MORESCO II vs. Cagalawan

A transfer of an employee, though within the employer's management prerogative, constitutes constructive dismissal when it is shown to be unnecessary, inconvenient, and prejudicial to the employee, and the employer fails to present substantial evidence proving that the transfer was required by legitimate business exigency. Belated submission of evidence in labor cases may only be allowed if the delay is adequately justified and the evidence is clearly material to establish the party's cause.

MORESCO II is a rural electric cooperative that hired Cagalawan as a Disconnection Lineman, first on a probationary basis on September 1, 1993, and then on a permanent basis on March 1, 1994. On July 17, 2001, Cagalawan was designated as Acting Head of the disconnection crew in the Balingasag sub-office. The case involves the employer's exercise of its management prerogative to transfer employees and the limits of that prerogative when exercised in a manner that is prejudicial to the employee.

MORESCO II hired Cagalawan as a Disconnection Lineman on a probationary basis on September 1, 1993, and appointed him to the same post on a permanent basis on March 1, 1994. On July 17, 2001, he was designated as Acting Head of the disconnection crew in the Balingasag sub-office. In a Memorandum dated May 9, 2002, MORESCO II General Manager Amado B. Ke-e transferred Cagalawan to the Gingoog sub-office as a member of the disconnection crew, stating that the transfer was done "in the exigency of the service."

In a letter dated May 15, 2002, Cagalawan assailed his transfer, claiming he was effectively demoted from his position as head of the disconnection crew to a mere member thereof. He also averred that the transfer was inconvenient and prejudicial to him as it would entail additional travel expenses, and sought clarification on the kind of exigency that justified his transfer and why he was chosen. In a Memorandum dated May 16, 2002, Ke-e explained that the transfer was not a demotion since Cagalawan was holding the position of Disconnection Head only by mere designation and not by appointment, but did not state the basis of the transfer, instead advising Cagalawan to comply with the order and not question management's legitimate prerogative.

In reply, Cagalawan claimed that he was transferred because he executed an Affidavit in support of his co-employee Jessie Rances, who filed an illegal dismissal case against MORESCO II. He emphasized that his action was not an act of disloyalty. Nonetheless, Cagalawan reported for work at the Gingoog sub-office on May 27, 2002 but reserved his right to contest the legality of the transfer. Ke-e issued an order recalling Cagalawan's previous designation as Acting Head of the disconnection crew of the Balingasag sub-office. Cagalawan eventually stopped reporting for work and filed a Complaint for constructive dismissal before the NLRC on July 1, 2002.

When the Labor Arbiter directed the parties to submit their verified position papers, only Cagalawan complied. He alleged that his transfer was unnecessary and made in retaliation for executing an affidavit in favor of a co-worker. He submitted a certification executed by Teodoro Ortiz, Head of the disconnection crew of the Gingoog sub-office, attesting that the sub-office was not undermanned. Cagalawan claimed that his transfer constituted a demotion and was tantamount to illegal constructive dismissal for being prejudicial and inconvenient, as he had to spend an additional ₱197.00 a day. MORESCO II failed to file a position paper, and the case was submitted for decision.

The Labor Arbiter rendered a Decision declaring that Cagalawan's transfer constituted illegal constructive dismissal, finding no sufficient reason for the transfer and that it was calculated to rid him of his employment, impelled by a vindictive motive. The Labor Arbiter ordered reinstatement to the position of Collector and awarded backwages, moral and exemplary damages, and attorney's fees, but denied the prayer for regularization as head of the disconnection crew. Both parties appealed. On appeal, MORESCO II invoked the liberal application of the rules and prayed for the NLRC to admit its evidence, submitting a letter dated May 8, 2002 from Gingoog sub-office Area Manager Engr. Ronel B. Canada requesting two additional disconnection linemen to attain the collection quota. The NLRC admitted the evidence and dismissed Cagalawan's complaint. The CA reversed, finding grave abuse of discretion in the admission of MORESCO II's evidence.

• Constructive Dismissal: MORESCO II insisted that Cagalawan's transfer was necessary to attain the collection quota of the Gingoog sub-office, and that he was not constructively dismissed but instead had voluntarily abandoned his job.
• Credibility of Evidence: MORESCO II contested the credibility of Ortiz's certification, arguing that Ortiz is not a managerial employee but merely a disconnection crew who is not competent to make declarations regarding the cooperative's business needs.
• Additional Expenses: MORESCO II refuted Cagalawan's claim of incurring additional expenses due to the transfer, arguing that he would incur meal and transportation expenses regardless of his place of assignment and that he was provided with a rented motorcycle with fuel and oil allowance.
• Admission of Evidence on Appeal: MORESCO II averred that the CA's ruling was not in accordance with jurisprudence, submitting that the NLRC correctly accepted its evidence submitted for the first time on appeal in line with the basic precepts of equity and fairness, and that Cagalawan was afforded the opportunity to rebut or comment on the appeal.

