July 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are selected July 2010 rulings of the Supreme Court of the Philippines on labor law and procedure:

Labor Law

Assumption of jurisdiction by Secretary of Labor; authority to decide on legality of dismissals arising from strike. The assumption of jurisdiction powers granted to the Labor Secretary under Article 263(g) is not limited to the grounds cited in the notice of strike or lockout that may have preceded the strike or lockout; nor is it limited to the incidents of the strike or lockout that in the meanwhile may have taken place.  As the term “assume jurisdiction” connotes, the intent of the law is to give the Labor Secretary full authority to resolve all matters within the dispute that gave rise to or which arose out of the strike or lockout, including cases over which the labor arbiter has exclusive jurisdiction.

In the present case, what the Labor Secretary refused to rule upon was the dismissal from employment of employees who violated the return to work order and participated in illegal acts during a strike. This was an issue that arose from the strike and was, in fact, submitted to the Labor Secretary, through the union’s motion for the issuance of an order for immediate reinstatement of the dismissed officers and the company’s opposition to the motion.  The dismissal issue was properly brought before the Labor Secretary and he was mistaken in ruling that the matter is legally within the exclusive jurisdiction of the labor arbiter to decide. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al. vs. Secretary of Department of Labor and Employment, et al./Triumph International (phils.), Inc. vs. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al., G.R. No. 167401, July 5, 2010.

Bargaining deadlock; award; findings of Secretary of Labor. Unless there is a clear showing of grave abuse of discretion, the Court cannot, and will not, interfere with the expertise of the Secretary of Labor. The award granted by the Labor Secretary in resolving the bargaining deadlock, drawn as they were from a close examination of the submissions of the parties, do not indicate any legal error, much less any grave abuse of discretion, and should not be disturbed. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al. vs. Secretary of Department of Labor and Employment, et al./Triumph International (phils.), Inc. vs. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al., G.R. No. 167401, July 5, 2010.

Dismissal of employees; just cause. Theft committed by an employee is a valid reason for his dismissal by the employer.  Although as a rule this Court leans over backwards to help workers and employees continue with their employment or to mitigate the penalties imposed on them, acts of dishonesty in the handling of company property, petitioner’s income in this case, are a different matter. Maribago Bluewater Beach Resort, Inc. vs. Nito Dual, G.R. No. 180660, July 20, 2010.

Dismissal of employees; requirements. The validity of an employee’s dismissal from service hinges on the satisfaction of the two substantive requirements for a lawful termination.  These are, first, whether the employee was accorded due process the basic components of which are the opportunity to be heard and to defend himself.  This is the procedural aspect.  And second, whether the dismissal is for any of the causes provided in the Labor Code of the Philippines.  This constitutes the substantive aspect. Erector Advertising Sign Group, Inc. and Arch Jimy C. Amoroto vs. Expedito Cloma, G.R. No. 167218, July 2, 2010.

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How to determine the nationality of a corporation (part 2)

The July 26 post describes two tests for the determining the nationality of a corporation:  the control test and the grandfather rule.  Which one applies?  As discussed below, the control test is the primary test for determining the nationality of a corporation;  however, a recent decision of the SEC raises the question of whether the SEC is now abandoning the control test in favor of the grandfather rule.

The control test as the primary test

As a rule, the control test applies. The primacy of the control test over the grandfather rule can be traced to DOJ Opinion No. 19, s. 1989 (the “1989 DOJ Ruling”), which states:

. . . the “Grandfather Rule”, which was evolved and applied by the SEC in several cases, will not apply in cases where the 60-40 Filipino-alien equity ownership in a particular natural resource corporation is not in doubt.  (underscoring supplied)

In other words, according to the Department of Justice, the control test generally applies, with the grandfather rule applicable only when the 60-40 Filipino-alien equity ownership is in doubt.

