G.R. No. L-2779 October 18, 1950 DANIEL SANCHEZ, ET AL., plaintiffs-appellees,vs. HARRY LYONS CONSTRUCTION, INC., ET AL., defendants-appellants. Gibbs, Gibbs, Chuidian and Quasha for appellant Harry Lyons Construction, Inc. Cecilio I. Lim and Antonio M. Castro for appellees.

MORAN, C. J .: This case originated in the Municipal Court of Manila upon a complaint filed on March 9, 1948, by the herein appellees as plaintiffs, against the herein appellants as defendants, for the sum of P2,210 plus interest, which plaintiffs claimed as one month advance pat due them. On April 28, 1948, the parties entered into a stipulation of facts upon which said municipal court rendered judgment for the plaintiffs. Upon denial of their motion for reconsideration of this judgment, the defendants filed an appeal to the Court of First Instance of Manila, wherein the parties submitted the case upon the same facts agreed upon in the Municipal Court. On October 2, 1948, the Court of First Instance of Manila rendered its decision holding for plaintiffs, as follows: Wherefore judgment is hereby rendered 1. Ordering defendant Material Distributors, Inc. to pay plaintiff Enrique Ramirez the sum of P360 and plaintiff Juan Ramirez the sum of P250 with legal interest on each of the said sums from the date of the filing of the complaint in the Municipal Court of Manila until the date of full payment thereof; and 2. Ordering defendant Harry Lyons Construction, Inc. to pay plaintiff Daniel Sanchez the sum of P250, and plaintiff Mariano Javier, Venancio Diaz, Esteban Bautista, Faustino Aquillo, Godofredo Diamante, Marcial Lazaro, Ambrosio de la Cruz, and Marcelino Maceda the sum of P150 each, with legal interest on each of the said sums from the date of the filing of the complaint in the Municipal Court of Manila until the date of full payment thereof. One half of the costs is to be paid by Material Distributors, Inc. and the other half by Harry Lyons Construction, Inc. From this judgment, defendants filed an appeal with this court purely upon a question of law. The stipulation of facts entered into by the parties on April 28, 1948, is as follows:lawphil.netSTIPULATION OF FACTS. Come now the plaintiffs and the defendants, by their respective undersigned attorneys and to this Honorable Court, respectfully submit the following stipulation of facts: 1. That the plaintiffs were respectively employed as follows: EMPLOYED BY DEFENDANT MATERIAL DISTRIBUTORS, INC. Name Date of Position Salary employment Enrique Ramirez .............. 12/16/46 Warehouseman P450 a mo. Juan Ramirez ................... do do 250 a mo. NOTE. The salary of Enrique Ramirez was later reduced to P360 per month. This was the amount he was receiving at the time of his dismissal. EMPLOYED BY DEFENDANT HARRY LYONS CONSTRUCTION, INC. Daniel Sanchez ................ 1/1/47 Carpenter- P250 a mo. Foreman Mariano Javier ................. ....do.................. Guard................. 5 a day Venancio Diaz ................. ....do.................. do....................... 5 a day Esteban Bautista ............ ....do.................. do....................... 5 a day Faustino Aquillo ............ ....do.................. do....................... 5 a day Godofredo Diamante ..... ....do.................. do....................... 5 a day Marcial Lazaro ................ ....do.................. do....................... 5 a day Ambrosio de la Cruz ..... ....do.................. do....................... 5 a day Marcelino Macada ........ ....do.................. do....................... 5 a day as per contracts of employment, copies of which are attached to defendants' answer marked Exhibits 1 to 11 inclusive 2. That in said contracts of employment the plaintiff agreed as follows: "I accept the foregoing appointment, and in consideration thereof I hereby agree that such employment may be terminated at any time, without previous notice, and I further agree that salary and wages, shall be computed and paid at the rate specified up to the date of such termination. "Also in consideration of such employment I hereby expressly waive the benefit of article 302 of the Code of Commerce and that of any other law, ruling, or custom which might require notice of discharge or payment of salary or wages after date of the termination of such employment." 3. That the plaintiffs were dismissed by the defendants on December 31, 1947 without one months' previous notice. 4. That each of the plaintiffs demanded payment of one month's salary from the defendants and that the latter refused to pay the same. WHEREFORE, it is respectfully prayed that judgment on the foregoing stipulation of facts be rendered by this Honorable Court. The points in issue herein are: first, whether plaintiffs, both those paid on a monthly and daily basis, are entitled to the benefit granted in article 302 of the Code of Commerce; and secondly, if they are so entitled, was their waiver of such benefits legal and valid? Article 302 of the Code of Commerce reads as follows: ART. 302. In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may cancel it, advising the other party thereof one month in advance. The factor or shop clerk shall be entitled, in such case, to the salary due for said month. It is a clear doctrine, as gleaned from the provision of the law and settled jurisprudence, 1 that in a mercantile contract of service in which no special time is fixed, any one of the parties may cancel said contract upon giving of a one-month notice, called a mesada, to the other party. The law gives an added proviso that in the case of factors or shop clerks, these shall be entitled to salary during this one month of standing notice. In any case, the one-month notice must be given to any employee, whether factor, shop clerk or otherwise, so long as the two conditions concur, namely, that no special time is fixed in the contract of service, and that said employee is a commercial employee. And when such notice is not given under these conditions, not only the factor or shop clerk but any employee discharged without cause, is entitled to indemnity which may be one month's salary. 2 In the instant case, there lies no doubt that plaintiffs are commercial employees of appellant corporations, rendering service as warehousemen, carpenter-foreman and guards. There is likewise no doubt as can be seen from the contracts of employment submitted as exhibits, that no special time has been fixed in the contracts of services between plaintiffs-appellees and defendants-appellants. The stated computation or manner of payment, whether monthly or daily, does not represent nor determine a special time of employment. Thus, a commercial employee may be employed for one year and yet receive his salary on the daily or weekly or monthly or other basis. Appellants allege that the use of the word "temporary" in the contracts of services of some of the plaintiffs shows that their employment was with a term, and the term was "temporary, on a day to day basis." The record discloses that this conclusion is unwarranted. The contracts simply say "You are hereby employed as temporary guard with a compensation at the rate of P5 a day . . . ." The word "temporary" as used herein does not mean the special time fixed in the contracts referred to in article 302 of the Code of Commerce. The daily basis therein stipulated is for the computation of pay, and is not necessarily the period of employment. Hence, this Court holds that plaintiffs-appellants come within the purview of article 302 of the Code of Commerce. Now, as the second question, namely, the validity of plaintiffs' waiver of the benefits given them by said article 302. This court holds that such a waiver, made in advance, is void as being contrary to public policy. Granting that the "mesada" given in article 302 of the Code of Commerce, is for the bilateral benefit of both employer and employee, nevertheless, this does not preclude the finding that a waiver of such "mesada" in advance by the employee is contrary to public policy. Public policy, with regard to labor, is clearly stated in article II, section 5, of the Philippine Constitution, which reads The promotion of social justice to insure the well-being and economic security of all the people should be the concern of the State. and article XIV, section 6, which reads The State shall afford protection to labor, especially to working women and minors, and shall regulate the relations between land-owner and tenant, and between labor and capital in industry and in agriculture. . . . Article 302 of the Code of Commerce must be applied in consonance with these provisions of our constitution. In the matter of employment bargaining, there is no doubt that the employer stands on higher footing than the employee. First of all, there is greater supply than demand for labor. Secondly, the need for employment by labor comes from vital and even desperate, necessity. Consequently, the law must protect labor, at least, to the extent of raising him to equal footing in bargaining relations with capital and to shield him from abuses brought about by the necessity for survival. It is safe to presume therefore, that an employee or laborer who waives in advance any benefit granted him by law does so, certainly not in his interest or through generosity but under the forceful intimidation of urgent need, and hence, he could not have so acted freely and voluntarily. For all the foregoing, this court hereby affirms the decision of the lower court, with costs against appellants. Ozaeta, Paras, Feria, Pablo, Tuason, Bengzon and