Reso: Tongko vs Manulife (GR No. 167622 January 25, 2011)

Tongko vs Manufacturer’s Life Insurance Co.
GR No. 167622 January 25, 2011

Issue: Whether or not petitioner as insurance agent is an employee of respondent company.

Held: No. Based on the evidence on record, the petitioner’s occupation was to sell Manulife’s insurance policies and products from 1977 until the termination of the career agent’s agreement. The evidence also shows that through the years, Manulife permitted him to exercise guiding authority over other agents who operate under their own agency agreements with Manulife and whose commissions he shared. Under this scheme — an agreement that pervades the insurance industry — petitioner in effect became a “lead agent” and his own commissions increased as they included his share in the commissions of the other agents; he also receive greater reimbursement for expenses and was allowed to use Manulife’s facilities. His designation also changed from unit manager to branch manager and then to regional sales manager, to reflect the increase in the number of agents he recruited and guided, as well as the increase in the area where these agents operated.

In our June 29, 2010 resolution, we noted that there are built in elements of control specific to an insurance agency, which do not amount to the elements of control that characterizes an employment relationship governed by the labor code. The insurance code provides definite parameters in the way an agent negotiates for the sale of the company’s insurance products, his collection activities and his delivery of the insurance contract or policy. In addition, the civil code defines an agent as a person who binds himself to do something in behalf of another, with the consent or authority of the latter. Article 1887 of the civil code also provides that in the execution of the agency, the agent shall act in accordance with the instructions of the principal.

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Dumpit-Murillo vs CA (GR No. 164652 June 8, 2007)

Dumpit-Murillo vs Court of Appeals
GR No. 164652 June 8, 2007

Facts: On October 2, 1995, under talent contract no. NT95-1805, private respondent Associated Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor of Balitang-Balita, an early evening news program. The contract was for a period of 3 months. It renewed under talent contract nos. NT95-1915, NT96-3002, NT98-4984, and NT99-5649. In addition, petitioner’s services were engaged for the program “Live on Five.” On September 30, 1999, after 4 years of repeated renewals, petitioner’s talent contract expired. Two weeks after the expiration of the last contract, petitioner sent a letter to Mr. Jose Javier, Vice President for news and public affairs of ABC, informing the latter that she was still interested in renewing her contract subject to a salary increase, thereafter, petitioner stopped reporting for work. On November 5, 1999 she wrote Mr. Javier another letter.

Issue: Whether or not the continuous renewal of petitioner’s talent contracts constitute regularity in the employment status.

Held: Yes. An employer-employee relationship was created when the private respondents started to merely renew the contracts repeatedly 15 times for 4 consecutive years.

Petitioner was a regular employee under contemplation of law. The practice of having fixed-term contracts in the industry does not automatically make all talent contracts valid and compliant with labor law. The assertion that a talent contract exists does not necessarily prevent a regular employment status.

The elements to determine the existence of an employment relationship are: a.) The selection and engagement of the employee; b.) The payment of wages; c.) The power of dismissal; and d.) The employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.

The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work or petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioner’s wages. ABC also had power to dismiss her. All these being present, clearly there existed an employment relationship between petitioner and ABC. 

Concerning regular employment, the law provides for 2 kinds of employees, namely: 1.) Those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and 2.) Those who have rendered at least one year of service, whether continuous or broken with respect to the activity in which they are employed. In other words, regular status arises from either the nature of work of the employee or the duration of his employment.

The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee vis-a-vis the usual trade or business of the employer. This connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. If the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. 

AFP Mutual vs NLRC (GR No. 102199 January 28, 1997)

AFP Mutual Benefit Association Inc vs National Labor Relations Commission
GR No. 102199 January 28, 1997

Facts: Private respondent Eutiquio Bustamente had been an insurance underwriter of petitioner AFP Mutual Benefit Association Inc. since 1975. The sales agreement provided for Bustamente’s duties and obligations, commissions and a statement that there shall be no employer-employee relationship between the parties, the sales agent being hereby deemed an independent contractor. On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for another life insurance company in violation of said agreement. On November 23, 1989, private respondent filed a complaint with the office of the insurance commissioner praying for the payment of the correct amount of his commission. Atty. German C. Alejandria, chief of the public assistance and information division, office of the insurance commissioner, advised private respondent that it was the DOLE that had jurisdiction over his complaint. On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming : 1.) Commission for 2 years from termination of employment equivalent to 30% of premiums remitted during employment; 2.) P354,796 as commissioned earned from renewals and old business generated since 1983; 3.) P100,000 as moral damages; and 4.) P100,000 as exemplary damages.

Issue: Whether or not there existed an employer-employee relationship between petitioner and private respondent.

Held: No. Well settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial evidence. The determinative factor in such finality is the presence of substantial evidence to support said finding. Otherwise, such factual findings cannot bind this court.

Time and again, the court has applied the four-fold test in determining the existence of employer-employee relationship. This test considers the following elements: 1.) The power to hire; 2.) The payment of wages; 3.) The power to dismiss; 4.) The power to control, the last being the most important element.

The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business exclusively for petitioner could hardly be considered as control on labor jurisprudence. Under memo circulars no. 2-81 and 2-85, dated December 17, 1981 and August 7, 1985 respectively issued by the insurance commissioner, insurance agents are barred from serving more than one insurance companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the insurance commission, and not from an intention by petitioner to establish control over the method and manner by which private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship between the parties, nor does it necessarily imbued such relationship with the quality of control envisioned by law.

To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority yo control the method and the details of performance of the service being rendered, and the degree to which the principal may intervene to exercise such control. The presence of such power of control is indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine claiming to be independent contractor has contracted to do the work according to his own methods and without being the subject to the control of the employer except only as to the result of his work. Such is exactly the nature of the relationship between petitioner and private respondent.

Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot be properly invoked by respondent commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action. Moreover, in the proceedings below, the petitioner consistently challenged the jurisdiction of the labor arbiter and respondent commission.

