Manalo vs. Ateneo de Naga University

A transfer of an employee is a valid exercise of management prerogative and does not constitute constructive dismissal when it is based on sound business judgment, unattended by demotion in rank or diminution of pay, and not motivated by bad faith. An educational institution is justified in relieving a professional educator of teaching posts when the educator violates the ethical standards of the profession for which the institution trains students, even if the violation occurred in a capacity separate from the teaching employment.

Manalo was a regular and permanent full-time faculty member of the Accountancy Department of Ateneo de Naga University's College of Commerce, employed on June 3, 1993, and granted permanent status in 1996. She was also a part-time Manager of the Ateneo de Naga Multi-Purpose Cooperative, a separate entity that was evicted from holding office inside campus in 1999. The accountancy profession in the Philippines is regulated by Republic Act No. 9298, the Philippine Accountancy Act of 2004, which emphasizes the development of "competent, virtuous, productive and well rounded professional accountants," and the Code of Ethics for Professional Accountants in the Philippines sets forth fundamental ethical principles including integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.

Jovita S. Manalo was a regular and permanent full-time faculty member of the Accountancy Department of Ateneo de Naga University's College of Commerce, employed on June 3, 1993, and granted permanent status in 1996. She taught subjects such as Auditing Theory, Auditing Practice, Financial Accounting, and Elementary Accounting, and in 1994 also taught subjects in the University's Economics Department, namely International Trade and Philippine Economic Development, though she insisted she did not have the required aptitude and competence. Manalo was also a part-time Manager of the Ateneo de Naga Multi-Purpose Cooperative before it was evicted from holding office inside campus in 1999.

During her stint as Cooperative Manager, Manalo came into conflict with Bernal, Dean of the University's College of Commerce, who charged her with various offenses regarding the management of the Cooperative before the Cooperative's Board of Directors. The Board of Directors dismissed Manalo on the basis of these charges, but on November 30, 1999, her dismissal was recalled by the Cooperative's General Assembly. On December 14, 1999, Bernal wrote to Fr. Tabora, the University President, recommending the termination of her employment on the grounds of serious business malpractice, palpable dishonesty, and questionable integrity. Acting on the charges, Fr. Tabora constituted a Grievance Committee, which found Manalo guilty and recommended her dismissal. The offenses attributed to Manalo were: "fraud in issuance of official receipts, collection of cash without documented remittance to the cooperative, use of inappropriate forms of documents cash receipts, 16 instances of bouncing checks issued by the cooperative . . . fraud in the issuance of an official receipt, unauthorized cash advances[.]"

Acting on the Grievance Committee's recommendation, and as University President with the "final say on the matter," Fr. Tabora instead opted to transfer Manalo to teach Economics in the Department of Social Sciences of the University's College of Arts and Science. Alleging that her transfer constituted constructive dismissal, Manalo filed a Complaint on April 3, 2000. The Labor Arbiter found that Manalo was constructively dismissed, faulting the action taken on her case for being anchored on "private affairs . . . which clearly has [sic] no bearing on the employment relationship between [Ateneo de Naga University] and [Manalo]," and construing her transfer to teach Economics—a subject she was supposedly not qualified to teach—as unduly burdensome, inconvenient, and even embarrassing. The Court of Appeals reversed, noting that there was ample factual basis for Manalo's transfer and that such transfer was well within the scope of the University's prerogatives as an employer and as an educational institution. The Labor Arbiter had also underscored that Manalo "was both a major of accounting and economics, and she was a magna cum laude to boot."

• Conclusiveness of Labor Arbiter and NLRC Findings: Petitioner insisted that the findings of the Labor Arbiter and the National Labor Relations Commission are conclusive and binding on the Court of Appeals, and that alternative findings could not have been the basis for reversing their rulings.
• Constructive Dismissal Through Transfer: Petitioner argued that she was constructively dismissed, anchoring this conclusion on how it was supposedly improper for the University to transfer her based on actions imputed to her in her capacity as Cooperative Manager and not in her capacity as a member of the University's faculty.
• Distinctness of Entities: Petitioner argued that the Cooperative and the University are distinct entities, and that her supposed offenses are not work-related and cannot be the bases of any prospective termination or of any other action taken on her employment as a faculty member.
• Lack of Qualification: Petitioner contended that her transfer to the Economics Department entailed an assignment to something in which she was not competent or qualified, emphasizing that her concentration and the bulk of her teaching load remained Accountancy subjects.

• Breach of Professional Ethics: Respondents argued that the offenses petitioner committed show "clear transgressions of the Code of Ethics of Accountants, which rendered petitioner disqualified to teach Accounting."
• Validity of Management Prerogative: Respondents maintained that the transfer was well within the scope of Ateneo de Naga University's prerogatives as an employer and as an educational institution, given the ample factual basis for the transfer.

• Propriety of Court of Appeals Review: Whether the Court of Appeals was in error for entertaining alternative findings to those made by Labor Arbiter Quiñones and the National Labor Relations Commission.
• Constructive Dismissal Through Transfer: Whether the shift in petitioner Jovita S. Manalo's teaching load from mainly Accountancy subjects to Economics subjects constituted constructive dismissal.

