P.J. Lhuillier, Inc. v. Flordeliz Velayo

These are the requirements to be complied in order that an employer may invoke loss of trust and confidence in terminating an employee under Article 282(c) of the Labor Code: “(1) the employee must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence.

G.R. No. 198620, 12 November 2014

Complainant Flordeliz Velayo filed a Labor Complaint for illegal dismissal, among others, against her employer defendant P.J. Lhuillier, Inc. Previously, complainant was hired as Accounting Clerk. Sometime after, she was served with a Show Cause Memo ordering her to explain her side against the charges wherein an overage amount of P540.00 was not reported immediately by her to the supervisor nor was it recorded at the end of that day. She sent a written reply admitting her inability to report the overage as her supervisor was on leave and she was still tracing the overage, and said that it was a simple mistake without intent to defraud the company. After the investigation, the company dismissed her on grounds of serious misconduct and breach of trust.

HELD: The complaint was dismissed. It is a well established rule that “the nature or extent of the penalty imposed on an erring employee must be commensurate to the gravity of the offense as weighed against the degree of responsibility and trust expected of the employee’s position.  On the other hand, the respondent is not just charged with a misdeed, but with loss of trust and confidence under Article 282(c) of the Labor Code, a cause premised on the fact that the employee holds a position whose functions may only be performed by someone who enjoys the trust and confidence of management.  Needless to say, such an employee bears a greater burden of trustworthiness than ordinary workers, and the betrayal of the trust reposed is the essence of the loss of trust and confidence which is a ground for the employee’s dismissal.”

PJLI is not limited to its pawnshop operations. PJLI also offers its “Pera Padala” cash remittance service “whereby, for a fee or ‘sending charge,’ a customer may remit money to a consignee through its network of pawnshop branches all over the country.  On October 29, 2007, a customer sent 500.00 through its branch in Capistrano, Cagayan de Oro City, and paid a remittance fee of 40.00.  Inexplicably, however, no corresponding entry was made to recognize the cash receipt of 540.00 in the computerized accounting system (operating system) of the PJLI.  The respondent claimed that she tried very hard but could not trace the source of her unexplained cash surplus of 540.00, but a branch audit conducted sometime in December 2007 showed that it came from a ‘Pera Padala’ customer.”

While there is no significant financial injury was sustained by PJLI in the loss of a mere P540.00 in cash, it should be pointed out that she “held a position of utmost trust and confidence in the company.”

There are certain position in the company that enjoy trust. “There  are  two  classes  of  corporate  positions  of  trust:  on  the  one hand  are  the  managerial  employees  whose  primary  duty  consists  of  the  management  of  the  establishment  in  which  they  are  employed  or of  a  department  or  a  subdivision  thereof,  and  other  officers  or members  of  the  managerial  staff;  on  the  other  hand  are  the  fiduciary rank-and-file  employees,  such  as  cashiers,  auditors,  property  custodians, or  those  who,  in  the  normal  exercise  of  their  functions,  regularly handle significant amounts of money or property.  These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.”

In this case, “respondent was first hired by the petitioners as an accounting clerk on June 13, 2003, for which she received a basic monthly salary of 9,353.00.  On October 29, 2007, the date of the subject incident, she performed the function of vault custodian and cashier in the petitioners’ Branch 4 pawnshop in Capistrano, Cagayan de Oro City.  In addition to her custodial duties, it was the respondent who electronically posted the day’s transactions in the books of accounts of the branch, a function that is essentially separate from that of cashier or custodian.  It is plain to see then that when both functions are assigned to one person to perform, a very risky situation of conflicting interests is created whereby the cashier can purloin the money in her custody and effectively cover her tracks, at least temporarily, by simply not recording in the books the cash receipt she misappropriated.  This is commonly referred to as lapping of accounts. Only a most trusted clerk would be allowed to perform the two functions, and the respondent enjoyed this trust.”

These are the requirements to be complied in order that an employer may invoke loss of trust and confidence in terminating an employee under Article 282(c) of the Labor Code: “(1) the employee must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence. While loss of trust and confidence should be genuine, it does not require proof beyond reasonable doubt, it being sufficient that there is some basis to believe that the employee concerned is responsible for the misconduct and that the nature of the employee’s participation therein rendered him unworthy of trust and confidence demanded by his position.”

Here, the employer was fully justified in claiming loss of trust and confidence in the employee. “While it is natural and understandable that the respondent should feel apprehensive about Tuling’s reaction concerning her cash overage, considering that it was their first time to be working together in the same branch, we must keep in mind that the unaccounted cash can only be imputed to the respondent’s own negligence in failing to keep track of the transaction from which the money came.  A subsequent branch audit revealed that it came from a ‘Pera Padala’ remittance, implying that although the amount had been duly remitted to the consignee, the sending branch failed to record the payment received from the consigning customer.  For days following the overage, the respondent tried but failed to reconcile her records, and for this inept handling of a ‘Pera Padala’ remittance, she already deserved to be sanctioned.”