Insular Life vs NLRC (GR No. 119930 March 12, 1998)

Insular Life Assurance Co. Ltd. vs National Labor Relations Commission (Delos Reyes)
GR No. 119930 March 12, 1998

Facts: On August 21, 1992 petitioner entered into an agency contract with respondent Pantaleon Delos Reyes authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of commitment. The contract was prepared by petitioner in its entirety and Delos Reyes merely signed his confirmity thereto. It contained the stipulation that no employer-employee relationship shall be created between the parties and that the agent shall be free to exercise his own judgement as to time, place and means of soliciting insurance. Delos Reyes however was prohibited by petitioner from working for any other life insurance company, and violation of this stipulation was sufficient ground for termination of the contract. Aside from soliciting insurance for the petitioner, private respondent was required to submit to the former all completed applications for insurance within 90 consecutive days, deliver policies, receive and collect initial premiums and balances of first year premiums, renewal premiums, deposits on applications and payments on policy loans. Private respondent was also bound to turn over to the company immediately any and all sums of money collected by him. In a written communication by petitioner to respondent Delos Reyes, the latter was urged to register with the Social Security System (SSS) as a self-employed individual as provided under PD 1636. On March 1, 1993, petitioner and private respondent entered into another contract where the latter was appointed as acting, unit manager under its office — the Cebu DSO vs Private respondent concurrently as agent and acting unit manager until he was notified by petitioner on November 18, 1993 that his services were terminated effective December 18, 1993. On November 7, 1994 he filed a complaint before the labor arbiter on the ground that he was illegally dismissed and that he was not paid his salaries and separation pay.

Issue: Whether or not there is an employer-employee relationship between the parties to entitle jurisdiction of the case before the labor arbiter.

Held: Yes. It is axiomatic that existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management contract and providing therein that the employee is an independent contractor when the terms of the agreement clearly shows otherwise. For, the employment status of a person is defined and prescribed by law and not by what the parties say it should be. In determining the status of the management contract, the “four-fold test” on employment earlier mentioned has to be applied.

Unlike Basiao, herein respondent Delos Reyes was appointed acting unit manager, not agency manager. There is no evidence that to implement his obligations under the management contract, Delos Reyes had organized an office. Petitioner in fact has admitted that it provided Delos Reyes a place and a table at its office where he reported for and worked whenever he was not out in the field. Placed under petitioner’s Cebu District Service Office, the unit was given a name by petitioner – Delos Reyes and Associates — and assigned code no. 11753 and recruitment no. 109398. Under the managership contract, Delos Reyes was obliged to work exclusively for petitioner in life insurance solicitation and was imposed premium production quotas. Of course, the acting unit manager could not underwrite other lines of insurance because his permanent certificate of authority was for life insurance only and for no other. He was proscribed from accepting a managerial or supervisory position. In any other office including the government without the written consent of petitioner. Delos Reyes could only be promoted to permanent unit manager if he met certain requirements and his promotion was recommended by the petitioner’s district manager and regional manager and approved by its division manager. As acting unit manager, Delos Reyes performed functions beyond mere solicitation of insurance business for petitioner. As found by the NLRC, he exercised administrative functions which were necessary and beneficial to the business of insular life.

Exclusivity of service, control of assignment and removal of agents under private respondent’s unit, collection of premiums, furnishing company facilities and materials as well as capital described as unit development fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon Delos Reyes was an employee of herein petitioner.

Insular Life vs NLRC (GR No. 84484 November 15, 1989)

Insular Life Assurance Co. Ltd vs National Labor Relations Commission
GR No. 84484 November 15, 1989

Facts: On July 2, 1968, Insular Life Assurance Co. Ltd and Melecio T. Basiao entered into a contract by which:

  1. Basiao was “authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations” of the company;
  2. He would receive “compensation, in the form of commissions.. as provided in the schedule of commissions” of the contract to “constitute a part of the consideration of (said) agreement,” and;
  3. The “rules in (the company) rate book and its agent’s manual as well as all circulars and those which may from time to time be promulgated by it,” were made part of said contract.

Some four years later, in April 1972, the parties entered into another contract – An agency manager’s contract – and to implement his end of it Basiao organized an agency or office to which he gave the name M Basiao and Associates, while concurrently fulfilling this commitments under the first contract with the company.

In May 1979, the company terminated the Agency Manager’s contract. After seeking a reconsideration, Basiao sued the company in a civil action and this was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commission starting April 1, 1980.

Issue: Whether or not the Labor Arbiter have jurisdiction by virtue of the contract between the company and Basiao.

Held: No. In determining the existence of employer-employee relationship, the following elements are generally considered namely: 

  1. The selection and engagement of the employee;
  2. The payment of wages;
  3. The power of dismissal; and
  4. The power to control the employee’s conduct

— although the latter is the most important element.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance and is on that account subject to regulation by the state with respect, not only to the internal affairs of the insurance company. Rules and Regulations governing the conduct of the business are provided for in the insurance code and enforced by the insurance commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribes the qualifications of persons who may be insured, subject insurance applications to processing and approval by the company and also reserve to the company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agents contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish on employer-employee relationship between him and the company.

The labor arbiter’s decision makes reference to Basiao’s claim of having been connected with the company for 25 years whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao’s status under the contract of July 2, 1968, not the length of his relationship with the company.

The court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The labor arbiter erred in taking cognizance of and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the arbiter’s decision. This conclusion renders it unnecessary and premature to consider Basiao’s claim for commission on its merits.

MR: Kida vs Senate (G.R. No. 196271 February 28, 2012)

Kida vs Senate of the Philippines
G.R. No. 196271 February 28, 2012
FACTS: We resolve: (a) the motion for reconsideration filed by petitioners Datu Michael Abas Kida, et al. in G.R. No. 196271; (b) the motion for reconsideration filed by petitioner Rep. Edcel Lagman in G.R. No. 197221; (c) the ex abundante ad cautelam motion for reconsideration filed by petitioner Basari Mapupuno in G.R. No. 196305; (d) the motion for reconsideration filed by petitioner Atty. Romulo Macalintal in G.R. No. 197282; (e) the motion for reconsideration filed by petitioners Almarim Centi Tillah, Datu Casan Conding Cana and Partido Demokratiko Pilipino Lakas ng Bayan in G.R. No. 197280; (f) the manifestation and motion filed by petitioners Almarim Centi Tillah, et al. in G.R. No. 197280; and (g) the very urgent motion to issue clarificatory resolution that the temporary restraining order (TRO) is still existing and effective.

