her,
including seniority and such other terms and conditions of employment AT THE
TIME OF HER LAY-OFF”
The basis on which this doctrine was laid
out was summed up by the Supreme Court which ratiocinated in this light. To quote:
“x
x x on the other hand, of the employer to deduct from the total of these, the
amount equivalent to these salaries or wages the employee or worker would have
earned in his old employment on the corresponding days that he was actually
gainfully employed elsewhere with an equal or higher salary or wage, such that
if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned x x x” (Ibid,
pp. 547-548).
But
the Supreme Court, in the instant case, pronounced a clear but different
judgment from that of East Asiatic Co. decretal portion, in this wise:
“WHEREFORE,
the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from
termination of employment until turning sixty (60) years of age (in 1995) and,
thereupon, to retirement benefits in accordance with law; xxx”
Undisputably
(sic), it was decreed in plain and unambiguous language that complainant Sadac
“shall be entitled to backwages.” No
more, no less.
Thus,
this decree for Sadac cannot be considered in any way, substantially in
essence, with the award of backwages as pronounced for Ms. Dizon in the case of
East Asiatic Co. Ltd.[50]
In the same vein, we cannot accept the Court of Appeals’
reliance on the doctrine as espoused in Millares. It is evident that Millares concerns itself with the computation of the salary base
used in computing the separation pay
of petitioners therein. The
distinction between backwages and separation pay is elementary. Separation pay is granted where reinstatement
is no longer advisable because of strained relations between the employee and
the employer. Backwages represent
compensation that should have been earned but were not collected because of the
unjust dismissal. The bases for
computing the two are different, the first being usually the length of the
employee’s service and the second the actual period when he was unlawfully
prevented from working.[51]
The issue that confronted the Court in Millares was whether petitioners’ housing and transportation allowances
therein which they allegedly received on a monthly basis during their
employment should have been included in the computation of their separation
pay. It is plain to see that the
reference to general increases in Millares
citing East Asiatic was a mere obiter.
The crux in Millares was our
pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize it as regular
and forming part of salary because the nature of the grant is a factor worth
considering. Whether salary increases
are deemed part of the salary base in the computation of backwages was not the
issue in Millares.
Neither can we look at St.
Louis of Tuguegarao to resolve the
instant controversy. What was mainly
contentious therein was the inclusion of fringe benefits in the computation of
the award of backwages, in particular additional vacation and sick leaves
granted to therein concerned employees, it evidently appearing that the reference
to East Asiatic in a footnote was a
mere obiter dictum. Salary
increases are not akin to fringe benefits[52]
and neither is it logical to conceive of both as belonging to the same
taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to the case at
bar. The basic issue before the Court
therein was whether the employee, Susan Sumatre, a domestic helper in Abu
Dhabi, United Arab Emirates, had been illegally dismissed, in light of the
contention of Sigma Personnel Services, a duly licensed recruitment agency, that
the former was a mere probationary employee who was, on top of this status,
mentally unsound.[53] Even a cursory reading of Sigma Personnel Services citing St. Louis College of Tuguegarao would
readily show that inclusion of salary increases in the computation of backwages
was not at issue. The same was not on
all fours with the instant petition.
What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner
Bank’s favor and against respondent Sadac’s claim for the inclusion of general
increases in the computation of his backwages.
We stressed in
The determination of the salary base for the computation of
backwages requires simply an application of judicial precedents defining the
term "backwages". Unfortunately, the Labor Arbiter erred in this
regard. An unqualified award of backwages
means that the employee is paid at the wage rate at the time of his dismissal [
There is no
ambivalence in
In Evangelista v.
National Labor Relations Commission,[55]
we addressed the sole issue of whether the computation of the award of
backwages should be based on current wage level or the wage levels at the time
of the dismissal. We resolved that an unqualified award of
backwages means that the employee is paid at the wage rate at the time of his
dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the
determination of the salary base for the computation of backwages requires
simply an application of judicial precedents defining the term “backwages.” An unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal. Furthermore, the award of salary
differentials is not allowed, the established rule being that upon
reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other benefits
that may have been received by their co-workers who were not dismissed or did
not go on strike.[56]
The case of
We also want to clarify that when there
is an award of backwages this actually refers to backwages without
qualifications and deductions. Thus, We
held that:
“The term ‘backwages without qualification and deduction’
means that the workers are to be paid their backwages fixed as of the time of
the dismissal or strike without deduction for their earnings elsewhere during
their layoff and without qualification of their wages as thus fixed; i.e.,
unqualified by any wage increases or
other benefits that may have been received by their co-workers who are not dismissed or did not go on
strike. Awards including salary differentials are not allowed. The salary base properly used should,
however, include not only the basic salary but also the emergency cost of
living allowances and also transportation allowances if the workers are
entitled thereto.”[59]
(Italics supplied.)
