Mt. Carmel College vs. Resuena

Where the NLRC finds illegal dismissal and orders reinstatement with backwages computed from the time of dismissal until actual reinstatement, or separation pay in lieu thereof, the employer's failure to exercise either option renders backwages continuing and cumulative until actual reinstatement or payment of separation pay is effected. The specific dates mentioned in the fallo do not limit the award where the body of the decision clearly states that backwages run until actual reinstatement, and the fallo itself directs reinstatement as the primary remedy.

Mt. Carmel College is a private educational institution in New Escalante, Negros Occidental, administered by the Carmelite Fathers. Respondents Jocelyn Resuena (Accounting Clerk), Eddie Villalon (Elementary Department Principal), Sylvia Sedayon (Treasurer), and Zonsayda Emnace (Secretary to the Director) were employees of petitioner. On 21 November 1997, respondents joined a protest action against the school administration, prompting petitioner's Director, Rev. Fr. Modesto E. Malandac, to issue memoranda directing them to explain why they should not be dismissed for loss of trust and confidence. Petitioner maintained that respondents occupied positions of a highly confidential nature.

Mt. Carmel College, a private educational institution in New Escalante, Negros Occidental, administered by the Carmelite Fathers, employed Jocelyn Resuena as Accounting Clerk, Eddie Villalon as Elementary Department Principal, Sylvia Sedayon as Treasurer, and Zonsayda Emnace as Secretary to the Director. On 21 November 1997, these four respondents, together with several faculty members, non-academic personnel, and students, participated in a protest action against the school administration. Petitioner's Director, Rev. Fr. Modesto E. Malandac, thereafter issued a memorandum to each respondent directing them to explain in writing why they should not be dismissed for loss of trust and confidence, petitioner maintaining that their positions were of a highly confidential nature. After a hearing conducted by petitioner's Fact-Finding Committee, which submitted its Report on 25 April 1998 recommending dismissal or suspension, petitioner issued written notices of termination on 7 May 1998 and terminated respondents on 15 May 1998.

Separate complaints for illegal dismissal were filed by each respondent before NLRC Regional Arbitration Branch VI in Bacolod City, docketed as RAB Cases No. 06-06-10393-98, 06-06-10394-98, 06-06-10395-98, and 06-06-10414-98, and subsequently consolidated. Labor Arbiter Ray T. Drilon, in a Decision dated 25 May 1999, affirmed the validity of the termination on the ground of loss of trust and confidence but, as equitable relief, awarded separation pay computed at one month pay for every year of service, proportionate 13th month pay, and attorney's fees totaling ₱334,875.47; claims for moral and exemplary damages were denied. No order of reinstatement was issued. Petitioner appealed to the NLRC Fourth Division in Cebu City, seeking reversal of the separation pay award. The NLRC, in its Decision dated 30 October 2001, dismissed the appeal but reversed and modified the Labor Arbiter's ruling, declaring the termination illegal and ordering reinstatement of respondents with backwages from 15 May 1998 up to 25 May 1999, or in lieu of reinstatement, payment of separation pay as computed in the appealed decision. Petitioner's Motion for Reconsideration was denied by the NLRC in its Resolution dated 19 June 2003.

Petitioner elevated the case to the Court of Appeals via a Special Civil Action for Certiorari and Prohibition, docketed as CA-G.R. SP No. 80639, arguing that there was sufficient basis for loss of trust and confidence and that it had complied with the twin requirements of notice and hearing. The Court of Appeals denied the petition in a Decision promulgated on 17 March 2004, finding no grave abuse of discretion on the NLRC's part and ruling that dismissal was too harsh a penalty given respondents' long years of faithful service and the legitimate, constitutionally-protected nature of their protest. No Motion for Reconsideration was filed, and the decision became final and executory on 14 April 2004. Meanwhile, Labor Arbiter Phibun D. Pura, who had taken over the case, issued successive writs of execution on 9 June 2003, 10 December 2003, and 20 January 2004, directing the collection of backwages well beyond the period 15 May 1998 to 25 May 1999, resulting in the garnishment of an aggregate amount of ₱1,736,592.08 representing respondents' accrued salaries, backwages, attorney's fees, and sheriff's fees computed from the promulgation of the NLRC Decision on 30 October 2001.