These motions assail our Decision dated October 18, 2011, where we upheld the constitutionality of Republic Act (RA) No. 10153. Pursuant to the constitutional mandate of synchronization, RA No. 10153 postponed the regional elections in the Autonomous Region in Muslim Mindanao (ARMM) (which were scheduled to be held on the second Monday of August 2011) to the second Monday of May 2013 and recognized the President’s power to appoint officers-in-charge (OICs) to temporarily assume these positions upon the expiration of the terms of the elected officials.

Issues: (a) Does the Constitution mandate the synchronization of ARMM regional elections with national and local elections?

(b) Does RA No. 10153 amend RA No. 9054? If so, does RA No. 10153 have to comply with the supermajority vote and plebiscite requirements?

(c) Is the holdover provision in RA No. 9054 constitutional?

(d) Does the COMELEC have the power to call for special elections in ARMM?

(e) Does granting the President the power to appoint OICs violate the elective and representative nature of ARMM regional legislative and executive offices?

(f) Does the appointment power granted to the President exceed the President’s supervisory powers over autonomous regions?

Held: YES. Synchronization mandate includes ARMM elections

The Court was unanimous in holding that the Constitution mandates the synchronization of national and local elections. While the Constitution does not expressly instruct Congress to synchronize the national and local elections, the intention can be inferred from the following provisions of the Transitory Provisions (Article XVIII) of the Constitution, which state:

Section 1. The first elections of Members of the Congress under this Constitution shall be held on the second Monday of May, 1987.

The first local elections shall be held on a date to be determined by the President, which may be simultaneous with the election of the Members of the Congress. It shall include the election of all Members of the city or municipal councils in the Metropolitan Manila area.

Section 2. The Senators, Members of the House of Representatives, and the local officials first elected under this Constitution shall serve until noon of June 30, 1992.

Of the Senators elected in the elections in 1992, the first twelve obtaining the highest number of votes shall serve for six years and the remaining twelve for three years.

The inclusion of autonomous regions in the enumeration of political subdivisions of the State under the heading “Local Government” indicates quite clearly the constitutional intent to consider autonomous regions as one of the forms of local governments.

NO. A thorough reading of RA No. 9054 reveals that it fixes the schedule for only the first ARMM elections;11 it does not provide the date for the succeeding regular ARMM elections. In providing for the date of the regular ARMM elections, RA No. 9333 and RA No. 10153 clearly do not amend RA No. 9054 since these laws do not change or revise any provision in RA No. 9054. In fixing the date of the ARMM elections subsequent to the first election, RA No. 9333 and RA No. 10153 merely filled the gap left in RA No. 9054.

We reiterate our previous observations:

This view – that Congress thought it best to leave the determination of the date of succeeding ARMM elections to legislative discretion – finds support in ARMM’s recent history.

To recall, RA No. 10153 is not the first law passed that rescheduled the ARMM elections. The First Organic Act – RA No. 6734 – not only did not fix the date of the subsequent elections; it did not even fix the specific date of the first ARMM elections, leaving the date to be fixed in another legislative enactment. Consequently, RA No. 7647, RA No. 8176, RA No. 8746, RA No. 8753, and RA No. 9012 were all enacted by Congress to fix the dates of the ARMM elections. Since these laws did not change or modify any part or provision of RA No. 6734, they were not amendments to this latter law. Consequently, there was no need to submit them to any plebiscite for ratification.

The Second Organic Act – RA No. 9054 – which lapsed into law on March 31, 2001, provided that the first elections would be held on the second Monday of September 2001. Thereafter, Congress passed RA No. 9140 to reset the date of the ARMM elections. Significantly, while RA No. 9140 also scheduled the plebiscite for the ratification of the Second Organic Act (RA No. 9054), the new date of the ARMM regional elections fixed in RA No. 9140 was not among the provisions ratified in the plebiscite held to approve RA No. 9054. Thereafter, Congress passed RA No. 9333, which further reset the date of the ARMM regional elections. Again, this law was not ratified through a plebiscite.

From these legislative actions, we see the clear intention of Congress to treat the laws which fix the date of the subsequent ARMM elections as separate and distinct from the Organic Acts. Congress only acted consistently with this intent when it passed RA No. 10153 without requiring compliance with the amendment prerequisites embodied in Section 1 and Section 3, Article XVII of RA No. 9054.12 (emphases supplied)

YES. The clear wording of Section 8, Article X of the Constitution expresses the intent of the framers of the Constitution to categorically set a limitation on the period within which all elective local officials can occupy their offices. We have already established that elective ARMM officials are also local officials; they are, thus, bound by the three-year term limit prescribed by the Constitution. It, therefore, becomes irrelevant that the Constitution does not expressly prohibit elective officials from acting in a holdover capacity. Short of amending the Constitution, Congress has no authority to extend the three-year term limit by inserting a holdover provision in RA No. 9054. Thus, the term of three years for local officials should stay at three (3) years, as fixed by the Constitution, and cannot be extended by holdover by Congress.

Admittedly, we have, in the past, recognized the validity of holdover provisions in various laws. One significant difference between the present case and these past cases is that while these past cases all refer to electivebarangay or sangguniang kabataan officials whose terms of office are not explicitly provided for in the Constitution, the present case refers to local elective officials – the ARMM Governor, the ARMM Vice Governor, and the members of the Regional Legislative Assembly – whose terms fall within the three-year term limit set by Section 8, Article X of the Constitution.

Even assuming that a holdover is constitutionally permissible, and there had been statutory basis for it (namely Section 7, Article VII of RA No. 9054), the rule of holdover can only apply as an available option where no express or implied legislative intent to the contrary exists; it cannot apply where such contrary intent is evident.

Congress, in passing RA No. 10153 and removing the holdover option, has made it clear that it wants to suppress the holdover rule expressed in RA No. 9054. Congress, in the exercise of its plenary legislative powers, has clearly acted within its discretion when it deleted the holdover option, and this Court has no authority to question the wisdom of this decision, absent any evidence of unconstitutionality or grave abuse of discretion. It is for the legislature and the executive, and not this Court, to decide how to fill the vacancies in the ARMM regional government which arise from the legislature complying with the constitutional mandate of synchronization.

