Equitable Banking Corporation vs. Sadac

General salary increases are not included in the computation of full backwages under Article 279 of the Labor Code, as amended by Republic Act No. 6715, because they are neither "allowances" nor "other benefits" within the meaning of the statute, but are mere expectancies dependent on variables such as the employer's fiscal situation and the employee's future performance. The base figure for computing backwages is the wage rate at the time of the employee's dismissal, inclusive of regular allowances such as emergency living allowances and 13th-month pay.

Respondent Ricardo Sadac was appointed Vice President of the Legal Department of petitioner Equitable Banking Corporation (now Equitable-PCI Bank) effective 1 August 1981, and subsequently General Counsel on 8 December 1981. His dismissal from employment had already been adjudged illegal in a prior proceeding before the Supreme Court docketed as G.R. No. 102467, Equitable Banking Corporation vs. National Labor Relations Commission, where the Court's 13 June 1997 Decision became final and executory on 28 July 1997. The instant case arose from the execution phase of that final judgment, specifically the divergent computations of backwages submitted by the parties before the Labor Arbiter.

Respondent Ricardo Sadac was appointed Vice President of the Legal Department of petitioner Equitable Banking Corporation effective 1 August 1981, and subsequently General Counsel on 8 December 1981. On 26 June 1989, nine lawyers of the bank's Legal Department sent a letter-petition to the Chairman of the Board of Directors accusing Sadac of abusive conduct and petitioning for a change in department leadership. On the ground of lack of confidence under the rules of client-lawyer relationship, the bank instructed Sadac to deliver all materials in his custody in all cases where he appeared as counsel of record. Sadac requested a full hearing and formal investigation, but the request remained unheeded.

On 9 November 1989, Sadac filed a complaint for illegal dismissal with damages against the bank and individual members of its Board of Directors. Upon learning of the complaint, the bank terminated Sadac's services. On 10 August 1989, Sadac was removed from his office and disentitled to compensation and other benefits. The Labor Arbiter initially dismissed the complaint on 2 October 1990, but the NLRC reversed on 24 September 1991, declaring the dismissal illegal and ordering reinstatement, full backwages, moral and exemplary damages, and attorney's fees. The bank elevated the matter to the Supreme Court via certiorari in G.R. No. 102467, where the Court's 13 June 1997 Decision affirmed the NLRC with modifications—entitling Sadac to backwages from termination until age sixty, then retirement benefits, deleting moral and exemplary damages, and limiting liability to the bank alone. That decision became final and executory on 28 July 1997.

Pursuant to the final judgment, Sadac filed a motion for execution with the Labor Arbiter, while the bank filed a manifestation praying that the award be computed and that upon payment it be released from liability. The parties submitted divergent computations. Sadac claimed a total monetary award of ₱6,030,456.59, representing backwages and other benefits including general salary increases computed at an annual rate of approximately fifteen percent, check-up benefit, clothing allowance, and cash conversion of vacation leaves. He anchored his claim on Article 279 of the Labor Code and cited East Asiatic Company, Ltd. vs. Court of Industrial Relations, St. Louis College of Tuguegarao vs. NLRC, and Sigma Personnel Services vs. NLRC, arguing that these cases uniformly held that salary increases are a component of backwages. The bank disputed the computation, contending that the correct amount was ₱2,981,442.98, to the exclusion of general salary increases and other claimed benefits which it maintained were unsubstantiated. It relied on Evangelista vs. NLRC and Paramount Vinyl Products Corp. vs. NLRC, which held that an unqualified award of backwages means the employee is paid at the wage rate at the time of dismissal.

On 2 August 1999, the Labor Arbiter adopted Sadac's computation, awarding ₱6,342,307.00 after deducting a prior partial payment, inclusive of general increases and other claimed benefits, plus 12% interest and 10% attorney's fees. The NLRC reversed on 28 March 2001, adopting the bank's computation of ₱2,981,442.98, finding the doctrine on general increases in the cited cases to be mere obiter dicta, disallowing the check-up benefit for lack of proof, and deleting attorney's fees. Sadac's motion for reconsideration was denied on 24 September 2002. Sadac then filed a petition for certiorari before the Court of Appeals, which reversed the NLRC on 6 April 2004 and revived the Labor Arbiter's order. The appellate court subsequently issued a Supplemental Decision on 26 October 2004, amending its dispositive to include attorney's fees equal to ten percent of the monetary award. The bank then filed the instant petition for review, assailing the inclusion of salary increases and other benefits in the backwages computation, the reliance on East Asiatic and related cases, and the grant of attorney's fees and interest.