On the basis of the 1989 DOJ Ruling, the SEC issued several opinions doing away with the grandfather rule.  For example, in a May 30, 1990 opinion, the SEC stated:

. . . the Commission En Banc, on the basis of the Opinion of the Department of Justice No. 18., S. 1989 dated January 19, 9189 voted and decided to do away with the strict application/computation of the so called “grandfather rule”. . . and instead applied the so-called “control test” method for determining corporate nationality.  (underscoring supplied)(see also SEC Opinion dated August 6, 1991;  SEC Opinion dated October 14, 1991)

Around two years after the issuance of the 1989 DOJ Ruling, Congress enacted the  Foreign Investments Act of 1991 (“FIA”), which expressly embodied the control test.   Section 3(a) of the FIA (as amended by Republic Act No. 8179) provides:

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July 2010 Philippine Supreme Court Decisions on Legal and Judicial Ethics

Here are selected July 2010 rulings of the Supreme Court of the Philippines on legal and judicial ethics:

Attorney; attorney’s fees. The issue of the reasonable legal fees due to respondent still needs to be resolved in a trial on the merits with the following integral sub-issues: (1) the reasonableness of the 10% contingent fee given that the recovery of Tiwi’s share [in unpaid realty taxes] was not solely attributable to the legal services rendered by respondent, (2) the nature, extent of legal work, and significance of the cases allegedly handled by respondent which reasonably contributed, directly or indirectly, to the recovery of Tiwi’s share, and (3) the relative benefit derived by Tiwi from the services rendered by respondent. The amount of reasonable attorney’s fees finally determined by the trial court should be without legal interest in line with well-settled jurisprudence. Municipality of Tiwi, represented by Hon. Mayor Jaime C. Villanueva and Sangguniang Bayan of Tiwi Vs. Antonio B. Betito, G.R. No. 171873, July 9, 2010.

Attorney; engagement of private counsel by GOCC. In Phividec Industrial Authority v. Capitol Steel Corporation, we listed three (3) indispensable conditions before a GOCC can hire a private lawyer: (1) private counsel can only be hired in exceptional cases; (2) the GOCC must first secure the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be; and (3) the written concurrence of the COA must also be secured.  Failure to comply with all three conditions would constitute appearance without authority.  A lawyer appearing after his authority as counsel had expired is also appearance without authority.  Rey Vargas, et al. vs. Atty. Michael Ignes, et al., A.C. No. 8096, July 5, 2010.

Attorney; engagement of private counsel by LGU. Pursuant to this provision [Section 444(b)(1)(vi) of the LGC], the municipal mayor is required to secure the prior authorization of the Sangguniang Bayan before entering into a contract on behalf of the municipality. In the instant case, the Sangguniang Bayan of Tiwi unanimously passed Resolution No. 15-92 authorizing Mayor Corral to hire a lawyer of her choice to represent the interest of Tiwi in the execution of this Court’s Decision in National Power Corporation v. Province of Albay. The above-quoted authority necessarily carried with it the power to negotiate, execute and sign on behalf of Tiwi the Contract of Legal Services. Municipality of Tiwi, represented by Hon. Mayor Jaime C. Villanueva and Sangguniang Bayan of Tiwi Vs. Antonio B. Betito, G.R. No. 171873, July 9, 2010.

Attorney; gross misconduct. In Lao v. Medel, we held that the deliberate failure to pay just debts and the issuance of worthless checks constitute gross misconduct for which a lawyer may be sanctioned with one-year suspension from the practice of law. However, in this case, we deem it reasonable to affirm the sanction imposed by the IBP-CBD, i.e., Atty. Valerio was ordered suspended from the practice of law for two (2) years, because, aside from issuing worthless checks and failing to pay her debts, she has also shown wanton disregard of the IBP’s and Court Orders in the course of the proceedings. A-1 Financial Services, Inc. vs. Atty. Laarni N. Valerio, A.C. No. 8390, July 2, 2010.