It is a matter of strict company policy that unexplained cash is recognized at the end of the day as miscellaneous income. “Inexplicably, despite being with the company for four years as accounting clerk and cashier, the respondent failed to make the required entry in the branch operating system recognizing miscellaneous income. Such an entry could have been easily reversed once it became clear how the overage came about. But the respondent obviously thought that by skipping the entry, she could keep Tuling from learning about the overage.  Her trustworthiness as branch cashier and bookkeeper has been irreparably tarnished. The respondent’s untrustworthiness is further demonstrated when she began to concoct lies concerning the overage: first, by denying its existence to Tuling and again to the company auditor; later, when she falsely claimed that a computer glitch or malfunction had prevented her from posting the amount on October 29, 2007; and finally, when she was forced to admit before the company’s investigating panel that she took and spent the money.”

Under the Article  282  of  the  Labor  Code, an  employer is allowed to dismiss an  employee  for  willful  breach  of  trust  or  loss  of  confidence.  “It has been held  that a special and unique  employment relationship exists between a corporation and its  cashier. Truly, more than  most key positions, that of a cashier calls for utmost  trust and confidence, and it is the breach of this trust that results in an employer’s loss of confidence in the employee.”

In dismissing a cashier on the ground of loss of confidence, “it is sufficient that there is some basis for the same or that the employer has a reasonable ground to believe that the employee is responsible for the misconduct, thus making him unworthy of the trust and confidence reposed in him. Therefore, if there is sufficient evidence to show that the employer has ample reason to distrust the employee, the labor tribunal cannot justly deny the employer the authority to dismiss him. Indeed, employers are allowed wider latitude in dismissing an employee for loss of trust and confidence… it must also be stressed that only substantial evidence is required in order to support a finding that an employer’s trust and confidence accorded to its employee had been breached.”

Citing Lopez v. Alturas Group of Companies (G.R. No. 191008, 11 April 2011), “the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer.  Such breach is willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.  Moreover, it must be based on substantial evidence and not on the employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the employer.  Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary.  And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer.  In addition, 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 or that the employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of the employer.  The betrayal of this trust is the essence of the offense for which an employee is penalized.”

Lastly, “misappropriation of company funds, notwithstanding that the shortage has been restituted, is a valid ground to terminate the services of an employee for loss of trust and confidence.” It should be pointed out that “it is immaterial what the respondent’s intent was concerning the missing fund, for the undisputed fact is that cash which she held in trust for the company was missing in her custody.  At the very least, she was negligent and failed to meet the degree of care and fidelity demanded of her as cashier.  Her excuses and failure to give a satisfactory explanation for the missing cash only gave the petitioners sufficient reason to lose confidence in her.”

Bahia Shipping Services, Inc. v. Joel P. Hipe

The seafarer’s non-compliance with the conflict-resolution procedure results in the affirmance of the fit-to-work certification of the company-designated physician.

G.R. No. 204699, 12 November 2014

Complainant Joel P. Hipe filed a Labor Complaint for payment of permanent disability compensation, among others. Previously, complainant “had been continuously hired by petitioner Bahia Shipping Services, Inc. (Bahia) for its foreign principal, Fred Olsen Cruise Line (Olsen), and deployed to the latter’s various vessels under seven (7) consecutive contracts. He was last employed by Bahia as plumber for the vessel M/S Braemar (vessel) under a six-month contract6 commencing on the day of his embarkation on December 6, 2007, with a basic monthly salary of US$708.007 exclusive of overtime and other benefits.”

Even after the lapse of his six months contract on 06 June 2008, “Hipe continued to work aboard the vessel without any new contract. On June 22, 2008, in the course of the performance of his duties as plumber, he sustained a back injury while carrying heavy equipment for use in his plumbing job. He was advised to rest and perform only light jobs, and was given the assurance that he will be repatriated at the next convenient port. After one (1) month, however, he claimed that his condition worsened and, upon his request, he was repatriated to Manila on August 5, 2008.”

Upon his arrival in the Philippines, he was examined by a company-physician who diagnosed him as having “Lumbosacral Strain with right L5 Radiculopathy.” After undergoing therapy, he was declared fit to work and thus a Certificate of Fitness of Work was issued.

Complainant sought for a second opinion from a doctor of the UP-PGH Medical Center who opined that he was not fit to work as seaman-plumber and recommended his disability rating at Grade 5.

HELD: The complaint was dismissed. In claims for disability, “two (2) elements must concur for an injury or illness of a seafarer to be compensable: (a) the injury or illness must be work-related; and (b) that the work-related injury or illness must have existed during the term of the seafarer’s employment contract.”

Here, Hipe was made “to continuously perform work aboard the vessel beyond his six-month contract without the benefit of a formal contract. Considering that any extension of his employment is discretionary on the part of respondents and that the latter offered no explanation why Hipe was not repatriated when his contract expired on June 5, 2008, the CA correctly ruled that he was still under the employ of respondents when he sustained an injury on June 22, 2008. Consequently, the injury suffered by Hipe was a work-related injury and his eventual repatriation on August 5, 2008, for which he was treated/rehabilitated can only be considered as a medical repatriation.”