Indeed, even a cursory reading of the dispositive portion of
the Court’s Decision of
A
demarcation line between salary increases and backwages was drawn by the Court
in Paguio v. Philippine Long Distance
Telephone Co., Inc.,[60] where
therein petitioner Paguio, on account
of his illegal transfer sought backwages, including an amount equal to 16
percent (16%) of his monthly salary representing his salary increases during
the period of his demotion, contending that he had been consistently granted
salary increases because of his above average or outstanding performance. We said:
In several cases, the Court had the
opportunity to elucidate on the reason for the grant of backwages. Backwages are granted on grounds of equity to
workers for earnings lost due to their illegal dismissal from work. They are a reparation for the illegal
dismissal of an employee based on earnings which the employee would have
obtained, either by virtue of a lawful decree or order, as in the case of a
wage increase under a wage order, or by rightful expectation, as in the case of
one’s salary or wage. The outstanding
feature of backwages is thus the degree of assuredness to an employee that he
would have had them as earnings had he not been illegally terminated from his
employment.
Petitioner’s claim, however, is based
simply on expectancy or his assumption that, because in the past he had been
consistently rated for his outstanding performance and his salary
correspondingly increased, it is probable that he would similarly have been
given high ratings and salary increases but for his transfer to another
position in the company.
In contrast to a grant of backwages or an
award of lucrum cessans in the civil
law, this contention is based merely on speculation. Furthermore, it assumes that in the other
position to which he had been transferred petitioner had not been given any
performance evaluation. As held by the
Court of Appeals, however, the mere fact that petitioner had been previously granted
salary increases by reason of his excellent performance does not necessarily
guarantee that he would have performed in the same manner and, therefore,
qualify for the said increase later.
What is more, his claim is tantamount to saying that he had a vested
right to remain as Head of the Garnet Exchange and given salary increases
simply because he had performed well in such position, and thus he should not
be moved to any other position where management would require his services.[61]
Applying Paguio to
the case at bar, we are not prepared to accept that this degree of assuredness
applies to respondent Sadac’s salary increases.
There was no lawful decree or order supporting his claim, such that his
salary increases can be made a component in the computation of backwages. What is evident is that salary increases are
a mere expectancy. They are, by its
nature volatile and are dependent on numerous variables, including the
company’s fiscal situation and even the employee’s future performance on the
job, or the employee’s continued stay in a position subject to management
prerogative to transfer him to another position where his services are
needed. In short, there is no vested
right to salary increases. That respondent
Sadac may have received salary increases in the past only proves fact of receipt
but does not establish a degree of assuredness that is inherent in
backwages. From the foregoing, the plain
conclusion is that respondent Sadac’s computation of his full backwages which
includes his prospective salary increases cannot be permitted.
Respondent Sadac cannot take exception by arguing that
jurisprudence speaks only of wage and
not salary, and therefore, the rule
is inapplicable to him. It is respondent Sadac’s stance that he
was not paid at the wage rate nor was he engaged in some form of manual or
physical labor as he was hired as Vice President of petitioner Bank. He cites Gaa
v. Court of Appeals[62] where the Court distinguished between
wage and salary.
The reliance is misplaced.
The distinction between salary and
wage in Gaa was for the purpose of Article 1708 of the Civil Code which
mandates that, “[t]he laborer’s wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical
attendance.” In labor law, however, the
distinction appears to be merely semantics.
P9,000.00 plus privileges. That wage
and salary are synonymous has
been settled in Songco v. National Labor
Relations Commission.[63] We said:
Broadly, the word “salary” means a recompense or
consideration made to a person for his pains or industry in another man’s
business. Whether it be derived from
“salarium,” or more fancifully from “sal,” the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered. Indeed, there is eminent authority for holding that the words “wages”
and “salary” are in essence synonymous (Words and Phrases, Vol. 38 Permanent
Edition, p. 44 citing
II.
