When is a “Holder” considered a “Holder in Due Course” so as to be Allowed to Recover?

 “In the case at bar as the payee acquired the check under circumstances which should have put it to inquiry, why the holder had the check and used it to pay his own personal account, the duty devolved upon it, plaintiff-appellee, to prove that it actually acquired said check in good faith. The stipulation of facts contains no statement of such good faith, hence we are forced to the conclusion that plaintiff payee has not proved that it acquired the check in good faith and may not be deemed a holder in due course thereof.”

The case below discusses the rights of a holder of a negotiable instrument, and his corresponding obligations when he comes into possession of an instrument under circumstances that put, or should put a reasonably prudent man to inquiry on the title of the person negotiating the instrument.

Brief Statement of Facts

In this case, Plaintiff-appellee Ocampo Clinic (“Ocampo”) sued Defendants Anita and Hipolito Gatchalian (each “Gatchalian,” collectively the “Gatchalians”) for recovery of the value of a check in the amount of P600.00 representing payment made by Manuel Gonzales (“Gonzales”), when the Gatchalians ordered a “stop payment” on the said check it issued to Gonzales. Ocampo claims that it received the check in payment of an indebtedness–hospital bills of the wife of Gonzales. The Gatchalians, on the other hand, denies his claim counterclaiming that they issued the check to Gonzales as a mere evidence of good faith in their intention to purchase the car belonging to Ocampo, which Gonzales was selling, as Ocampo’s agent, to the Gatchalians.

The Court held:

“Our resolution of this issue leads us to a consideration of the last question presented by the appellants, i.e., whether the plaintiff-appellee may be considered as a holder in due course.

Section 52, Negotiable Instruments Law, defines holder in due course, thus:

A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

The stipulation of facts expressly states that plaintiff-appellee was not aware of the circumstances under which the check was delivered to Manuel Gonzales, but we agree with the defendants-appellants that the circumstances indicated by them in their briefs, such as the fact that appellants had no obligation or liability to the Ocampo Clinic; that the amount of the check did not correspond exactly with the obligation of Matilde Gonzales to Dr. V. R. de Ocampo; and that the check had two parallel lines in the upper left hand corner, which practice means that the check could only be deposited but may not be converted into cash — all these circumstances should have put the plaintiff-appellee to inquiry as to the why and wherefore of the possession of the check by Manuel Gonzales, and why he used it to pay Matilde's account. It was payee's duty to ascertain from the holder Manuel Gonzales what the nature of the latter's title to the check was or the nature of his possession. Having failed in this respect, we must declare that plaintiff-appellee was guilty of gross neglect in not finding out the nature of the title and possession of Manuel Gonzales, amounting to legal absence of good faith, and it may not be considered as a holder of the check in good faith. To such effect is the consensus of authority.

In order to show that the defendant had "knowledge of such facts that his action in taking the instrument amounted to bad faith," it is not necessary to prove that the defendant knew the exact fraud that was practiced upon the plaintiff by the defendant's assignor, it being sufficient to show that the defendant had notice that there was something wrong about his assignor's acquisition of title, although he did not have notice of the particular wrong that was committed. Paika v. Perry, 225 Mass. 563, 114 N.E. 830.

It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted with fraud. It is not necessary that he should know the particulars or even the nature of the fraud, since all that is required is knowledge of such facts that his action in taking the note amounted bad faith. Ozark Motor Co. v. Horton (Mo. App.), 196 S.W. 395. Accord. Davis v. First Nat. Bank, 26 Ariz. 621, 229 Pac. 391.

Liberty bonds stolen from the plaintiff were brought by the thief, a boy fifteen years old, less than five feet tall, immature in appearance and bearing on his face the stamp a degenerate, to the defendants' clerk for sale. The boy stated that they belonged to his mother. The defendants paid the boy for the bonds without any further inquiry. Held, the plaintiff could recover the value of the bonds. The term 'bad faith' does not necessarily involve furtive motives, but means bad faith in a commercial sense. The manner in which the defendants conducted their Liberty Loan department provided an easy way for thieves to dispose of their plunder. It was a case of "no questions asked." Although gross negligence does not of itself constitute bad faith, it is evidence from which bad faith may be inferred. The circumstances thrust the duty upon the defendants to make further inquiries and they had no right to shut their eyes deliberately to obvious facts. Morris v. Muir, 111 Misc. Rep. 739, 181 N.Y. Supp. 913, affd. in memo., 191 App. Div. 947, 181 N.Y. Supp. 945." (pp. 640-642, Brannan's Negotiable Instruments Law, 6th ed.).