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Philippine Laws: July 2010

In the second month of his presidency, President P-Noy was not able to approve a new law in July as he organized his Cabinet and dealt with early controversies about his executive orders, and as the 15th Congress began its task of legislating. In June 30, 2010, however, a new law was deemed approved, in accordance with Section 27(1), Article VI, of the Philippine Constitution, as it was not acted upon by President GMA within 30 days from the date of her receipt thereof from the 14th Congress. This is Republic Act No. 10142, the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, which was passed by the House of Representatives on February 1, 2010 and the Senate on February 3, 2010.

The FRIA expressly repealed the Insolvency Law (Act No. 1956) as amended, and impliedly repealed, to the extent that they are inconsistent with the provisions of the Act, all other laws, orders, rules and regulations. The FRIA is significant because it covers the rehabilitation of sole proprietorships, partnerships and corporations, provides the legal basis for our procedural rules on corporate rehabilitation (the latest of which is A.M. No. 00-8-10-SC, promulgated by the Supreme Court en banc on December 2, 2009, and took effect on January 16, 2009), and consolidates the laws on insolvency and rehabilitation. The FRIA shall take effect 15 days after its complete publication in the Official Gazette or in at least two national newspapers of general circulation.

I will not venture to summarize the 150-section FRIA, but will just endeavour to discuss provisions which, to my mind, are significant, particularly in connection with rehabilitation proceedings.

The FRIA provides for different types of rehabilitation proceedings for sole proprietorships, partnerships and corporations. The Court-Supervised Rehabilitation (see Chapter II of the FRIA) includes:

(a) Voluntary Proceedings which is a rehabilitation petition initiated by the sole proprietor, by a majority of the partners, or by a majority of the board of directors/trustees and authorized by the corporation’s stockholders representing at least 2/3 of the outstanding capital stock or 2/3 of the members, and

(b) Involuntary Proceedings which is a rehabilitation petition initiated by creditors with an aggregate claim of at least P1 Million or at least 25% of the subscribed capital stock or partners’ contribution, whichever is higher. The Pre-Negotiated Rehabilitation (see Chapter III of the FRIA) is initiated by the insolvent debtor, by itself or jointly with any of its creditors, and seeks the approval of a pre-negotiated Rehabilitation Plan endorsed or approved by creditors holding at least 2/3 of the debtor’s total liabilities, including secured creditors holding more than 50% of the secured claims, and unsecured creditors holding more than 50% of the unsecured claims.

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Regulations Update: BIR Regulations Implementing Expanded Senior Citizens Act

The Bureau of Internal Revenue recently issued Revenue Regulations No. 07-10 (the “Regulations”), which implement Republic Act No. 9994, otherwise known as the Expanded Senior Citizens Act of 2010.

The major provisions of the Regulations include the following:

A.      Income tax and other taxes

In general, Senior Citizens must file income tax returns and pay income tax. However, the Senior Citizen is exempt from paying income tax if his returnable income is in the nature of compensation income and he qualifies as a minimum wage earner under RA No. 9504. The Senior Citizen is also exempt from income tax if the aggregate amount of gross income earned by the Senior Citizen during the taxable year does not exceed the amount of his personal exemptions (basic and additional).

Under the Regulations, the Senior Citizen can avail of income tax exemption only upon compliance with certain requirements. These are:

1.     the Senior Citizen must first be qualified as such by the Commissioner of Internal Revenue or his duly authorized representative (i.e., the Revenue District Officer (RDO)) having jurisdiction over the place where the Senior Citizen resides), by submitting a certified true copy of his Senior Citizen Identification Card (OSCA ID) issued by the OSCA of the city or municipality where he resides;

2.     the Senior Citizen must file a Sworn Statement on or before January 31 of every year that his annual taxable income for the previous year does not exceed the poverty level as determined by the NEDA thru the NSCB; and

3.     if qualified, his name shall be recorded by the RDO in the Master List of Tax-Exempt Senior Citizens for that particular year, which the RDO is mandatorily required to keep.