NO. COMELEC has no authority to hold special elections

Neither do we find any merit in the contention that the Commission on Elections (COMELEC) is sufficiently empowered to set the date of special elections in the ARMM. To recall, the Constitution has merely empowered the COMELEC to enforce and administer all laws and regulations relative to the conduct of an election. Although the legislature, under the Omnibus Election Code (Batas Pambansa Bilang [BP] 881), has granted the COMELEC the power to postpone elections to another date, this power is confined to the specific terms and circumstances provided for in the law. Specifically, this power falls within the narrow confines of the following provisions:

Section 5. Postponement of election. – When for any serious cause such as violenceterrorismloss or destruction of election paraphernalia or records, force majeure, and other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible in any political subdivision, the Commission, motu proprio or upon a verified petition by any interested party, and after due notice and hearing, whereby all interested parties are afforded equal opportunity to be heard, shall postpone the election therein to a date which should be reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause for such postponement or suspension of the election or failure to elect.

Section 6. Failure of election. – If, on account of force majeureviolenceterrorismfraud, or other analogous causes the election in any polling place has not been held on the date fixed, or had been suspended before the hour fixed by law for the closing of the voting, or after the voting and during the preparation and the transmission of the election returns or in the custody or canvass thereof, such election results in a failure to elect, and in any of such cases the failure or suspension of election would affect the result of the election, the Commission shall, on the basis of a verified petition by any interested party and after due notice and hearing, call for the holding or continuation of the election not held, suspended or which resulted in a failure to elect on a date reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause of such postponement or suspension of the election or failure to elect. [emphases and underscoring ours]

YES. The power to appoint has traditionally been recognized as executive in nature. Section 16, Article VII of the Constitution describes in broad strokes the extent of this power, thus:

YES. We reiterate once more the importance of considering RA No. 10153 not in a vacuum, but within the context it was enacted in. In the first place, Congress enacted RA No. 10153 primarily to heed the constitutional mandate to synchronize the ARMM regional elections with the national and local elections. To do this, Congress had to postpone the scheduled ARMM elections for another date, leaving it with the problem of how to provide the ARMM with governance in the intervening period, between the expiration of the term of those elected in August 2008 and the assumption to office – twenty-one (21) months away – of those who will win in the synchronized elections on May 13, 2013.

In our assailed Decision, we already identified the three possible solutions open to Congress to address the problem created by synchronization – (a) allow the incumbent officials to remain in office after the expiration of their terms in a holdover capacity; (b) call for special elections to be held, and shorten the terms of those to be elected so the next ARMM regional elections can be held on May 13, 2013; or (c) recognize that the President, in the exercise of his appointment powers and in line with his power of supervision over the ARMM, can appoint interim OICs to hold the vacated positions in the ARMM regional government upon the expiration of their terms. We have already established the unconstitutionality of the first two options, leaving us to consider the last available option.

In this way, RA No. 10153 is in reality an interim measure, enacted to respond to the adjustment that synchronization requires. Given the context, we have to judge RA No. 10153 by the standard of reasonableness in responding to the challenges brought about by synchronizing the ARMM elections with the national and local elections. In other words, “given the plain unconstitutionality of providing for a holdover and the unavailability of constitutional possibilities for lengthening or shortening the term of the elected ARMM officials, is the choice of the President’s power to appoint – for a fixed and specific period as an interim measure, and as allowed under Section 16, Article VII of the Constitution – an unconstitutional or unreasonable choice for Congress to make?

Kida vs Senate (G.R. No. 196271 October 18, 2011)

Kida vs Senate of the Philippines
G.R. No. 196271 October 18, 2011

Facts: The State, through Sections 15 to 22, Article X of the 1987 Constitution, mandated the creation of autonomous regions in Muslim Mindanao and the Cordilleras. Section 15 states:

Section 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural heritage, economic and social structures, and other relevant characteristics within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines.

Section 18 of the Article, on the other hand, directed Congress to enact an organic act for these autonomous regions to concretely carry into effect the granted autonomy.

Section 18. The Congress shall enact an organic act for each autonomous region with the assistance and participation of the regional consultative commission composed of representatives appointed by the President from a list of nominees from multisectoral bodies. The organic act shall define the basic structure of government for the region consisting of the executive department and legislative assembly, both of which shall be elective and representative of the constituent political units. The organic acts shall likewise provide for special courts with personal, family and property law jurisdiction consistent with the provisions of this Constitution and national laws.

The creation of the autonomous region shall be effective when approved by a majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and geographic areas voting favorably in such plebiscite shall be included in the autonomous region.

On August 1, 1989 or two years after the effectivity of the 1987 Constitution, Congress acted through Republic Act (RA) No. 6734 entitled “An Act Providing for an Organic Act for the Autonomous Region in Muslim Mindanao.” A plebiscite was held on November 6, 1990 as required by Section 18(2), Article X of RA No. 6734, thus fully establishing the Autonomous Region of Muslim Mindanao (ARMM). The initially assenting provinces were Lanao del Sur, Maguindanao, Sulu and Tawi-tawi. RA No. 6734 scheduled the first regular elections for the regional officials of the ARMM on a date not earlier than 60 days nor later than 90 days after its ratification.

RA No. 9054 (entitled “An Act to Strengthen and Expand the Organic Act for the Autonomous Region in Muslim Mindanao, Amending for the Purpose Republic Act No. 6734, entitled An Act Providing for the Autonomous Region in Muslim Mindanao, as Amended”) was the next legislative act passed. This law provided further refinement in the basic ARMM structure first defined in the original organic act, and reset the regular elections for the ARMM regional officials to the second Monday of September 2001.

Congress passed the next law affecting ARMM – RA No. 91401 – on June 22, 2001. This law reset the first regular elections originally scheduled under RA No. 9054, to November 26, 2001. It likewise set the plebiscite to ratify RA No. 9054 to not later than August 15, 2001.

RA No. 9054 was ratified in a plebiscite held on August 14, 2001. The province of Basilan and Marawi City voted to join ARMM on the same date.

RA No. 93332 was subsequently passed by Congress to reset the ARMM regional elections to the 2nd Monday of August 2005, and on the same date every 3 years thereafter. Unlike RA No. 6734 and RA No. 9054, RA No. 9333 was not ratified in a plebiscite.

