Tuesday, November 13, 2012

GOVERNMENT SERVICE, INSURANCE SYSTEM

FIRST DIVISION


G.R. No. 128523 September 28, 1998
GOVERNMENT SERVICE, INSURANCE SYSTEM, petitioner,
vs.
COURT OF APPEALS, and ZENAIDA LIWANAG, respondents.

DAVIDE, JR. J.:

Petitioner Government Service Insurance System (GSIS) seeks to reverse the 26 February 1997 decision 1 of respondent Court of Appeals in CA G.R. SP No. 41976 which granted private respondent Zenaida Liwanag compensation benefits under P.D. No. 626, as amended, and in the process, set aside the 27 December 1995 decision 2 of the Employees' Compensation Commission (ECC) in ECC Case No. 7633.
As found by respondent Court of Appeals, the facts of this case were as follows:
[Private respondent] Zenaida Liwanag is the surviving spouse of the late Jaime Liwanag who died on September 14, 1994. He was 48 years old and had served the police force continuously for 17 years. At the time of his death, he was [a] Senior Superintendent of the Philippine National Police.
On August 28, 1994, the late P/Sr. Supt. Jaime Liwanag was admitted at the Medical Center of Manila due to complaints of Ascites, Poor Appetite. [The] CT Scan showed Cirrhosis with probable Hepatocellular CA, HB 5A3 positive. Despite medical intervention, Jaime Liwanag succumbed to Upper GI Bleeding, Cirrhosis Secondary to Hepatitis B; Hepatocellular Carcinoma on September 14, 1994.
As a consequence, [private respondent] filed a claim with the Government Service Insurance System (GSIS) for compensation benefits. The claim was denied for not being an occupational disease under the law neither was the risk of contracting the ailment of the deceased increased by his employment as a member of the police force.
On appeal pursuant to Section 5, Rule XVIII of Presidential Decree No. 626, as amended, the . . . Employees Compensation Commission affirmed the GSIS ruling and ultimately dismissed the appeal for lack of merit. . . . 3
In denying private respondent's claim, the ECC ruled:
Sec. 1 (B), Rule III of the Amended Rules on Employees' Compensation clearly defined when a disability or death resulting from illnesses is considered compensable. It provides:
Sec. 1. . . .;
(b) For the sickness and the resulting disability or death to be compensable, the sickness must be the result of an occupational disease listed under Annex "A" of these Rules with the conditions set therein satisfied; otherwise proof must be shown that the risk of contracting the disease is increased by the working conditions.
The late P/Sr[.] Supt. Liwanag's ailments, Upper GI Bleeding; Cirrhosis secondary to Hepatitis B; Hepatocellualar Carcinoma, cannot be made compensable inasmuch as the said ailments are not among those listed as occupational diseases, nor has appellant shown proofs [sic] that the risk of contacting said diseases were [sic] increased be her late husband's working conditions and employment as a member of our country's police force.
A study on the etiologies of P/Sr. Supt. Liwanag's ailments reveal that to wit:
Cirrhosis a disorganization of liver architecture by widespread fibrosis and nodule formation. It may be due to the following:
a.) Congenital Causes: hemorrhagic telagiectaria
galactosemia
b.) Chemicals: alcohol
methotrexate
halothane
c.) infection: Viral Hepatitis B
congenital Syphilis
(Merck's Manual, 14th ed. P. 831)
Hepatocellular Carcinoma — grievously somitinus called a hepatoma. It may be due, to wit:
a.) underlying cirrhosis: alcoholic postneurotic,
hemochromatotic
b.) environmental carcinogen: food contaminated with fungal aflatoxin
c.) Chronic infection with Hepatitis B
(Merck's Manual 14th ed., p. 859)
Apparently, P/Sr. Supt. Liwanag's ailments are not inherent among policemen and everybody is susceptible to the said diseases regardless of one[']s job.
It is well settled under the Employees' Compensation Law that when the ailment is not the direct result of the covered employee's employment, like the instant case, and the appellant failed to show proof that the risk of contracting the disease was increased by the covered employee's employment and working conditions the claim for compensation benefits cannot prosper.
Thus, finding no causal relation between P/Sr. Supt. Liwanag's ailment with his employment and working conditions, or the nature of appellant's work had increased the risk of contracting said diseases, . . . GSIS is correct in denying [private respondent's] application for compensation benefits under PD. NO. 262, as amended. 4
In her petition 5 filed before the Court of Appeals, private respondent relied heavily on two (2) documents as proof of the causal relation between P/Sr. Supt. Liwanag's ailments and his employment and working conditions: first, the "Investigation Report Re Death of the Late P/SSUPT JAIME M. LIWANAG" dated 14 September 1994 submitted by Cristeto Rey R. Gonzalodo, Police Chief Inspector, Investigator on Case; and second, the "REPORT OF PROCEEDING OF LOD BOARD TO DETERMINE THE LINE OF DUTY STATUS OF THE LATE P/SSUPT JAIME J. LIWANAG PNP." Moreover, private respondent argued that the requirement of proof of a causal relation between a claimant's ailments and his employment and working conditions "admits of exceptions and must yield to the higher interests of justice." In closing, private respondent advocated for a liberal interpretation of social legislation statutes, citing jurisprudence which, however, dealt with the relaxation of the procedural requirements as regards the late filing of pleadings and/or belated appeals.
As these documents form the Philippine National Police (PNP) are of importance to the resolution of this dispute, they are hereunder quoted in full. The Investigation Report 6 reads as follows:

Republic of the Philippines
Department of the Interior and Local Government
National Police Commission
NATIONAL HEADQUARTERS, PHILIPPINE NATIONAL POLICE
DIRECTORATE FOR PLANS
Camp Crame, Quezon City
ODPL-A 14 September 1994
SUBJECT: Investigation Report Re Death of the late
P/SSUPT JAIME M LIWANAG
TO: Officer-In-Charge, DPL
P o s t I. AUTHORITY:
Verbal Order of the Officer-In-Charge, DPL. II. MATTERS INVESTIGATED:
To determine the causes surrounding the death of the late P/SSUPT JAIME M. LIWANAG, Deputy Director for Plans and the Line of Duty Status thereof.
III. FACTS OF THE CASE:
. . . IV. DISCUSSION:
1. The late P/SSUPT JAIME M. LIWANAG had been vigorously/mentally examined before he was called to Active Duty as Second Lieutenant in the defunct Philippine Constabulary on 16 January 1969 which was repeated when he was appointed as Regular Officer (Direct Commission) on 1 Aug. 1971. From that initial rank he gradually rose to Police Senior Superintendent with Physical/Medical examination as a matter of requirement for promotion. All the while, P/SSUPT JAIME M. LIWANAG was physically/mentally fit for the service.
2. It [is] highly believed that the late P/SSUPT JAIME M. LIWANAG acquired his illness in the course of his employment with the Philippine National Police considering that there are some personnel in his office who are positive to [sic] Hepatitis B (Reactive) virus.
IV. CONCLUSION:
The death of the late P/SSUPT JAIME M. LIWANAG was in Line of Duty and not attributable to his own misconduct or negligence.
V. RECOMMENDATION:
Recommend that the death benefits due to the legal heirs/beneficiary (ies) of the late P/SSUPT JAIME M. LIWANAG be granted to them.
(signed)
CRISTETO REY R. GONZALODO
Police Chief Inspector
Investigator on Case
The Report of Proceedings 7 reads as follows:

REPORT OF PROCEEDINGS OF LOD BOARD TO DETERMINE THE LINE OF DUTY STATUS OF THE LATE P/SSUPT JAIME M. LIWANAG PNP
UNIT/ORGANIZATION: Directorate for Plans, NHQ PNP Camp Crame, Quezon City
DATE/TIME: 040900 October 1994
AUTHORITY: Letter Order Nr 454 dtd 04 October 1994
PRESENT:
P/SSUPT FRANCISCO F. CABACCANG, MDS — Chairman
P/SUPT REYNALDO R. ALBERTO, LS — Member
P/CINSP CRISTETO REY R. GONZALODO — Mbr/Recorder
P/INSP SERVILLANO B. RITUALO, PHPGH — Member
P/INSP LYDIA M. DAVID, BFAD — Member ABSENT: P/SINSP EMMA S. LACANDULA — DPRM — Member
040900 Oct. 94
CHAIRMAN — There being a quorum, I hereby declare that the Board will come to order. Mr. Member/Recorder, what is the order for today?
Member/Recorder: Mr. Chairman, we have been convened pursuant to Letter Order Nr 454 NHQ PNP dtd 04 Oct 94 to determine the Line of Duty (LOD) Status of the late P/SSUPT JAIME M. LIWANAG, then Deputy Director for Plans who died at Medical Center Manila located along Taft Ave. corner UN Ave. Manila on or about 132210 Sept. 94. . . .
Chairman: So, [t]herefore (referring to all the members) having been detailed as members and member/recorder, do you swear and affirm to thoroughly examine today's proceeding, the evidence now available in your possession without partiality, favor, affection, prejudice or hope of any reward?
Member/Recorder: Yes, Mr. Chairman, we do.
Member: On the otherhand [sic], P/SSUPT FRANCISCO F. CABACCANG, having been detailed as Chairman of this Board, do you swear and affirm to thoroughly examine today's proceeding, the evidence now available in your possession without partiality, favor, affection, prejudice or hope of any reward?
Chairman: Yes, I do.
Chairman: Mr. Member/Recorder, what are the evidence now in the possession of [the] LOD Board?
Member/Recorder: Chairman, the available evidences [sic] follows:
Appointment Order
Death Certificate
Medical Certificate
Abstract Clinical Record of
P/SSUPT LIWANAG JM Spot Report
Investigation Report
Result of Hepatitis B Lab Test of all ODPL Personnel
Statement of Service
Chairman: Based on the record, the immediate cause of death of the late P/SSUPT JAIME M. LIWANAG, then Deputy Director for Plans was due to Cardio-Respiratory Arrest Secondary to Gastro-Intestinal bleeding as a result of fulminating Hepatitis. How was he infected by this Virus?
P/SINPS RITUALO: It is highly possible that he got infected just recently in the Directorate for Plans since there were five (5) other ODPL pers[onnel] out of the total strength of forty five (45) who are reactive to Hepatitis B Antigen Test. Modes of transmittal are through body fluids and secretion. Another proof is that all the immediate members of his family are negative [for the] Hepatitis B Virus.
P/CINSP ODPL received an undated report on Hepa B Test
GONZALODO: finding from the Chief, Laboratory Section, PNPGH on 15 June 1994, when did P/SSUPT LIWANAG actually know that he was positive [for] Hepatitis B
P/SINSP RITUALO: He came to know about it as early as 19 Apr. 94 when he visited my office at the Laboratory Section, PNPGH. On 20 June 1994 when he came to my office again, I advised him to go slow with his work as I observed something unusual in his Liver Profile.
P/SUPT ALBERTO: Where did P/SSUPT LIWANAG g[e]t this Hepatitis B?
F/SINSP RITUALO: I strongly believe that he got this while working [at] Headquarters since this is [sic] already endemic in this camp. You can get infected anywhere? [sic]
F/SUPT ALBERTO: So, do you want to say that this kind of disease was acquired by the late P/SSUPT LIWANAG while serving the Philippine National Police?
P/SINSP RITUALO: Yes, sir.
P/CINSP. What type of Hepatitis [did] the late P/SSUPT
GONZALODO: LIWANAG acquired [sic]?
P/SINSP RITUALO: It was of Acute Fulminant Type. The effect is so immediate that one out of ten usually dies.
P/SINSP DAVID: I would like to inform the Board that under Ministry of National Defense Department Order Nr 162 dtd 15 Jan. 65, a military personnel who died while in the Active Service is presumed to have died in [the] Line of Duty and not as a result of his own misconduct unless there is substantial evidence to rebut such presumption.
P/CINSP Is this still binding [upon] PNP Personnel?