• Propriety of Court of Appeals Review: No. The Court of Appeals properly reviewed the Labor Arbiter's and NLRC's rulings for grave abuse of discretion amounting to lack or excess of jurisdiction, as a Rule 65 petition for certiorari is confined to issues of jurisdiction or grave abuse of discretion, and the Court of Appeals was not bound by the mere coincidence of the Labor Arbiter's and NLRC's findings.
• Constructive Dismissal Through Transfer: No. The transfer was a valid exercise of management prerogative, not constructive dismissal, because Manalo's professional indiscretions breached the fundamental ethical principles of the accountancy profession, and the transfer was based on sound business judgment, unattended by demotion in rank or diminution of pay, and not motivated by bad faith.

• Propriety of Court of Appeals Review: Judicial review of decisions of the National Labor Relations Commission is through a petition for certiorari under Rule 65 of the Rules of Court, which is confined to issues of jurisdiction or grave abuse of discretion. The Court of Appeals, in a Rule 65 petition, examines whether the NLRC acted in such a "capricious and whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law." The Court of Appeals was not bound by the mere fact that the Labor Arbiter and NLRC findings coincided; it was its business to determine whether there had been grave abuse of discretion. The Court of Appeals concluded that the Labor Arbiter and NLRC committed grave abuse of discretion, and the Supreme Court sustained this conclusion because the Labor Arbiter and NLRC "divorced petitioner's manifest breach of the ethical standards binding accountancy professionals from petitioner's role as an educator of prospective accounting professionals." The Labor Arbiter and NLRC committed gross errors amounting to an evasion of their positive duty to render judgment after meticulous consideration of the circumstances.

• Constructive Dismissal Through Transfer: Constructive dismissal arises "when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee." At its core is the "gratuitous, unjustified, or unwarranted nature of the employer's action." Not every inconvenience, disruption, difficulty, or disadvantage that an employee must endure results in a finding of constructive dismissal. An employer is free to regulate all aspects of employment, including transfer of employees, except as limited by special laws. Jurisprudence recognizes that transferring employees, to the extent that it is done fairly and in good faith, is a valid exercise of management prerogative and will not sustain a charge of constructive dismissal when the transfer is based on sound business judgment, unattended by demotion in rank or diminution of pay or bad faith. The Court disagreed with petitioner's argument that her offenses were not work-related. The offenses she committed—fraud in issuance of official receipts, collection of cash without documented remittance, use of inappropriate forms, 16 instances of bouncing checks, fraud in the issuance of an official receipt, and unauthorized cash advances—run afoul of the first and most basic fundamental ethical principle of the accountancy profession: integrity. Her having sanctioned unauthorized advances demonstrates a violation of the second fundamental ethical principle: objectivity. Even assuming these acts do not evince a premeditated scheme, they manifest that petitioner failed to act diligently, competently, and with due care. The totality of the indiscretions reflects negatively on the accountancy profession and indicates anything but professional behavior. Worse, these acts indicate that petitioner failed to demonstrate to students and to live by her own example the ideals of the accountancy profession. The Court emphasized that "practicing a profession and educating a profession are not only technical or operational matters; they are as much a matter of ethics." The Court found ample basis not only for the precautionary measures actually taken on petitioner, but even for other heavier penalties that could have been imposed on her. The Court also failed to appreciate petitioner's contention that she was not competent or qualified to teach Economics, as she was "both a major of accounting and economics, and she was a magna cum laude to boot," and she admitted to having previously taught Economics subjects. Her lack of a Master's Degree in Economics did not automatically render her unqualified, as the 1992 Manual of Regulations for Private Schools did not absolutely prevent non-holders of master's degrees from teaching in undergraduate programs. Ultimately, the University could not be said to have acted in an arbitrary, unjustified, or unwarranted manner in preventing petitioner from teaching Accountancy subjects, and having failed to prove the crucial element of what amounts to constructive dismissal, petitioner's Complaint was rightly dismissed.

• Constructive Dismissal — Constructive dismissal arises "when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee." At its core is the gratuitous, unjustified, or unwarranted nature of the employer's action. The Court applied this doctrine by contrasting the allegation of constructive dismissal with the validity of exercising management prerogative, holding that not every inconvenience, disruption, difficulty, or disadvantage sustains a finding of constructive dismissal.
• Management Prerogative — An employer is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work, except as limited by special laws. The transfer of an employee from one area of operation to another is a management prerogative and is not constitutive of constructive dismissal when the transfer is based on sound business judgment, unattended by demotion in rank or a diminution of pay or bad faith. The Court applied this doctrine in holding that the University validly exercised its management prerogative in transferring Manalo, given her professional indiscretions.
• Mode of Review in Labor Cases — Judicial review of decisions of the National Labor Relations Commission is through a petition for certiorari under Rule 65, confined to issues of jurisdiction or grave abuse of discretion. In a Rule 45 petition before the Supreme Court, the question is not whether the employee was dismissed, but whether the Court of Appeals erred in not finding grave abuse of discretion in the NLRC's decision. The Court applied this doctrine in affirming the Court of Appeals' authority to examine the records and embark on its own analysis of whether the Labor Arbiter and NLRC properly performed their duties.