Reyes, JJ., concur. G.R. No. 200094 June 10, 2013 BENIGNO M. VIGILLA, ALFONSO M. BONGOT, ROBERTO CALLESA, LINDA C. CALLO, NILO B. CAMARA, ADELIA T. CAMARA, ADOLFO G. PINON, JOHN A. FERNANDEZ, FEDERICO A. CALLO, MAXIMA P. ARELLANO, JULITO B. COST ALES, SAMSON F. BACHAR, EDWIN P. DAMO, RENA TO E. FERNANDEZ, GENARO F.CALLO, JIMMY C. ALETA, and EUGENIO SALINAS, Petitioners,vs. PHILIPPINE COLLEGE OFCRIMINOLOGY INC. and/or GREGORY ALAN F. BAUTISTA, Respondents. D E C I S I O N MENDOZA, J .: This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 16, 2011 Decision1 of the Court of Appeals (CA), in CA-G.R. SP No. 120225, which affirmed the February 11, 2011 Resolution2 and the April 28, 20113 Resolution of the National Labor Relations Commission (NLRC). The two NLRC resolutions affirmed with modifications the July 30, 2010 Decision4 of the Labor Arbiter (LA) finding that (a) Metropolitan Building Services, Inc. (MBMSI) was a labor-only contractor; (b) respondent Philippine College of Criminology Inc. (PCCr) was the petitioners real principal employer; and (c) PCCr acted in bad faith in dismissing the petitioners. The NLRC, however, declared that the claims of the petitioners were settled amicably because of the releases, waivers and quitclaims they had executed. The Antecedents PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the Maintenance Department of PCCr under the supervision and control of Atty. Florante A. Seril (Atty. Seril), PCCrs Senior Vice President for Administration. The petitioners, however, were made to understand, upon application with respondent school, that they were under MBMSI, a corporation engaged in providing janitorial services to clients. Atty. Seril is also the President and General Manager of MBMSI. Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been revoked as of July 2, 2003. On March 16, 2009, PCCr, through its President, respondent Gregory Alan F. Bautista (Bautista), citing the revocation, terminated the schools relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI, except Alfonso Bongot (Bongot) who was retired. In September, 2009, the dismissed employees, led by their supervisor, Benigno Vigilla (Vigilla), filed their respective complaints for illegal dismissal, reinstatement, back wages, separation pay (for Bongot), underpayment of salaries, overtime pay, holiday pay, service incentive leave, and 13th month pay against MBMSI, Atty. Seril, PCCr, and Bautista. In their complaints, they alleged that it was the school, not MBMSI, which was their real employer because (a) MBMSIs certification had been revoked; (b) PCCr had direct control over MBMSIs operations; (c) there was no contract between MBMSI and PCCr; and (d) the selection and hiring of employees were undertaken by PCCr. On the other hand, PCCr and Bautista contended that (a) PCCr could not have illegally dismissed the complainants because it was not their direct employer; (b) MBMSI was the one who had complete and direct control over the complainants; and (c) PCCr had a contractual agreement with MBMSI, thus, making the latter their direct employer. On September 11, 2009, PCCr submitted several documents before LA Ronaldo Hernandez, including releases, waivers and quitclaims in favor of MBMSI executed by the complainants to prove that they were employees of MBMSI and not PCCr.5 The said documents appeared to have been notarized by one Atty. Ramil Gabao. A portion of the releases, waivers and quitclaims uniformly reads: For and in consideration of the total amount of ______________, as and by way of separation pay due to the closure of the Company brought about by serious financial losses, receipt of the total amount is hereby acknowledged, I _______________, x x x forever release and discharge x x x METROPOLITAN BUILDING MAINTENANCE SERVICES, INC., of and from any and all claims, demands, causes of actions, damages, costs, expenses, attorneys fees, and obligations of any nature whatsoever, known or unknown, in law or in equity, which the undersigned has, or may hereafter have against the METROPOLITAN BUILDING MAINTENANCE SERVICES, INC., whether administrative, civil or criminal, and whether or not arising out of or in relation to my employment with the above company or third persons.6 Ruling of the Labor Arbiter After due proceedings, the LA handed down his decision, finding that (a) PCCr was the real principal employer of the complainants ; (b) MBMSI was a mere adjunct or alter ego/labor-only contractor; (c) the complainants were regular employees of PCCr; and (d) PCCr/Bautista were in bad faith in dismissing the complainants. The LA ordered the respondents (a) to reinstate petitioners except Bongot who was deemed separated/retired; (b) to pay their full back wages from the date of their illegal dismissal until actual reinstatement (totalingP2,963,584.25); (c) to pay Bongots separation or retirement pay benefit under the Labor Code (amounting toP254,010.00); (d) to pay their 3-year Service Incentive Leave Pay (P4,245.60 each) except Vigilla (P5,141.40); (e) to pay all the petitioners moral and exemplary damages in the combined amount of P150,000.00; and finally (f) to pay 10% of the total computable award as Attorneys Fees. The LA explained that PCCr was actually the one which exercised control over the means and methods of the work of the petitioners, thru Atty. Seril, who was acting, throughout the time in his capacity as Senior Vice President for Administration of PCCr, not in any way or time as the supposed employer/general manager or president of MBMSI. Despite the presentation by the respondents of the releases, waivers and quitclaims executed by petitioners in favor of MBMSI, the LA did not touch on the validity and authenticity of the same. Neither did he discuss the effects of such releases, waivers and quitclaims on petitioners claims. Ruling of the NLRC Not satisfied, the respondents filed an appeal before the NLRC. In its Resolution, dated February 11, 2011, the NLRC affirmed the LAs findings. Nevertheless, the respondents were excused from their liability by virtue of the releases, waivers and quitclaims executed by the petitioners. Specifically, the NLRC pointed out: As Respondent MBMSI and Atty. Seril, together are found to be labor only contractor, they are solidarily liable with Respondent PCCr and Gregory Alan F. Bautista for the valid claims of Complainants pursuant to Article 109 of the Labor Code on the solidary liability of the employer and indirect employer. This liability, however, is effectively expunged by the acts of the 17 Complainants of executing Release, Waiver, and Quitclaims (pp. 170-184, Records) in favor of Respondent MBMSI. The liability being joined, the release of one redounds to the benefit of the others, pursuant to Art. 1217 of the Civil Code, which provides that "Payment made by one of the solidary debtors extinguishes the obligation. x x x."7 In their motion for reconsideration, petitioners attached as annexes their affidavits denying that they had signed the releases, waivers, and quitclaims. They prayed for the reinstatement in toto of the July 30, 2010 Decision of the LA.8 MBMSI/Atty. Seril also filed a motion for reconsideration9 questioning the declaration of the NLRC that he was solidarily liable with PCCr. On April 28, 2011, NLRC modified its February 11, 2011 Resolution by affirming the July 30, 2010 Decision10 of the LA only in so far as complainants Ernesto B. Ayento and Eduardo B. Salonga were concerned. As for the other 17 complainants, the NLRC ruled that their awards had been superseded by their respective releases, waivers and quitclaims. The seventeen (17) complainants filed with the CA a petition for certiorari under Rule 65 faulting the NLRC with grave abuse of discretion for absolving the respondents from their liability by virtue of their respective releases, waivers and quitclaims. Ruling of the Court of Appeals On September 16, 2011, the CA denied the petition and affirmed the two Resolutions of the NLRC, dated February 11, 2011 and April 28, 2011. The CA pointed out that based on the principle of solidary liability and Article 121711 of the New Civil Code, petitioners respective releases, waivers and quitclaims in favor of MBMSI and Atty. Seril redounded to the benefit of the respondents. The CA also upheld the factual findings of the NLRC as to the authenticity and due execution of the individual releases, waivers and quitclaims because of the failure of petitioners to substantiate their claim of forgery and to overcome the presumption of regularity of a notarized document. Petitioners motion for reconsideration was likewise denied by the CA in its January 4, 2012 Resolution. Hence, this petition under Rule 45 challenging the CA Decision anchored on the following GROUNDS The Hon. Court of Appeals COMMITTED REVERSIBLE ERRORS when: A. IT CONSIDERED RESPONDENT METROPOLITAN BUILDING MAINTENANCE SERVICES, INC.S LIABILITY AS SOLIDARY TO RESPONDENT PHILIPPINE COLLEGE OF CRIMINOLOGY, INC., WHEN IN FACT THERE IS NO LEGAL BASIS TO THAT EFFECT. B. IT DID NOT AFFIRM THE DECISION OF THE HON. LABOR ARBITER, DATED JULY 30, 2010, AS TO 17 PETITIONERS IN THIS CASE, DISREGARDING THE CORPORATION LAW AND JURISPRUDENCE OF THE HON. SUPREME COURT IN SO FAR AS QUITLCLAIMS, RELEASE AND WAIVERS ARE CONCERNED IN LABOR CASES. C. IT AFFIRMED THE DECISION OF THE HON. NATIONAL LABOR RELATIONS COMMISSION, THAT THE 17 COMPLAINANTS HAVE SETTLED THEIR CLAIMS BY VIRTUE OF ALLEGED RELEASES, WAIVERS AND QUITCLAIMS SIGNED BY THE COMPLAINANTS IN FAVOR OF METROPOLITAN BUILDING MAINTENANCE, INC. D. IT DID NOT TAKE INTO CONSIDERATION SUBSTANTIAL