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July 2010 Philippine Supreme Court Decisions on Criminal Law and Procedure

Here are selected July 2010 rulings of the Supreme Court of the Philippines on criminal law and procedure:


1.     Revised Penal Code

Aggravating circumstance; treachery. In the killing of victims in this case, the trial court was correct in appreciating the aggravating circumstance of treachery. There is treachery when the attack is so sudden and unexpected that the victim had no opportunity either to avert the attack or to defend himself. Indeed, nothing can be more sudden and unexpected than when a father stabs to death his two young daughters while they were sound asleep and totally defenseless. People of the Philippines vs. Calonge y Verana, G.R. No. 182793, July 5, 2010.

Aggravating circumstance; treachery. The Court held that treachery can still be appreciated even though the victim was forewarned of the danger to his life because what is decisive is that the attack was executed in a manner that the victim was rendered defenseless and unable to retaliate. Although the victim knew that the accused held a grudge against him, he never had any inkling that he would actually be attacked that night. The way it was executed made it impossible for the victim to respond or defend himself. He just had no opportunity to repel the sudden attack, rendering him completely helpless. Accused, moreover, used a firearm to easily neutralize the victim, which was undeniably a swift and effective way to achieve his purpose. Lastly, but significantly, the accused aimed for the face of the victim ensuring that the bullet would penetrate it and damage his brain. These acts are distinctly indicative of the treacherous means employed by the accused to guarantee the consummation of his criminal plan. Thus, as treachery attended the killing of Loreto Cruz, such circumstance qualified the killing as murder, punishable under paragraph 1 of Article 248 of the Revised Penal Code. People of the Philippines vs. Pedro Ortiz, Jr. y Lopez, G.R. No. 188704, July 7, 2010.

Attempted homicide; civil liability; temperate damages. The Supreme Court modified the decision of the Court of Appeals with respect to the petitioner’s civil liability for being erroneous and contrary to prevailing jurisprudence. The Court of Appeals ordered actual damages to be paid in the amount of P3,858.50. In People v. Andres, the Supreme Court held that if the actual damages, proven by receipts during the trial, amount to less than P25,000.00, the victim shall be entitled to temperate damages in the amount of P25,000.00 in lieu of actual damages. The award of temperate damages is based on Article 2224 of the New Civil Code which states that temperate or moderate damages may be recovered when the court finds that some pecuniary loss was suffered but its amount cannot be proven with certainty. In this case, the victim is entitled to the award of P25,000.00 as temperate damages considering that the amount of actual damages is only P3,858.50. Actual damages should no longer be awarded. Giovani Serrano y Cervantes vs. People of the Philippines, G.R. No. 175023, July 5, 2010.

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July 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected July 2010 rulings of the Supreme Court of the Philippines on civil law:

Civil Code

Agency; doctrine of apparent authority. The doctrine of apparent authority in respect of government contracts, has been restated to mean that the government is NOT bound by unauthorized acts of its agents, even though within the apparent scope of their authority. Under the law on agency, however, “apparent authority” is defined as the power to affect the legal relations of another person by transactions with third persons arising from the other’s manifestations to such third person such that the liability of the principal for the acts and contracts of his agent extends to those which are within the apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such contracts has been conferred.

Apparent authority, or what is sometimes referred to as the “holding out” theory, or doctrine of ostensible agency, imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists. The existence of apparent authority may be ascertained through (1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties.

Easily discernible from the foregoing is that apparent authority is determined only by the acts of the principal and not by the acts of the agent. The principal is, therefore, not responsible where the agent’s own conduct and statements have created the apparent authority.

In this case, not a single act of respondent, acting through its Board of Directors, was cited as having clothed its general manager with apparent authority to execute the contract with it. Sargasso Construction & Development Corporation / Pick & Shovel, Inc./Atlantic Erectors, Inc./ Joint Venture vs. Philippine Ports Authority, G.R. No. 170530, July 5, 2010.

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