Pursuant to RA No. 9333, the next ARMM regional elections should have been held on August 8, 2011. COMELEC had begun preparations for these elections and had accepted certificates of candidacies for the various regional offices to be elected. But on June 30, 2011, RA No. 10153 was enacted, resetting the ARMM elections to May 2013, to coincide with the regular national and local elections of the country.

RA No. 10153 originated in the House of Representatives as House Bill (HB) No. 4146, seeking the postponement of the ARMM elections scheduled on August 8, 2011. On March 22, 2011, the House of Representatives passed HB No. 4146, with one hundred ninety one (191) Members voting in its favor.

Issue: Whether or not RA 10153 is constitutional.

Held: Yes. Congress acted within its powers and pursuant to a constitutional mandate – the synchronization of national and local elections – when it enacted RA No. 10153. This Court cannot question the manner by which Congress undertook this task; the Judiciary does not and cannot pass upon questions of wisdom, justice or expediency of legislation. As judges, we can only interpret and apply the law and, despite our doubts about its wisdom, cannot repeal or amend it.

We find that Congress, in passing RA No. 10153, acted strictly within its constitutional mandate. Given an array of choices, it acted within due constitutional bounds and with marked reasonableness in light of the necessary adjustments that synchronization demands. Congress, therefore, cannot be accused of any evasion of a positive duty or of a refusal to perform its duty. We thus find no reason to accord merit to the petitioners’ claims of grave abuse of discretion.

The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers which enjoins upon each department a becoming respect for the acts of the other departments. The theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted. [Emphasis ours.]

Given the failure of the petitioners to rebut the presumption of constitutionality in favor of RA No. 10153, we must support and confirm its validity.

I. Synchronization as a recognized constitutional mandate

While the Constitution does not expressly state that Congress has to synchronize national and local elections, the clear intent towards this objective can be gleaned from the Transitory Provisions (Article XVIII) of the Constitution, which show the extent to which the Constitutional Commission, by deliberately making adjustments to the terms of the incumbent officials, sought to attain synchronization of elections.

The objective behind setting a common termination date for all elective officials, done among others through the shortening the terms of the twelve winning senators with the least number of votes, is to synchronize the holding of all future elections – whether national or local – to once every three years. This intention finds full support in the discussions during the Constitutional Commission deliberations.

These Constitutional Commission exchanges, read with the provisions of the Transitory Provisions of the Constitution, all serve as patent indicators of the constitutional mandate to hold synchronized national and local elections, starting the second Monday of May, 1992 and for all the following elections.

Although called regional elections, the ARMM elections should be included among the elections to be synchronized as it is a “local” election based on the wording and structure of the Constitution.

A basic rule in constitutional construction is that the words used should be understood in the sense that they have in common use and given their ordinary meaning, except when technical terms are employed, in which case the significance thus attached to them prevails. As this Court explained in People v. Derilo, “[a]s the Constitution is not primarily a lawyer’s document, its language should be understood in the sense that it may have in common. Its words should be given their ordinary meaning except where technical terms are employed.”

Understood in its ordinary sense, the word “local” refers to something that primarily serves the needs of a particular limited district, often a community or minor political subdivision. Regional elections in the ARMM for the positions of governor, vice-governor and regional assembly representatives obviously fall within this classification, since they pertain to the elected officials who will serve within the limited region of ARMM.

From the perspective of the Constitution, autonomous regions are considered one of the forms of local governments, as evident from Article X of the Constitution entitled “Local Government.” Autonomous regions are established and discussed under Sections 15 to 21 of this Article – the article wholly devoted to Local Government. That an autonomous region is considered a form of local government is also reflected in Section 1, Article X of the Constitution.

II. The President’s Certification on the Urgency of RA No. 10153

The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of martial law Art. VII, Section 18, or the existence of a national emergency justifying the delegation of extraordinary powers to the President under Art. VI, Section 23(2) is subject to judicial review because basic rights of individuals may be of hazard. But the factual basis of presidential certification of bills, which involves doing away with procedural requirements designed to insure that bills are duly considered by members of Congress, certainly should elicit a different standard of review. [Emphasis supplied.]

The House of Representatives and the Senate – in the exercise of their legislative discretion – gave full recognition to the President’s certification and promptly enacted RA No. 10153. Under the circumstances, nothing short of grave abuse of discretion on the part of the two houses of Congress can justify our intrusion under our power of judicial review.

III. A. RA No. 9333 and RA No. 10153 are not amendments to RA No. 9054

From these legislative actions, we see the clear intention of Congress to treat the laws which fix the date of the subsequent ARMM elections as separate and distinct from the Organic Acts. Congress only acted consistently with this intent when it passed RA No. 10153 without requiring compliance with the amendment prerequisites embodied in Section 1 and Section 3, Article XVII of RA No. 9054.

III. B. Supermajority voting requirement unconstitutional for giving RA No. 9054 the character of an irrepealable law

Moreover, it would be noxious anathema to democratic principles for a legislative body to have the ability to bind the actions of future legislative body, considering that both assemblies are regarded with equal footing, exercising as they do the same plenary powers. Perpetual infallibility is not one of the attributes desired in a legislative body, and a legislature which attempts to forestall future amendments or repeals of its enactments labors under delusions of omniscience.

xxx

A state legislature has a plenary law-making power over all subjects, whether pertaining to persons or things, within its territorial jurisdiction, either to introduce new laws or repeal the old, unless prohibited expressly or by implication by the federal constitution or limited or restrained by its own. It cannot bind itself or its successors by enacting irrepealable laws except when so restrained. Every legislative body may modify or abolish the acts passed by itself or its predecessors. This power of repeal may be exercised at the same session at which the original act was passed; and even while a bill is in its progress and before it becomes a law. This legislature cannot bind a future legislature to a particular mode of repeal. It cannot declare in advance the intent of subsequent legislatures or the effect of subsequent legislation upon existing statutes.(Emphasis ours.)

Thus, while a supermajority is not a total ban against a repeal, it is a limitation in excess of what the Constitution requires on the passage of bills and is constitutionally obnoxious because it significantly constricts the future legislators’ room for action and flexibility.