EVIDENCE OF PETITIONERS/COMPLAINANTS DISPUTING THE ALLEGED WAIVERS, RELEASES AND QUITCLAIMS, INCLUDING THE ALLEGED NOTARIZATION THEREOF.12 The petition fails. The grounds cited by the petitioners boil down to this basic issue: whether or not their claims against the respondents were amicably settled by virtue of the releases, waivers and quitclaims which they had executed in favor of MBMSI. In resolving this case, the Court must consider three (3) important sub-issues, to wit: (a) whether or not petitioners executed the said releases, waivers and quitclaims; (b) whether or not a dissolved corporation can enter into an agreement such as releases, waivers and quitclaims beyond the 3-year winding up period under Section 122 of the Corporation Code; and (c) whether or not a labor-only contractor is solidarily liable with the employer. The Releases, Waivers and Quitclaims are Valid Petitioners vehemently deny having executed any release, waiver or quitclaim in favor of MBMSI. They insist that PCCr forged the documents just to evade their legal obligations to them, alleging that the contents of the documents were written by one person, whom they identified as Reynaldo Chavez, an employee of PCCr, whose handwriting they were familiar with.13 To begin with, their posture was just an afterthought. Petitioners had several opportunities to question the authenticity of the said documents but did not do so. The records disclose that during the proceedings before the LA, PCCr submitted several documents, including the subject releases, waivers and quitclaims executed on September 11, 2009 in favor of MBMSI,14 but petitioners never put their genuineness and due execution at issue. These were brought up again by the respondents in their Memorandum of Appeal,15 but again petitioners did not bother to dispute them. It was only after the NLRCs declaration in its February 11, 2011 Resolution that the claims of petitioners had been settled amicably by virtue of the releases, waivers and quitclaims, that petitioners, in their motion for reconsideration,16 denied having executed any of these instruments. This passiveness and inconsistency of petitioners will not pass the scrutiny of this Court. At any rate, it is quite apparent that this petition raises questions of fact inasmuch as this Court is being asked to revisit and assess anew the factual findings of the CA and the NLRC regarding the validity, authenticity and due execution of the subject releases, waivers and quitclaims. Well-settled is the rule that this Court is not a trier of facts and this doctrine applies with greater force in labor cases. Questions of fact are for the labor tribunals to resolve.17 Only errors of law are generally reviewed in petitions for review on certiorari criticizing decisions of the CA. Moreover, findings of fact of quasi-judicial bodies like the NLRC, as affirmed by the CA, are generally conclusive on this Court.18 Hence, as correctly declared by the CA, the following NLRC factual findings are binding and conclusive on this Court: We noted that the individual quitclaims, waivers and releases executed by the complainants showing that they received their separation pay from MBMSI were duly notarized by a Notary Public. Such notarization gives prima facie evidence of their due execution. Further, said releases, waivers, and quitclaims were not refuted nor disputed by complainants herein, thus, we have no recourse but to uphold their due execution.19 Even if the Court relaxes the foregoing rule, there is still no reason to reverse the factual findings of the NLRC and the CA. What is on record is only the self-serving allegation of petitioners that the releases, waivers and quitclaims were mere forgeries. Petitioners failed to substantiate this allegation. As correctly found by the CA: "petitioners have not offered concrete proof to substantiate their claim of forgery. Allegations are not evidence."20 On the contrary, the records confirm that petitioners were really paid their separation pay and had executed releases, waivers and quitclaims in return. In his motion for reconsideration of the February 11, 2011 Resolution of the NLRC, Atty. Seril, President and General Manager of MBMSI, stated that the amount of 2,000,000.00 "was coursed by PCCr to me, to be handed to the complainants, through its employee, Rey Chavez."21 Petitioners requested the Court to take a look at such releases, waivers and quitclaims, particularly their contents and the handwriting, but they failed to attach to the records copies of the said documents which they claimed to have been forged. The petition is dismissible on this ground alone. The Rules of Court require the petition to be accompanied by such material portions of the record as would support the petition.22 Failure to comply with the requirements regarding "the contents of and the documents which should accompany the petition" is a ground for the dismissal of the appeal.23 Moreover, mere unsubstantiated allegations of lack of voluntariness in executing the documents will not suffice to overcome the presumption of authenticity and due execution of a duly notarized document. As correctly held by the NLRC, "such notarization gives prima facie evidence of their due execution."24 Petitioners contend that the alleged notarization of the releases, waivers and quitclaims by one Atty. Ramil Gabao did not take place, because there were no records of such documents in the Notary Section of Manila. Thus, the prima facie evidence thereof has been disputed. The Court is not moved. Respondents should not be penalized for the failure of the notary public to submit his Notarial Report. In Destreza v. Rinoza-Plazo,25 this Court stated that "the notarized deed of sale should be admitted as evidence despite the failure of the Notary Public in submitting his notarial report to the notarial section of the RTC Manila." The Court expounded: It is the swearing of a person before the Notary Public and the latters act of signing and affixing his seal on the deed that is material and not the submission of the notarial report. Parties who appear before a notary public to have their documents notarized should not be expected to follow up on the submission of the notarial reports. They should not be made to suffer the consequences of the negligence of the Notary Public in following the procedures prescribed by the Notarial Law.26 It would have been different if the notary public was not a lawyer or was not commissioned as such. In this regard, however, petitioners offered no proof. On the Revocation of MBMSIs Certificate of Incorporation Petitioners further argue that MBMSI had no legal personality to incur civil liabilities as it did not exist as a corporation on account of the fact that its Certificate of Incorporation had been revoked on July 2, 2003. Petitioners ask this Court to exempt MBMSI from its liabilities because it is no longer existing as a corporation. The Court cannot accommodate the prayer of petitioners. The executed releases, waivers and quitclaims are valid and binding notwithstanding the revocation of MBMSIs Certificate of Incorporation. The revocation does not result in the termination of its liabilities. Section 12227 of the Corporation Code provides for a three-year winding up period for a corporation whose charter is annulled by forfeiture or otherwise to continue as a body corporate for the purpose, among others, of settling and closing its affairs. Even if said documents were executed in 2009, six (6) years after MBMSIs dissolution in 2003, the same are still valid and binding upon the parties and the dissolution will not terminate the liabilities incurred by the dissolved corporation pursuant to Sections 122 and 14528 of the Corporation Code. In the case of Premiere Development Bank v. Flores,29 the Court held that a corporation is allowed to settle and close its affairs even after the winding up period of three (3) years. The Court wrote: As early as 1939, this Court held that, although the time during which the corporation, through its own officers, may conduct the liquidation of its assets and sue and be sued as a corporation is limited to three years from the time the period of dissolution commences, there is no time limit within which the trustees must complete a liquidation placed in their hands. What is provided in Section 122 of the Corporation Code is that the conveyance to the trustees must be made within the three-year period. But it may be found impossible to complete the work of liquidation within the three-year period or to reduce disputed claims to judgment. The trustees to whom the corporate assets have been conveyed pursuant to the authority of Section 122 may sue and be sued as such in all matters connected with the liquidation. Furthermore, Section 145 of the Corporation Code clearly provides that "no right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation." Even if no trustee is appointed or designated during the three-year period of the liquidation of the corporation, the Court has held that the board of directors may be permitted to complete the corporate liquidation by continuing as "trustees" by legal implication.30 [Emphases supplied; citations omitted] A Labor-only Contractor is Solidarily Liable with the Employer The issue of whether there is solidary liability between the labor-only contractor and the employer is crucial in this case. If a labor-only contractor is solidarily liable with the employer, then the releases, waivers and quitclaims in favor of MBMSI will redound to the benefit of PCCr. On the other hand, if a labor-only contractor