The above considerations would seem sufficient to justify our ruling that plaintiff-appellee should not be allowed to recover the value of the check. Let us now examine the express provisions of the Negotiable Instruments Law pertinent to the matter to find if our ruling conforms thereto. Section 52 (c) provides that a holder in due course is one who takes the instrument "in good faith and for value;" Section 59, "that every holder is deemed prima facie to be a holder in due course;" and Section 52 (d), that in order that one may be a holder in due course it is necessary that "at the time the instrument was negotiated to him "he had no notice of any . . . defect in the title of the person negotiating it;" and lastly Section 59, that every holder is deemed prima facie to be a holder in due course.

In the case at bar the rule that a possessor of the instrument is prima facie a holder in due course does not apply because there was a defect in the title of the holder (Manuel Gonzales), because the instrument is not payable to him or to bearer. On the other hand, the stipulation of facts indicated by the appellants in their brief, like the fact that the drawer had no account with the payee; that the holder did not show or tell the payee why he had the check in his possession and why he was using it for the payment of his own personal account — show that holder's title was defective or suspicious, to say the least. As holder's title was defective or suspicious, it cannot be stated that the payee acquired the check without knowledge of said defect in holder's title, and for this reason the presumption that it is a holder in due course or that it acquired the instrument in good faith does not exist. And having presented no evidence that it acquired the check in good faith, it (payee) cannot be considered as a holder in due course. In other words, under the circumstances of the case, instead of the presumption that payee was a holder in good faith, the fact is that it acquired possession of the instrument under circumstances that should have put it to inquiry as to the title of the holder who negotiated the check to it. The burden was, therefore, placed upon it to show that notwithstanding the suspicious circumstances, it acquired the check in actual good faith.

The rule applicable to the case at bar is that described in the case of Howard National Bank v. Wilson, et al., 96 Vt. 438, 120 At. 889, 894, where the Supreme Court of Vermont made the following disquisition:

Prior to the Negotiable Instruments Act, two distinct lines of cases had developed in this country. The first had its origin in Gill v. Cubitt, 3 B. & C. 466, 10 E. L. 215, where the rule was distinctly laid down by the court of King's Bench that the purchaser of negotiable paper must exercise reasonable prudence and caution, and that, if the circumstances were such as ought to have excited the suspicion of a prudent and careful man, and he made no inquiry, he did not stand in the legal position of a bona fide holder. The rule was adopted by the courts of this country generally and seem to have become a fixed rule in the law of negotiable paper. Later in Goodman v. Harvey, 4 A. & E. 870, 31 E. C. L. 381, the English court abandoned its former position and adopted the rule that nothing short of actual bad faith or fraud in the purchaser would deprive him of the character of a bona fide purchaser and let in defenses existing between prior parties, that no circumstances of suspicion merely, or want of proper caution in the purchaser, would have this effect, and that even gross negligence would have no effect, except as evidence tending to establish bad faith or fraud. Some of the American courts adhered to the earlier rule, while others followed the change inaugurated in Goodman v. Harvey. The question was before this court in Roth v. Colvin, 32 Vt. 125, and, on full consideration of the question, a rule was adopted in harmony with that announced in Gill v. Cubitt, which has been adhered to in subsequent cases, including those cited above. Stated briefly, one line of cases including our own had adopted the test of the reasonably prudent man and the other that of actual good faith. It would seem that it was the intent of the Negotiable Instruments Act to harmonize this disagreement by adopting the latter test. That such is the view generally accepted by the courts appears from a recent review of the cases concerning what constitutes notice of defect. Brannan on Neg. Ins. Law, 187-201. To effectuate the general purpose of the act to make uniform the Negotiable Instruments Law of those states which should enact it, we are constrained to hold (contrary to the rule adopted in our former decisions) that negligence on the part of the plaintiff, or suspicious circumstances sufficient to put a prudent man on inquiry, will not of themselves prevent a recovery, but are to be considered merely as evidence bearing on the question of bad faith. See G. L. 3113, 3172, where such a course is required in construing other uniform acts.