Notwithstanding, “Hipe was subsequently declared fit to work by the company-designated physician on October 9, 2008, or merely 65 days after his repatriation, thus negating the existence of any permanent disability for which compensability is sought.” This fit-to-work certification stands for two (2) reasons: (1) Hipe’s doctor made his medical opinion which “was not supported by any diagnostic tests and/or procedures as would adequately refute the fit-to-work assessment, but merely relied on a review of Hipe’s medical history and his physical examination”; and (2) “Hipe failed to comply with the procedure laid down under Section 20 (B) (3) of the 2000 POEA-SEC with regard to the joint appointment by the parties of a third doctor whose decision shall be final and binding on them in case the seafarer’s personal doctor disagrees with the company-designated physician’s fit-to-work assessment.”

As provided for in jurisprudence, “the seafarer’s non-compliance with the said conflict-resolution procedure results in the affirmance of the fit-to-work certification of the company-designated physician.”

S.V. More Pharma Corporation v. Drugmakers Laboratories, Inc.

The amount of loss warranting the grant of actual or compensatory damages must be proved with a reasonable degree of certainty, based on competent proof and the best evidence obtainable by the injured party.

G.R. Nos. 200408 and 200416, 12 November 2014

“Eliezer, Evangeline C. Del Mundo, and Atty. Quirico T. Carag (Atty. Carag) (Del Mundo Group) are the registered owners of fifty percent (50%) (i.e., 250,000 shares of stock) of E.A. Northam Pharma Corporation (E.A. Northam), a domestic corporation which exclusively distributes and markets 28 various pharmaceutical products that are exclusively manufactured by Drugmakers, a domestic corporation under the control of Eliezer. The remaining fifty percent (50%) in E.A. Northam are owned by Alberto and Nilo S. Valente (Santillana Group). In an Agreement dated May 31, 1993, the Del Mundo Group agreed to cede all their rights and interests in E.A. Northam in favor of the Santillana Group for a consideration of 4,200,000.00. However, it was agreed therein that: (a) the said pharmaceutical products shall remain jointly owned by Eliezer/Drugmakers and Alberto; (b) the products shall be exclusively manufactured by Drugmakers as long as Eliezer maintains majority ownership and control of the said company; and (c) the products will be sold, conveyed, and transferred to S.V. More, provided that Alberto remains its chief executive officer with majority ownership and control thereof.

“On even date, E.A. Northam entered into a Deed of Sale/Assignment with S.V. More, whereby E.A. Northam agreed to convey, transfer, and assign all its rights over 28 pharmaceutical products in favor of S.V. More which shall then have the right to have them sold, distributed, and marketed in the latter’s name, subject to the condition that such pharmaceutical products will be exclusively manufactured by Drugmakers based on their existing Contract Manufacturing Agreement (CMA) set to expire in October 1993.

“In September 1993, or a month prior to the expiration of the CMA, Drugmakers proposed a new manufacturing agreement which S.V. More found unacceptable. In a letter dated October 20, 1993, S.V. More, for the purpose of renewing its License to Operate with the Bureau of Food and Drug (BFAD), requested a copy of the existing CMA from Drugmakers, but to no avail.16 Hence, on October 23, 1993, S.V. More entered into a Contract to Manufacture Pharmaceutical Products (CMPP) with Hizon Laboratories, Inc. (Hizon Laboratories), and, thereafter, caused the latter to manufacture some of the pharmaceutical products covered by the Deed of Sale/Assignment.19 Meanwhile, the BFAD issued the corresponding Certificates of Product Registration (CPR) therefor, with S.V. More as distributor, and Hizon Laboratories as manufacturer. On February 23, 1995, and after their protest on the new registration went unheeded, Drugmakers and Eliezer (respondents) filed a Complaint for Breach of Contract, Damages, and Injunction with Prayer for the Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining Order against S.V. More and Alberto (petitioners), and Hizon Laboratories, and its President, Rafael H. Hizon, Jr. (Rafael)…”

HELD: Defendants were held liable. “The existence of contractual breach in this case revolves around the exclusive status of Drugmakers as the manufacturer of the subject pharmaceutical products which was stipulated and, hence, recognized under the following contracts: (a) the CMA dated October 30, 1992 between Drugmakers, as manufacturer, and S.V. More, as the holder of the CPR covering the pharmaceutical products; (b) the Agreement dated May 31, 1993 covering the change in ownership in E.A. Northam, or the distributor of the pharmaceutical products manufactured by Drugmakers and covered by S.V. More’s CPR; and (c) the Deed of Sale/Assignment of even date between E.A. Northam and S.V. More, whereby the former’s distributorship rights were transferred to the latter.

“In particular, the CMA states that Drugmakers, being the exclusive manufacturer of the subject pharmaceutical products, had to first give its written consent before S.V. More could contract the services of another manufacturer… In the May 31, 1993 Agreement, the new ownership of E.A. Northam, or the initial distributor of the same pharmaceutical products, equally recognized Drugmakers’s status as exclusive manufacturer… The same was echoed in the Deed of Sale/Assignment, wherein S.V. More, being the transferee of E.A. Northam’s distributorship rights.

“These provisions notwithstanding, records disclose that petitioner S.V More, through the CMPP and absent the prior written consent of respondent Drugmakers, as represented by its President, respondent Eliezer, contracted the services of Hizon Laboratories to manufacture some of the pharmaceutical products covered by the said contracts. Thus, since the CMPP with Hizon Laboratories was executed on October 23, 1993,54 or seven (7) days prior to the expiration of the CMA on October 30, 1993, it is clear that S.V. More, as well as its President, petitioner Alberto, who authorized the foregoing, breached the obligation to recognize Drugmakers as exclusive manufacturer, thereby causing prejudice to the latter.”