is not solidarily liable with the employer, the latter being directly liable, then the releases, waivers and quitclaims in favor of MBMSI will not extinguish the liability of PCCr. On this point, petitioners argue that there is no solidary liability to speak of in case of an existence of a labor-only contractor. Petitioners contend that under Article 10631 of the Labor Code, a labor-only contractors liability is not solidary as it is the employer who should be directly responsible to the supplied worker. They argue that Article 10932 of the Labor Code (solidary liability of employer/indirect employer and contractor/subcontractor) and Article 1217 of the New Civil Code (extinguishment of solidary obligation) do not apply in this case. Hence, the said releases, waivers and quitclaims which they purportedly issued in favor of MBMSI and Atty. Seril do not automatically release respondents from their liability. Again, the Court disagrees. The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by petitioners in favor of MBMSI redounded to the benefit of PCCr pursuant to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily liable with the respondents for the valid claims of petitioners pursuant to Article 109 of the Labor Code. As correctly pointed out by the respondents, the basis of the solidary liability of the principal with those engaged in labor-only contracting is the last paragraph of Article 106 of the Labor Code, which in part provides: "In such cases labor-only contracting, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him." Section 19 of Department Order No. 18-02 issued by the Department of Labor and Employment (DOLE), which was still in effect at the time of the promulgation of the subject decision and resolution, interprets Article 106 of the Labor Code in this wise: Section 19. Solidary liability. The principal shall be deemed as the direct employer of the contractual employees and therefore, solidarily liable with the contractor or subcontractor for whatever monetary claims the contractual employees may have against the former in the case of violations as provided for in Sections 5 (LaborOnly contracting), 6 (Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these Rules. In addition, the principal shall also be solidarily liable in case the contract between the principal and contractor or subcontractor is preterminated for reasons not attributable to the fault of the contractor or subcontractor. [Emphases supplied]. The DOLE recognized anew this solidary liability of the principal employer and the labor-only contractor when it issued Department Order No. 18-A, series of 2011, which is the latest set of rules implementing Articles 106-109 of the Labor Code. Section 27 thereof reads: Section 27. Effects of finding of labor-only contracting and/or violation of Sections 7, 8 or 9 of the Rules. A finding by competent authority of labor-only contracting shall render the principal jointly and severally liable with the contractor to the latters employees, in the same manner and extent that the principal is liable to employees directly hired by him/her, as provided in Article 106 of the Labor Code, as amended. A finding of commission of any of the prohibited activities in Section 7, or violation of either Sections 8 or 9 hereof, shall render the principal the direct employer of the employees of the contractor or subcontractor, pursuant to Article 109 of the Labor Code, as amended. (Emphasis supplied.) These legislative rules and regulations designed to implement a primary legislation have the force and effect of law. A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature.33 Jurisprudence is also replete with pronouncements that a job-only contractor is solidarily liable with the employer. One of these is the case of Philippine Bank of Communications v. NLRC34 where this Court explained the legal effects of a job-only contracting, to wit: Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters into a contract with a contractor for the performance of work for the employer, does not thereby create an employer-employees relationship between himself and the employees of the contractor. Thus, the employees of the contractor remain the contractor's employees and his alone. Nonetheless when a contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who contracted out the job to the contractor becomes jointly and severally liable with his contractor to the employees of the latter "to the extent of the work performed under the contract" as such employer were the employer of the contractor's employees. The law itself, in other words, establishes an employer-employee relationship between the employer and the job contractor's employees for a limited purpose, i.e., in order to ensure that the latter get paid the wages due to them. A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the person or intermediary" - is considered "merely as an agent of the employer." The employer is made by the statute responsible to the employees of the "labor only" contractor as if such employees had been directly employed by the employer. Thus, where "labor-only" contracting exists in a given case, the statute itself implies or establishes an employer-employee relationship between the employer (the owner of the project) and the employees of the "labor only" contractor, this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code." The law in effect holds both the employer and the "laboronly" contractor responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.35 [Emphasis supplied]. The case of San Miguel Corporation v. MAERC Integrated Services, Inc.36 also recognized this solidary liability between a labor-only contractor and the employer. In the said case, this Court gave the distinctions between solidary liability in legitimate job contracting and in labor-only contracting, to wit: In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.37 [Emphases supplied; Citations omitted] Recently, this Court reiterated this solidary liability of labor-only contractor in the case of 7K Corporation v. NLRC38 where it was ruled that the principal employer is solidarily liable with the labor-only contractor for the rightful claims of the employees. Conclusion Considering that MBMSI, as the labor-only contractor, is solidarily liable with the respondents, as the principal employer, then the NLRC and the CA correctly held that the respondents solidary liability was already expunged by virtue of the releases, waivers and quitclaims executed by each of the petitioners in favor of MBMSI pursuant to Article 1217 of the Civil Code which provides that "payment made by one of the solidary debtors extinguishes the obligation." This Court has constantly applied the Civil Code provisions on solidary liability, specifically Articles 1217 and 1222,39 to labor cases. In Varorient Shipping Co., Inc. v. NLRC,40 this Court held: The POEA Rules holds her, as a corporate officer, solidarily liable with the local licensed manning agency. Her liability is inseparable from those of Varorient and Lagoa. If anyone of them is held liable then all of them would be liable for the same obligation. Each of the solidary debtors, insofar as the creditor/s is/are concerned, is the debtor of the entire amount; it is only with respect to his co-debtors that he/she is liable to the extent of his/her share in the obligation. Such being the case, the Civil Code allows each solidary debtor, in actions filed by the creditor/s, to avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertaining to his share [citing Section 1222 of the Civil Code]. He may also avail of those defenses personally belonging to his co-debtors, but only to the extent of their share in the debt. Thus, Varorient may set up all the defenses pertaining to Colarina and Lagoa; whereas Colarina and Lagoa are liable only to the extent to which Varorient may be found liable by the court.1wphi 1 x x x x If Varorient were to be found liable and made to pay pursuant thereto, the entire obligation would already be extinguished [citing Article 1217 of the Civil Code] even if no attempt was made to enforce the judgment against Colarina. Because there existed a common cause of action against the three solidary obligors, as the acts and omissions imputed against them are one and the same, an ultimate finding that Varorient was not liable would, under these circumstances, logically imply a similar exoneration from liability for Colarina and Lagoa, whether or not they interposed any defense.41 [Emphases supplied] In light of these conclusions, the Court holds that the releases, waivers and quitclaims executed by petitioners in favor of MBMSI redounded to the respondents' benefit. The liabilities of the respondents to petitioners are now deemed extinguished. The Court cannot allow petitioners to reap the benefits given to them by MBMSI in exchange for the releases, waivers and quitclaims and, again, claim the same benefits from PCCr. While it is the duty of the courts to prevent the exploitation of employees, it also behooves the courts to protect the sanctity of contracts that do not contravene the law.42 The law in protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer. While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, the Court has inclined more often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine.43 WHEREFORE, the petition is DENIED. SO ORDERED. G.R. No. 80609 August 23, 1988 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,vs. THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents. Nicanor G. Nuevas for petitioner.