• Exclusion of Salary Increases from Backwages: Petitioner argued that Article 279 of the Labor Code does not contemplate the inclusion of salary increases in the definition of "full backwages," as the law expressly provides only for the inclusion of "allowances" and "other benefits," and salary increases are neither.
• Inapplicability of East Asiatic and Related Cases: Petitioner maintained that East Asiatic, St. Louis, Sigma Personnel, and Millares should not govern the case, as East Asiatic was decided prior to the amendment of Article 279 by Republic Act No. 6715 and was premised on the old rule allowing deduction of earnings elsewhere; the references to salary increases in St. Louis, Sigma Personnel, and Millares were merely obiter dicta.
• Applicability of Paramount Vinyl, Evangelista, and Espejo: Petitioner anchored its position on cases holding that an unqualified award of backwages means the employee is paid at the wage rate at the time of dismissal, exclusive of general salary increases.
• Lack of Evidence for Claimed Benefits: Petitioner ascribed error to the Court of Appeals' ruling that Sadac was entitled to check-up benefit, clothing allowance, and cash conversion of vacation leaves, notwithstanding that Sadac presented no evidence to prove entitlement to these claims.
• Impropriety of Attorney's Fees: Petitioner contended that neither the dispositive portion nor the body of the 13 June 1997 Decision in G.R. No. 102467 awarded attorney's fees, and that the Court of Appeals erred in issuing a Supplemental Decision directing payment of attorney's fees equal to ten percent of the monetary award.
• Premature Imposition of Interest: Petitioner argued that Sadac was not entitled to legal interest because the principal amount due had not yet been correctly and finally determined.

• Inclusion of General Increases: Respondent submitted that the Court of Appeals was correct in ruling that his backwages should include general increases, relying on East Asiatic, St. Louis, Sigma Personnel, and Millares, which uniformly hold that it is the obligation of the employer to pay an illegally dismissed employee the whole amount of salaries plus all other benefits, bonuses, and general increases to which he would have been normally entitled had he not been dismissed.
• Entitlement to Other Benefits: Respondent contended that his check-up benefit, clothing allowance, and cash conversion of vacation leaves must be included in the computation of his backwages, arguing that if ordinary employees were entitled to these benefits, a Vice President should likewise receive them.
• Entitlement to Attorney's Fees: Respondent filed a partial motion for reconsideration seeking the inclusion of attorney's fees, which the Court of Appeals ultimately granted in its Supplemental Decision.

• Computation of Backwages: Whether periodic general increases in basic salary are included in the computation of full backwages for illegally dismissed employees under Article 279 of the Labor Code.
• Applicable Precedents: Whether the Court of Appeals erred in relying on East Asiatic, St. Louis, Sigma Personnel, and Millares rather than Paramount Vinyl, Evangelista, and Espejo.
• Claimed Benefits: Whether respondent is entitled to check-up benefit, clothing allowance, and cash conversion of vacation leaves.
• Attorney's Fees: Whether respondent is entitled to attorney's fees equal to ten percent of the monetary award.
• Legal Interest: Whether respondent is entitled to twelve percent per annum interest on the outstanding balance from 28 July 1997 until full payment.
• Referral to En Banc: Whether the petition should be referred to the Court En Banc.