Petitioner Bank ascribes as its second assignment of error
the Court of Appeals’ ruling that respondent Sadac is entitled to check-up
benefit, clothing allowance and cash conversion of vacation leaves
notwithstanding that respondent Sadac did not present any evidence to prove
entitlement to these claims.[65]
The determination of respondent Sadac’s entitlement to check-up
benefit, clothing allowance, and cash conversion of vacation leaves involves a
question of fact. The well-entrenched
rule is that only errors of law not of facts are reviewable by this Court in a
petition for review.[66] The jurisdiction of this Court in a petition
for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended, is limited to reviewing
only errors of law, not of fact, unless the factual findings being assailed are
not supported by evidence on record or the impugned judgment is based on a
misapprehension of facts.[67] This Court is also not precluded from delving
into and resolving issues of facts, particularly if the findings of the Labor Arbiter
are inconsistent with those of the NLRC and the Court of Appeals.[68] Such is the case in the instant petition. The Labor Arbiter and the Court of Appeals
are in agreement anent the entitlement of respondent Sadac to check-up benefit,
clothing allowance, and cash conversion of vacation leaves, but the findings of
the NLRC were to the contrary. The Labor
Arbiter sustained respondent Sadac’s entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner Bank’s
acknowledgment in its computation that respondent Sadac is entitled to certain
benefits, namely, rice subsidy, tuition fee allowance, and medicine allowance,
thus, there exists no reason to deprive respondent Sadac of his other
benefits. The Labor Arbiter also
reasoned that the petitioner Bank did not adduce evidence to support its claim
that the benefits sought by respondent Sadac are not granted to its employees
and officers. Similarly, the Court of Appeals
ratiocinated that if ordinary employees are entitled to receive these benefits,
so it is with more reason for a Vice President, like herein respondent Sadac to
receive the same.
We find in the records that, per petitioner Bank’s
computation, the benefits to be received by respondent are monthly rice
subsidy, tuition fee allowance per year, and medicine allowance per year.[69] Contained nowhere is an acknowledgment of
herein claimed benefits, namely, check-up benefit, clothing allowance, and cash
conversion of vacation leaves. We cannot
sustain the rationalization that the acknowledgment by petitioner Bank in its
computation of certain benefits granted to respondent Sadac means that the
latter is also entitled to the other benefits as claimed by him but not
acknowledged by petitioner Bank. The
rule is, he who alleges, not he who denies, must prove. Mere allegations by respondent Sadac does not
suffice in the absence of proof supporting the same.
III.
We come to the third assignment of error raised by petitioner
Bank in its Supplement to Petition for Review, assailing the
We do
not agree.
At the
outset it must be emphasized that when a final judgment becomes executory, it
thereby becomes immutable and unalterable.
The judgment may no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether the modification is attempted
to be made by the Court rendering it or by the highest Court of the land. The only recognized exceptions are the
correction of clerical errors or the making of so-called nunc pro tunc entries which cause no prejudice to any party, and,
of course, where the judgment is void.[71] The Court’s
Proceeding therefrom, we make a determination of whether the
Court in Equitable Banking Corporation v.
National Labor Relations Commission,[73] G.R. No. 102467, dated
WHEREFORE, the herein questioned
Resolution of the NLRC is AFFIRMED with the following MODIFICATIONS: That
private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to
retirement benefits in accordance with law; that private respondent shall be
paid an additional amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability
herein pronounced shall be due from petitioner bank alone, the other
petitioners being absolved from
solidary liability. No costs.[74]
The dispositive portion of the
WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former position as bank Vice-President and General Counsel without loss of seniority rights and other privileges, and to pay him full backwages and other benefits from the time his compensation was withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages of P50,000.00, and attorney’s fees equivalent to Ten Percent (10%) of the monetary award. Should reinstatement be no longer possible due to strained relations, the respondents are ordered likewise jointly and severally to grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorney’s fees equal to Ten Percent (10%) of all the monetary award, or a grand total of P1,649,329.53.[75] (Italics Ours.)
As can be gleaned from the foregoing,
the Court’s Decision of
IV.
We proceed with the penultimate issue on the entitlement of
respondent Sadac to twelve percent (12%) interest per annum on the outstanding
balance as of
In Eastern Shipping Lines, Inc. v. Court of Appeals,[76]
the Court, speaking through the Honorable Justice Jose C. Vitug,
laid down the following rules of thumb:
I. When an
obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title X
II. With regard particularly to an award of
interest in the concept of actual or compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as
follows:
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 12% 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 (Article
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 12% per annum
from such finality until its satisfaction, this interim period being deemed to
be by then an equivalent to a forbearance of credit.[77]
It is obvious that the legal interest of twelve percent (12%)
per annum shall be imposed from the time judgment becomes final and executory,
until full satisfaction thereof.
Therefore, petitioner Bank is liable to pay interest from
V.
Finally, petitioner Bank’s Motion to Refer the Petition En Banc must necessarily be denied as
established in our foregoing discussion. We are not herein modifying or reversing a
doctrine or principle laid down by the Court en banc or in a division.
