Title
Castro, Jr. vs. Ateneo de Naga University
Case
G.R. No. 175293
Decision Date
Jul 23, 2014
Castro, a university faculty member, claimed illegal dismissal after contract non-renewal. Despite signing a quitclaim for retirement benefits, the Supreme Court ruled he was entitled to accrued salaries during non-reinstatement, emphasizing labor law protections.
illegal dismissal
accrued salaries
payment
A

Case Summary (A.M. No. 07-1-05-RTC)

Administrative and Labor Law Provisions in Play

The controlling labor provisions invoked in the decision were Article 279 of the Labor Code, as amended, on reinstatement for illegally dismissed employees, and Article 223 of the Labor Code, on the immediately executory character of reinstatement orders even pending appeal. The decision also discussed the employer’s option between actual reinstatement and reinstatement in the payroll under the reinstatement framework recognized in the Labor Code.

Facts Material to the Dispute

Petitioner began his employment with the University in the first semester of school year 1960–1961. He was allegedly dismissed when his contract was not renewed. Petitioner asserted that after attempts to discuss the matter with Fr. Tabora, he was not given any teaching load or other assignments effective June 2000, prompting him to file a complaint for illegal dismissal.

The University denied illegal dismissal. It claimed that petitioner was a participant and regular contributor to the Ateneo de Naga Employees Retirement Plan, and that upon reaching age 60 on June 26, 1999, he was automatically retired under the Plan. It further maintained that after retirement, he was allowed to teach only on a contractual basis.

Labor Arbiter’s Ruling and the Employer’s Appeal

On September 3, 2001, Labor Arbiter Jesus Orlando M. Quinones ruled in petitioner’s favor and declared the dismissal illegal. The LA ordered respondents to (a) reinstate petitioner to his former position without loss of seniority rights or other privileges, or, at respondents’ option, through payroll reinstatement; and (b) pay full backwages of P637,999.65, moral and exemplary damages of P500,000, and attorney’s fees equal to 10% of the total award. The LA’s disposition thus treated reinstatement as executory while leaving only the method—actual reinstatement or payroll reinstatement—to the employer’s option.

Respondents appealed to the NLRC. During the appeal, respondents manifested that actual or payroll reinstatement could not be effected because petitioner had been employed as a Presidential Assistant for Southern Luzon Affairs with the position of Undersecretary, and that reinstatement would allegedly cause dual employment and double compensation prohibited by civil service rules.

Petitioner’s Motion for Accrued Salaries and the LA’s Directive

On July 12, 2002, petitioner filed a motion to order respondents to pay his salaries and benefits accruing from September 3, 2001 until July 3, 2002, contending that the reinstatement order was executory. In its order dated October 10, 2002, the LA denied the motion for accrued salaries for lack of merit while directing respondents to exercise the statutory option to choose between actual reinstatement and payroll reinstatement within ten (10) days from receipt of the order. The LA further provided that failure to exercise the option within the period would render the motion for accrued salaries appropriate, and that after the employer’s election, petitioner would have to abide by the chosen mode.

Petitioner later filed a notice of partial appeal, but it was denied due course on June 30, 2003. After denial of his motion for reconsideration, he sought relief from the CA through a petition for certiorari.

Execution of Receipt and Quitclaim and the Alleged Settlement Issue

While the case was pending, petitioner executed a receipt and quitclaim on June 26, 2004 in favor of the University regarding benefits under the retirement plan. The document acknowledged receipt of P646,828.42 as full payment of benefits due pursuant to the Employees retirement plan, and it stated that petitioner waived rights to retirement benefits under the plan, with the instruction that the bank would reimburse the University.

A few days later, petitioner sent a letter to Fr. Tabora dated June 29, 2004, stating that he received the retirement pay under protest and under specified conditions, including that the payment was without prejudice to his case against the University and the individual respondents, and that his receipt did not confirm the computation of his years of service. The letter also indicated that he did not agree with the computation and that the total amount remained subject to verification.

NLRC Reversal on Illegal Dismissal and Effect of Quitclaim

The NLRC first affirmed the LA ruling with modification, but later reversed itself on August 31, 2005, setting aside the LA decision and dismissing the complaint for lack of merit. The NLRC justified the reversal on the premise that petitioner’s execution of the receipt and quitclaim estopped him from pursuing other claims arising from the employer-employee relationship.