CRUZ, J .: The only issue presented in the case at bar is the legality of the award of financial assistance to an employee who had been dismissed for cause as found by the public respondent. Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was accused by two complainants of having demanded and received from them the total amount of P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone installation. 1 Investigated and heard, she was found guilty as charged and accordingly separated from the service. 2 She went to the Ministry of Labor and Employment claiming she had been illegally removed. After consideration of the evidence and arguments of the parties, the company was sustained and the complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of labor arbiter's decision declared: WHEREFORE, the instant complaint is dismissed for lack of merit. Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally blameless in the light of the fact that the deal happened outhide the premises of respondent company and that their act of giving P3,800.00 without any receipt is tantamount to corruption of public officers, complainant must be given one month pay for every year of service as financial assistance. 3 Both the petitioner and the private respondent appealed to the National Labor Relations Board, which upheld the said decision in toto and dismissed the appeals. 4 The private respondent took no further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is now before us to question the affirmance of the above- quoted award as having been made with grave abuse of discretion. In its challenged resolution of September 22, 1987, the NLRC said: ... Anent the award of separation pay as financial assistance in complainant's favor, We find the same to be equitable, taking into consideration her long years of service to the company whereby she had undoubtedly contributed to the success of respondent. While we do not in any way approve of complainants (private respondent) mal feasance, for which she is to suffer the penalty of dismissal, it is for reasons of equity and compassion that we resolve to uphold the award of financial assistance in her favor. 5 The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is entitled to reinstatement and backwages as required by the labor laws. However, an employee dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief at all because his dismissal is in accordance with law. In the case of the private respondent, she has been awarded financial assistance equivalent to ten months pay corresponding to her 10 year service in the company despite her removal for cause. She is, therefore, in effect rewarded rather than punished for her dishonesty, and without any legal authorization or justification. The award is made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such award puts a premium on dishonesty and encourages instead of deterring corruption. For its part, the public respondent claims that the employee is sufficiently punished with her dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to help her for the loss of her employment after working faithfully with the company for ten years. In support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation of Davao, 7 where the employees were dismissed for cause but were nevertheless allowed separation pay on grounds of social and compassionate justice. As the Court put it in the Firestone case: In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of Lariosa and that the NLRC acted with grave abuse of discretion in ordering his reinstatement. However, considering that Lariosa had worked with the company for eleven years with no known previous bad record, the ends of social and compassionate justice would be served if he is paid full separation pay but not reinstatement without backwages by the NLRC. In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded him full separation pay for his 11 years of service with the company. In Soco, the employee was also legally separated for unauthorized use of a company vehicle and refusal to attend the grievance proceedings but he was just the same granted one-half month separation pay for every year of his 18-year service. Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed for preferring certain dealers in violation of company policy but was allowed separation pay for his 2 years of service. In Metro Drug Corporation v. NLRC, 9 the employee was validly removed for loss of confidence because of her failure to account for certain funds but she was awarded separation pay equivalent to one-half month's salary for every year of her service of 15 years. In Engineering Equipment, Inc. v. NLRC, 10 the dismissal of the employee was justified because he had instigated labor unrest among the workers and had serious differences with them, among other grounds, but he was still granted three months separation pay corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, 11 the employee's 3- year service was held validly terminated for lack of confidence and abandonment of work but he was nonetheless granted three months separation pay. And in San Miguel Corporation v. Deputy Minister of Labor and Employment, et al ., 12 full separation pay for 6, 10, and 16 years service, respectively, was also allowed three employees who had been dismissed after they were found guilty of misappropriating company funds. The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not entitled to separation pay. 13 The cases above cited constitute the exception, based upon considerations of equity. Equity has been defined as justice outside law, 14 being ethical rather than jural and belonging to the sphere of morals than of law. 15 It is grounded on the precepts of conscience and not on any sanction of positive law. 16 Hence, it cannot prevail against the expressed provision of the labor laws allowing dismissal of employees for cause and without any provision for separation pay. Strictly speaking, however, it is not correct to say that there is no express justification for the grant of separation pay to lawfully dismissed employees other than the abstract consideration of equity. The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub- topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause. The Court notes, however, that where the exception has been applied, the decisions have not been consistent as to the justification for the grant of separation pay and the amount or rate of such award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow workers in the Engineering Equipment case were both awarded separation pay notnvithstanding that the first cause was certainly more serious than the second. No less curiously, the employee in the Soco case was allowed only one-half month pay for every year of his 18 years of service, but in Filipro the award was two months separation pay for 2 years service. In Firestone, the emplovee was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee was granted only one-half month separation pay for every year of her 15year service. It would seem then that length of service is not necessarily a criterion for the grant of separation pay and neither apparently is the reason for the dismissal. The Court feels that distinctions are in order. We note that heretofore the separation pay, when it was considered warranted, was required regardless of the nature or degree of the ground proved, be it mere inefficiency or something graver like immorality or dishonesty. The benediction of compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the validly dismissed employee whatever the reason for his dismissal. This policy should be re-examined. It is time we rationalized the exception, to make it fair to both labor and management, especially to labor. There should be no question that where it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation pay to the dismissed employee may be both just and compassionate, particularly if he has worked for some time with the company. For example, a subordinate who has irreconcilable policy or personal differences with his employer may be validly dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who has to be frequently absent because she has also to take care of her child may also be removed because of her poor attendance, this being another authorized ground. It is not the employee's fault if he does not have the necessary aptitude for his work but on the other hand the company cannot be required to maintain him just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under these and similar circumstances, however, the award to the employee of separation pay would be sustainable under the social justice policy even if the separation is for cause. But where the cause of the separation is more serious than mere inefficiency, the generosity of the law must be more discerning. There is no doubt it is compassionate to give separation pay to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the company premises, the situation is changed completely. This is not only inefficiency but immorality and the grant of separation pay would be entirely unjustified. We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution. The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character. Applying the above considerations, we hold that the grant of separation pay in the case at bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during all of her 10 years of service with the company. If regarded as a justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all undesirables. The Court also rules that the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material. This is without prejudice to the application of special agreements between the employer and the employee stipulating a higher rate of computation and providing for more benefits to the discharged employee. 17 WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is AFFIRMED in totoexcept for the grant of separation pay in the form of financial assistance, which is hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so ordered. Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and Medialdea, JJ., concur.

Separate Opinions

FERNAN, C.J ., dissenting: The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed employees is that "our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers." 1 It is my firm belief that providing a rigid mathematical formula for determining the amounts of such separation pay will not be in keeping with these constitutional directives. By computing the allowable financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying these constitutional mandates that "those who have less in life should have more in law." It cannot be denied that a low salaried employee who is separated from work would suffer more hardship than a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the latter instead of the former, as it would be the low- salaried employee who would encounter difficulty finding another job. I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the "environmental facts" of the case. PADILIA, J ., separate opinion I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial assistance, to the private respondent, since the ground for termination of employment is dishonesty in the performance of her duties. I do not, however, subscribe to the view that "the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material." (p.11, Decision). It is my considered view that, except for terminations based on dishonesty and serious misconduct involving moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the termination of employment is for a valid cause without, however, involving dishonesty or serious misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that should be awarded to the terminated employee in accordance with the "environmental facts" of each case. It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay awarded by the NLRC in such cases of valid termination of employment but with the financial assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC. GRIO AQUINO, J ., dissent: We should not rationalize compassion. I vote to affirm the grant of financial assistance.