The instant case is not one that should be heard by the Court en banc.[79]
Fallo
WHEREFORE, the
petition is PARTIALLY GRANTED in the
sense that in the computation of the backwages, respondent Sadac’s claimed
prospective salary increases, check-up benefit, clothing allowance, and cash
conversion of vacation leaves are excluded. The petition is PARTIALLY DENIED insofar as we AFFIRMED
the grant of attorney’s fees equal to ten percent (10%) of all the monetary
award and the imposition of twelve percent (12%) interest per annum on the
outstanding balance as of
Petitioner Bank is DIRECTED TO PAY respondent Sadac the
following:
(1) BACKWAGES in accordance with Our Decision dated
(2) ATTORNEY’S FEES equal to TEN PERCENT (10%) of the total sum of
all monetary award; and
(3) INTEREST
of TWELVE PERCENT (12%) per annum is
hereby imposed on the total sum of all monetary award from
The
Motion to Refer the Petition to the Court En
Banc is DENIED.
No
costs.
SO ORDERED.
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MINITA
V. CHICO-NAZARIO
Associate Justice |
WE CONCUR:
Chief Justice
Chairperson
On Leave
Associate Justice
Associate Justice
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Acting Chairman |
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ROMEO J.
CALLEJO, SR. Associate Justice |
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Pursuant to Article VIII, Section 13
of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
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ARTEMIO V.
PANGANIBAN Chief Justice |
* On leave.
** Acting Chairman.
[1] Rollo, pp. 30-40; Penned by Associate Justice Vicente Q. Roxas with
Associate Justices Rodrigo V. Cosico
and Mariano C. Del Castillo, concurring.
[2]
[3]
[4] Equitable Banking Corporation v. National Labor Relations Commission,
339 Phil. 541, 550-551 (1997).
[5] CA rollo, pp. 49-68.
[6]
[7]
[8] Supra note 4; See also CA rollo, pp.
106-136.
[9] Penned by Associate Justice Jose C. Vitug.
[10] Sec. 26, Rule 138, Rules of Court, now reads:
Sec. 26. Change of Attorneys. – x x x
A client may at any time dismiss his attorney or substitute another in his place, but if the contract between client and attorney has been reduced to writing and the dismissal of the attorney was without justifiable cause, he shall be entitled to recover from the client the full compensation stipulated in the contract. However, the attorney may, in the discretion of the court, intervene in the case to protect his rights. For the payment of his compensation the attorney shall have a lien upon all judgments for the payment of money, and executions issued in pursuance of such judgment, rendered in the case wherein his services had been retained by the client.
[11] Equitable Banking Corporation v. National Labor Relations Commission, supra note 4 at 569-570.
[12] See
CA rollo, p. 137.
[13]
[14]
[15] 148-B Phil. 401, 414-415 (1971).
[16] G.R. No. 74214,
[17] G.R. No. 108284,
[18] 319 Phil. 299, 301 (1995).
[19] G.R. No. 81200,
[20]
[21] 365 Phil. 42, 54 (1999).
[22] CA rollo, pp. 180-183.
[23] Rollo,
pp. 122-123.
[24]
[25]
[26]
[27]
[28] CA rollo, pp. 102-103.
[29]
[30] Rollo,
pp. 55-56.
[31]
[32]
[33]
[34] Supra note 19.
[35] Supra note 18.
[36] 325 Phil. 753, 760 (1996).
[37] Torillo
v. Leogardo, Jr., 274 Phil. 758, 765 (1991), citing Philippine
Airlines, Inc. v. National Labor Relations Commission, G.R. No. 55159, 22
December 1989, 180 SCRA 555, 565.
[38] Tomas
Claudio Memorial College, Inc. v. Court of Appeals, G.R. No. 152568, 16 February
2004, 423 SCRA 122, 134, citing Imperial Textile Mills, Inc. v. National
Labor Relations Commission, G.R. No. 101527, 19 January 1993, 217 SCRA 237,
247; St. Theresa’s School of Novaliches
Foundation v. National Labor Relations Commission, 351 Phil. 1038,
1044-1045 (1998).
[39] 332 Phil. 833 (1996).
[40] ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.
[41] Bustamante v. National Labor Relations Commission, supra note 39 at 842-843.
[42] 155 Phil. 636 (1974).
[43] See
Mercury Drug Co. Inc. v.
[44] G.R. No. 100898,
[45] G.R. No. 96779,
[46] Rollo,
pp. 33-36.
[47] Words and Phrases, Vol. 3, Permanent Edition, p. 360, citing Sherburne’s Adm’r v. United States, 16 Ct.Cl. 491, 496, 500.
[48] Rollo,
p. 66.
[49] East
Asiatic Company, Ltd. v. Court of Industrial Relations, supra note 15 at
429.