It comes to this then: When the case has taken such shape that the plaintiff is called upon to prove himself a holder in due course to be entitled to recover, he is required to establish the conditions entitling him to standing as such, including good faith in taking the instrument. It devolves upon him to disclose the facts and circumstances attending the transfer, from which good or bad faith in the transaction may be inferred.

In the case at bar as the payee acquired the check under circumstances which should have put it to inquiry, why the holder had the check and used it to pay his own personal account, the duty devolved upon it, plaintiff-appellee, to prove that it actually acquired said check in good faith. The stipulation of facts contains no statement of such good faith, hence we are forced to the conclusion that plaintiff payee has not proved that it acquired the check in good faith and may not be deemed a holder in due course thereof.

For the foregoing considerations, the decision appealed from should be, as it is hereby, reversed, and the defendants are absolved from the complaint. With costs against plaintiff-appellee.

Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and De Leon, JJ., concur.
Bengzon, C.J., concurs in the result.

Vicente R. De Ocampo & Co. vs. Anita Gatchalian, et al., G.R. No. L-15126 November 30, 1961

Read the full text of the case here.

Monthly paid employees are entitled to holiday pay. Do you know whether your company pays you the law-mandated holiday pay?

If you are paid your holiday pay, the discussion in the case below gives insight on its possible implications on overtime pay, and service incentive leave pay.

In the case below, one of the issues raised is:

2) Whether or not, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days and whether or not the previous use of 251 as divisor resulted in overpayment for overtime, night differential, vacation and sick leave pay.

The Court also discussed the “divisor test,” and the operative fact doctrine as a bonus.

The Court held:

The petitioner union also assails the respondent arbitrator's ruling that, concomitant with the award of holiday pay, the divisor should be changed from 251 to 261 days to include the additional 10 holidays and the employees should reimburse the amounts overpaid by Filipro due to the use of 251 days' divisor.

Arbitrator Vivar's rationale for his decision is as follows:

. . . The new doctrinal policy established which ordered payment of ten holidays certainly adds to or accelerates the basis of conversion and computation by ten days. With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261 or 262 if election day is counted. This is indeed an extremely difficult legal question of interpretation which accounts for what is claimed as falling within the concept of "solutio indebti."

When the claim of the Union for payment of ten holidays was granted, there was a consequent need to abandon that 251 divisor. To maintain it would create an impossible situation where the employees would benefit with additional ten days with pay but would simultaneously enjoy higher benefits by discarding the same ten days for purposes of computing overtime and night time services and considering sick and vacation leave credits. Therefore, reimbursement of such overpayment with the use of 251 as divisor arises concomitant with the award of ten holidays with pay. (Rollo, p. 34)

The divisor assumes an important role in determining whether or not holiday pay is already included in the monthly paid employee's salary and in the computation of his daily rate. This is the thrust of our pronouncement in Chartered Bank Employees Association v. Ople (supra). In that case, We held:

xxx It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251. xxx

In the petitioner’s case, its computation of daily ratio since September 1, 1980, is as follows:

monthly rate x 12 months

—————————————

251 days

Following the criterion laid down in the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise the divisor should have been 261.

It must be stressed that the daily rate, assuming there are no intervening salary increases, is a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.

The respondent arbitrator's order to change the divisor from 251 to 261 days would result in a lower daily rate which is violative of the prohibition on non-diminution of benefits found in Article 100 of the Labor Code. To maintain the same daily rate if the divisor is adjusted to 261 days, then the dividend, which represents the employee's annual salary, should correspondingly be increased to incorporate the holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00 After the payment of 10 days' holiday pay, his annual salary already includes holiday pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment of overtime and night differential pay and sick and vacation leave benefits, the computation of which are all based on the daily rate, since the daily rate is still the same before and after the grant of holiday pay.

Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its use of 251 days as divisor must fail in light of the Labor Code mandate that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be resolved in favor of labor." (Article 4). Moreover, prior to September 1, 1980, when the company was on a 6-day working schedule, the divisor used by the company was 303, indicating that the 10 holidays were likewise not paid. When Filipro shifted to a 5-day working schebule on September 1, 1980, it had the chance to rectify its error, if ever there was one but did not do so. It is now too late to allege payment by mistake.