• Computation of Backwages: No. General salary increases are not included in the computation of full backwages; the base figure is the wage rate at the time of dismissal, inclusive of regular allowances such as emergency living allowances and 13th-month pay, pursuant to Article 279 of the Labor Code as construed in Paramount Vinyl, Evangelista, and Espejo.
• Applicable Precedents: Yes, the Court of Appeals erred. East Asiatic was decided prior to Republic Act No. 6715 and was premised on the old deduction-of-earnings rule; the references to salary increases in St. Louis, Sigma Personnel, and Millares were obiter dicta. Paramount Vinyl, Evangelista, and Espejo are the controlling authorities.
• Claimed Benefits: No. Respondent presented no evidence to prove entitlement to check-up benefit, clothing allowance, and cash conversion of vacation leaves; mere allegations do not suffice absent supporting proof.
• Attorney's Fees: Yes. The award of attorney's fees equal to ten percent of the monetary award was part of the NLRC Decision affirmed with modification by the Supreme Court in G.R. No. 102467, which became final and executory on 28 July 1997, and is thus immutable.
• Legal Interest: Yes. Twelve percent per annum interest is imposed on the total monetary award from 28 July 1997, the date of finality of the judgment in G.R. No. 102467, until full payment, pursuant to Eastern Shipping Lines, Inc. vs. Court of Appeals.
• Referral to En Banc: No. The case did not involve the modification or reversal of any doctrine or principle laid down by the Court En Banc or in division.

• Computation of Backwages: Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, mandates that an employee's full backwages shall be "inclusive of allowances, and to his other benefits or their monetary equivalent." Salary increases cannot be interpreted as either an allowance or a benefit. Allowances and benefits are granted apart from and in addition to the wage or salary, while salary increases are increments added to the salary itself and, once granted, become part of the salary. To extend the coverage of "allowance" or "benefit" to include salary increases would strain both the language of the law and the Court's imagination. If the legislature intended to include salary increases, it would have done so expressly, as it did with allowances and benefits. Moreover, salary increases are mere expectancies, volatile and dependent on numerous variables including the company's fiscal situation and the employee's future performance. There is no vested right to salary increases; past receipt proves only fact of receipt, not the degree of assuredness inherent in backwages. The controlling precedents—Paramount Vinyl, Evangelista, and Espejo—uniformly hold that an unqualified award of backwages means the employee is paid at the wage rate at the time of dismissal, inclusive of regular allowances but exclusive of general salary increases. The dispositive portion of the 13 June 1997 Decision in G.R. No. 102467 awarded backwages in unqualified terms, thus pegging the base at the wage rate at the time of dismissal.

• Applicable Precedents: East Asiatic was decided on 31 August 1971, prior to the effectivity of Republic Act No. 6715 on 21 March 1989. Its doctrine was premised on the old rule allowing the employer to deduct earnings derived by the employee elsewhere, and its emphasis was on the duty of both parties to disclose material facts relevant to the determination of deductions. That rationale has no relevance under the amended law. The references to salary increases in St. Louis (which concerned fringe benefits), Sigma Personnel (which concerned illegal dismissal of a domestic helper), and Millares (which concerned separation pay, not backwages) were all obiter dicta, as the inclusion of salary increases in backwages was not the issue in any of those cases. The distinction between backwages and separation pay is elementary: separation pay is usually based on length of service, while backwages are based on the actual period the employee was unlawfully prevented from working.

• Claimed Benefits: The determination of entitlement to check-up benefit, clothing allowance, and cash conversion of vacation leaves involves a question of fact. While this Court's jurisdiction in a petition for review is generally limited to errors of law, it may resolve factual issues where the findings of the Labor Arbiter and the Court of Appeals are inconsistent with those of the NLRC. The bank's own computation acknowledged only rice subsidy, tuition fee allowance, and medicine allowance—nowhere did it acknowledge the benefits claimed by Sadac. The Labor Arbiter's rationalization that acknowledgment of certain benefits implied entitlement to all other claimed benefits was erroneous. The rule is that he who alleges must prove; mere allegations by Sadac do not suffice absent supporting evidence.

• Attorney's Fees: When a final judgment becomes executory, it becomes immutable and unalterable. The 13 June 1997 Decision in G.R. No. 102467 became final on 28 July 1997. That Decision affirmed with modification the NLRC Decision of 24 September 1991, which had awarded attorney's fees equivalent to ten percent of the monetary award. The modifications made by the Supreme Court deleted only moral and exemplary damages—not attorney's fees. It is the dispositive portion of a judgment that settles and declares the rights and obligations of the parties definitively, notwithstanding inconsistent statements in the body. The issue of attorney's fees was thus settled with finality in G.R. No. 102467 and can no longer be modified.