Petitioner opposed the continuing execution, filing motions to quash and appeals to the NLRC, all of which were denied. The NLRC, in Resolutions dated 15 August 2005 and 30 November 2005, affirmed the Labor Arbiter's orders. Petitioner then filed a Special Civil Action for Certiorari and Prohibition with the Court of Appeals, docketed as CA-G.R. CEB-SP No. 01615, which was dismissed in a Decision dated 2 June 2006. The Court of Appeals found that petitioner had never exercised its option to reinstate respondents or pay separation pay, and that the CA Decision in CA-G.R. SP No. 80639 had already sanctioned the payment of backwages beyond 25 May 1999, having become final on 14 April 2004. Petitioner thereafter filed the instant Petition for Review on Certiorari before the Supreme Court, assailing not the judgment itself but the manner of its execution.

• Inapplicability of Article 223 (Self-Executing Reinstatement): Petitioner argued that Article 223 of the Labor Code, which provides that a Labor Arbiter's order of reinstatement is immediately executory even pending appeal, does not apply because reinstatement was ordered not by the Labor Arbiter but by the NLRC on appeal. Since the Labor Arbiter's original Decision contained no order of reinstatement, there was nothing self-executory to enforce pending appeal.
• Applicability of Article 224 and NLRC Manual on Execution of Judgment: Petitioner maintained that Article 224 of the Labor Code and Rule III, Section 2(b) of the NLRC Manual on Execution of Judgment govern execution in this case, as the reinstatement order was issued by the NLRC and affirmed by the Court of Appeals. Under these provisions, reinstatement requires a writ of execution and is not self-executory.
• Limitation of Backwages to the Period 15 May 1998 to 25 May 1999: Petitioner contended that its liability for backwages is limited to the period from 15 May 1998 to 25 May 1999, as allegedly determined by the NLRC in its Decision dated 30 October 2001, and that the writs of execution went beyond the terms of the decision they sought to implement. Petitioner invoked Filflex Industrial & Manufacturing Corporation vs. National Labor Relations Commission, where the Court held that reinstatement during appeal is warranted only when the Labor Arbiter himself orders it, and that backwages granted are limited to the period prior to the filing of the appeal.
• Refund of Excess Garnishment: Petitioner prayed that respondents be ordered to refund and pay the alleged excess in the amounts garnished by virtue of the writs of execution dated 9 June 2003, 10 December 2003, and 30 January 2004.

• Self-Executing Reinstatement: Whether reinstatement in the instant case is self-executory and does not need a writ of execution for its enforcement.
• Continuing Award of Backwages: Whether the continuing award of backwages beyond the period from 15 May 1998 to 25 May 1999 is proper.

• Self-Executing Reinstatement: No, as applied. Article 223 is inapplicable because reinstatement was ordered by the NLRC on appeal, not by the Labor Arbiter; Article 224 of the Labor Code and Rule III of the NLRC Manual on Execution of Judgment govern. However, this finding does not affect the award of backwages beyond 25 May 1999.
• Continuing Award of Backwages: Yes. The NLRC Decision ordered reinstatement with backwages "from the time they were illegally dismissed up to the time of their actual reinstatement," and because petitioner never exercised its option to reinstate or pay separation pay, its obligation for backwages continues to accumulate until actual reinstatement or payment of separation pay.

• Self-Executing Reinstatement: Article 223 of the Labor Code provides that a Labor Arbiter's decision reinstating a dismissed employee is immediately executory even pending appeal. This provision finds no application here because the original Decision of Labor Arbiter Drilon did not order reinstatement; reinstatement was first ordered by the NLRC on appeal and affirmed by the Court of Appeals. Petitioner correctly invoked Article 224, which authorizes the issuance of a writ of execution on a judgment within five years from the date it becomes final and executory, and Rule III of the NLRC Manual on Execution of Judgment, which provides that if execution is for reinstatement, the writ shall be served by the sheriff upon the losing party. The order of Labor Arbiter Pura on 31 January 2005 directing reinstatement was issued after the Court of Appeals Decision dated 17 March 2004 affirming the NLRC's order of reinstatement had become final. Nevertheless, the Court clarified that this determination does not affect the award of backwages for the period beyond 25 May 1999, as the discussion below demonstrates.