III. C. Section 3, Article XVII of RA No. 9054 excessively enlarged the plebiscite requirement found in Section 18, Article X of the Constitution

The requirements of RA No. 9054 not only required an unwarranted supermajority, but enlarged as well the plebiscite requirement, as embodied in its Section 3, Article XVII of that Act. As we did on the supermajority requirement, we find the enlargement of the plebiscite requirement required under Section 18, Article X of the Constitution to be excessive to point of absurdity and, hence, a violation of the Constitution.

IV. The synchronization issue

As we discussed above, synchronization of national and local elections is a constitutional mandate that Congress must provide for and this synchronization must include the ARMM elections. On this point, an existing law in fact already exists – RA No. 7166 – as the forerunner of the current RA No. 10153. RA No. 7166 already provides for the synchronization of local elections with the national and congressional elections. Thus, what RA No. 10153 provides is an old matter for local governments (with the exception of barangay and Sanggunian Kabataan elections where the terms are not constitutionally provided) and is technically a reiteration of what is already reflected in the law, given that regional elections are in reality local elections by express constitutional recognition.

To achieve synchronization, Congress necessarily has to reconcile the schedule of the ARMM’s regular elections (which should have been held in August 2011 based on RA No. 9333) with the fixed schedule of the national and local elections (fixed by RA No. 7166 to be held in May 2013).

During the oral arguments, the Court identified the three options open to Congress in order to resolve this problem. These options are: (1) to allow the elective officials in the ARMM to remain in office in a hold over capacity, pursuant to Section 7(1), Article VII of RA No. 9054, until those elected in the synchronized elections assume office; (2) to hold special elections in the ARMM, with the terms of those elected to expire when those elected in the synchronized elections assume office; or (3) to authorize the President to appoint OICs, pursuant to Section 3 of RA No. 10153, also until those elected in the synchronized elections assume office.

As will be abundantly clear in the discussion below, Congress, in choosing to grant the President the power to appoint OICs, chose the correct option and passed RA No. 10153 as a completely valid law.

Macasaet vs Co (G.R. No. 156759 June 5, 2013)

Macasaet etal vs Co
G.R. No. 156759 June 5, 2013

Facts: On July 3, 2000, respondent, a retired police officer assigned at the Western Police District in Manila, sued Abante Tonite, a daily tabloid of general circulation; its Publisher Allen A. Macasaet; its Managing Director Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet Bay, Jesus R. Galang and Randy Hagos; and its Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an allegedly libelous article petitioners published in the June 6, 2000 issue of Abante Tonite. The suit, docketed as Civil Case No. 0097907, was raffled to Branch 51 of the RTC, which in due course issued summons to be served on each defendant, including Abante Tonite, at their business address at Monica Publishing Corporation, 301-305 3rd Floor, BF Condominium Building, Solana Street corner A. Soriano Street, Intramuros, Manila. In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the stated address to effect the personal service of the summons on the defendants. But his efforts to personally serve each defendant in the address were futile because the defendants were then out of the office and unavailable. He returned in the afternoon of that day to make a second attempt at serving the summons, but he was informed that petitioners were still out of the office. He decided to resort to substituted service of the summons, and explained why in his sheriff’s return dated September 22, 2005.

Issue: Whether or not jurisdiction over the petitioners have been acquired.

Held: Yes. Jurisdiction over the person, or jurisdiction in personam –the power of the court to render a personal judgment or to subject the parties in a particular action to the judgment and other rulings rendered in the action – is an element of due process that is essential in all actions, civil as well as criminal, except in actions in rem or quasi in rem. Jurisdiction over the defendant in an action in rem or quasi in rem is not required, and the court acquires jurisdiction over an action as long as it acquires jurisdiction over the res that is the subject matter of the action. The purpose of summons in such action is not the acquisition of jurisdiction over the defendant but mainly to satisfy the constitutional requirement of due process.

The distinctions that need to be perceived between an action in personam, on the one hand, and an action in rem or quasi in rem, on the other hand, are aptly delineated in Domagas v. Jensen, thusly:

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him. An action in personam is said to be one which has for its object a judgment against the person, as distinguished from a judgment against the property to determine its state. It has been held that an action in personam is a proceeding to enforce personal rights or obligations; such action is brought against the person. As far as suits for injunctive relief are concerned, it is well-settled that it is an injunctive act in personam. In Combs v. Combs, the appellate court held that proceedings to enforce personal rights and obligations and in which personal judgments are rendered adjusting the rights and obligations between the affected parties is in personam. Actions for recovery of real property are in personam.

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the property of such persons to the discharge of the claims assailed. In an action quasi in rem, an individual is named as defendant and the purpose of the proceeding is to subject his interests therein to the obligation or loan burdening the property. Actions quasi in rem deal with the status, ownership or liability of a particular property but which are intended to operate on these questions only as between the particular parties to the proceedings and not to ascertain or cut off the rights or interests of all possible claimants. The judgments therein are binding only upon the parties who joined in the action.

As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not found in the Philippines because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court; but when the case is an action in rem or quasi in rem enumerated in Section 15, Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and decide the case because they have jurisdiction over the res, and jurisdiction over the person of the non-resident defendant is not essential. In the latter instance, extraterritorial service of summons can be made upon the defendant, and such extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for the purpose of complying with the requirements of fair play or due process, so that the defendant will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the defendant in an action in personam does not reside and is not found in the Philippines, our courts cannot try the case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court.

As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the court by the act of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction over his person either by the proper service of the summons, or by a voluntary appearance in the action.

The significance of the proper service of the summons on the defendant in an action in personam cannot be overemphasized. The service of the summons fulfills two fundamental objectives, namely: (a) to vest in the court jurisdiction over the person of the defendant; and (b) to afford to the defendant the opportunity to be heard on the claim brought against him. As to the former, when jurisdiction in personam is not acquired in a civil action through the proper service of the summons or upon a valid waiver of such proper service, the ensuing trial and judgment are void. If the defendant knowingly does an act inconsistent with the right to object to the lack of personal jurisdiction as to him, like voluntarily appearing in the action, he is deemed to have submitted himself to the jurisdiction of the court. As to the latter, the essence of due process lies in the reasonable opportunity to be heard and to submit any evidence the defendant may have in support of his defense. With the proper service of the summons being intended to afford to him the opportunity to be heard on the claim against him, he may also waive the process. In other words, compliance with the rules regarding the service of the summons is as much an issue of due process as it is of jurisdiction.