• Legal Interest: Under Eastern Shipping Lines, Inc. vs. Court of Appeals, when a judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be twelve percent per annum from such finality until satisfaction, this interim period being deemed equivalent to a forbearance of credit. The 13 June 1997 Decision became final on 28 July 1997; accordingly, twelve percent interest runs from that date until full payment, notwithstanding the parties' dispute over the computation of backwages.

• Referral to En Banc: The case did not involve the modification or reversal of any doctrine or principle laid down by the Court En Banc or in division. The Court was merely applying existing jurisprudence on the computation of backwages. Under Section 4(2), Article VIII of the 1987 Constitution, referral to the En Banc is not warranted.

• Full Backwages Under Article 279 — Full backwages, as contemplated by Article 279 of the Labor Code as amended by Republic Act No. 6715, mean backwages without deduction of earnings derived elsewhere by the employee during the period of illegal dismissal. However, the base figure for computation is the wage rate at the time of dismissal, inclusive of regular allowances (such as emergency living allowances and 13th-month pay) but exclusive of general salary increases. Salary increases are neither "allowances" nor "benefits" within the meaning of the statute; they are mere expectancies dependent on variables such as the employer's fiscal situation and the employee's future performance, and there is no vested right to them.

• Immutability of Final Judgments — When a final judgment becomes executory, it becomes immutable and unalterable and may no longer be modified in any respect, even by the court rendering it or by the highest court of the land. The only recognized exceptions are the correction of clerical errors, nunc pro tunc entries causing no prejudice, and where the judgment is void. Applied here, the award of attorney's fees in G.R. No. 102467, having become final on 28 July 1997, could not be modified or deleted in the execution phase.

• Dispositive Portion Controls — It is the dispositive part of the judgment that actually settles and declares the rights and obligations of the parties finally, definitively, and authoritatively, notwithstanding inconsistent statements in the body that may tend to confuse. Applied here, although the body of the 13 June 1997 Decision did not expressly discuss attorney's fees, the dispositive affirmed the NLRC's award thereof by deleting only moral and exemplary damages.

• Legal Interest on Final Monetary Awards — Pursuant to Eastern Shipping Lines, Inc. vs. Court of Appeals, when a judgment awarding a sum of money becomes final and executory, legal interest of twelve percent per annum shall be imposed from the date of finality until full satisfaction, the interim period being deemed equivalent to a forbearance of credit.

• Burden of Proof for Claimed Benefits — He who alleges, not he who denies, must prove. Mere allegations by an employee of entitlement to specific benefits, unsupported by evidence, do not suffice. The employer's acknowledgment of certain benefits in its own computation does not imply acknowledgment of all other benefits claimed by the employee.

• "Salary increases are not akin to allowances or benefits, and cannot be confused with either. The term 'allowances' is sometimes used synonymously with 'emoluments,' as indirect or contingent remuneration, which may or may not be earned, but which is sometimes in the nature of compensation, and sometimes in the nature of reimbursement." — This passage articulates the ratio decidendi on why salary increases fall outside the statutory language of Article 279, establishing the distinction between allowances/benefits and salary increases.

• "To extend the coverage of an allowance or a benefit to include salary increases would be to strain both the imagination of the Court and the language of law." — A frequently cited formulation underscoring the principle of statutory construction that courts cannot extend the plain meaning of a statute to cover matters the legislature did not expressly include.

• "There is no vested right to salary increases. That respondent Sadac may have received salary increases in the past only proves fact of receipt but does not establish a degree of assuredness that is inherent in backwages." — This defines the conceptual boundary between backwages (grounded on assuredness) and salary increases (grounded on mere expectancy), applying the framework from Paguio vs. PLDT.

• "An unqualified award of backwages means that the employee is paid at the wage rate at the time of his dismissal." — The canonical formulation from Paramount Vinyl Products Corp. vs. NLRC and Evangelista vs. NLRC, reaffirmed as the controlling rule on the salary base for backwages computation.