• Continuing Award of Backwages: Petitioner's argument that backwages are limited to the period 15 May 1998 to 25 May 1999 is untenable. The NLRC Decision dated 30 October 2001 declared respondents illegally dismissed and ordered reinstatement with backwages "from the time they were illegally dismissed up to the time of their actual reinstatement." While the fallo mentioned specific dates (15 May 1998 to 25 May 1999), the body of the NLRC Decision clearly stated that backwages run until actual reinstatement. The general rule is that where there is a conflict between the dispositive portion (fallo) and the body of a decision, the fallo controls; however, in this case, the fallo itself directed reinstatement or payment of separation pay in lieu thereof, and the body clarified that backwages run until actual reinstatement. The Court of Appeals Decision in CA-G.R. SP No. 80639 affirmed the NLRC ruling in its entirety and became final on 14 April 2004. Critically, petitioner never exercised its option under the NLRC Decision to either reinstate respondents or pay separation pay. Under Article 279 of the Labor Code, an unjustly dismissed employee is entitled to reinstatement without loss of seniority rights and to full backwages computed from the time compensation was withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible, separation pay equivalent to one month salary for every year of service is awarded in addition to backwages. Petitioner's reliance on Filflex was rejected as misplaced: in Filflex, the NLRC found no illegal dismissal, which is why it deleted backwages awarded during appeal; in the instant case, the NLRC found illegal dismissal and ordered reinstatement, reversing the Labor Arbiter's finding of valid dismissal. The NLRC, under Article 218(c) of the Labor Code, is empowered to correct, amend, or waive any error in the exercise of its appellate jurisdiction. Until petitioner actually implements the reinstatement aspect of the NLRC Decision, its obligation for accrued backwages and other benefits continues to accumulate.

• Backwages in Illegal Dismissal — An illegally dismissed employee is entitled to two separate and distinct reliefs: reinstatement without loss of seniority rights and other privileges, and full backwages inclusive of allowances and other benefits or their monetary equivalent, computed from the time compensation was withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible due to strained relations, separation pay equivalent to one month salary for every year of service is awarded as an alternative, in addition to backwages. The employer's obligation for backwages continues to accrue until actual reinstatement is effected or separation pay is paid.

• Fallo Controls Over Body of Decision — Where there is a conflict between the dispositive portion (fallo) and the body of a decision, the fallo controls, resting on the theory that the fallo is the final order while the opinion in the body is merely a statement ordering nothing. In this case, however, the fallo itself directed reinstatement or separation pay in lieu thereof, and the body clarified the backwages period, so both were read together to confirm continuing backwages.

• Self-Executing Reinstatement Under Article 223 — Article 223 of the Labor Code provides that a Labor Arbiter's decision reinstating a dismissed employee is immediately executory even pending appeal, without need of a writ of execution. This applies only when the Labor Arbiter himself orders reinstatement. Where reinstatement is first ordered by the NLRC on appeal, Article 224 governs, and a writ of execution is required.

• Execution Must Not Be Frustrated — Execution is the final stage of litigation and should not be frustrated except for serious reasons demanded by justice and equity. Courts must guard against any scheme calculated to deprive the winning party of the fruits of the verdict, as litigation must end sometime and somewhere.

• "Backwages are to be computed from the time of illegal dismissal until reinstatement or upon petitioner's payment of separation pay to respondents if reinstatement is no longer possible." — This passage states the controlling rule on backwages computation, anchoring the Court's holding that the employer's failure to exercise its option to reinstate or pay separation pay renders backwages continuing and cumulative.

• "Thus, until petitioner actually implements the reinstatement aspect of the NLRC Decision dated 30 October 2001, as affirmed in the Court of Appeals Decision dated 17 March 2004 in CA-G.R. SP No. 80639, its obligation to respondents, insofar as accrued backwages and other benefits are concerned, continues to accumulate." — This is the ratio decidendi on the second issue, directly linking the employer's inaction to the continuing accrual of backwages.