[50] Rollo,
pp. 64-65.
[51] Lim
v. National Labor Relations Commission, G.R. Nos. 79907 and 79975,
[52] Fringe benefits are defined by Section 33(B) of the Tax Code of 1997, viz.:
Section 33. Special Treatment of Fringe Benefit. – x x x
(B) Fringe Benefit Defined. - For purposes of this Section, the term 'fringe benefit' means any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees as defined herein) such as, but not limited to, the following:
(1) Housing;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver and others;
(5) Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted;
(6) Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations;
(7) Expenses for foreign travel;
(8)
(9) Educational assistance to the employee or his dependents; and
(10) Life or health insurance and other non-life
insurance premiums or similar amounts in excess of what the law allows.
[53] Sigma
Personnel Services v. National Labor Relations Commission, supra note 17 at
184.
[54] Paramount
Vinyl Products Corporation v. National Labor Relations Commission, supra
note 19 at 537.
[55] Supra note 18.
[56]
[57] Supra note 36 at 436 (1996).
[58] G.R. No. 85534,
[59]
[60] 441 Phil. 679 (2002).
[61]
[62] G.R. No. L-44169,
[63] G.R. Nos. 50999-51000,
[64]
[65] Rollo,
p. 16.
[66] Blanco v. Quasha, 376 Phil. 480, 491 (1999), citing Boneng v. People, 363 Phil. 594, 600 (1999).
[67] Manila
Bankers Life Insurance Corporation v. Ng Kok Wei, G.R. No. 139791, 12 December
2003, 418 SCRA 454, 459, citing Cosmos Bottling Corporation v. National
Labor Relations Commission, G.R. No. 146397, 1 July 2003, 405 SCRA 258,
263.
[68] Nasipit
Lumber Company v. National Organization of Workingmen (NOWM), G.R. No.
146225,
[69] CA rollo, p. 179.
[70]
[71] Nuńal
v. Court of Appeals, G.R. No. 94005, 6 April 1993, 221 SCRA 26, 32, citing Manning International Corporation v. National
Labor Relations Commission, G.R. No. 83018, 13 March 1991, 195 SCRA 155, 161; See also Ramos v. Ramos, 447
Phil. 114, 116 (2003); Argel v. Pascua, 415 Phil. 608, 612 (2001); Sacdalan v. Court of Appeals, G.R. No.
128967,
[72] Light
Rail Transit Authority v. Court of Appeals, G.R. Nos. 139275-76 and 140949,
25 November 2004, 444 SCRA 125, 136,
citing Espiritu v. Court of First
Instance of Cavite, G.R. No. L-44696,
[73] Supra note 4.
[74]
[75] CA
[76] G.R. No. 97412,
[77]
[78] Equitable
Banking Corporation v. National Labor Relations Commission, supra note 4.
[79] Sec. 4(2), Article VIII, 1987 Constitution reads:
(2) All cases involving the constitutionality of a treaty, international or executive agreement, or law, which shall be heard by the Supreme Court en banc, and all other cases which under the Rules of Court are required to be heard en banc, including those involving the constitutionality, application, or operation of presidential decrees, proclamations, orders, instructions, ordinances, and other regulations, shall be decided with the concurrence of a majority of the Members who actually took part in the deliberations on the issues in the case and voted thereon. See also Firestone Ceramics, Inc. v. Court of Appeals, 389 Phil. 810, 816-817 (2000), citing Supreme Court Circular No. 2-89, dated February 7, 1989, as amended by the Resolution of November 18, 1993, holding, viz.:
x x x the following are considered en banc cases:
1. Cases in which the constitutionality or validity of any treaty, international or executive agreement, law, executive order, or presidential decree, proclamation, order, instruction, ordinance, or regulation is in question;
2. Criminal cases in which the appealed decision imposes the death penalty;
3. Cases raising novel questions of law;
4. Cases affecting ambassadors, other public ministers and consuls;
5. Cases involving decisions, resolutions or orders of the Civil Service Commission, Commission on Elections, and Commission on Audit;
6. Cases where the penalty to be imposed is the dismissal of a judge, officer or employee of the judiciary, disbarment of a lawyer, or either the suspension of any of them for a period of more than one (1) year or a fine exceeding P10,000.00 or both;
7. Cases where a doctrine or principle laid down by the court en banc or in division may be modified or reversed;
8. Cases assigned to a division which in the opinion of at least three (3) members thereof merit the attention of the court en banc and are acceptable to a majority of the actual membership of the court en banc; and
9.
All other cases as the court en banc by a majority of its actual membership may deem of
sufficient importance to merit its attention.