Nestle also questions the voluntary arbitrator's ruling that holiday pay should be computed from November 1, 1974. This ruling was not questioned by the petitioner union as obviously said decision was favorable to it. Technically, therefore, respondent Nestle should have filed a separate petition raising the issue of effectivity of the holiday pay award. This Court has ruled that an appellee who is not an appellant may assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he cannot seek modification or reversal of the judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v. Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in order to fully settle the issues so that the execution of the Court's decision in this case may not be needlessly delayed by another petition, the Court resolved to take up the matter of effectivity of the holiday pay award raised by Nestle.

Nestle insists that the reckoning period for the application of the holiday pay award is 1985 when the Chartered Bank decision, promulgated on August 28, 1985, became final and executory, and not from the date of effectivity of the Labor Code. Although the Court does not entirely agree with Nestle, we find its claim meritorious.

In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132 SCRA 663 [1984], hereinafter referred to as the IBAA case, the Court declared that Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9, issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976, respectively, and which excluded monthly paid employees from holiday pay benefits, are null and void. The Court therein reasoned that, in the guise of clarifying the Labor Code's provisions on holiday pay, the aforementioned implementing rule and policy instruction amended them by enlarging the scope of their exclusion. The Chartered Bank case reiterated the above ruling and added the "divisor" test.

However, prior to their being declared null and void, the implementing rule and policy instruction enjoyed the presumption of validity and hence, Nestle's non-payment of the holiday benefit up to the promulgation of the IBAA case on October 23, 1984 was in compliance with these presumably valid rule and policy instruction.

In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the Court discussed the effect to be given to a legislative or executive act subsequently declared invalid:

xxx xxx xxx

. . . It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, — with respect to particular relations, individual and corporate, and particular conduct, private and official." (Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil. 1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738 [1956]). An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-435)

The "operative fact" doctrine realizes that in declaring a law or rule null and void, undue harshness and resulting unfairness must be avoided. It is now almost the end of 1991. To require various companies to reach back to 1975 now and nullify acts done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts of this case.

Applying the aforementioned doctrine to the case at bar, it is not far-fetched that Nestle, relying on the implicit validity of the implementing rule and policy instruction before this Court nullified them, and thinking that it was not obliged to give holiday pay benefits to its monthly paid employees, may have been moved to grant other concessions to its employees, especially in the collective bargaining agreement. This possibility is bolstered by the fact that respondent Nestle's employees are among the highest paid in the industry. With this consideration, it would be unfair to impose additional burdens on Nestle when the non-payment of the holiday benefits up to 1984 was not in any way attributed to Nestle's fault.

The Court thereby resolves that the grant of holiday pay be effective, not from the date of promulgation of the Chartered Bank case nor from the date of effectivity of the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA case.

Union of Filipro Employees vs. Benigno Vivar, Jr., et al. G.R. No. 79255 January 20, 1992 

Read the full text of the case here.

Are sales personnel considered field personnel, so that they are excluded from entitlement to holiday pay under Article 82 of the Labor Code of the Philippines?

This is one of the controversies raised by the petitioners, and settled by the Court in the affirmative—sales personnel are field personnel, thus, are not entitled to holiday pay—in the below case.

Article 82 of the Labor Code of the Philippines, or PD 442 provides:

Article 82. Coverage. The provisions of this Title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations.

As used herein, "managerial employees" refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff.

"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty.

In deciding the case, the Court explained:

“The petitioner insists that respondent's sales personnel are not field personnel under Article 82 of the Labor Code. The respondent company controverts this assertion.

Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as "non-agritultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty."

The controversy centers on the interpretation of the clause "whose actual hours of work in the field cannot be determined with reasonable certainty."

It is undisputed that these sales personnel start their field work at 8:00 a.m. after having reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m. if they are Makati-based.

The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m. comprises the sales personnel's working hours which can be determined with reasonable certainty.

The Court does not agree. The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of determining whether or not these sales personnel, even if they report to the office before 8:00 a.m. prior to field work and come back at 4:30 p.m, really spend the hours in between in actual field work.