Separate Opinions FERNAN, C.J ., dissenting: The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed employees is that "our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers." 1 It is my firm belief that providing a rigid mathematical formula for determining the amounts of such separation pay will not be in keeping with these constitutional directives. By computing the allowable financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying these constitutional mandates that "those who have less in life should have more in law." It cannot be denied that a low salaried employee who is separated from work would suffer more hardship than a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the latter instead of the former, as it would be the low- salaried employee who would encounter difficulty finding another job. I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and that of Justice Padilla that the awards of financial assistance should be left to the discretion of the National Labor Relations Commission as may be warranted by the "environmental facts" of the case. PADILIA, J ., separate opinion I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial assistance, to the private respondent, since the ground for termination of employment is dishonesty in the performance of her duties. I do not, however, subscribe to the view that "the separation pay, if found due under the circumstances of each case, should be computed at the rate of one month salary for every year of service, assuming the length of such service is deemed material." (p.11, Decision). It is my considered view that, except for terminations based on dishonesty and serious misconduct involving moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the termination of employment is for a valid cause without, however, involving dishonesty or serious misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that should be awarded to the terminated employee in accordance with the "environmental facts" of each case. It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay awarded by the NLRC in such cases of valid termination of employment but with the financial assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC. GRIO AQUINO, J ., dissent: We should not rationalize compassion. I vote to affirm the grant of financial assistance. G.R. No. 184520 March 13, 2013 ROLANDO DS.TORRES, Petitioner,vs. RURAL BANK OF SAN JUAN, INC., ANDRES CANO CHUA, JOBEL GO CHUA, JESUS CANO CHUA, MEINRADO DALISAY, JOSE MANALANSAN III, OFELIA GINA BE and NATY ASTRERO, Respondents. D E C I S I O N REYES, J .: This Petition for Review on Certiorari,1 under Rule 45 of the Rules of Court, seeks to reverse and set aside the Decision2 dated February 21, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 94690 dismissing the complaint for illegal dismissal filed by petitioner Rolando OS. Torres (petitioner) against respondent Rural Bank of San Juan, Inc. (RBSJT) and its officers who are the herein individual respondents, namely: Andres Cano Chua (Andres), Jobel Go Chua (Jobel), Jesus Cano Chua (Jesus), Meinrado Dalisay, Jose Manalansan III (Jose), Ofelia Ginabe (Ofelia) and Naty Astrero (collectively referred to as respondents).3 Likewise assailed is the CA Resolution4 dated June 3, 2008 which denied reconsideration. The antecedents Culled from the rulings of the labor tribunals and the appellate court are the ensuing factual milieu:5 The petitioner was initially hired by RBSJI as Personnel and Marketing Manager in 1991. After a six-month probationary period and finding his performance to be satisfactory, RBSJI renewed his employment for the same post to a permanent/regular status. In June 1996, the petitioner was offered the position of Vice-President for RBSJIs newly created department, Allied Business Ventures. He accepted the offer and concomitantly relinquished his post. The vacancy created was filled by respondent Jobel who temporarily held the position concurrently as a Corporate Planning and Human Resources Development Head. On September 24, 1996, the petitioner was temporarily assigned as the manager of RBSJIs N. Domingo branch in view of the resignation of Jacinto Figueroa (Jacinto). On September 27, 1996, Jacinto requested the petitioner to sign a standard employment clearance pertaining to his accountabilities with RBSJI. When the petitioner declined his request, Jacinto threw a fit and shouted foul invectives. To pacify him, the petitioner bargained to issue a clearance but only for Jacintos paid cash advances and salary loan. About seven months later or on April 17, 1997, respondent Jesus issued a memorandum to the petitioner requiring him to explain why no administrative action should be imposed on him for his unauthorized issuance of a clearance to Jacinto whose accountabilities were yet to be audited. Jacinto was later found to have unliquidated cash advances and was responsible for a questionable transaction involving P11 million for which RBSJI is being sued by a certain Actives Builders Manufacturing Corporation. The memorandum stressed that the clearance petitioner issued effectively barred RBSJI from running after Jacinto.6 The petitioner submitted his explanation on the same day clarifying that the clearance was limited only to Jacintos paid cash advances and salary loan based on the receipts presented by Lily Aguilar (Lily), the cashier of N. Domingo branch. He emphasized that he had no foreknowledge nor was he forewarned of Jacintos unliquidated cash advances and questionable transactions and that the clearance did not extend to those matters.7 After conducting an investigation, RBSJIs Human Resources Department recommended the petitioners termination from employment for the following reasons, to wit: 1. The issuance of clearance to Mr. Jacinto Figueroa by the petitioner have been prejudicial to the Bank considering that damages [sic] found caused by Mr. Figueroa during his stay with the bank; 2. The petitioner is not in any authority to issue said clearance which is a violation of the Company Code of Conduct and Discipline under Category B Grave Offense No. 1 (falsifying or misrepresenting persons or other company records, documents or papers) equivalent to termination; and 3. The nature of his participation in the issuance of the said clearance could be a reasonable ground for the Management to believe that he is unworthy of the trust and confidence demanded by his position which is also a ground for termination under Article 282 of the Labor Code.8 On May 19, 1997, RBSJIs Board of Directors adopted the above recommendation and issued Resolution No. 97-102 terminating the petitioner from employment, the import of which was communicated to him in a Memorandum dated May 30, 1997.9 Feeling aggrieved, the petitioner filed the herein complaint for illegal dismissal, illegal deduction, non-payment of service incentive, leave pay and retirement benefits.10 The petitioner averred that the supposed loss of trust and confidence on him was a sham as it is in fact the calculated result of the respondents dubious plot to conveniently oust him from RBSJI. He claimed that he was deceived to accept a Vice-President position, which turned out to be a mere clerical and menial work, so the respondents can install Jobel, the son of a major stockholder of RBSJI, as Personnel and Marketing Manager. The plot to oust the petitioner allegedly began in 1996 when Jobel annexed the Personnel and Marketing Departments to the Business Development and Corporate Planning Department thus usurping the functions of and displacing the petitioner, who was put on a floating status and stripped of managerial privileges and allowances. The petitioner further alleged that he was cunningly assigned at N. Domingo branch so he can be implicated in the anomalous transaction perpetrated by Jacinto. He narrated that on September 27, 1996, the officers of RBSJI, namely: Jobel, Andres, Jose and Ofelia, were actually at the N. Domingo branch but they all suspiciously left him to face the predicament caused by Jacinto. He recounted that the next day he was assigned back at the Tarlac extension office and thereafter repeatedly harassed and forced to resign. He tolerated such treatment and pleaded that he be allowed to at least reach his retirement age. On March 7, 1996, he wrote a letter to George Cano Chua (George) expressing his detestation of how the "new guys" are dominating the operations of the company by destroying the image of pioneer employees, like him, who have worked hard for the good image and market acceptability of RBSJI. The petitioner requested for his transfer to the operations or marketing department. His request was, however, not acted upon. The petitioner claimed that on March 19, 1997, respondent Jesus verbally terminated him from employment but he later on retracted the same and instead asked the petitioner to tender a resignation letter. The petitioner refused. A month thereafter, the petitioner received the memorandum asking him to explain why he cleared Jacinto of financial accountabilities and thereafter another memorandum terminating him from employment. For their part, the respondents maintained that the petitioner was validly dismissed for loss of trust and confidence precipitated by his unauthorized issuance of a financial accountability clearance sans audit to a resigned employee. They averred that a copy of the clearance mysteriously disappeared from RBSJIs records hence, the petitioners claim that it pertained only to Jacintos paid cash advances and salary loan cannot stand for being uncorroborated. Attempts at an amicable settlement were made but the same proved futile hence, the Labor Arbiter11 (LA) proceeded