• "Not every inconvenience, disruption, difficulty, or disadvantage that an employee must endure sustains a finding of constructive dismissal. When professionals and educators violate the ethical standards of the profession to which they belong and for which they train students, educational institutions employing them are justified in relieving them of their teaching posts and in taking other appropriate precautionary or punitive measures." — This passage states the core ruling of the case, articulating the standard for constructive dismissal and the justification for employer action against professional educators.
• "Constructive dismissal arises 'when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.'" — This passage defines the canonical formulation of constructive dismissal, frequently cited in subsequent jurisprudence.
• "The transfer of an employee from one area of operation to another is a management prerogative and is not constitutive of constructive dismissal, when the transfer is based on sound business judgment, unattended by demotion in rank or a diminution of pay or bad faith." — This passage articulates the controlling rule on transfer of employees as a valid exercise of management prerogative.
• "We again emphasize that practicing a profession and educating a profession are not only technical or operational matters; they are as much a matter of ethics." — This passage underscores the Court's reasoning that professional ethics are integral to the role of an educator, justifying the University's action.

• St. Martin Funeral Homes vs. National Labor Relations Commission, 356 Phil. 811 (1998) — Cited as the authority clarifying that judicial review of NLRC decisions is through a petition for certiorari under Rule 65, not an appeal.
• Odango vs. National Labor Relations Commission, G.R. No. 147420, June 10, 2004, 431 SCRA 633 — Cited for the proposition that a special civil action for certiorari is an extraordinary remedy allowed "only and restrictively in truly exceptional cases," and that a petition for certiorari is "confined to issues of jurisdiction or grave abuse of discretion."
• Brown Madonna Press vs. Casas, G.R. No. 200898, June 15, 2015 — Cited for its exhaustive discussion of the mode of review in illegal dismissal cases, distinguishing between Rule 65 and Rule 45 review and clarifying the question presented in each.
• Hyatt Taxi Services vs. Catinoy, 412 Phil. 295 (2001) — Cited for the proposition that constructive dismissal does not always involve forthright dismissal or diminution in rank, compensation, benefit and privileges, and may arise from an act of clear discrimination, insensibility, or disdain by an employer that becomes so unbearable as to foreclose any choice by the employee except to forego continued employment.
• Tan vs. National Labor Relations Commission, 359 Phil. 499 (1998) — Cited for the definition of constructive dismissal and for the rule that transfer of an employee is a management prerogative not constitutive of constructive dismissal when based on sound business judgment, unattended by demotion in rank or diminution of pay or bad faith.
• Philippine Japan Active Carbon Corp. vs. NLRC — Cited within Tan for the proposition that it is the employer's prerogative to move employees around in various areas of its business operations to ascertain where they will function with maximum benefit to the company.
• San Miguel Brewery Sales Force Union vs. Ople, 252 Phil. 27 (1989) — Cited for the proposition that an employer is free to regulate all aspects of employment, including transfer of employees, except as limited by special laws.

• Article XII, Section 14, 1987 Constitution — Provides that the practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law, and that the State shall promote the sustained development of a reservoir of national talents. The Court cited this as the constitutional basis for professional regulation by the state.
• Section 2, Republic Act No. 9298 (Philippine Accountancy Act of 2004) — Declares the State's policy to develop and nurture competent, virtuous, productive and well rounded professional accountants. The Court cited this to show the centrality of ethics in the practice of accountancy.
• Section 9, Republic Act No. 9298 (Philippine Accountancy Act of 2004) — Grants the Professional Regulatory Board of Accountancy the power to prescribe and/or adopt a Code of Ethics for the practice of accountancy and to adopt measures for the enhancement and maintenance of high professional, ethical, accounting and auditing standards. The Court cited this to show the statutory basis for ethical regulation of the accountancy profession.
• Code of Ethics for Professional Accountants in the Philippines (2008), Section 100 — Sets forth the fundamental ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. The Court applied these principles to Manalo's offenses to conclude that she breached the ethical standards of the accountancy profession.
• Section 44(c)(l)(a), 1992 Manual of Regulations for Private Schools — Allowed non-holders of master's degrees to teach "subject to regulation" by the then Department of Education, Culture and Sports. The Court cited this to reject petitioner's argument that her lack of a Master's Degree in Economics rendered her unqualified to teach.
• Section 35, Manual of Regulation for Private Higher Education — Provides that in specific fields where there is a dearth of holders of Master's degree, a holder of a professional license requiring at least a bachelor's degree may be qualified to teach. The Court cited this to show that the present manual similarly does not absolutely prevent non-holders of master's degrees from teaching.

Carpio (Chairperson), Velasco, Jr., Brion, and Del Castillo, JJ., concurred.