We concur with the following disquisition by the respondent arbitrator:

The requirement for the salesmen and other similarly situated employees to report for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the realm of work in the field as defined in the Code but an exercise of purely management prerogative of providing administrative control over such personnel. This does not in any manner provide a reasonable level of determination on the actual field work of the employees which can be reasonably ascertained. The theoretical analysis that salesmen and other similarly-situated workers regularly report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m., creating the assumption that their field work is supervised, is surface projection. Actual field work begins after 8:00 a.m., when the sales personnel follow their field itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their hours of work in the field, the extent or scope and result of which are subject to their individual capacity and industry and which "cannot be determined with reasonable certainty." This is the reason why effective supervision over field work of salesmen and medical representatives, truck drivers and merchandisers is practically a physical impossibility. Consequently, they are excluded from the ten holidays with pay award. (Rollo, pp. 36-37)

Moreover, the requirement that "actual hours of work in the field cannot be determined with reasonable certainty" must be read in conjunction with Rule IV, Book III of the Implementing Rules which provides:

Rule IV Holidays with Pay

Sec. 1. Coverage — This rule shall apply to all employees except:

xxx xxx xxx

(e) Field personnel and other employees whose time and performance is unsupervised by the employer . . . (Emphasis supplied)

While contending that such rule added another element not found in the law (Rollo, p. 13), the petitioner nevertheless attempted to show that its affected members are not covered by the abovementioned rule. The petitioner asserts that the company's sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day) schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo, pp. 53-55).

Contrary to the contention of the petitioner, the Court finds that the aforementioned rule did not add another element to the Labor Code definition of field personnel. The clause "whose time and performance is unsupervised by the employer" did not amplify but merely interpreted and expounded the clause "whose actual hours of work in the field cannot be determined with reasonable certainty." The former clause is still within the scope and purview of Article 82 which defines field personnel. Hence, in deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query must be made as to whether or not such employee's time and performance is constantly supervised by the employer.

The SOD schedule adverted to by the petitioner does not in the least signify that these sales personnel's time and performance are supervised. The purpose of this schedule is merely to ensure that the sales personnel are out of the office not later than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.

Likewise, the Court fails to see how the company can monitor the number of actual hours spent in field work by an employee through the imposition of sanctions on absenteeism contained in the company circular of March 15, 1984.

The petitioner claims that the fact that these sales personnel are given incentive bonus every quarter based on their performance is proof that their actual hours of work in the field can be determined with reasonable certainty.

The Court thinks otherwise.

The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume based on sales target; (2) good collection performance; (3) proper compliance with good market hygiene; (4) good merchandising work; (5) minimal market returns; and (6) proper truck maintenance. (Rollo, p. 190).

The above criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the actual hours of field work which are hardly susceptible to determination.

In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]), the Court had occasion to discuss the nature of the job of a salesman. Citing the case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:

The reasons for excluding an outside salesman are fairly apparent. Such a salesman, to a greater extent, works individually. There are no restrictions respecting the time he shall work and he can earn as much or as little, within the range of his ability, as his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra compensation. He works away from his employer's place of business, is not subject to the personal supervision of his employer, and his employer has no way of knowing the number of hours he works per day.

While in that case the issue was whether or not salesmen were entitled to overtime pay, the same rationale for their exclusion as field personnel from holiday pay benefits also applies.”

Union of Filipro Employees vs. Benigno Vivar, Jr., et al. G.R. No. 79255 January 20, 1992 

Read the full text of the case here.

Tragedy Struck South Korea, as Ship Sinks Claiming Young Lives.

Our prayers go to the bereaved parents and loved ones of the victims—mostly high school students—of a tragic sinking of a vessel in South Korea, while sailing off to a vacation island.  News say one hundred seventy-nine have so far been rescued, while two hundred eighty-seven remain unaccounted for.

The circumstances surrounding the capsizing make this accident raise unprecedented questions. Allegedly, the passengers were told to sit tight, as help was minutes away. And in a country were discipline is high, few were surprised that the passengers waited until it was a little too late before they started moving on their own to jump off the ship.

Survivors recount that for thirty to forty-five minutes the passengers did not move and waited for help, as instructed. When the vessel uncharacteristically began to list rather dramatically fast, there was very little the passengers could do to crawl up a steep and wet floor, or out of their cabins—yes, some wereeven in their cabins—leaving many trapped to their death.

This is a shock to a country that is known for safety. Consider, too, that their vessels are new. The result of the ensuing investigation will be significant in improving maritime safety, especially to less-developed countries like the Philippines, which ferry hundreds of thousands of its people across hundreds of islands that dot the archipelago in dilapidated fifty plus year-old hand-me-down ships.

This South Korean maritime disaster should highlight that even dated vessels succumb to the vagaries of the sea. And this should serve as a wakeup call to our authorities to make serious amendments to our laws. It does not help that our laws presume warranty on seaworthiness, because we have not seen it make a difference.