to rule on the complaint. Ruling of LA In its Decision12 dated November 27, 1998, the LA sustained the claims of the petitioner as against the factually unsubstantiated allegation of loss of trust and confidence propounded by the respondents. The LA observed that the petitioners selfless dedication to his job and efforts to achieve RBSJIs stability, which the respondents failed to dispute, negate any finding of bad faith on his part when he issued a clearance of accountabilities in favor of Jacinto. As such, the said act cannot serve as a valid and justifiable ground for the respondents to lose trust and confidence in him. The LA further held that the failure of both parties to present a copy of the subject clearance amidst the petitioners explanation that it did not absolutely release Jacinto from liability, should work against the respondents since it is the proof that will provide basis for their supposed loss of trust and confidence. The LA upheld the petitioners contention that the loss of trust and confidence in him was indeed a mere afterthought to justify the respondents premeditated plan to ease him out of RBSJI. The LAs conclusion was premised on the convergence of the following circumstances: (1) the petitioners stint from 1991-1996 was not marred with any controversy or complaint regarding his performance; (2) when Jobel joined RBSJI in the latter part of 1996, he took over the department led by the petitioner thus placing the latter in a floating status; and (3) the petitioners temporary transfer to the N. Domingo branch was designed to deliberately put him in a bind and blame him on whatever course of action he may take to resolve the same. Accordingly, the petitioner was found to have been illegally dismissed and thus accorded the following reliefs in the decretal portion of the LA Decision, viz: WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Bank and individual respondents, to reinstate [the petitioner to his previous or equivalent position, without loss of seniority rights and other benefits and privileges appurtaining [sic] to him, and to pay the petitioner the following: 1. The petitioners partial backwages and other emoluments in the form of allowances, as gasoline, maintenance, representation, uniform and membership allowances, from the time of his dismissal up to his actual date of reinstatement, which as of this date amount to: Backwages (Partial) P244,800.00 Gasoline Allowances .. 63,000.00 Maintenance Allowance . 45,000.00 Representation Allowance .. 54,000.00 Membership Allowance .. 12,000.00 Uniform Allowance 8,000.00 Total P426,800.00 2. The petitioners 13th month pay from the time of his dismissal up to actual date of reinstatement, which as of this date amounts to Twenty-Seven Thousand Two Hundred (P27,200.00) Pesos; 3. Moral and exemplary damages in the amount of Fifty Thousand ([P]50,000.00) Pesos each, respectively; and 4. Attorneys fees amounting to ten percent (10%) of the total award, specifically amounting to Fifty-Five Thousand Nine Hundred Twenty-Three Pesos and Eight ([P]55,923.08) Centavos. All other claims are hereby Dismissed for lack of merit. SO ORDERED.13 Ruling of the National Labor Relations Commission (NLRC) In its Resolution14 dated April 14, 2000, the NLRC disagreed with the LAs conclusion and opined that it was anchored on irrelevant matters such as the petitioners performance and the preferential treatment given to relatives of RBSJIs stockholders. The NLRC held that the legality of the petitioners dismissal must be based on an appreciation of the facts and the proof directly related to the offense charged, which NLRC found to have weighed heavily in favor of the respondents. The NLRC remarked that the petitioner was indisputably not authorized to issue the clearance. Also, the tantrums and furious attitude exhibited by Jacinto are not valid reasons to submit to his demands. The fact that the N. Domingo branch had been sued civilly on February 25, 1997 for a tax scam while under Jacintos leadership, should have alerted the petitioner into issuing him a clearance. The action taken by the petitioner lacked the prudence expected from a man of his stature thus prejudicing the interests of RBSJI. Accordingly, the dispositive portion of the decision reads: WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Let a new one [sic] entered DISMISSING the instant case for lack of merit. However, respondent should pay the petitioner his proportionate 13th month pay for 1997 as he was dismissed on May 30, 1997. SO ORDERED.15 The petitioner sought reconsideration16 which was admitted by the NLRC in an Order dated September 30, 2005. From such Order, the respondents filed a motion for reconsideration on the ground that the petitioner failed to present a copy of his purported motion bearing the requisite proof of filing.17 Traversing both motions, the NLRC issued its Decision18 dated March 3, 2006: (1) granting the petitioners plea for the reconsideration of its Resolution dated April 14, 2000 thus effectively reversing and nullifying the same; and (2) denying the respondents motion for reconsideration of the Order dated September 30, 2005. Anent the first disposition, the NLRC accorded weight to the explanations proffered by the petitioner that the clearance issued to Jacinto was limited only to his paid cash advances and salary loan. The NLRC further held that the offense imputed to the petitioner is not covered by Category B, Grave Offense No. 1 of RBSJIs Code of Conduct and Discipline as it does not appear that he falsified or misrepresented personal or other company records, documents or papers.19 Taking an entirely opposite stance, the NLRC declared that the clearance issued by the petitioner did not prejudice RBSJIs interest as it was limited in scope and did not entirely clear Jacinto from all his financial accountabilities. Also, the petitioner was only "a day old" at the N. Domingo branch and thus he cannot be reasonably expected to be aware of the misdeeds purportedly committed by Jacinto.20 For the foregoing reasons, the NLRC reversed its earlier ruling and reinstated the LAs Decision dated November 27, 1998, thus: WHEREFORE, the Arbiters decision of 27 November 1998 is hereby AFFIRMED and REINSTATED. Accordingly, the Resolution of 14 April 2000 is REVERSED and SET ASIDE. Finally, the respondents Motion for Reconsideration dated 2 November 2005 is DENIED for lack of merit. SO ORDERED.21 Ruling of the CA The respondents sought recourse with the CA,22 which in its Decision23 dated February 21, 2008 reversed and set aside the NLRC Decision dated March 3, 2006 and ruled that the petitioner was dismissed for a just cause. The appellate court articulated that as the Acting Manager of RBSJIs N. Domingo branch, the petitioner held a highly sensitive and critical position which entailed the conscientious observance of company procedures. Not only was he unauthorized to issue the clearance, he also failed to exercise prudence in clearing Jacinto of his accountabilities given the fact that the same were yet to be audited. Such omission financially prejudiced RBSJI and it amounted to gross negligence and incompetence sufficient to sow in his employer the seed of mistrust and loss of confidence.24 The decretal portion of the CA Decision thus reads: IN VIEW OF ALL THE FOREGOING, the petition is GRANTED. The March 03, 2006 Decision of the National Labor Relations Commission is REVERSED and SET ASIDE. The April 14, 2000 Decision of the National Labor Relations Commission is hereby REINSTATED. No costs. SO ORDERED.25 The petitioner moved for reconsideration26 but the motion was denied in the CA Resolution27 dated June 3, 2008. Hence, the present appeal. Arguments of the parties The petitioner avers that the respondents claim of loss of trust and confidence is not worthy of credence since they failed to present a copy of the clearance purportedly showing that he cleared Jacinto of all his financial accountabilities and not merely as to his paid cash advances and salary loan. He points out that RBSJI must be in custody thereof considering that it is a vital official record. The petitioner insists that the alleged loss of trust and confidence in him is a mere subterfuge to cover the respondents ploy to oust him out of RBSJI. He asserts that the seven-month gap between the date when he issued the subject clearance and the date when he was sent a memorandum for the said act shows that the respondents supposed loss of trust and confidence was a mere afterthought.28 On the other hand, the respondents invoke the ratiocinations of the CA that they were justified in losing the trust and confidence reposed on the petitioner since he failed to exercise the degree of care expected of his managerial position. They reiterate the petitioners admission that no audit was yet conducted as to the accountabilities of Jacinto when he issued the clearance. The respondents further assert that as a former Personnel Manager, the petitioner is well-aware of RBSJIs policy that before a resigned employee can be cleared of accountabilities, he must be first examined or audited. However, the petitioner opted to violate this policy and yield to Jacintos tantrums.29 The above arguments yield the focal issue of whether or not the petitioner was validly dismissed from employment. The Courts Ruling The petition is impressed with merit. Settled is the rule that when supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court.30 As such, only errors of law are reviewed by the Court in petitions for review of CA decisions. By way of exception, however, the Court will exercise its equity jurisdiction and re-evaluate, review and re-examine the factual