Nonetheless, the appellate court’s award of P6,000,000,000.00 based on supposed loss of profits was erroneous. “Records reveal that in their attempt to prove their claim for loss of profits corresponding to the aforesaid amount, respondents based their computation thereof on a Sales Projection Form for the period November 1993 to February 1995. However, it is readily observable that the breach occurred only for a period of seven (7) days, or from October 23, 1993 until October 30, 1993 – that is, the date when the CMA expired. Notably, the CMA – from which stems S.V. More’s obligation to recognize Drugmakers’s status as the exclusive manufacturer of the subject pharmaceutical products and which was only carried over in the other two (2) above-discussed contracts – was never renewed by the parties, nor contained an automatic renewal clause, rendering the breach and its concomitant effect, i.e., loss of profits on the part of Drugmakers, only extant for the limited period of, as mentioned, seven (7) days.” Further, “it is also evident that only six (6) of the 28 pharmaceutical products were caused by petitioners to be manufactured by Hizon Laboratories.”

As required by law, “the amount of loss warranting the grant of actual or compensatory damages must be proved with a reasonable degree of certainty, based on competent proof and the best evidence obtainable by the injured party.”

“Nevertheless, considering that respondents palpably suffered some form of pecuniary loss resulting from petitioners’ breach of contract, the Court deems it proper to, instead, award in their favor the sum of 100,000.00 in the form of temperate damages. This course of action is hinged on Article 2224 of the Civil Code which states that ‘temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty,’ as in this case.”

Conchita J. Racelis v. United Philippine Lines Inc.

The beneficiaries of a deceased seafarer may be able to claim death benefits for as long as they are able to establish that (a) the seafarer’s death is work-related, and (b) such death had occurred during the term of his employment contract.

G.R. No. 198408, 12 November 2014

Complainant Conchita J. Racelis, as the surviving spouse of Rodolfo L. Racelis, initiated a claim for death benefits pursuant to the International Transport Workers’ Federation-Collective Bargaining Agreement (ITWF-CBA), of which her husband was a member. However, her claim was denied by the employer on the ground that the death was not work-related as it was due to Brainstem (pontine) Cavernous Malformation, which was congenital and it had familiar strains according to a doctor. Thus, complainant instituted a labor case against them.

Previously, Rodolfo L. Racelis “was recruited and hired by respondent United Philippine Lines, Inc. (UPL) for its principal, respondent Holland America Lines, Inc. (HAL) to serve as ‘Demi Chef De Partie’ on board the vessel MS Prinsendam, with a basic monthly salary of US$799.55.5 The Contract of Employment was for a term of four (4) months, extendible for another two (2) months upon mutual consent. After complying with the required pre-employment medical examination where he was declared fit to work, Rodolfo joined the vessel on January 25, 2008. Prior thereto, Rodolfo was repeatedly contracted by said respondents and was deployed under various contracts since December 17, 1985.”

On his last employment, Rodolfo experienced severe pain in his ears and high blood pressure causing him to collapse while in the performance of his duties. He consulted a doctor in Argentina and was medically repatriated on February 20, 2008 for further medical treatment. Upon arrival in Manila, he was immediately brought to Medical City, Pasig City, where he was seen by a company-designated physician, Dr. Gerardo Legaspi, M.D. (Dr. Legaspi), and was diagnosed to be suffering from Brainstem (pontine) Cavernous Malformation. He underwent surgery twice for the said ailment but developed complications and died on March 2, 2008.”

HELD: The employer was held liable. “Deemed incorporated in every seafarer’s employment contract, denominated as the POEA-SEC or the Philippine Overseas Employment Administration-Standard Employment Contract, is a set of standard provisions determined and implemented by the POEA, called the ‘Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels,’ which are considered to be the minimum requirements acceptable to the government for the employment of Filipino seafarers on board foreign ocean-going vessels.”

In the 2000 POEA-SEC, it stipulates that “the beneficiaries of a deceased seafarer may be able to claim death benefits for as long as they are able to establish that (a) the seafarer’s death is work-related, and (b) such death had occurred during the term of his employment contract.”

Under the 2000 POEA-SEC, “work-related injury” is defined as “injury(ies) resulting in disability or death arising out of and in the course of employment.” On the other hand, “work-related illness” is defined as “any sickness resulting to disability or death as a result of an occupational disease listed under Section 32-A of this contract with the conditions set therein satisfied.”

Jurisprudence provides that “[t]he words ‘arising out of’ refer to the origin or cause of the accident, and are descriptive of its character, while the words ‘in the course of’ refer to the time, place, and circumstances under which the accident takes place. As a matter of general proposition, an injury or accident is said to arise ‘in the course of employment’ when it takes place within the period of the employment, at a place where the employee reasonably may be, and while he is fulfilling his duties or is engaged in doing something incidental thereto.”

