Case Summary (G.R. No. 160827)
Key Dates and Procedural Posture
Employment began: November 3, 1991.
Incident/Refusal of Entry: November 28, 1996.
Labor Arbiter decision: September 23, 1998.
NLRC decision on appeal: modified Labor Arbiter decision (date in record).
Court of Appeals decision: May 9, 2003 (affirmed with modification).
Supreme Court decision: Denial of petition for review on certiorari (case culminated in affirmation of CA decision).
Applicable Law, Doctrines, and Authorities Relied Upon
- Republic Act No. 8183 (repeal of RA 529): provides that monetary obligations shall be settled in Philippine currency unless the parties agree otherwise.
- Article 100, Labor Code: prohibition against elimination or diminution of benefits (principle of non‑diminution).
- Relevant jurisprudence cited in the record and relied upon: C.F. Sharp & Co. v. Northwest Airlines, Inc.; Asia World Recruitment, Inc. v. NLRC; Sebuguero v. NLRC; and other labor practice cases discussing the ripening of employer practices into vested benefits.
Antecedents and Factual Background (Employment Relationship and Dispute)
Delmo was an account manager who worked mainly in the field and was not required to punch timecards. He produced substantial sales and claimed substantial commissions, both in pesos and in US dollars. Netlink resisted full payment, instead advancing partial cash payments charged against commissions and issuing memoranda criticizing Delmo’s attendance and conduct. Netlink eventually denied him entry to company premises and retained his belongings, prompting Delmo to file for illegal dismissal and recovery of unpaid commissions and benefits.
Claim and Relief Sought Before the Labor Arbiter
Delmo alleged illegal dismissal and claimed, among other reliefs, full backwages, unpaid commissions (P993,558.89 and US$7,588.30), 13th month pay, and attorney’s fees.
Labor Arbiter Ruling (Principal Reliefs Ordered)
The Labor Arbiter declared the dismissal illegal, ordered reinstatement without loss of seniority and full backwages and benefits, and awarded: P161,000 (backwages), P15,000 (13th month pay for 1996–1998), P993,558.89 (unpaid commissions), US$7,588.30 (unpaid commissions in dollars), and 10% attorney’s fees. Reinstatement was immediately executory, with separation pay if reinstatement proved infeasible.
NLRC Ruling (Modification and Rationale)
The NLRC set aside the Labor Arbiter’s grant of backwages and reinstatement after finding valid and just causes for termination but awarded indemnity for failure to observe procedural due process (P2,000), the unpaid peso commissions (P993,558.89), the US dollar commissions (US$7,588.30), P15,000 (13th month pay for 1996–1998), and 10% attorney’s fees. The NLRC thus recognized procedural defect but upheld substantive cause for termination.
Court of Appeals Ruling (Further Modifications)
The CA affirmed the NLRC’s factual findings but modified the monetary awards: it held that commissions contingent on collection from customers had not fully accrued where client accounts remained unpaid; it deducted an advance payment of P216,799.45 from the P993,558.89, leaving P776,779.44 payable upon collection of the underlying accounts; it recognized an accrued portion of unpaid commissions amounting to P4,066.19; it limited 13th month pay to pro‑rata January–November 1996 (P4,584.00) given the CA’s finding that termination was for cause but without procedural due process; it upheld the award of unpaid US$7,588.30 commissions; and it sustained the award of 10% attorney’s fees (with certain exclusions as indicated in the CA’s order).
Issues Presented on Supreme Court Review
- Whether Delmo’s commissions denominated in US dollars should be paid in US dollars (and whether the applicable exchange rate is that prevailing at the time of sale or at the time of payment).
- Whether attorney’s fees in the amount awarded were warranted.
Supreme Court Analysis — Foreign Currency Payment and Company Practice
- General rule: monetary obligations in the Philippines are to be paid in Philippine currency unless the parties agree otherwise (RA 8183). RA 8183 repealed the prior prohibition and permits stipulation of other currencies. RA 8183 and its predecessor statutes do not specify the exchange rate to be applied for conversion.
- Rate of exchange issue: prior jurisprudence (as discussed in C.F. Sharp and Asia World) establishes the principle that the real value of an obligation incurred in foreign currency should be preserved up to the date of payment; hence the exchange rate at the time of payment, not at the time of sale, controls unless the parties agreed otherwise.
- Company practice as substitute for written stipulation: although there was no written agreement specifying payment of commissions in US dollars, Netlink’s established practice of paying sales agents in US dollars for US dollar‑denominated transactions had ripened into a company practice. Netlink failed to refute that such payments were made in US dollars to its sales agents and therefore could not unilaterally repudiate or diminish that benefit.
- Non‑diminution doctrine: Article 100 of the Labor Code prohibits elimination or diminution of benefits enjoyed at the time of promulgation of the Code; the Court treated the regular practice of paying US dollar commissions as a vested benefit that could not be unilaterally reduced. Jurisprudence cited shows no fixed minimum years required for a practice to ripen into an enforceable benefi
Case Syllabus (G.R. No. 160827)
Title and Citation
- Reported at 736 Phil. 487.
- G.R. No. 160827, June 18, 2014.
- Decision penned by Justice Bersamin, J., with the concurrence of Chief Justice Sereno and Justices Leonardo-De Castro, Villarama, Jr., and Reyes.