• "Art. 223 of the Labor Code provides that reinstatement is immediately executory even pending appeal only when the Labor Arbiter himself ordered the reinstatement. In this case, the original Decision of Labor Arbiter Drilon did not order reinstatement." — This passage clarifies the scope of Article 223 and explains why it does not apply when reinstatement is first ordered by the NLRC on appeal.

• "The general rule is that where there is conflict between the dispositive portion or the fallo and the body of the decision, the fallo controls. This rule rests on the theory that the fallo is the final order while the opinion in the body is merely a statement ordering nothing." — This articulates the canonical formulation of the fallo-controls doctrine, frequently cited in subsequent jurisprudence on execution of judgments.

• Abbott vs. National Labor Relations Commission, 229 Phil. 229 (1986) — Cited for the principle that while a decision that has become final can no longer be challenged, it must be enforced in accordance with its terms and conditions, and any deviation therefrom can be the subject of a proper appeal. The Court found that the manner of execution in this case fell squarely within the terms of the decision.

• Filflex Industrial & Manufacturing Corporation vs. National Labor Relations Commission, 349 Phil. 913 (1998) — Cited by petitioner for the propositions that reinstatement during appeal is warranted only when the Labor Arbiter himself orders it, and that backwages are limited to the period prior to the appeal. The Court distinguished and rejected petitioner's reliance, noting that in Filflex the NLRC found no illegal dismissal (hence no reinstatement or backwages during appeal were proper), whereas in the instant case the NLRC found illegal dismissal and ordered reinstatement.

• Pioneer Texturizing Corporation vs. National Labor Relations Commission, 345 Phil. 1057 (1997) — Cited by the Labor Arbiter for the doctrine that an order or award for reinstatement is self-executory. The Court found petitioner's reliance on this case misplaced because Article 223 was inapplicable where reinstatement was ordered by the NLRC, not the Labor Arbiter.

• Poliand Industrial Limited vs. National Development Company, G.R. No. 143866, 22 August 2005, 467 SCRA 500 — Cited for the rule that the fallo controls over the body of a decision where there is conflict between the two.

• Pheschem Industrial Corporation vs. Moldez, G.R. No. 161158, 9 May 2005, 458 SCRA 339 — Cited to support the proposition that backwages do not merely cover the period from dismissal to the Labor Arbiter's decision, and that separation pay is awarded in addition to backwages where reinstatement is no longer viable.

• Triad Security & Allied Services, Inc. vs. Ortega, Jr., G.R. No. 160871, 6 February 2006, 481 SCRA 591 — Cited for the doctrine that an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and to backwages; and that the payment of separation pay is in addition to payment of backwages.

• Article 223, Labor Code — Provides that the decision of a Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory even pending appeal. The Court held this provision inapplicable because reinstatement was ordered by the NLRC on appeal, not by the Labor Arbiter.

• Article 224, Labor Code — Authorizes the Secretary of Labor, the Commission, or any Labor Arbiter to issue a writ of execution on a judgment within five years from the date it becomes final and executory. The Court found this provision applicable because the reinstatement order was first issued by the NLRC and affirmed by the Court of Appeals, requiring a writ of execution for enforcement.

• Article 279, Labor Code — Provides that an employee unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, and to full backwages inclusive of allowances and other benefits or their monetary equivalent computed from the time compensation was withheld up to the time of actual reinstatement. The Court applied this provision to hold that backwages continue to accrue until actual reinstatement or payment of separation pay.

• Article 218(c), Labor Code — Empowers the NLRC to correct, amend, or waive any error, defect, or irregularity whether in substance or form, in the exercise of its appellate jurisdiction. The Court cited this to explain that the NLRC's Decision reversing the Labor Arbiter's finding of valid dismissal was within its appellate authority.

• Rule III, Section 2(b), NLRC Manual on Execution of Judgment — Provides that if execution is for the reinstatement of any person to a position, office, or employment, the writ shall be served by the sheriff upon the losing party, who may be punished for contempt if he disobeys. The Court found this provision applicable alongside Article 224.

Ynares-Santiago, Chairperson; Austria-Martinez; Nachura; Reyes — concurred.