The NLRC reasoned that by executing a quitclaim or release, an employee is estopped from pursuing further money claims against the employer arising from employment. It treated petitioner’s execution and signing of the receipt and quitclaim as a voluntary waiver of his money awards, concluding that the document covered any and all claims arising out of the employment relationship because it represented voluntary and reasonable settlement of petitioner’s claims.

CA Dismissal as Moot and Academic

On May 31, 2006, the CA dismissed petitioner’s petition for certiorari for being moot and academic, on the basis that the August 31, 2005 NLRC decision had dismissed the complaint for illegal dismissal. The CA thus declined to grant substantive relief.

Issues on Appeal to the Supreme Court

Petitioner argued that the CA erred in treating the certiorari petition as moot by reason of the NLRC’s dismissal of his illegal dismissal complaint. He contended that his certiorari petition concerned accrued salaries and benefits as an incident of the LA’s reinstatement order pending appeal. He further argued that the receipt and quitclaim covered only retirement benefits and should not be construed as a settlement or waiver of accrued salaries arising from illegal dismissal.

Petitioner also invoked Roquero v. Philippine Airlines, Inc., asserting that the employer must reinstate the dismissed employee and pay wages during the period of appeal of the LA decision in favor of the employee until reversal, and that a reversal with finality did not require reimbursement of the salary already received.

The Supreme Court’s Disposition: Reversal

The Supreme Court reversed the CA decision, set aside the CA disposition of May 31, 2006, and remanded the records to the Labor Arbiter for the correct computation of accrued salaries from the date of respondents’ receipt of the LA’s September 3, 2001 decision until petitioner’s actual reinstatement in November 2002. It also ordered respondents to pay the costs of suit.

Receipt and Quitclaim Did Not Waive Accrued Salaries for Illegal Dismissal

On the estoppel theory adopted by the NLRC, the Court held that the receipt and quitclaim did not constitute a settlement of petitioner’s claim for accrued salaries arising from illegal dismissal. The Court emphasized that the document’s text was clear that the sum received represented full payment of benefits pursuant to the Employees retirement plan. It reasoned that both the NLRC and CA should have recognized that the quitclaim related only to retirement benefits, which could not be conflated with the reliefs awarded to an illegally dismissed employee.

The Court explained the substantive distinction between retirement and illegal dismissal remedies. It characterized retirement as a different species of benefit, intended as a reward for loyalty and service and meant to support the employee in remaining years. By contrast, reliefs for illegal dismissal recognize a continuing employer-employee relationship severed without just or authorized cause or without due process. Because of that difference, the receipt and quitclaim could not be treated as a waiver of the separate and distinct monetary consequences of illegal dismissal.

Accrued Salaries Were Not Rendered Moot by Later Dismissal of the Complaint

The Court then addressed petitioner’s entitlement to accrued salaries and benefits for the period respondents failed to reinstate him. It held that petitioner’s argument aligned with the doctrine in Roquero and with the statutory command of Article 279 and Article 223. Under Article 279, an illegally dismissed employee is entitled to reinstatement. Under Article 223, reinstatement is immediately executory even pending appeal.

The Court ruled that Article 223 cannot be construed as a source of a right for the employer to avoid compliance once it fails to reinstate immediately. It held that the refusal to reinstate would make the payment of salaries a consequence that continues to accrue as a ministerial duty for implementation of the reinstatement order. Citing Roquero, the Court explained that the unjustified refusal to reinstate entitled the employee to salaries from the time the employer failed to reinstate him, rendering it a duty of the LA to implement the reinstatement order.

The Court further relied on the rule recognized in Triad Security & Allied Services v. Ortega, Jr. that the law mandates prompt reinstatement without need of a writ of execution. It also cited Pioneer Texturizing Corporation v. NLRC, observing that Article 223 is clear that reinstatement is immediately enforceable even pending appeal, and that the posting of a bond should not stay reinstatement. The Court adopted the doctrine that, for as long as the employer continuously fails to actually implement the reinstatement aspect of the LA decision, the obligation for accrued backwages and other benefits keeps accumulating.

The decision also reiterated the employer’s election between actual reinstatement and payroll reinstatement, but it treated the LA’s reinstatement order as self-executory. While the employer has the right to choose the mode, it still must inform the employee of its election. In the Court’s view, the obligation to pay accrued backwages could not be

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