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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June 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Labor Law

Acceptance of Benefits, render moot claim under other policies.  As in the case of Capili v. National Labor Relations Commission [273 SCRA 576], a claim for benefit under the company’s retirement plan becomes moot when the employee accepts retirement benefits on the basis of Article 287 of the Labor Code.  By Yuson’s acceptance of her retirement benefits through a compromise agreement entered into with her employer, she is deemed to have opted to retire under Article 287. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369, June 16, 2010.

Approval for company’s early retirement program; management prerogative.  Approval of applications for the early retirement program (“ERP”) is within the employer’s management prerogatives.  The exercise of management prerogative is valid as long as it is not done in a malicious, harsh, oppressive, vindictive, or wanton manner. In the present case, the Court sees no bad faith on the part of the employer.  The 21 August 2001 memorandum clearly states that petitioner, on its discretion, was offering ERP to its employees.  The memorandum also states that the reason for the ERP was to prevent further losses.  Petitioner did not abuse its discretion when it excluded respondent in the ERP because the latter is already about to retire.  To allow respondent to avail of the ERP would have been contrary to the purpose of the program. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369, June 16, 2010.

Constructive dismissal; definition; transfer as management prerogative. Constructive dismissal is defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely, or when there is a demotion in rank or a diminution of pay. It exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.

Here, there was no diminution of petitioner’s salary and other benefits.  There was no evidence that she was harassed or discriminated upon, or that respondents made it difficult for her to continue with her other duties.  Absent any evidence of bad faith, it is within the exercise of respondents’ management prerogative to transfer some of petitioner’s duties, if, in their judgment, this would be more beneficial to the corporation.  Estrella Velasco vs. Transit Automotive Supply, Inc. and Antonio de Dios, G.R. No. 171327, June 18, 2010.

Constructive dismissal; off-detailing; resignation; notice requirement. The company evidently placed petitioner on floating status after being relieved of her position.  But, as the Court has repeatedly ruled, such act of “off-detailing” does not amount to a dismissal so long as the floating status does not continue beyond a reasonable time.  In this case, the employee’s floating status ran up to more than six months as of August 16, 2002. For this reason, the company may be considered to have constructively dismissed the employee from work as of that date. Hence, petitioner’s purported resignation on October 15, 2002 could not have been legally possible.

The company claims that it gave petitioner notices on August 23, 2002 and September 2, 2002, asking her to explain her failure to report for work and informing her that the company would treat such failure as lack of interest in her continued employment.  But these notices cannot possibly take the place of the notices required by law as they came more than six months after the company placed her on floating status, at which time, the employee is already deemed to have been constructively dismissed her from work.  Elsa S. Mali-on v. Equitable General Services Inc., G.R. No. 185269, June 29, 2010.

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May 2010 Philippine Supreme Court Decisions on Tax Law

Here are May 2010 rulings of the Supreme Court of the Philippines on tax law:

Assessment; prescriptive period. The government must assess internal revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return, whichever comes later. An assessment notice issued after the three-year prescriptive period is no longer valid and effective unless falling under the exceptions.     Commissioner of Internal Revenue vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010.

Prescriptive period for assessment; exceptions. In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed at any time within ten years after the discovery of the falsity, fraud or omission. If before the expiration of the time prescribed in the National Internal Revenue Code (NIRC) for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon.  Commissioner of Internal Revenue vs. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010.

Prescriptive period for assessment; requirements for a proper waiver. RMO 20-90 and RDAO 05-01 lay down the following procedures for the proper execution of the waiver of the prescriptive period:

(1)     the waiver must be in the proper form prescribed by RMO 20-90; the phrase “but not after ___ 19____,” which indicates the expiry date of the period agreed upon to assess the tax after the regular three-year period of prescription must be filled up;

(2)     the waiver must be signed by the taxpayer himself or his duly authorized representative; in the case of a corporation, the waiver must be signed by any of its responsible officials; if the authority is delegated by the taxpayer to a representative, such should be in writing and duly notarized;

(3)     the waiver should be duly notarized;

(4)     the Commissioner of Internal Revenue (CIR) or the revenue official authorized by him must sign the waiver indicating that the Bureau of Internal Revenue (BIR) has accepted and agreed to the waiver; the date of the BIR’s acceptance should be indicated;  before signing the waiver, the CIR ort he revenue official authorized by him must make sure that the waiver is in the prescribed form, duly notarized, and executed by the taxpayer or his duly authorized representative;

(5)     both the date of execution by the taxpayer and date of acceptance by the BIR should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed; and

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April 2010 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Labor Law

Dismissal; backwages. Article 279 of the Labor Code provides that “an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”

Thus, a number of cases holds that an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement.  The two reliefs are separate and distinct. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay is granted.  In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights, and payment of backwages computed from the time compensation was withheld up to the date of actual reinstatement.  Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service should be awarded as an alternative.  The payment of separation pay is in addition to the payment of backwages.

Since reinstatement is no longer feasible in the present case, the award of separation pay in lieu of reinstatement is in order.  Petitioner’s prayer for the award of backwages is meritorious, it, and the award of separation pay not being mutually exclusive. Ferdinand A. Pangilinan vs. Wellmade Manufacturing Corporation, G.R. No. 187005, April 7, 2010.

Dismissal; backwages. Reprimand being the appropriate imposable penalty for respondent’s actuations from the very beginning, the Court finds that respondent was unfairly denied from reporting for work and earning his keep, thus, entitling him to the payment of backwages.