We have had tragic maritime events, and we have lost thousands of lives, but we’re yet to see one ship owner or its officers go to jail. Many shipping companies continue to operate after paying loose change to lives lost, and serving only short suspensions.

It’s hard to believe that in the 21^st century, where people shuttle to outer space for vacation, we still risk our lives every time we ferry across islands to see loved ones, or visit our hometowns.

Our authorities should stop putting thousands of us each day, especially this lent when thousands have gone to their hometowns, in danger by allowing these shipping businesses to operate on the pure agenda of profit, and with scant regard for passenger safety.

Mistakes are made; lives are lost. But the costliest mistakes are those that we fail to learn from. It is high time we grounded these floating coffins before another tragedy claims lives senselessly.

 For now, let us join our South Korean brothers and sisters in praying for the safety and survival of these missing young passengers.

erratum:The post title as originally posted on April 17, 2014, read "Tragedy Struck South Korea, as Ship Sinks Claiming Over a Hundred Young Lives." It is unfortunate that confusion got the better of the author amid the deluge of emotional accounts of the event. It is now corrected to read "Tragedy Struck South Korea, as Ship Sinks Claiming Young Lives.

Principle of Finality and Conclusiveness of the Decisions of the Labor Tribunals; Exceptions to it.

While the factual findings of an administrative agency is normally accorded great respect, and when warranted, even finality by the appellate courts, they may be reviewed in certain cases, as when there is lack of  substantial basis in fact or in law.

This issue is discussed in part in the below case.

In this case, the Petitioner assails the decision of the Court of Appeals reversing the consistent factual findings of her constructive dismissal by both the Labor Arbiter and the NLRC, reasoning they are conclusive upon the Court.

In rejecting this proposition, the Court held:

Petitioner faults the Court of Appeals for reversing the factual findings of the Labor Arbiter as affirmed by the NLRC that she was constructively dismissed relying on the principle of finality and conclusiveness of the decisions of the labor tribunals. However, it is well-settled that for want of substantial basis, in fact or in law, factual findings of an administrative agency, such as the NLRC, cannot be given the stamp of finality and conclusiveness normally accorded to it, as even decisions of administrative agencies which are declared "final" by law are not exempt from the judicial review when so warranted.¹⁶

In administrative proceedings, the quantum of proof required is substantial evidence, which is more than a mere scintilla of evidence, but such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.¹⁷ The Court of Appeals may review the factual findings of the NLRC and reverse its ruling if it finds that the decision of the NLRC lacks substantial basis.

In the same vein, factual findings of the Court of Appeals are generally not subject to this Court’s review under Rule 45. However, the general rule on the conclusiveness of the factual findings of the Court of Appeals is also subject to well-recognized exceptions such as where the Court of Appeals’ findings of facts contradict those of the lower court, or the administrative bodies, as in this case.¹⁸ All these considered, we are compelled to make a further calibration of the evidence at hand.” (Underscoring added)

Ma. Finina E. Vicente vs. The Hon. Court Of Appeals, et al. G.R. No. 175988,  August 24, 2007

Read the full text of the case here.

When Resignation is Voluntary, and When Forced as to Amount to Constructive Dismissal.

We have heard a lot about forced resignation in the workplace. But just when is it indeed “forced” as to give rise to a cause of action for constructive dismissal? In the case below, the Petitioner contends she had been coerced to resign, thus she filed a case for illegal dismissal three years later.

Let’s examine the alleged statement of her boss (AVP), from which she deduced the coercion for her to resign from her position:

"MAG-RESIGN KANA AGAD KASI MAIIPIT KAMI,"

Brief Statement of Facts

“Petitioner Finina E. Vicente was employed by respondent Cinderella Marketing Corporation (Cinderella) as Management Coordinator in January 1990. Prior to her resignation in February 2000, she held the position of Consignment Operations Manager with a salary of P27,000.00 a month.⁵ She was tasked with the oversight, supervision and management of the Consignment Department dealing directly with Cinderella’s consignors.⁶

After some time, one of Cinderella’s suppliers complained about the unauthorized deductions from the net sales due them. Accordingly, an investigation was conducted and upon initial review of respondent’s business records, it appears that petitioner was among those involved in the irregular and fraudulent preparation and encashment of respondent’s corporate checks amounting to at least P500,000.00.⁸

Petitioner alleged that Mr. Tecson demanded her resignation on several occasions. On February 15, 2000, Mr. Tecson allegedly told her "MAG-RESIGN KANA AGAD KASI MAIIPIT KAMI," in the presence of Lizz Villafuerte, the Accounting Manager.⁹ As a result of this alleged force and intimidation, petitioner tendered her resignation letter.

