G.R. No. 205278 - Philippine Spring Water Resources, Inc. vs. Court of Appeals

Case Summary (G.R. No. 205278)

Factual Background

The respondent, Juvenstein B. Mahilum, was engaged by PSWRI as Vice-President for Sales and Marketing for the Bulacan–South Luzon Area at a monthly salary of P15,000 plus two commission provisions of 0.25% each. He was designated overall chairman of the Bulacan plant inauguration and company Christmas party scheduled December 19, 2004. After initial meetings, Mahilum attended prior business engagements and allegedly delegated responsibility to Ms. Vicky Evangelista, Vice-President for Administration and Finance. On the day of the event Mahilum was not called to deliver an inaugural speech; following an inquiry he was required to explain why the company president, Danilo Y. Lua, was not recognized and was placed under preventive suspension for thirty (30) days. After the suspension elapsed, Mahilum was barred from the workplace and received a termination memorandum dated January 31, 2005 effective February 1, 2005. He received a clearance and PHP 43,998.56 and executed a Release, Waiver and Quitclaim in favor of PSWRI and Lua.

Proceedings Before the Labor Arbiter

Mahilum filed a complaint for illegal dismissal with prayer for reinstatement, payment of back wages and damages, and he alleged that he was constructively dismissed and forced to sign the quitclaim. The Labor Arbiter dismissed his complaint on April 25, 2006 on the ground that the executed quitclaim operated as a bar to his right to question the dismissal. The LA found that Mahilum was of sufficient intelligence to understand the instrument and that the quitclaim was voluntarily executed and supported by reasonable consideration.

NLRC Ruling

On appeal the National Labor Relations Commission reversed the Labor Arbiter in its October 11, 2006 Decision. The NLRC held that the quitclaim did not constitute a reasonable settlement of Mahilum’s cause of action because the amounts received represented benefits already earned, not consideration for separation. The NLRC found that Mahilum was illegally dismissed, observing that loss of trust and confidence could not be lightly invoked to terminate a managerial employee and that the company failed to show cause sufficient to justify dismissal. The NLRC directed payment of separation pay, backwages inclusive of salary and 0.25% commission on cash-on-delivery from February 1, 2005 until finality, and moral and exemplary damages of PHP 100,000.

Court of Appeals Decisions

PSWRI and Lua petitioned the Court of Appeals. On September 30, 2008, the CA reversed the NLRC, upholding the validity of the quitclaim and ruling that Mahilum was bound by the instrument because there was no showing of deceit or coercion; the CA concluded that the amounts received represented the total benefits owing to him. Mahilum moved for reconsideration. The CA, upon reconsideration, issued an Amended Decision on July 23, 2010 in which it found merit in Mahilum’s arguments, declared his dismissal illegal, ruled the quitclaim void for lack of consideration, and awarded full backwages and separation pay in lieu of reinstatement given strained relations. A motion for reconsideration was denied by the CA on October 31, 2012.

Issues Presented on Certiorari

The petition to the Supreme Court raised principally: (1) the alleged grave abuse of discretion by the CA in applying Article 279 of the Labor Code; (2) the contention that Mahilum was a contractual or probationary employee; (3) that substantive and procedural due process attended the termination; (4) that commissions should not have been awarded as part of backwages; and (5) that moral and exemplary damages lacked basis.

Mode of Appeal and Jurisdictional Question

The Supreme Court first addressed procedural propriety. It observed that the proper remedy to assail a CA decision is a petition for review under Rule 45, not a special civil action under Rule 65, and reiterated that certiorari is unavailable where an appeal is available. The Court found the petition filed beyond the reglementary period to file a petition for review on certiorari and that the petitioners chose the wrong mode of appeal. Notwithstanding this defect, citing precedents that permit treating an untimely certiorari as a petition for review in the interest of substantial justice, the Court resolved the case on the merits given the monetary awards involved.

Regular or Probationary Status

The petitioners relied on a Memorandum of Agreement providing for probationary employment for six months. The Court analyzed Article 281 of the Labor Code and the record and concluded that Mahilum was a regular employee at the time of dismissal. The Court observed that Mahilum had been allowed to work after the lapse of the probationary period and that he had served the company for eight months at dismissal; therefore Article 281’s six-month limit rendered him regular and entitled to security of tenure. The Court held that the petitioners could not, belatedly and inconsistently, invoke probationary status as a ground for dismissal when the termination letter relied on loss of trust and confidence.