• Bustamante vs. NLRC, 332 Phil. 833 (1996) — Controlling precedent on the meaning of "full backwages" under Article 279 as amended by Republic Act No. 6715. Held that full backwages should not be diminished by earnings derived elsewhere during the period of illegal dismissal. Followed in this case for the proposition that the legislative intent of RA 6715 was to give more benefits to workers, but distinguished on the specific question of salary increases.

• Paramount Vinyl Products Corp. vs. NLRC, 190 SCRA 525 (1990) — Controlling precedent on the salary base for backwages computation. Held that an unqualified award of backwages means the employee is paid at the wage rate at the time of dismissal, inclusive of regular allowances. Relied upon as the primary authority for excluding salary increases.

• Evangelista vs. NLRC, 319 Phil. 299 (1995) — Followed Paramount Vinyl and held that the computation of backwages should be based on the wage rate at the time of dismissal, not current wage levels, and that salary differentials are not allowed. Relied upon as controlling precedent.

• Espejo vs. NLRC, 325 Phil. 753 (1996) — Reiterated Paramount Vinyl and Evangelista in a case involving a General Manager with a monthly salary, establishing that the wage/salary distinction is immaterial in labor law. Relied upon as controlling precedent.

• East Asiatic Company, Ltd. vs. Court of Industrial Relations, 148-B Phil. 401 (1971) — Distinguished and found inapplicable. Decided prior to RA 6715, its doctrine was premised on the old rule allowing deduction of earnings elsewhere. The Court held that its rationale—requiring both parties to disclose material facts for determining deductions—has no relevance under the amended law.

• Millares vs. NLRC, 305 SCRA 500 (1999) — Distinguished. The issue therein concerned the computation of separation pay, not backwages. The reference to general increases citing East Asiatic was held to be obiter dictum.

• St. Louis College of Tuguegarao vs. NLRC, 177 SCRA 151 (1989) — Distinguished. The main issue was the inclusion of fringe benefits in backwages; the reference to East Asiatic on salary increases was a mere obiter dictum in a footnote.

• Sigma Personnel Services vs. NLRC, 224 SCRA 181 (1993) — Distinguished. The basic issue was whether a domestic helper was illegally dismissed; the inclusion of salary increases in backwages was not at issue.

• Paguio vs. Philippine Long Distance Telephone Co., Inc., 441 Phil. 679 (2002) — Followed. Established that salary increases are based on mere expectancy or speculation, not on the degree of assuredness inherent in backwages. Applied to hold that Sadac had no vested right to prospective salary increases.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA 78 (1994) — Controlling precedent on the imposition of legal interest. Applied to impose 12% per annum interest from the date the judgment became final and executory until full satisfaction.

• Songco vs. NLRC, 183 SCRA 610 (1990) — Followed. Held that "wages" and "salary" are synonymous in labor law, defeating Sadac's argument that the rule on backwages applied only to wage earners and not to salaried executives.

• Article 279, Labor Code of the Philippines, as amended by Section 34 of Republic Act No. 6715 — Provides that an employee unjustly dismissed shall be entitled to reinstatement without loss of seniority rights and to 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." Applied as the statutory basis for computing backwages; the Court held that "allowances" and "other benefits" do not encompass salary increases.

• Article 282, Labor Code of the Philippines — Enumerates the just causes for termination of employment. Referenced in the prior decision in G.R. No. 102467, where the Court found that Sadac's dismissal was not grounded on any of the causes stated therein.

• Section 2 and Section 5, Rule XIV, Book V, Implementing Rules of the Labor Code — Prescribe the procedural requirements for terminating employment. Referenced in G.R. No. 102467, where the Court found that the bank disregarded these requirements.

• Section 4(2), Article VIII, 1987 Constitution — Defines the cases that must be heard by the Supreme Court En Banc, including those where a doctrine or principle laid down by the Court En Banc or in division may be modified or reversed. Applied to deny the motion to refer the petition to the Court En Banc.

Panganiban, C.J. (Chairperson, on leave); Ynares-Santiago, J.; Austria-Martinez, J. (Acting Chairman); Callejo, Sr., J.