findings of the CA when, as in this case, the same are contradicting31 with the findings of the labor tribunals. The respondents failed to prove that the petitioner was dismissed for a just cause. As provided in Article 28232 of the Labor Code and as firmly entrenched in jurisprudence,33 an employer has the right to dismiss an employee by reason of willful breach of the trust and confidence reposed in him. To temper the exercise of such prerogative and to reconcile the same with the employees Constitutional guarantee of security of tenure, the law imposes the burden of proof upon the employer to show that the dismissal of the employee is for just cause failing which would mean that the dismissal is not justified. Proof beyond reasonable doubt is not necessary but the factual basis for the dismissal must be clearly and convincingly established.34 Further, the law mandates that before validity can be accorded to a dismissal premised on loss of trust and confidence, two requisites must concur, viz: (1) the employee concerned must be holding a position of trust; and (2) the loss of trust must be based on willful breach of trust founded on clearly established facts.35 There is no arguing that the petitioner was part of the upper echelons of RBSJIs management from whom greater fidelity to trust is expected. At the time when he committed the act which allegedly led to the loss of RBSJIs trust and confidence in him, he was the Acting Manager of N. Domingo branch. It was part of the petitioners responsibilities to effect a smooth turn-over of pending transactions and to sign and approve instructions within the limits assigned to the position under existing regulations.36 Prior thereto and ever since he was employed, he has occupied positions that entail the power or prerogative to dictate management policies as Personnel and Marketing Manager and thereafter as Vice-President. The presence of the first requisite is thus certain. Anent the second requisite, the Court finds that the respondents failed to meet their burden of proving that the petitioners dismissal was for a just cause. The act alleged to have caused the loss of trust and confidence of the respondents in the petitioner was his issuance, without prior authority and audit, of a clearance to Jacinto who turned out to be still liable for unpaid cash advances and for an P11-million fraudulent transaction that exposed RBSJI to suit. According to the respondents, the clearance barred RBSJI from running after Jacinto. The records are, however, barren of any evidence in support of these claims. As correctly argued by the petitioner and as above set forth, the onus of submitting a copy of the clearance allegedly exonerating Jacinto from all his accountabilities fell on the respondents. It was the single and absolute evidence of the petitioners act that purportedly kindled the respondents loss of trust. Without it, the respondents allegation of loss of trust and confidence has no leg to stand on and must thus be rejected. Moreover, one can reasonably expect that a copy of the clearance, an essential personnel document, is with the respondents. Their failure to present it and the lack of explanation for such failure or the documents unavailability props up the presumption that its contents are unfavorable to the respondents assertions. At any rate, the absence of the clearance upon which the contradicting claims of the parties could ideally be resolved, should work against the respondents. With only sworn pleadings as proof of their opposite claims on the true contents of the clearance, the Court is bound to apply the principle that the scales of justice should be tilted in favor of labor in case of doubt in the evidence presented.37 RBSJI also failed to substantiate its claim that the petitioners act estopped them from pursuing Jacinto for his standing obligations. There is no proof that RBSJI attempted or at least considered to demand from Jacinto the payment of his unpaid cash advances. Neither was RBSJI able to show that it filed a civil or criminal suit against Jacinto to make him responsible for the alleged fraud. There is thus no factual basis for RBSJIs allegation that it incurred damages or was financially prejudiced by the clearance issued by the petitioner. More importantly, the complained act of the petitioner did not evince intentional breach of the respondents trust and confidence. Neither was the petitioner grossly negligent or unjustified in pursuing the course of action he took. It must be pointed out that the petitioner was caught in the quandary of signing on the spot a standard employment clearance for the furious Jacinto sans any information on his outstanding accountabilities, and refusing to so sign but risk alarming or scandalizing RBSJI, its employees and clients. Contrary to the respondents allegation, the petitioner did not concede to Jacintos demands. He was, in fact, able to equalize two equally undesirable options by bargaining to instead clear Jacinto only of his settled financial obligations after proper verification with branch cashier Lily. It was only after Lily confirmed Jacintos recorded payments that the petitioner signed the clearance. The absence of an audit was precisely what impelled the petitioner to decline signing a standard employment clearance to Jacinto and instead issue a different one pertaining only to his paid accountabilities. Under these circumstances, it cannot be concluded that the petitioner was in any way prompted by malicious motive in issuing the clearance. He was also able to ensure that RBSJIs interests are protected and that Jacinto is pacified. He did what any person placed in a similar situation can prudently do. He was able to competently evaluate and control Jacintos demands and thus prevent compromising RBSJIs image, employees and clients to an alarming scene. The Court has repeatedly emphasized that the act that breached the trust must be willful such that it was done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.38 The conditions under which the clearance was issued exclude any finding of deliberate or conscious effort on the part of the petitioner to prejudice his employer. Also, the petitioner did not commit an irregular or prohibited act. He did not falsify or misrepresent any company record as it was officially confirmed by Lily that the items covered by the clearance were truly settled by Jacinto. Hence, the respondents had no factual basis in declaring that the petitioner violated Category B Grave Offense No. 1 of the Company Code of Conduct and Discipline. The respondents cannot capitalize on the petitioners lack of authority to issue a clearance to resigned employees. First, it remains but an unsubstantiated allegation despite the several opportunities for them in the proceedings below to show, through bank documents, that the petitioner is not among those officers so authorized. Second, it is the Courts considered view that by virtue of the petitioners stature in respondent bank, it was well-within his discretion to sign or certify the truthfulness of facts as they appear in RBSJIs records. Here, the records of RBSJI cashier Lily clearly showed that Jacinto paid the cash advances and salary loan covered by the clearance issued by the petitioner. Lastly, the seven-month gap between the clearance incident and the April 17, 1997 memorandum asking the petitioner to explain his action is too lengthy to be ignored. It likewise remains uncontroverted that during such period, respondent Jesus verbally terminated the petitioner only to recall the same and instead ask the latter to tender a resignation letter. When the petitioner refused, he was sent the memorandum questioning his issuance of a clearance to Jacinto seven months earlier. The confluence of these undisputed circumstances supports the inference that the clearance incident was a mere afterthought used to gain ground for the petitioners dismissal. Loss of trust and confidence as a ground for dismissal has never been intended to afford an occasion for abuse because of its subjective nature. It should not be used as a subterfuge for causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought intended to justify an earlier action taken in bad faith.39 All told, the unsubstantiated claims of the respondents fall short of the standard proof required for valid termination of employment. They failed to clearly and convincingly establish that the petitioners act of issuing a clearance to Jacinto rendered him unfit to continue working for RBSJI. The petitioner was illegally dismissed from employment and is entitled to back wages, to be computed from the date he was illegally dismissed until the finality of this decision.40 The disposition of the case made by the LA in its Decision dated November 27, 1998, as affirmed by the NLRC in its Decision dated March 6, 2006, is most in accord with the above disquisitions hence, must be reinstated. However, the monetary awards therein should be clarified. The petitioner is entitled to separation pay in lieu of reinstatement and his back wages shall earn legal interest. In accordance with current jurisprudence, the award of back wages shall earn legal interest at the rate of six percent (6%) per annum from the date of the petitioners illegal dismissal until the finality of this decision.41Thereafter, it shall earn 12% legal interest until fully paid42 in accordance with the guidelines in Eastern Shipping Lines, Inc., v. Court of Appeals.43 In addition to his back wages, the petitioner is also entitled to separation pay. It cannot be gainsaid that animosity and antagonism have been brewing between the parties since the petitioner was gradually eas