JUANITO A. GARCIA and ALBERTO J. DUMAGO,
- versus -
PHILIPPINE AIRLINES, INC.,
G.R. No. 164856
LEONARDO-DE CASTRO, and
January 20, 2009
D E C I S I O N
CARPIO MORALES, J.:
Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 69540 which granted the petition for certiorari of respondent, Philippine Airlines, Inc. (PAL), and denied petitioners’ Motion for Reconsideration, respectively. The dispositive portion of the assailed Decision reads:
WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET ASIDE.
The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners after they were allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers raided the PAL Technical Center’s Toolroom Section on July 24, 1995.
After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of Discipline, prompting them to file a complaint for illegal dismissal and damages which was, by Decision of January 11, 1999, resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the decision.
Prior to the promulgation of the Labor
Arbiter’s decision, the Securities and Exchange Commission (SEC) placed PAL
(hereafter referred to as respondent), which was suffering from severe
financial losses, under an Interim Rehabilitation Receiver, who was
subsequently replaced by a Permanent Rehabilitation Receiver on
From the Labor Arbiter’s decision,
respondent appealed to the NLRC which, by Resolution of
Motion for Reconsideration was denied by Resolution of
Subsequently or on
In a related move, respondent filed an
Urgent Petition for Injunction with the NLRC which, by Resolutions of
Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision (the first ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides a reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second ground).
By Decision of
Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal to the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners’ case for illegal dismissal and should instead have directed them to lodge their claim before PAL’s receiver.
However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar circumstances of the case– that their dismissal was eventually held valid with only the matter of reinstatement pending appeal being the issue– this Court deems it legally expedient to suspend the proceedings in this case.
WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.
SO ORDERED. (Italics in the original; underscoring supplied)
By Manifestation and Compliance of
In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining issue for consideration, which is whether petitioners may collect their wages during the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.
Amplification of the First Ground
The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision.
On this score, the Court’s attention is drawn to seemingly divergent decisions concerning reinstatement pending appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as expounded in a line of cases including Air Philippines Corp. v. Zamora, while on the other is the recent case of Genuino v. National Labor Relations Commission. At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor Code which reads:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis and underscoring supplied)
The view as maintained in a number of cases is that:
x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services during the period. (Emphasis in the original; italics and underscoring supplied)
In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to comply therewith.
The opposite view is articulated in Genuino which states:
If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.
Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC Decision. (Emphasis, italics and underscoring supplied)
It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found to be valid, and to do so would constitute unjust enrichment.
Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases, the Court did not order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of the reinstatement order.
The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale of reinstatement pending appeal.
x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man.
x x x x
These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability.
x x x x
x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its execution pending appeal.
x x x x
x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family.
The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory precepts portray the otherwise “unjust” situation as a condition affording full protection to labor.
Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the “refund doctrine” easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.
Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on the horizon.
Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter’s decision ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond premiums. This circumvents, if not directly contradicts, the proscription that the “posting of a bond [even a cash bond] by the employer shall not stay the execution for reinstatement.”
In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal.
Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more basis to enforce the reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this argument and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the present case, the writ of execution therein was secured prior to the reversal of the Labor Arbiter’s decision.
The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there without considering the cause of the delay. Second, it requires the issuance of a writ of execution despite the immediately executory nature of the reinstatement aspect of the decision. In Pioneer Texturing Corp. v. NLRC, which was cited in Panuncillo v. CAP Philippines, Inc., the Court observed:
x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No. 6715, Congress should not be considered to be indulging in mere semantic exercise. x x x (Italics in the original; emphasis and underscoring supplied)
The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. It settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employee’s salaries.
Amplification of the Second Ground
The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by the appellate court in the assailed issuances. The Court sustains the appellate court’s finding that the peculiar predicament of a corporate rehabilitation rendered it impossible for respondent to exercise its option under the circumstances.
spirit of the rule on reinstatement pending appeal animates the proceedings once
the Labor Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution needs no
further elaboration. Reinstatement
pending appeal necessitates its immediate execution during the pendency of the
appeal, if the law is to serve its noble purpose. At the same time, any attempt on the part
of the employer to evade or delay its execution, as observed in Panuncillo
and as what actually transpired in Kimberly,
After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer.
The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s decision.
Genuino, there was no showing that the employer refused to
reinstate the employee, who was the Treasury Sales Division Head, during the
short span of four months or from the promulgation on
In a situation like that in International Container Terminal Services, Inc. v. NLRC where it was alleged that the employer was willing to comply with the order and that the employee opted not to pursue the execution of the order, the Court upheld the self-executory nature of the reinstatement order and ruled that the salary automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later discovered that the employee indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter. In that scenario where the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter who failed to act upon the employee’s motion for the issuance of a writ of execution may no longer adversely affect the cause of the dismissed employee in view of the self-executory nature of the order of reinstatement.
new NLRC Rules of Procedure, which took effect on
In the case at bar, petitioners exerted
to execute the Labor Arbiter’s order of reinstatement until they were able to
secure a writ of execution, albeit issued on
It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was justified depends on the onset of the exigency of corporate rehabilitation.
It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended. As stated early on, during the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.
Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is ministerial and mandatory. This injunction or suspension of claims by legislative fiat partakes of the nature of a restraining order that constitutes a legal justification for respondent’s non-compliance with the reinstatement order. Respondent’s failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondent’s obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach.