Legality of Dismissal

Applying Article 279 and Article 282 of the Labor Code, the Court found that the primary cause of dismissal stemmed from alleged lapses as chairman of the inauguration, and that such lapses were inadvertent, non work-related, and did not amount to just cause or authorized cause for termination. The Court accorded respect to the NLRC’s factual findings as affirmed by the CA and found no compelling reason to depart from their conclusion that Mahilum’s failure to supervise resulted from a mistaken belief in proper delegation and did not evidence loss of trust or fitness to continue employment. Consequently, the Court sustained the conclusion that Mahilum was illegally dismissed.

Quitclaim and Consideration

The Court sustained the CA’s Amended Decision that the Release, Waiver and Quitclaim executed by Mahilum did not bar his action for illegal dismissal. It agreed with the NLRC’s reasoning that the amounts received represented wages and benefits legally due rather than consideration for a separation settlement, and that receiving only lawfully owed sums evinced absence of a valid consideration sufficient to extinguish the cause of action for illegal dismissal. The Court therefore deemed the quitclaim void and ineffective to bar relief.

Entitlement to Monetary Claims

The Court reviewed the remedies under Article 279, including reinstatement with backwages and other benefits or separation pay in lieu of reinstatement when reinstatement is not viable. It concluded that reinstatement was impracticable given the animosity between Mahilum and the company president; accordingly Mahilum was entitled to separation pay and full backwages computed from dismissal until finality, together with other benefits or their monetary equivalents.

Commissions and Backwages

The Court modified the monetary awards by excluding the 0.25% commissions on cash sales that the NLRC had included in backwages. Relying on jurisprudence distinguishing commissions that form part of basic salary from productivity or profit‑sharing payments, the Court concluded that Mahilum’s commissions, by reason of his position as Vice‑President and the nature of the commission clau

Case Syllabus (G.R. No. 205278)

Parties and Procedural Posture

Philippine Spring Water Resources, Inc. and Danilo Y. Lua were the petitioners before the Supreme Court.
Court of Appeals and Juvenstein B. Mahilum were the respondents in the petition.
The petition invoked the special civil action of certiorari under Rule 65, Rules of Court to assail the CA’s July 23, 2010 Amended Decision and October 31, 2012 Resolution in CA-G.R. SP No. 02636.
The petitioners had filed their certiorari petition out of the reglementary period for a petition for review under Rule 45, Rules of Court, but the Supreme Court nonetheless resolved the merits in the interest of substantial justice.

Key Factual Allegations

Philippine Spring Water Resources, Inc. hired Juvenstein B. Mahilum as Vice-President for Sales and Marketing for the Bulacan-South Luzon Area at a monthly salary of P15,000 and a 0.25% commission on cash-on-delivery and 0.25% on new accounts.
Mahilum was designated overall chairman of the company’s Bulacan plant inauguration and Christmas party scheduled on December 19, 2004.
Mahilum missed parts of the preparatory meetings and the program proper because he attended business appointments and believed he had delegated duties to Ms. Vicky Evangelista.
Danilo Y. Lua allegedly became furious when Mahilum was not recognized during the program and thereafter initiated disciplinary proceedings resulting in a preventive 30-day suspension.
Mahilum was issued a Memorandum dated January 31, 2005 terminating his services effective February 1, 2005, and was given a clearance with PHP 43,998.56 upon execution of a Release, Waiver and Quitclaim.

Procedural History

The Labor Arbiter dismissed Mahilum’s illegal dismissal complaint on April 25, 2006, holding that the quitclaim barred his claim.
The National Labor Relations Commission reversed on October 11, 2006, holding that the quitclaim was not a reasonable settlement and declaring the dismissal illegal and awarding separation pay, backwages, and PHP 100,000.00 as moral and exemplary damages.
The Court of Appeals on September 30, 2008 reversed the NLRC in part by finding the dismissal legal but upheld the validity of the quitclaim.
The CA issued an Amended Decision on July 23, 2010 reinstating the NLRC’s finding of illegal dismissal and declaring the quitclaim void for lack of consideration.
The Supreme Court issued the challenged decision to address the parties’ petitions, partially granting the petition with modification.

Issues Presented

Whether the Supreme Court should entertain a petition for certiorari under Rule 65 when an appeal under Rule 45 was available but not timely filed.
Whether Mahilum was a probationary or regular employee at the time of his termination.
Whether Mahilum was validly dismissed for loss of trust and confidence or for causes under Art. 282, Labor Code.
Whether the executed quitclaim barred Mahilum’s illegal dismissal claim.
Whether commissions and awards for moral and exemplary damages were proper elements of the monetary reliefs.

Parties' Contentions

The petitioners contended that Mahilum was a contractual or probationary employee whose probationary status had not been satisfied under the Memorandum of Agreement.
The petitioners contended that d