Here, the death of the seafarer is evidently work-related. “While it is true that Brainstem (pontine) Cavernous Malformation is not listed as an occupational disease under Section 32-A of the 2000 POEA-SEC, Section 20 (B) (4) of the same explicitly provides that ‘[t[he liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his contract are as follows: (t)hose illnesses not listed in Section 32 of this Contract are dispuatbly presumed as work related.’ In other words, the 2000 POEA-SEC ‘has created a disputable presumption in favor of compensability[,] saying that those illnesses not listed in Section 32 are disputably presumed as work-related. This means that even if the illness is not listed under Section 32-A of the POEA-SEC as an occupational disease or illness, it will still be presumed as work-related, and it becomes incumbent on the employer to overcome the presumption.’ This presumption should be overturned only when the employer’s refutation is found to be supported by substantial evidence, which, as traditionally defined is “such relevant evidence as a reasonable mind might accept as sufficient to support a conclusion.”

Further, the seafarer’s death occurred during the term of employment. “While it is true that a medical repatriation has the effect of terminating the seafarer’s contract of employment, it is, however, enough that the work-related illness, which eventually becomes the proximate cause of death, occurred while the contract was effective for recovery to be had.”

The 1987 Constitution affords full protection to labor. “Consistent with the State’s avowed policy to afford full protection to labor as enshrined in Article XIII of the 1987 Philippine Constitution, the POEA-SEC was designed primarily for the protection and benefit of Filipino seafarers in the pursuit of their employment on board ocean-going vessels. As such, it is a standing principle that its provisions are to be construed and applied fairly, reasonably, and liberally in their favor.”

Guided by these principles, it has been held that “a medical repatriation case constitutes an exception to the second requirement under Section 20 (A) (1) of the 2000 POEA-SEC, i.e., that the seafarer’s death had occurred during the term of his employment, in view of the terminative consequences of a medical repatriation under Section 18 (B) of the same. In essence, the Court held that under such circumstance, the work-related death need not precisely occur during the term of his employment as it is enough that the seafarer’s work-related injury or illness which eventually causes his death had occurred during the term of his employment.”

As for the award, respondents never died and therefore admitted that “the late Rodolfo’s membership in the AMOSUP that had entered into a collective bargaining agreement with HAL, or the ITWF-CBA” is applicable. Its provisions therefore must prevail over the standard terms and benefits formulated by the POEA in its Standard Employment Contract. Hence, the NLRC’s award of US$60,000.00 as compensation for the death of Rodolfo in accordance with Article 21.2.1 of the ITWF-CBA was in order. The same holds true for the award of burial assistance in the amount of US$1,000.00 which is provided under Section 20 (A) (4) (c) of the 2000 POEA-SEC. Moreover, conformably with existing case law, the NLRC’s grant of attorney’s fees in the amount of US$6,100.00 was called for since petitioner was forced to litigate to protect her valid claim. Where an employee is forced to litigate and incur expenses to protect his right and interest, he is entitled to an award of attorney’s fees equivalent to 10% of the award.”

Sps. Felipe Solitarios and Julia Torda v. Sps. Gaston Jaque and Lilia Jaque

A purported contract of sale where the vendor remains in physical possession of the land, as lessee or otherwise, is an indicium of an equitable mortgage.

G.R. No. 199852, 12 November 2014
Plaintiffs Sps. Gaston Jaque and Lilia Jaque initiated a Complaint for Ownership and Recovery of Possession against Defendants Sps. Felipe Solitarios and Julia Torda.

Plaintiffs alleged that “they purchased Lot 4089 from the [defendants], spouses Solitarios in stages. According to [plaintiffs], they initially bought one-half of Lot No. 4089 for 7,000.00. This sale is allegedly evidenced by a notarized Deed of Sale dated May 8, 1981. Two months later, the spouses Solitarios supposedly mortgaged the remaining half of Lot 4089 to the Jaques via a Real Estate Mortgage (REM) dated July 15, 1981, to secure a loan amounting to 3,000.00… After almost two (2) years, the spouses Solitarios finally agreed to sell the mortgaged half. However, instead of executing a separate deed of sale for the second half, they executed a Deed of Sale dated April 26, 1983 for the whole lot to save on taxes, by making it appear that the consideration for the sale of the entire lot was only 12,000.00 when the Jaques actually paid 19,000.00 in cash and condoned the spouses Solitarios’ 3,000.00 loan.” As a result, the tile was transferred and registered from defendants to plaintiffs.

In spite of the sale, the Jaques, supposedly out of pity for the spouses Solitarios, allowed the latter to retain possession of Lot 4089, subject only to the condition that the spouses Solitarios will regularly deliver a portion of the property’s produce. In an alleged breach of their agreement, however, the spouses Solitarios stopped delivering any produce sometime in 2000. Worse, the spouses Solitarios even claimed ownership over Lot 4089. Thus, the Jaques filed the adverted complaint with the RTC.”

For their defense, defendants spouses Solitarios “denied selling Lot 4089 and explained that they merely mortgaged the same to the Jaques after the latter helped them redeem the land from the Philippine National Bank (PNB).”