• Belated Submission of Evidence: Cagalawan averred that MORESCO II cannot present evidence for the first time on appeal without giving any valid reason for its failure to submit its evidence before the Labor Arbiter as provided under the NLRC rules.
• Not Newly Discovered Evidence: Cagalawan claimed that the May 8, 2002 letter of Engr. Canada was not newly discovered evidence, and that MORESCO II's failure to present it at the earliest opportunity raised suspicion that the document was merely fabricated for the purpose of appeal.
• Lack of Reasonable Basis: Cagalawan claimed that if there was indeed a request from the Area Manager for additional personnel, such reason should have been mentioned in Ke-e's May 16, 2002 Memorandum, and the failure to do so showed that the transfer was without any valid reason.

• Constructive Dismissal: Whether respondent Cagalawan was constructively dismissed by petitioner MORESCO II.
• Admission of Evidence on Appeal: Whether the Court of Appeals erred in reversing the NLRC's admission of MORESCO II's evidence submitted for the first time on appeal.

• Constructive Dismissal: Yes. Cagalawan was constructively dismissed, as MORESCO II's evidence was insufficient to show that the transfer was required by the exigency of the electric cooperative's business interest, and the transfer was unnecessary, inconvenient, and prejudicial to the employee.
• Admission of Evidence on Appeal: No. The Court of Appeals did not err in reversing the NLRC, as MORESCO II's belated submission of evidence without any valid explanation could not be permitted, and the evidence was not substantial to prove a genuine business urgency.

• Constructive Dismissal: The Court acknowledged that it is within the ambit of the employer's prerogative to transfer an employee for valid reasons and according to the requirement of its business, provided that the transfer does not result in demotion in rank or diminution of salary, benefits and other privileges. However, this prerogative should be exercised without grave abuse of discretion and with due regard to the basic elements of justice and fair play, such that if there is a showing that the transfer was unnecessary or inconvenient and prejudicial to the employee, it cannot be upheld. While the transfer of Cagalawan neither entailed a demotion in rank since he did not have tenurial security over the position of head of the disconnection crew, nor resulted in diminution of pay as this was not sufficiently proven, MORESCO II's evidence was nevertheless not enough to show that the transfer was required by the exigency of the cooperative's business interest. The only evidence adduced was the letter-request of Engr. Canada, which was nothing more than a mere request for additional personnel and, standing alone, was self-serving and could not be considered as competent evidence. MORESCO II could have presented financial documents or other concrete documentary evidence showing that the collection quota had not been met or that there was a lack of sufficient personnel, but failed to do so. When there is doubt between the evidence submitted by the employer and that submitted by the employee, the scales of justice must be tilted in favor of the employee, consistent with the rule that an employer's cause could only succeed on the strength of its own evidence and not on the weakness of the employee's evidence.

• Admission of Evidence on Appeal: The Court held that labor tribunals are not precluded from receiving evidence submitted on appeal as technical rules are not binding in cases submitted before them. However, any delay in the submission of evidence should be adequately explained and should adequately prove the allegations sought to be proven. In this case, MORESCO II did not cite any reason why it failed to file its position paper or present its cause before the Labor Arbiter despite sufficient notice and time given to do so. Only after an adverse decision was rendered did it present its defense. The belated submission of the letter-request without any valid explanation cast doubt on its credibility, especially since it was not newly discovered evidence. The letter-request was dated May 8, 2002, a day before the memorandum for Cagalawan's transfer was issued, and MORESCO II could have easily presented it in the proceedings before the Labor Arbiter. Furthermore, if there was already a letter-request from the Gingoog area manager, Ke-e could have easily referred to or specified this in his subsequent memorandum of May 16, 2002, but the memorandum was silent in this respect.

• Personal Liability of Corporate Officers: The Court held that Ke-e and Subrado could not be held personally liable for Cagalawan's money claims. Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral obliquity and conscious doing of a wrong. Although the Labor Arbiter found that Ke-e acted in an arbitrary manner in effecting the transfer, the same, absent any showing of some dishonest or wrongful purpose, does not amount to bad faith. Bad faith must be established clearly and convincingly as the same is never presumed. Similarly, no bad faith can be presumed from the fact that Subrado was the opponent of Cagalawan's father-in-law in the election for directorship, as this was a mere allegation without proof. As the Chairman of the Board of Directors, Subrado had the duty and obligation to act upon complaints of clients, and the Court found that he had no participation whatsoever in Cagalawan's illegal dismissal.

• Constructive Dismissal — Constructive dismissal occurs when an employee's transfer is shown to be unnecessary, inconvenient, and prejudicial to the employee, and the employer fails to present substantial evidence proving that the transfer was required by legitimate business exigency. The employer's management prerogative to transfer employees should be exercised without grave abuse of discretion and with due regard to the basic elements of justice and fair play.

• Management Prerogative to Transfer — It is within the ambit of the employer's prerogative to transfer an employee for valid reasons and according to the requirement of its business, provided that the transfer does not result in demotion in rank or diminution of salary, benefits and other privileges. This prerogative is not absolute and is subject to the requirement of good faith and fair play.