While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is similarly in a judicially monitored state of being resuscitated in order to survive.
The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a competent court and not formulated for the first time in this case by respondent.
More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation. Respondent was, during the period material to the case, effectively deprived of the alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim relinquishment of management control to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to optimize the utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver may decide otherwise, not to mention the subsistence of the injunction on claims.
In sum, the obligation to pay the employee’s salaries upon the employer’s failure to exercise the alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of corporate rehabilitation.
WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5, 2003 and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and the Notice of Garnishment are concerned, the Court finds no reversible error.
CONCHITA CARPIO MORALES
REYNATO S. PUNO
LEONARDO A. QUISUMBING
ANTONIO T. CARPIO
MA. ALICIA AUSTRIA-MARTINEZ
RENATO C. CORONA
ADOLFO S. AZCUNA
DANTE O. TINGA
PRESBITERO J. VELASCO, JR.
MINITA V. CHICO-NAZARIO
ANTONIO EDUARDO B. NACHURA
TERESITA J. LEONARDO-DE CASTRO
ARTURO D. BRION
Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.
REYNATO S. PUNO
 Justices Marina L. Buzon, Sergio L. Pestaño (ponente) and Jose C. Mendoza comprised the [Former] Fourteenth Division of the appellate court.
 Rollo, pp. 47-48.
 Juanito A. Garcia and Alberto J. Dumago were employed as aircraft inspector and aircraft furnisher master, respectively.
 Particularly, Chapter II, Section 6, Articles 46 (Violation of Law/Government Regulations) and 48 (Prohibited Drugs).
 Records, Vol. 1, p. 167. The dispositive portion of the Decision penned by Labor Arbiter Ramon Valentin Reyes reads:
WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the respondents guilty of illegal suspension and illegal dismissal and ordering them to reinstate complainants to their former position without loss of seniority rights and other privileges. Respondents are hereby further ordered to pay jointly and severally unto the complainants the following:
Alberto J. Dumago -
backwages as of
34,125.00 for 13th month pay
Juanito A. Garcia -
P1,290,744.00 backwages as of
107,562.00 for 13th month pay
[t]he amounts of
P100,000.00 and P50,000.00
to each complainant as and by way of moral and exemplary damages; and
[t]he sum equivalent to ten percent (10%) of the total award as and for attorney’s fees.
Respondents are directed to immediately comply with the reinstatement aspect of this Decision. However, in the event that reinstatement is no longer feasible, respondent is hereby ordered, in lieu thereof, to pay unto the complainants their separation pay computed at one month for [e]very year of service.
SO ORDERED. (Emphasis and underscoring supplied)
 Records, Vol. 1. pp. 174-186.
at 209. A second look at the antecedents
of the main case reveals that petitioners went on certiorari to the
Court of Appeals to challenge the finding of the validity of their
dismissal. By Resolutions of
v. Philippine Airlines, Inc., G.R. No. 164856,
 Rollo, pp. 250-257.
 G.R. No. 148247,
 G.R. Nos. 142732-33,
 Supra note 10 at 72-73.
 Roquero v. Philippine Airlines, 449 Phil. 437, 446 (2003).
 Supra note 11 at 363-364. The Court therein sustained the NLRC’s reversal of the Labor Arbiter’s decision but cancelled the NLRC’s award of salaries accruing from the Labor Arbiter’s order of reinstatement pending appeal.
 Composite Enterprises, Inc. v. Caparoso, G.R. No. 159919, August 8, 2007, 529 SCRA 470; Kimberly Clark (Phils), Inc. v. Facundo, G.R. No. 144885, July 26, 2006 (Unsigned Resolution); Sanchez v. NLRC, G.R. No. 124348, February 7, 2001 Unsigned Resolution; International Container Terminal Services, Inc. v. NLRC, 360 Phil. 527 (1998).
 Roquero v. Philippine Airlines, supra at 445 citing Aris (Phil.) Inc. v. NLRC, 200 SCRA 246 (1991).
 Labor Code, Article 223, par. 3.
 345 Phil. 1057 (1997) which established the doctrine that an order or award for reinstatement is self-executory, meaning that it does not require a writ of execution, much less a motion for its issuance.
 Supra note 18 at 1075-1076.
 Supra note 12.
 Kimberly Clark (Phils), Inc. v. Facundo, supra.
 Supra, where the 3 months salary was delayed because the employer filed another baseless motion to quash writ of execution.
 Supra, where the employer did not release the salaries despite agreeing on payroll reinstatement, awaiting the resolution of its unmeritorious Motion to be Allowed to pay Separation Pay in lieu of Reinstatement.
 Supra, where the employer did not at all comply with the standing writ of execution.
 Supra, where the employer refused to comply with the writ of execution, arguing that it filed a petition for review before the Court.
 International Container Terminal Services, Inc. v. NLRC, supra.
 Revised Rules of Procedure of the NLRC (2005), Rule V, Sec. 14 and Rule XI, Sec. 6.
 Petitioners state that respondent
ignored their letter of
 Garcia v. Philippine Airlines, Inc., supra note 8.
 Roquero v. Philippine Airlines, supra note 13.
 Pres. Decree No. 902-A, Sec. 6 (c), as amended.