On January 13, 2003, or three years after her resignation, petitioner filed a complaint against Cinderella alleging that her severance from employment was involuntary amounting to constructive dismissal.¹⁰” xxx

If you think the above utterance sounds like coercing the Petitioner to resign, the labor arbiter and the NLRC agree, thus:

“On October 21, 2003, the Labor Arbiter rendered a Decision¹² finding that petitioner was constructively and illegally dismissed. The Labor Arbiter ruled that Cinderella was not able to controvert petitioner’s assertion that she was forced to resign; that the resignation letter relied upon by respondent to show the voluntariness of the resignation was fabricated and without evidentiary weight since it does not bear petitioner’s signature; that there was no basis to terminate petitioner on the ground of loss of confidence since her involvement in the fraudulent transactions was doubtful as shown by the Confidential Memo clearing her of any liability. The dispositive portion of the Labor Arbiter’s decision reads:

WHEREFORE, premises all considered, judgment is hereby rendered ordering respondent Cinderella Marketing Corporation to:

1. pay complainant separation pay in lieu of reinstatement computed at one (1) month for every year of service in the amount of P270,000.00; and

2. pay complainant full backwages from the time she filed this complaint in the amount of P270,000.00.

SO ORDERED.¹³”

“On appeal, the NLRC affirmed the decision of the Labor Arbiter. It held that the statement of Mr. Tecson informing petitioner, to wit: "MAG-RESIGN KANA AGAD KASI MAIIPIT KAMI," was the proximate cause for petitioner’s decision to resign. Thus, the resignation cannot be deemed voluntary notwithstanding the execution of the two resignation letters.”

On petition for Certiorari under Rule 65, however, the Court of Appeals overthrows the concurrent findings of both the labor arbiter and the NLRC:

“On August 18, 2006, the Court of Appeals rendered its decision finding that the totality of evidence on record showed that petitioner voluntarily resigned from her employment; that the subsequent acts of petitioner belie the claim of constructive dismissal; that after the alleged forced resignation, petitioner attended the meetings concerning her involvement in the anomalous transactions and even arranged for the settlement of her consequent liabilities as may be determined during the investigation; that the belated filing of the complaint militates against petitioner because it is hardly expected from an aggrieved employee to wait three years before instituting the case.

The dispositive portion of the Decision provides:

WHEREFORE, the foregoing considered, the petition is GRANTED and the assailed Decision REVERSED and SET ASIDE. Private respondent’s complaint a quo is hereby dismissed. No costs.

SO ORDERED.¹⁴”

Petitioner took to the Supreme Court with this Petition for Review on Certiorari under Rule 45 raising the following issues:

“I.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN REVERSING THE FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC.

II.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT PETITIONER VOLUNTARILY RESIGNED FROM PRIVATE RESPONDENT.¹⁵

Petitioner asserts the following: (1) The factual findings of the Labor Arbiter and the NLRC are not correctible by certiorari and are binding on the Supreme Court in the absence of any showing that they are completely without any support in the evidence on record. (2) In termination cases, the employer has the burden of proof that the resignation is voluntary and not the product of coercion, intimidation or other factors that vitiate the free will. (3) The NLRC correctly gave credence to petitioner’s allegation that Mr. Tecson demanded her resignation. (4) The delay in filing the complaint for illegal dismissal cannot be taken against her as the same was filed within the prescriptive period allowed by law to file such actions.”

The court held:

xxx

“The petition lacks merit.

The primary issue in the case at bar is factual: whether petitioner was constructively dismissed. Petitioner claims that her separation from employment was a case of constructive dismissal. On the other hand, respondent argues that petitioner voluntarily resigned.

Petitioner argues that the employer bears the burden of proof that the resignation is voluntary and not the product of coercion or intimidation. We agree that in termination cases, burden of proof rests upon the employer to show that the dismissal is for a just and valid cause and failure to do so would necessarily mean that the dismissal was illegal.¹⁹ InMobile Protective & Detective Agency v. Ompad,²⁰ the Court ruled that should an employer interpose the defense of resignation, as in the present case, it is still incumbent upon respondent company to prove that the employee voluntarily resigned.