Procedural Posture and Parties
- Petitioner: Netlink Computer Incorporated (referred to in the record as Netlink).
- Respondent: Eric S. Delmo (referred to in the record as Delmo or the private respondent).
- Case proceeded from: Labor Arbiter decision (September 23, 1998) → National Labor Relations Commission (NLRC) appeal and decision → Court of Appeals (CA) decision (May 9, 2003) → Petition for review on certiorari to the Supreme Court (denied).
Facts / Antecedents
- Netlink hired Eric S. Delmo on November 3, 1991, as an account manager tasked to canvass, source clients and persuade them to buy Netlink's products and services.
- Delmo worked mostly in the field and, along with fellow account managers, was not required to accomplish time cards to record office presence.
- Delmo generated sales approximating P35,000,000.00 and earned commissions amounting to P993,558.89 (Philippine pesos) and US$7,588.30.
- Delmo requested payment of his commissions; Netlink refused payment of the full commissions and instead provided partial cash advances chargeable to commissions.
- Netlink issued memoranda faulting Delmo’s attendance (alleging absences and tardiness) and other supposed infractions; memoranda were used as management tools according to Netlink.
- Despite memoranda, Delmo continued to generate substantial sales.
- On November 28, 1996, Delmo was refused entry into Netlink premises pursuant to a memorandum; his personal belongings remained on company premises and he sought their return.
- The November 28, 1996 incident prompted Delmo to file a complaint for illegal dismissal.
Netlink’s Pleadings and Defenses
- Netlink asserted the existence of guidelines on company working time and time recording, alleging all personnel were required to use the bundy clock to punch in and out, except company officers and authorized field personnel.
- Netlink contended that it was losing on transactions closed by Delmo due to high equipment costs and that Delmo’s major client had not yet paid.
- Netlink alleged Delmo became lax and had been outperformed by other account managers.
- Netlink maintained that warning, reprimand and suspension memoranda were necessary management tools for instilling discipline.
Labor Arbiter Ruling (September 23, 1998)
- Labor Arbiter found Delmo was illegally and unjustly dismissed.
- Ordered reinstatement to former position without loss of seniority rights, with full backwages and other benefits.
- Monetary awards ordered:
- P161,000.00 as backwages, basic pay and allowances (Nov. 1996 to Sept. 1998).
- P15,000.00 as 13th month pay for 1996 to 1998.
- P993,558.89 as unpaid commissions (pesos).
- Total of P1,169,558.89 (sum of backwages, 13th month and unpaid peso commissions).
- US$7,588.30 as unpaid commissions (dollar-denominated).
- 10% attorney’s fees.
- Reinstatement declared immediately executory even pending appeal; if reinstatement not feasible, separation pay of one-month pay per year of service to be paid.
- All other claims dismissed.
NLRC Decision on Appeal
- The NLRC set aside the Labor Arbiter’s reinstatement and backwages finding, finding valid and just causes for termination.
- NLRC nonetheless found procedural due process was not observed and awarded P2,000.00 as indemnity for failure to observe procedural due process.
- NLRC awarded:
- Unpaid commissions P993,558.89 (pesos).
- Unpaid commissions US$7,588.30 (dollars).
- P15,000.00 representing 13th month pay for 1996, 1997 and 1998.
- 10% attorney’s fees of the total amount awarded.
- NLRC denied a motion for reconsideration.
Court of Appeals Decision (May 9, 2003) — Outcome and Reasoning
- The CA affirmed the NLRC’s disposition with modifications.
- CA’s key legal findings and reasoning:
- Where payment of commission depends on a future and uncertain event (payment of accounts by customers), the obligation to pay the commission has not yet arisen if the customer has not paid.
- The evidence showed Alcatel (the private respondent’s biggest client) had not fully paid the petitioner as of March 10, 1998; thus, obligation to pay commission for that unpaid account had not yet matured.
- Netlink had made an advance payment of P216,799.45 to Delmo; this advance must be deducted from the P993,558.89 unpaid commission.
- After deduction and accounting for an admitted net commission of P4,066.19, the CA calculated:
- P4,066.19 representing unpaid commissions that have accrued.
- P776,779.44 representing unpaid commissions payable upon payment of the accounts out of which such commissions will be taken.
- CA agreed that Delmo was not entitled to 13th month pay for 1997 and 1998 because his dismissal was for cause though without due process; thus only pro rata 13th month pay from January 1996 to November 1996 (P4,584.00) was awarded.
- CA rejected the petitioner’s argument that the dollar commissions should be computed using the peso-to-dollar exchange rate at time of sale; CA cited the Labor Arbiter’s observation that devaluation cannot be used as a shield by the respondent employer and that the employer should have provided a contractual clause fixing exchange-rate consequences.
- CA invoked the rule that factual findings of the NLRC are binding and conclusive when NLRC and Labor Arbiter agree.
- CA’s modified awards ordered:
- P2,000.00 indemnity for procedural due process failure.
- P4,066.19 representing unpaid commissions that have accrued.
- P776,779.44 payable upon payment of accounts out of which said amount will be taken.
- P4,584.00 representing unpaid 13th month pay (pro rata Jan–Nov 1996).
- US$7,588.30 as unpaid commission.
- 10% attorney’s fees of the total amount awarded, excluding the amount