Facts:

The case involves American Hospital Supplies/Philippines, Inc. (AHS), its president Gervacio R. Amistoso, and vice-president Constancio V. Halili as petitioners, against the Court of Appeals and Alfonso R. Bayani as respondents. The events leading to the case began on June 1, 1970, when AHS hired Alfonso R. Bayani as an Area Manager for Visayas and Mindanao, later promoting him to Manager of its Cebu branch. On January 30, 1978, Bayani was dismissed from his position, earning a monthly salary of P3,180. Following his dismissal, Bayani filed a complaint on May 5, 1978, alleging that AHS was involved in corrupt practices, specifically bribing government hospital officials under the guise of "commissions" and "entertainment expenses." He claimed that he was dismissed for refusing to participate in these corrupt activities. Bayani sought damages amounting to P520,000 for moral and consequential damages, P25,000 for exemplary damages, and P50,000 for attorney&#...

Facts:

Employment and Dismissal:

• Petitioner American Hospital Supplies/Philippines, Inc. (AHS) hired private respondent Alfonso R. Bayani as an Area Manager for Visayas and Mindanao on June 1, 1970. He was later appointed Manager of the Cebu branch.
• On January 30, 1978, Bayani was dismissed from service. At the time of his dismissal, he was receiving a monthly salary of P3,180.00.

Allegations of Corruption:

• On May 5, 1978, Bayani filed a complaint for damages, alleging that AHS encouraged bribery in the form of "commissions," "entertainment expenses," and "representation expenses" to government hospital officials to secure favorable recommendations and purchases of medicines.
• Bayani claimed he was dismissed for refusing to participate in these corrupt practices. He sought P520,000.00 in moral and consequential damages, P25,000.00 in exemplary damages, and P50,000.00 in attorney’s fees.
• AHS countered that Bayani resigned voluntarily.

Trial Court Decision:

• On January 25, 1989, the trial court ruled that Bayani was illegally dismissed because AHS failed to secure prior clearance from the Secretary of Labor before terminating his employment.
• The court awarded Bayani P297,600.00 in actual and compensatory damages (representing 8 years of salary until retirement) and P25,000.00 in attorney’s fees.
• The court denied moral and exemplary damages, finding that Bayani was also involved in the corrupt practices he complained about.

Court of Appeals Decision:

• The Court of Appeals affirmed the trial court’s decision in toto on August 31, 1993.

Issue:

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Ruling:

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Ratio:

1. Illegal Dismissal: An employee cannot be dismissed for refusing to comply with unlawful orders, such as participating in corrupt practices. Bayani’s refusal to give bribes was justified, and his dismissal was therefore without just cause.
2. Prior-Clearance Rule: The lack of prior clearance was not a valid ground for illegal dismissal in this case, as it was not raised as an issue during the trial.
3. Damages: The Mercury Drug Rule limits back wages to three years, as the trial and appeal process should ideally be resolved within that period. Separation pay is awarded when reinstatement is impractical due to strained employer-employee relations.
4. Personal Liability of Corporate Officers: Corporate officers are not personally liable for the dismissal of employees unless they acted with malice or bad faith. In this case, there was no evidence of such conduct.
5. Attorney’s Fees: Attorney’s fees are recoverable when an employee is forced to litigate to protect their rights.

Final Decision

The Supreme Court modified the Court of Appeals’ decision. AHS was ordered to pay Bayani:

• Back wages for three years (P114,480.00),
• Separation pay (P20,670.00), and
• Attorney’s fees (P25,000.00).

Petitioners Amistoso and Halili were absolved from personal liability.