Under the Rules of Court, the service of the summons should firstly be effected on the defendant himself whenever practicable. Such personal service consists either in handing a copy of the summons to the defendant in person, or, if the defendant refuses to receive and sign for it, in tendering it to him. The rule on personal service is to be rigidly enforced in order to ensure the realization of the two fundamental objectives earlier mentioned. If, for justifiable reasons, the defendant cannot be served in person within a reasonable time, the service of the summons may then be effected either (a) by leaving a copy of the summons at his residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copy at his office or regular place of business with some competent person in charge thereof. The latter mode of service is known as substituted service because the service of the summons on the defendant is made through his substitute.

There is no question that Sheriff Medina twice attempted to serve the summons upon each of petitioners in person at their office address, the first in the morning of September 18, 2000 and the second in the afternoon of the same date. Each attempt failed because Macasaet and Quijano were “always out and not available” and the other petitioners were “always roving outside and gathering news.” After Medina learned from those present in the office address on his second attempt that there was no likelihood of any of petitioners going to the office during the business hours of that or any other day, he concluded that further attempts to serve them in person within a reasonable time would be futile. The circumstances fully warranted his conclusion. He was not expected or required as the serving officer to effect personal service by all means and at all times, considering that he was expressly authorized to resort to substituted service should he be unable to effect the personal service within a reasonable time. In that regard, what was a reasonable time was dependent on the circumstances obtaining. While we are strict in insisting on personal service on the defendant, we do not cling to such strictness should the circumstances already justify substituted service instead. It is the spirit of the procedural rules, not their letter, that governs.

Sotto vs Palicte ( G.R. No. 159691 June 13, 2013)

Heirs of Marcelo Sotto vs Palicte
G.R. No. 159691 June 13, 2013

Facts: Filemon had four children, namely: Marcelo Sotto (Marcelo), Pascuala SottoPahang (Pascuala), Miguel Barcelona (Miguel), and Matilde. Marcelo was the administrator of the Estate of Sotto. Marcelo and Miguel were the predecessorsin-interest of petitioners. In June 1967, Pilar Teves (Pilar) and other heirs of Carmen Rallos (Carmen), the deceased wife of Filemon, filed in the Court of First Instance (CFI) of Cebu City a complaint against the Estate of Sotto (Civil Case No. R-10027) seeking to recover certain properties that Filemon had inherited from Carmen, and damages. The CFI rendered judgment awarding to Pilar and other heirs of Carmen damages of P233,963.65, among other reliefs. To satisfy the monetary part of the judgment, levy on execution was effected against six parcels of land and two residential houses belonging to the Estate of Sotto. The levied assets were sold at a public auction. Later on, Matilde redeemed four of the parcels of land in her own name (i.e., Lots No. 1049, No. 1051, No. 1052 and No. 2179-C), while her sister Pascuala redeemed one of the two houses because her family was residing there. On July 9, 1980, the Deputy Provincial Sheriff of Cebu executed a deed of redemption in favor of Matilde, which the Clerk of Court approved. On July 24, 1980, Matilde filed in Civil Case No. R-10027 a motion to transfer to her name the title to the four properties. However, the CFI denied her motion, and instead declared the deed of redemption issued in her favor null and void, holding that Matilde, although declared in Special Proceedings No. 2706-R as one of the heirs of Filemon, did not qualify as a successor-in-interest with the right to redeem the four properties. Matilde directly appealed the adverse ruling to the Court via petition for review, and on September 21, 1987, the Court, reversing the CFI’s ruling, granted Matilde’s petition for review but allowed her co-heirs the opportunity to join Matilde as co-redemptioners for a period of six months before the probate court (i.e., RTC of Cebu City, Branch 16) would grant her motion to transfer the title to her name. In November 1998, the heirs of Miguel filed a motion for reconsideration in Civil Case No. R-10027 of the RTC of Cebu City, Branch 16, praying that the order issued on October 5, 1989 be set aside, and that they be included as Matilde’s co-redemptioners. After the RTC denied the motion for reconsideration for its lack of merit on April 25, 2000, they assailed the denial by petition for certiorari and prohibition (C.A.-G.R. SP No. 60225). The CA dismissed the petition for certiorari and prohibition on January 10, 2002. Thereafter, they elevated the matter to the Court via petition for certiorari (G.R. No. 154585), which the Court dismissed on September 23, 2002 for being filed out of time and for lack of merit. On September 10, 1999, the heirs of Marcelo, specifically: Lolibeth Sotto Noble, Danilo C. Sotto, Cristina C. Sotto, Emmanuel C. Sotto, Filemon C. Sotto, and Marcela C. Sotto; and the heirs of Miguel, namely: Alberto, Arturo and Salvacion, all surnamed Barcelona (herein petitioners), instituted the present action for partition against Matilde in the RTC of Cebu City, Branch 20 (Civil Case No. CEB24293).2 Alleging in their complaint that despite the redemption of the four properties having been made in the sole name of Matilde, the four properties still rightfully belonged to the Estate of Sotto for having furnished the funds used to redeem the properties, they prayed that the RTC declare the four properties as the assets of the Estate of Sotto, and that the RTC direct their partition among the heirs of Filemon.

Issue: Whether or not res judicata is applicable in the case at bar.

Held: Yes. All these judgments and order upholding Matilde’s exclusive ownership of the subject properties became final and executory except the action for partition which is still pending in this Court. The judgments were on the merits and rendered by courts having jurisdiction over the subject matter and the parties. There is substantial identity of parties considering that the present case and the previous cases involve the heirs of Filemon.

There is identity of parties not only when the parties in the case are the same, but also between those in privity with them, such as between their successors-in-interest. Absolute identity of parties is not required, and where a shared identity of interest is shown by the identity of relief sought by one person in a prior case and the second person in a subsequent case, such was deemed sufficient. There is identity of causes of action since the issues raised in all the cases essentially involve the claim of ownership over the subject properties. Even if the forms or natures of the actions are different, there is still identity of causes of action when the same facts or evidence support and establish the causes of action in the case at bar and in the previous cases.