The Court is not unmindful of our previous pronouncements in similar cases involving suspension or dismissal from service, wherein the penalty imposed was reduced, but the award of backwages was denied.

Given the circumstances of the case, however, where the proper penalty should only be a reprimand, the Court finds the aforementioned cases to be inapplicable herein. On this note, the Court deems it proper to distinguish between the penalties of dismissal or suspension and reprimand and their respective effects on the grant or award of backwages. When an employee is dismissed or suspended it is but logical that since he is barred from reporting to work the same negates his right to be paid backwages. He has no opportunity to work during the period he was dismissed or suspended and, therefore, he has no salary to expect. However, the same does not hold true for an employee who is reprimanded. A reprimand usually carries a warning that a repetition of the same or similar act will be dealt with more severely. Under normal circumstances, an employee who is reprimanded is never prevented from reporting to work. He continues to work despite the warning. Thus, in the case at bar, since respondent’s penalty should only be a reprimand, the Court deems it proper and equitable to affirm the Court of Appeals’ (CA’s) award of backwages.

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September 2009 Philippine Supreme Court Decisions on Labor Law

Here are selected September 2009 Philippine Supreme Court decisions on labor law:

Dismissal;  abandonment.  Abandonment is a form of neglect of duty, one of the just causes for an employer to terminate an employee. It is a hornbook precept that in illegal dismissal cases, the employer bears the burden of proof. For a valid termination of employment on the ground of abandonment, Lucinario must prove, by substantial evidence, the concurrence of petitioner’s failure to report for work for no valid reason and his categorical intention to discontinue employment.

Lucinario, however, failed to establish any overt act on the part of petitioner to show his intention to abandon employment. Petitioner, after being informed of his alleged shortages in collections and despite his relegation to that of company custodian, still reported for work. He later applied for a 4-day leave of absence. On his return, he discovered that his name was erased from the logbook, was refused entry into the company premises, and learned that his application for a 4-day leave was not approved. He thereupon exerted efforts to communicate with Lucinario on the status of his employment, but to no avail. These circumstances do not indicate abandonment.

That petitioner immediately filed the illegal dismissal complaint with prayer for reinstatement should dissipate any doubts that he wanted to return to work.

What thus surfaces is that petitioner was constructively dismissed. No actual dismissal might have occurred in the sense that petitioner was not served with a notice of termination, but there was constructive dismissal, petitioner having been placed in a position where continued employment was rendered impossible and unreasonable by the circumstances indicated above. Odilon L. Martinez vs. B&B Fish Broker and/or Norberto M. Lucinario, G.R. No. 179985, September 18, 2009.

Dismissal;  burden of proof.  While the employer bears the burden in illegal dismissal cases to prove that the termination was for valid or authorized cause, the employee must first establish by substantial evidence the fact of dismissal from service. This petitioner failed to discharge. He, in fact, failed to refute respondent’s claim that it sent him a Violation Memorandum, which was duly received by him on April 15, 2003, and a subsequent Memorandum via registered mail, requiring him to explain his habitual tardiness on the therein indicated dates but that he failed to comply therewith.

Constructive dismissal contemplates, among other things, quitting because continued employment is rendered impossible, unreasonable or unlikely, or a demotion in rank or a diminution of pay. It clearly exists when an act of clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee, leaving him with no option but to forego his continued employment. Not any of these circumstances exists to call for a ruling that petitioner was constructively dismissed.  Romero Montederamos vs. Tri-Union International Corporation, G.R. No. 1767000, September 4, 2009.

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August 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected August 2009 Philippine Supreme Court decisions on civil law:

Contracts;  binding effect.  As a general rule, obligations derived from a contract are transmissible (see Article 1311, par.1 of the Civil Code).  The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied.  William Ong Genato vs. Benjamin Bayhon, et al., G.R. No. 171035, August 24, 2009.

Contracts;  breach.  CCC defaulted in the payment of its obligation to FILSYSTEMS under the Compromise Agreement. On the other hand, FILSYSTEMS was not in default; however, considering that it failed to perform the obligation incumbent upon it under the Compromise Agreement, it must be held liable for the cost of completion of the unfinished portion of the project.  Continental Cement Corp., vs. Filipinas (PREFAB) Systems, Inc./Filipinas (PREFAB) Systems, inc. vs. Continental Cement Corp., G.R. No. 176917/G.R. No. 176919, August 4, 2009.

Contracts; due and demandable obligations.  Petitioner does not deny that she obtained a loan from respondent. She, however, contends that the loan is not yet due and demandable because the suspensive condition – the completion of the renovation of the apartment units – has not yet been fulfilled. She also assails the award of attorney’s fees to respondent as baseless.

For his part, respondent admits that initially, they agreed that payment of the loan shall be made upon completion of the renovations. However, respondent claims that during their meeting with some family members in the house of their brother Genaro sometime in the second quarter of 1997, he and petitioner entered into a new agreement whereby petitioner was to start making monthly payments on her loan, which she did from June to October of 1997. 

Evidently, by virtue of the subsequent agreement, the parties mutually dispensed with the condition that petitioner shall only begin paying after the completion of all renovations. There was, in effect, a modificatory or partial novation, of petitioner’s obligation under Article 1291 of the Civil Code. Maria Soledad Tomimbang vs. Atty. Jose Tomimbang, G.R. No. 165116, August 4, 2009.

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