HELD: The parties entered into an equitable mortgage over the lot, and not an absolute contract of sale. Thus, “the transaction between the parties of the present case is actually one of equitable mortgage pursuant to the foregoing provisions of the Civil Code. It has never denied by respondents that the petitioners, the spouses Solitarios, have remained in possession of the subject property and exercised acts of ownership over the said lot even after the purported absolute sale of Lot 4089. This fact is immediately apparent from the testimonies of the parties and the evidence extant on record, showing that the real intention of the parties was for the transaction to secure the payment of a debt. Nothing more.”

It was more evident during proceedings. “During pre-trial, the Jaques admitted that the spouses Solitarios were in possession of the subject property. Gaston Jaque likewise confirmed that petitioners were allowed to produce copra and till the rice field, which comprise one-half of the lot that was previously covered by the real estate mortgage, after said portion was allegedly sold to them.”

Citing a previous case, it was held that “a purported contract of sale where the vendor remains in physical possession of the land, as lessee or otherwise, is an indicium of an equitable mortgage… the reason for this rule lies in the legal reality that in a contract of sale, the legal title to the property is immediately transferred to the vendee. Thus, retention by the vendor of the possession of the property is inconsistent with the vendee’s acquisition of ownership under a true sale. It discloses, in the alleged vendee, a lack of interest in the property that belies the truthfulness of the sale.”

Further, the plaintiffs have never asserted ownership for a long period of time. “During the period material to the present controversy, the petitioners, spouses Solitarios, retained actual possession of the property. This was never disputed. If the transaction had really been one of sale, as the Jaques claim, they should have asserted their rights for the immediate delivery and possession of the lot instead of allowing the spouses Solitarios to freely stay in the premises for almost seventeen (17) years from the time of the purported sale until their filing of the complaint. Human conduct and experience reveal that an actual owner of a productive land will not allow the passage of a long period of time, as in this case, without asserting his rights of ownership.”

As provided for in Article 1602(6) of the Civil Code, a transaction is presumed to be an equitable mortgage “where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.” This provision finds application in this case.  “First, the very testimony of Gaston Jaque and the documents he presented establish the existence of two loans, which the Jaques extended to the spouses Solitarios, that were secured by the subject property; and, second, the testimonies of the parties reveal that they came to an agreement as to how these loans would be paid.”

The rule on equitable mortgage is primarily designed “for the protection of the unlettered such as the spouses Solitarios, who are penurious vis-à-vis their creditors.” In this case, “the parties were negotiating on unequal footing. As opposed to the uneducated and impoverished farmer, Felipe Solitarios, Gaston Jaque, was a 2nd Lieutenant of the Armed Forces of the Philippines when he retired. Further, Felipe Solitarios was constantly in financial distress. He was constantly in debt and in dire financial need. That he borrowed money from the PNB twice, first in 1975 then in 1976, and mortgaged the subject property to the Jaques suggest as much.”

Moreover, it is a rule that “when doubt exists as to the true nature of the parties’ transaction, courts must construe such transaction purporting to be a sale as an equitable mortgage, as the latter involves a lesser transmission of rights and interests over the property in controversy.”

In view thereof, the transfer of ownership of Lot 4098 to the Jacques was invalidated. To do so “would amount to condoning the prohibited practice of pactum comissorium. Article 2088 of the Civil Code clearly provides that a creditor cannot appropriate or consolidate ownership over a mortgaged property merely upon failure of the mortgagor to pay a debt obligation.”

Lastly, “the mortgage debt of the spouses Solitarios had been fully paid. This holds true whether the amount of the debt is 12,000.00, as found by the RTC or 22,000.00, the amount which the Jaques claim they paid for the subject property.” Article 1602 of the Civil Code states: “In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.” As applied by the trial court, from 1976 to 2000, defendants were “giving the one-half share of the plaintiffs from the proceeds of the copras and rice land to plaintiffs’ alleged caretaker, Yaning. So, if the produce of the land in question as claimed by the plaintiffs is about Php50,000.00 a year, one-half (1/2) of it would be Php25,000.00 which is 25 times higher than the Php1,000.00 interest at 12% per year for the alleged purchase price of Php12,000.00 of the land in question. The Php24,000.00 excess interest would have already been sufficient to pay even the principal of Php12,000.00. Thus, clearly, the Php12,000.00 purchase price of the land should now be considered fully paid.”

Bernardino P. Bartolome v. Social Security System

In ECC-related death benefit claims, dependent parents as beneficiaries include biological parents in case the decedent was adopted.

G.R. No. 192531, 12 November 2014

Petitioner Bernardina P. Bartolome initiated a claim for death benefits under PD 626 with the Social Security System (SSS) at San Fernando City, La Union, over the death of her son John Colcol (John), who she gave up for adoption, and alleged that she was the sole remaining beneficiary. Previously, John was employed as electrician by Defendant Scanmar Maritime Services, Inc., on board the vessel Maersk Danville. He was covered by the government’s Employees’ Compensation Program (ECP). Unfortunately, he met an accident on board the vessel wherein steel plates fell on him resulting in his death.

When petitioner filed her claim, the SSS denied it stating that she was no longer the parent of John as he was legally adopted by Cornelio Colocol based on the documentary evidence submitted by petitioner herself. On appeal, the Employees’ Compensation Commission (ECC) affirmed the SSS ruling through a decision dated 17 March 17 2010 citing Rule XV, Sec. 1(c)(1) of the Amended Rules on Employees’ Compensation.