• Admission of Evidence on Appeal in Labor Cases — Labor tribunals are not precluded from receiving evidence submitted on appeal as technical rules are not binding in cases submitted before them. However, any delay in the submission of evidence should be adequately explained and should adequately prove the allegations sought to be proven. Belated submission of evidence may only be allowed if the delay is adequately justified and the evidence is clearly material to establish the party's cause.

• Substantial Evidence — The quantum of evidence required to establish a fact in labor cases is substantial evidence, described as more than a mere scintilla. The evidence must be real and substantial, and not merely apparent. Self-serving and unsubstantiated declarations are not sufficient.

• Bad Faith — Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral obliquity and conscious doing of a wrong; a breach of sworn duty through some motive or intent or ill will; it partakes of the nature of fraud. Bad faith must be established clearly and convincingly as the same is never presumed.

• Tilted Scales of Justice in Favor of the Employee — When there is doubt between the evidence submitted by the employer and that submitted by the employee, the scales of justice must be tilted in favor of the employee. An employer's cause could only succeed on the strength of its own evidence and not on the weakness of the employee's evidence.

• "In labor cases, strict adherence with the technical rules is not required. This literal policy, however, should still conform with the rudiments of equitable principles of law. For instance, belated submission of evidence may only be allowed if the delay is adequately justified and the evidence is clearly material to establish the party's cause." — This passage states the controlling principle on the admission of belated evidence in labor cases, establishing the twin requirements of adequate justification and materiality.

• "The rule is that it is within the ambit of the employer's prerogative to transfer an employee for valid reasons and according to the requirement of its business, provided that the transfer does not result in demotion in rank or diminution of salary, benefits and other privileges. This Court has always considered the management's prerogative to transfer its employees in pursuit of its legitimate interests. But this prerogative should be exercised without grave abuse of discretion and with due regard to the basic elements of justice and fair play, such that if there is a showing that the transfer was unnecessary or inconvenient and prejudicial to the employee, it cannot be upheld." — This passage defines the scope and limits of the management prerogative to transfer employees, which is central to the constructive dismissal determination.

• "When there is doubt between the evidence submitted by the employer and that submitted by the employee, the scales of justice must be tilted in favor of the employee. This is consistent with the rule that an employer's cause could only succeed on the strength of its own evidence and not on the weakness of the employee's evidence." — This passage articulates the rule on resolving evidentiary doubts in labor cases in favor of the employee.

• "Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral obliquity and conscious doing of a wrong; a breach of sworn duty through some motive or intent or ill will; it partakes of the nature of fraud." — This passage defines bad faith for purposes of determining the personal liability of corporate officers in labor cases.

• Spic N' Span Services Corporation vs. Paje, G.R. No. 174084, August 25, 2010, 629 SCRA 261 — Cited for the principle that strict adherence with technical rules is not required in labor cases.
• Anabe vs. Asian Construction (ASIAKONSTRUKT), G.R. No. 183233, December 23, 2009, 609 SCRA 213 — Cited for the rule that belated submission of evidence may only be allowed if the delay is adequately justified and the evidence is clearly material.
• Iran vs. National Labor Relations Commission, 352 Phil. 261 (1998) — Cited for the principle that labor tribunals are not precluded from receiving evidence submitted on appeal.
• Genuino Ice Company, Inc. vs. Magpantay, 526 Phil. 170 (2006) — Cited for the rule on the employer's prerogative to transfer employees for valid reasons.
• Yuco Chemical Industries, Inc. vs. Ministry of Labor and Employment, 264 Phil. 338 (1990) — Cited for the rule that the management prerogative to transfer should be exercised without grave abuse of discretion.
• Travelaire and Tours Corp. vs. National Labor Relations Commission, 355 Phil. 932 (1998) — Cited for the rule that when there is doubt between the evidence submitted by the employer and that submitted by the employee, the scales of justice must be tilted in favor of the employee.
• Functional, Inc. vs. Granfil, G.R. No. 176377, November 16, 2011 — Cited for the rule that an employer's cause could only succeed on the strength of its own evidence.
• Coastal Safeway Marine Services, Inc. vs. Esguerra, G.R. No. 185352, August 10, 2011, 655 SCRA 300 — Cited for the definition of substantial evidence as more than a mere scintilla.
• Jebsens Maritime Inc. vs. Undag, G.R. No. 191491, December 14, 2011 — Cited for the rule that evidence must be real and substantial, and not merely apparent.
• Andrade vs. Court of Appeals, 423 Phil. 30 (2001) — Cited for the definition of bad faith.
• Harpoon Marine Services, Inc. vs. Francisco, G.R. No. 167751, March 2, 2011, 644 SCRA 394 — Cited for the rule that bad faith must be established clearly and convincingly as it is never presumed.

• Section 3, Rule V, NLRC Rules of Procedure — The provision prohibits parties from alleging facts or presenting evidence to prove facts not referred to in the complaint or position papers, affidavits and other documents. The CA cited this provision in finding that the NLRC gravely abused its discretion in admitting MORESCO II's evidence, which was presented for the first time on appeal.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Jose Portugal Perez, and Estela M. Perlas-Bernabe concurred in the decision.