From the totality of evidence on record, it was clearly demonstrated that respondent Cinderella has sufficiently discharged its burden to prove that petitioner’s resignation was voluntary. In voluntary resignation, the employee is compelled by personal reason(s) to disassociate himself from employment. It is done with the intention of relinquishing an office, accompanied by the act of abandonment.²¹ To determine whether the employee indeed intended to relinquish such employment, the act of the employee before and after the alleged resignation must be considered.²²

Petitioner relinquished her position when she submitted the letters of resignation. The resignation letter submitted on February 15, 2000 confirmed the earlier resignation letter she submitted on February 7, 2000. The resignation letter contained words of gratitude which can hardly come from an employee forced to resign.²³

The NLRC cannot disregard the resignation letter dated February 15, 2000 on the allegation that its submission was a product of an unintelligent and confused decision due to the disdain shown by Mr. Tecson absent any sufficient proof of force or intimidation. Likewise, it was erroneous for the Labor Arbiter not to give evidentiary weight on the resignation letter on the ground that it was fabricated as it was not signed by petitioner. A careful scrutiny of the said letter shows that it bears the signature of petitioner. More importantly, petitioner admitted having submitted the said letter, albeit, due to an alleged intimidation.

Subsequently, petitioner stopped reporting for work although she met with the officers of the corporation to settle her accountabilities but never raised the alleged intimidation employed on her. Also, though the complaint was filed within the 4-year prescriptive period, its belated filing supports the contention of respondent that it was a mere afterthought.²⁴ Taken together, these circumstances are substantial proof that petitioner’s resignation was voluntary.

Hence, petitioner cannot take refuge in the argument that it is the employer who bears the burden of proof that the resignation is voluntary and not the product of coercion or intimidation. Having submitted a resignation letter, it is then incumbent upon her to prove that the resignation was not voluntary but was actually a case of constructive dismissal²⁵with clear, positive, and convincing evidence.²⁶ Petitioner failed to substantiate her claim of constructive dismissal.

Petitioner contends there was an orchestrated plan to intimidate her into resigning to exculpate other officers of the company from the anomaly; and that in the course of the internal investigation, Mr. Tecson forced her to resign by saying, "Mag-resign ka na. Maiipit kami." Allegedly, this caused confusion and fear which led to her uninformed decision of tendering the resignation letter on February 15, 2000.

We agree with the Court of Appeals that it was grave error on the part of the NLRC to rely on the allegation that Mr. Tecson threatened and forced petitioner to resign. Other than being unsubstantiated and self-serving, the allegation does not suffice to support the finding of force, intimidation, and ultimately constructive dismissal.

Bare allegations of constructive dismissal, when uncorroborated by the evidence on record, cannot be given credence.²⁷In St. Michael Academy v. National Labor Relations Commission,²⁸ we ruled that mere allegations of threat or force do not constitute substantial evidence to support a finding of forced resignation. We enumerated the requisites for intimidation to vitiate consent as follows:

(1) that the intimidation caused the consent to be given; (2) that the threatened act be unjust or unlawful; (3) that the threat be real or serious, there being evident disproportion between the evil and the resistance which all men can offer, leading to the choice of doing the act which is forced on the person to do as the lesser evil; and (4) that it produces a well-grounded fear from the fact that the person from whom it comes has the necessary means or ability to inflict the threatened injury to his person or property. x x x²⁹

None of the above requisites was established by petitioner. Other than the allegation that Mr. Tecson intimidated petitioner into resigning, there were no other proofs presented to support a finding of forced resignation to stand against respondent’s denial and proof against dismissal. Neither can we consider the conduct of audits and other internal investigations as a form of harassment against petitioner. Said investigation was legitimate and justified, conducted in view of the discovery of the anomalous transaction involving the employees of the respondent including petitioner.

Moreover, we note that petitioner is holding a managerial position with a salary of P27,000.00 a month. Hence, she is not an ordinary employee with limited understanding such that she would be easily maneuvered or coerced to resign against her will.³⁰ Thus, we find no compelling reason to disturb the findings and conclusions of the Court of Appeals that petitioner voluntarily resigned and was not constructively dismissed by respondent.” (Underscoring added)

xxx

Ma. Finina E. Vicente vs. The Hon. Court Of Appeals, et al. G.R. No. 175988,  August 24, 2007

Read the full text of the case here.