HELD: Petitioner was entitled to receive the claim for death benefits. “Based on Cornelio’s death certificate, it appears that John’s adoptive father died on October 26, 1987, or only less than three (3) years since the decree of adoption on February 4, 1985, which attained finality. As such, it was error for the ECC to have ruled that it was not duly proven that the adoptive parent, Cornelio, has already passed away.

The ECC Rule limiting death benefit claims to the legitimate parents is contrary to law. “Rule XV, Sec. 1(c)(1) of the Amended Rules on Employees’ Compensation deviates from the clear language of Art. 167 (j) of the Labor Code, as amended…” Hence, it was held that “Rule XV of the Amended Rules on Employees’ Compensation is patently a wayward restriction of and a substantial deviation from Article 167 (j) of the Labor Code when it interpreted the phrase ‘dependent parents’ to refer to ‘legitimate parents.'”

As the law does not define “dependent parents”, it should be understood to have a general and inclusive scope. Thus, “the term ‘parents’ in the phrase ‘dependent parents’ in the afore-quoted Article 167 (j) of the Labor Code is used and ought to be taken in its general sense and cannot be unduly limited to ‘legitimate parents’ as what the ECC did. The phrase ‘dependent parents’ should, therefore, include all parents, whether legitimate or illegitimate and whether by nature or by adoption. When the law does not distinguish, one should not distinguish. Plainly, ‘dependent parents’ are parents, whether legitimate or illegitimate, biological or by adoption, who are in need of support or assistance.

“Moreover, the same Article 167 (j), as couched, clearly shows that Congress did not intend to limit the phrase ‘dependent parents’ to solely legitimate parents. At the risk of being repetitive, Article 167 provides that ‘in their absence, the dependent parents and subject to the restrictions imposed on dependent children, the illegitimate children and legitimate descendants who are secondary beneficiaries.’ Had the lawmakers contemplated ‘dependent parents’ to mean legitimate parents, then it would have simply said descendants and not ‘legitimate descendants.’ The manner by which the provision in question was crafted undeniably show that the phrase ‘dependent parents’ was intended to cover all parents – legitimate, illegitimate or parents by nature or adoption.”

The law is clear that “the biological parents retain their rights of succession to the estate of their child who was the subject of adoption. While the benefits arising from the death of an SSS covered employee do not form part of the estate of the adopted child, the pertinent provision on legal or intestate succession at least reveals the policy on the rights of the biological parents and those by adoption vis-à-vis the right to receive benefits from the adopted.”

As a result, it was held that “Cornelio’s death at the time of John’s minority resulted in the restoration of petitioner’s parental authority over the adopted child.”

“Moreover, John, in his SSS application, named petitioner as one of his beneficiaries for his benefits under RA 8282, otherwise known as the ‘Social Security Law.’ While RA 8282 does not cover compensation for work-related deaths or injury and expressly allows the designation of beneficiaries who are not related by blood to the member unlike in PD 626, John’s deliberate act of indicating petitioner as his beneficiary at least evinces that he, in a way, considered petitioner as his dependent. Consequently, the confluence of circumstances – from Cornelio’s death during John’s minority, the restoration of petitioner’s parental authority, the documents showing singularity of address, and John’s clear intention to designate petitioner as a beneficiary – effectively made petitioner, to Our mind, entitled to death benefit claims as a secondary beneficiary under PD 626 as a dependent parent.”

In sum, “the Decision of the ECC dated March 17, 2010 is bereft of legal basis. Cornelio’s adoption of John, without more, does not deprive petitioner of the right to receive the benefits stemming from John’s death as a dependent parent given Cornelio’s untimely demise during John’s minority. Since the parent by adoption already died, then the death benefits under the Employees’ Compensation Program shall accrue solely to herein petitioner, John’s sole remaining beneficiary.”

Goodyear Philippines, Inc. et al, v. Marina L. Angus

“In the absence of an express or implied prohibition against it, collection of both retirement benefits and separation pay upon severance from employment is allowed. This is grounded on the social justice policy that doubts should always be resolved in favor of labor rights.”

G.R. No. 185449, 12 November 2014

Complainant Marina L. Angus filed a labor complaint against her previous employer Defendants Goodyear Philippines, Inc. and its Human Resource Director Remigio M. Ramos. “In order to maintain the viability of its operations in the midst of economic reversals, Goodyear implemented cost-saving measures which included the streamlining of its workforce.” Complainant received from Defendant Ramos a letter stating that her position as Secretary to the Manager of Quality and Technology “is already redundant or is no longer necessary for its effective operation and is to be abolished effective today.” After 30 days, complainant would be terminated.

The letter further stated: “As Company practice, termination due to redundancy or retrenchment is paid at 45 days’ pay per year of service. Considering, that you have rendered 34.92 years of service to the Company as of October 18, 2001, and have reached the required minimum age of 55 to qualify for early retirement, Management has decided to grant you early retirement benefit at 47 days’ per year of service.”

On the day she received the letter, Complainant replied thereto accepting the management’s decision but protesting on the terms. She wrote: “… I accept Management decision to avail early retirement benefit. However, I do not agree on the terms stated therein. I suggest I be given a premium of additional 3 days for every year of service which is only 6.3% or a total of 50 days. I gathered it is Philippine industry’s practice to give premium to encourage employees to avail of the early retirement benefit… Acceptance of this proposal will make my separation from Goodyear pleasant.”