Res judicata exists when as between the action sought to be dismissed and the other action these elements are present, namely; (1) the former judgment must be final; (2) the former judgment must have been rendered by a court having jurisdiction of the subject matter and the parties; (3) the former judgment must be a judgment on the merits; and (4) there must be between the first and subsequent actions (i) identity of parties or at least such as representing the same interest in both actions; (ii) identity of subject matter, or of the rights asserted and relief prayed for, the relief being founded on the same facts; and, (iii) identity of causes of action in both actions such that any judgment that may be rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.

The first three elements were present. The decision of the Court in G.R. No. 55076 (the first case), the decision of the Court in G.R. No. 131722 (the second case), the order dated October 5, 1989 of the RTC in Civil Case No. R-10027 as upheld by the Court in G.R. No. 154585 (the third case), and the decision in G.R. No. 158642 (the fourth case) – all of which dealt with Matilde’s right to the four properties – had upheld Matilde’s right to the four properties and had all become final. Such rulings were rendered in the exercise of the respective courts’ jurisdiction over the subject matter, and were adjudications on the merits of the cases.

Manila Jockey vs Trajano (G.R. No. 160982 June 26, 2013)

Manila Jockey Club Inc vs Trajano
G.R. No. 160982 June 26, 2013

Facts: MJCI had employed Trajano as a selling teller of betting tickets since November 1989. On April 25, 1998, she reported for work. At around 7:15 p.m., two regular bettors gave her their respective lists of bets (rota) and money for the bets for Race 14. Although the bettors suddenly left her, she entered their bets in the selling machine and segregated the tickets for pick up by the two bettors upon their return. Before closing time, one of the bettors (requesting bettor) returned and asked her to cancel one of his bets worth P2,000.00. Since she was also operating the negative machine on that day, she obliged and immediately cancelled the bet as requested. She gave the remaining tickets and the P2,000.00 to the requesting bettor, the money pertaining to the canceled bet. When Race 14 was completed, she counted the bets received and the sold tickets. She found that the bets and the tickets balanced. But then she saw in her drawer the receipt for the canceled ticket, but the canceled ticket was not inside the drawer. Thinking she could have given the canceled ticket to the requesting bettor, she immediately looked for him but could not find him. It was only then that she remembered that there were two bettors who had earlier left their bets with her. Thus, she went to look for the other bettor (second bettor) to ask if the canceled ticket was with him. When she located the second bettor, she showed him the receipt of the canceled ticket to counter-check the serial number with his tickets. Thereafter, the second bettor returned to Trajano and told her that it was one of his bets that had been canceled, instead of that of the requesting bettor. To complicate things, it was also the same bet that had won Race 14. Considering that the bet was for a daily double, the second bettor only needed to win Race 15 in order to claim dividends. At that point, she realized her mistake, and explained to the second bettor that the cancellation of his ticket had not been intentional, but the result of an honest mistake on her part. She offered to personally pay the dividends should the second bettor win Race 15, which the latter accepted. When Race 15 was completed, the second bettor lost. She was thus relieved of the obligation to pay any winnings to the second bettor. To her surprise, the reliever-supervisor later approached Trajano and told her to submit a written explanation about the ticket cancellation incident. The next day (April 26, 1998), she submitted the handwritten explanation to Atty. Joey R. Galit, Assistant Racing Supervisor. She then resumed her work as a selling teller, until later that day, when she received an inter-office correspondence signed by Atty. Galit informing her that she was being placed under preventive suspension effective April 28, 1998, for an unstated period of time. At the end of thirty days of her suspension, Trajano reported for work. But she was no longer admitted. She then learned that she had been dismissed when she read a copy of an interoffice correspondence about her termination posted in a selling station of MJCI.

Issue: Whether or not Trajano is validly dismissed.

Held: No. The valid termination of an employee may either be for just causes under Article 282 or for authorized causes under Article 283 and Article 284, all of the Labor Code.

Specifically, loss of the employer’s trust and confidence is a just cause under Article 282 (c), a provision that ideally applies only to cases involving an employee occupying a position of trust and confidence, or to a situation where the employee has been routinely charged with the care and custody of the employer’s money or property. But the loss of trust and confidence, to be a valid ground for dismissal, must be based on a willful breach of trust and confidence founded on clearly established facts. “A breach is willful,” according to AMA Computer College, Inc. v. Garay, “if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the employer’s arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer.” An ordinary breach is not enough.

Moreover, the loss of trust and confidence must be related to the employee’s performance of duties.  As held in Gonzales v. National Labor Relations Commission:

Loss of confidence, as a just cause for termination of employment, is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence. He must be invested with confidence on delicate matters such as the custody, handling, care and protection of the employer’s property and/or funds. But in order to constitute a just cause for dismissal, the act complained of must be “work-related” such as would show the employee concerned to be unfit to continue working for the employer.

As a selling teller, Trajano held a position of trust and confidence. The nature of her employment required her to handle and keep in custody the tickets issued and the bets made in her assigned selling station. The bets were funds belonging to her employer. Although the act complained of – the unauthorized cancellation of the ticket (i.e., unauthorized because it was done without the consent of the bettor) – was related to her work as a selling teller, MJCI did not establish that the cancellation of the ticket was intentional, knowing and purposeful on her part in order for her to have breached the trust and confidence reposed in her by MJCI, instead of being only out of an honest mistake.

The procedure to be followed in the termination of employment based on just causes is laid down in Section 2 (d), Rule I of the Implementing Rules of Book VI of the Labor Code, to wit:

Section 2. Security of Tenure. —
x x x x

(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:

For termination of employment based on just causes as defined in Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side.
(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee’s last known address.

A review of the records warrants a finding that MJCI did not comply with the prescribed procedure.

There is no question that an illegally dismissed employee is entitled to her reinstatement without loss of seniority rights and other privileges, and to full back wages, inclusive of allowances and other benefits or their monetary equivalent.

In case the reinstatement is no longer possible, however, an award of separation pay, in lieu of reinstatement, will be justified. The Court has ruled that reinstatement is no longer possible: (a) when the former position of the illegally dismissed employee no longer exists; or (b) when the employer’s business has closed down; or (c) when the employer-employee relationship has already been strained as to render the reinstatement impossible. The Court likewise considered reinstatement to be non-feasible because a “considerable time” has lapsed between the dismissal and the resolution of the case. In that regard, a lag of eight years or ten years is sufficient to justify an award of separation pay in lieu of reinstatement.