Meanwhile, Defendant Goodyear submitted an Establishment Termination Report with DOLE in connection with complainant’s termination.

Subsequently, complainant accepted the checks which covered payment of her retirement benefits computed at 47 days’ pay per year of service and other company benefits. However, she made an annotation in the acknowledgment receipt: “Received under protest – amount is not acceptable. Acceptance is on condition that I will be given a premium of 3 days for every year of service.” This time she also asked for separatin pay. “Since my service was terminated due to redundancy, I now claim my separation pay as mandated by law. This is a separate claim from my early retirement benefit.”

It is claimed that the check were taken back due to the annotation and complainant’s refusal to sign a Release and Quitclaim. Through another letter, Defendant Ramos explained that “the company has already offered her the most favorable separation benefits due to redundancy, that is, 47 days’ pay per year of service instead of the applicable rate of 45 days’ pay per year of service. And based on the Retirement Plan under the Collective Bargaining Agreement (CBA) and the parties’ Employment Contract, Angus is entitled to only one of the following kinds of separation pay: (1) normal retirement which is payable at 47 days’ pay per year of service; (2) early retirement at a maximum of 47 days’ pay per year of service; (3) retrenchment, redundancy, closure of establishment at 45 days’ pay per year of service; (4) medical disability at 45 days’ pay per year of service; or (5) resignation at 20 days’ pay per year of service. Because of these, [defendant] Ramos informed [complainant] that the company cannot anymore entertain any of her additional claims.”

Complainant replied to the last letter reiterating her claims adding the following demands: that she be furnished a copies of the Notice of Redundancy filed with DOLE, specific provisions in the Retirement Plan, CBA and Employment Contract “which could justify the prohibition against the grant of both to a separated employee as asserted by [defendants].” However, her last letter was merely brushed aside and instead she was simply reminded to claim her checks.

As a result, complainant finally accepted a check in the amount of P1,958,927.89 which supposedly includes all termination benefits computed at 47 days’ pay per year of service. Then, she executed a Release and Quitclaim in favor of defendant Goodyear.

Notwithstanding, complainant initiated a labor complaint for illegal dismissal with claims for separation pay, damages and attorney’s fees, against defendants.

The Labor Arbiter upheld the validity of complainant’s termination. However, her claim for both separation pay and retirement benefit were denied holding that such was not allowed under the Retirement Plan/CBA. On appeal, NLRC affirmed the Labor Arbiter. On Petition for Certiorari, the Court of Appeals partially granted complainant’s claims. While the appellate court upheld the dismissal, it ruled that she was entitled to both separation pay and retirement benefits “in view of the absence of any provision in the CBA prohibiting the payment of both.” Further, it was observed that complainant did not voluntarily sign the Release and Quitclaim as that would result in her receiving less than what she was legally entitled to receive. She was granted moral damages and attorney’s fees. On motion for reconsideration by respondents/defendants, the appellate court denied the same.

HELD: Defendants were made liable. Complainant is entitled to both separation pay and early retirement benefit as there is no express and specific provision in the CBA that prohibits recovering for both. Citing earlier jurisprudence, “an employee is entitled to recover both separation pay and retirement benefits in the absence of a specific prohibition in the Retirement Plan or CBA. Concomitantly, the Court ruled that an employee’s right to receive separation pay in addition to retirement benefits depends upon the provisions of the company’s Retirement Plan and/or CBA.”

Retirement benefits and separation pay are not mutually exclusive. “Retirement benefits are a form of reward for an employee’s loyalty and service to an employer and are earned under existing laws, CBAs, employment contracts and company policies. On the other hand, separation pay is that amount which an employee receives at the time of his severance from employment, designed to provide the employee with the wherewithal during the period that he is looking for another employment and is recoverable only in instances enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal cases when reinstatement is not feasible. In the case at bar, Article 283 clearly entitles [complainant] to separation pay apart from the retirement benefits she received from petitioners.”

The release and quitclaim is invalid. The Supreme Court concurred with the appellate court that “the terms of the quitclaim authorizes Angus to receive less than what she is legally entitled to.” This is contrary to prevailing jurisprudence holding that “a quitclaim cannot bar an employee from demanding benefits to which he is legally entitled.” Such quitclaim was held to be “ineffective in barring claims for the full measure of the worker’s rights and the acceptance of benefits therefrom does not amount to estoppel”. Further, “release and quitclaims are often looked upon with disfavor when the waiver was not done voluntarily by employees who were pressured into signing them by unscrupulous employers seeking to evade their obligations.”

Complainant was entitled to moral damages and attorney’s fees. “Moral damages is awarded when fraud and bad faith have been established, as in this case. [Defendants’] false contention over what has been paid to Angus suggests an attempt to feign compliance with their legal obligation to grant their employee all the benefits provided for by agreement and law. Their bad faith is evident in the intent to circumvent this legal mandate. And as [complainant] was then forced to litigate her just claims when [defendants] refused to heed her demands for the payment of separation pay, the award of attorney’s fees equivalent to 10% of the amount of separation pay is also in order.”