GONZALODO:
P/SINSP DAVID: Yes, sir. We are still using this as a reference.
P/SUPT ALBERTO: Based on the records and the foregoing discussions, it is hereby resolved that P/SSUPT JAIME M. LIWANAG died in [the] Line of Duty. Mr. Chairman, I therefore move that all the benefits due the late P/SR JAIME M. LIWANAG be granted to his legal heirs/beneficiary(ies) and henceforth, be likewise cleared from money and property accountabilities.
Member/Recorder: I second the motion.
CHAIRMAN: After a judicious appreciation of all evidences [sic] and after hearing the members of the Board, I personally favor the motion, hence, I now declared [sic] it as carried, voted upon affirmatively and duly resolved unanimously by the LOD Board. Do we have other more business to transact?
MEMBER/RECORDER: No more other business, Mr. Chairman.
CHAIRMAN: There being no other business to transact, upon motion duly made and seconded, this LOD proceeding is hereby adjourned.
WE HEREBY CERTIFY that the foregoing are true and correct of the LOD (P/SSUPT JAIME M. LIWANAG, PNP) Board proceeding.
(signed)
P/SSUPT F[R]ANCISCO F. CABACCANG, PNP
Chairman
P/SUPT REYNATO R. ALBERTO, PNP
Member
P/CINSP CRISTETO REY R. GONZALODO, PNP
Member/Recorder
P/SINSP SERVILLANO B. RITUALO, PNP
Member
P/SINSP LYDIA M. DAVID, PNP
Member
In its Comment 8 filed with the Court of Appeals, petitioner argued that since the ailments of P/Sr. Supt. Liwanag were not among those listed as occupational diseases, the burden then lay on herein private respondent to prove that the risk of contracting the disease was increased by her late husband's working conditions and employment as a member of the PNP. As regards private respondent's reliance on the Investigation Report, petitioner pointed out that said Report fallaciously concluded that the deceased contracted Hepatitis B in the course of his employment as some of his co-workers in his office tested positive for Hepatitis B. Petitioner deemed this reasoning as mere allegations which were inadmissible. In fact, petitioner contends that the ailments of the deceased were not inherent among policemen and everybody was susceptible to the disease regardless of one's work. At bottom, petitioner asserted that there was no substantial evidence pointing to a reasonable connection, much less, a direct causal relation, between the deceased's ailments and the nature of his employment; and that while social legislation statutes had to be interpreted liberally in favor of the intended beneficiaries, undue compassion for victims of diseases not covered by the law would endanger the integrity of the State Insurance Fund and deprive beneficiaries truly deserving of benefits.
In its Comment 9 filed with the Court of Appeals, the Employees' Compensation Commission (ECC), represented by the office of the Solicitor General (OSG), expectedly echoed the arguments of petitioner herein. The ECC merely added that as regards the nature of Hepatitis B and the need for substantial evidence proving that the risk of contracting the same was increased by one's working conditions: "It is a sickness that strikes people in general. The nature of one's employment is irrelevant. It makes no difference whether the victim is employed or not, [a] white collar employee or a blue collar worker, a housekeeper, an urban dweller or a resident of a rural area."
Respondent court, in ruling for private respondent, held:
In the case at bench, the [ECC] ruled that the ailment[s] of the deceased . . . are not among those listen as compensable occupational diseases. [The ECC] furthermore said that . . . there is no showing of any casual relation between the sickness of the late P/Supt. Liwanag with his employment or working condition[s]. We disagree.
Records of this case reveal that proceedings were conducted by the Directorate for Plans, National Headquarters, PNP, Camp Crame, Quezon City, to determine the line of duty status of the late P/Supt. Jaime M. Liwanag (Annex F, Petition). Submitted as well is the investigation report thereof (Annex E, Petition).
In said exhibits, it is clearly shown that prior to the employment of the deceased to active duty as [a] 2nd Lieutenant in the defunct Philippine Constabulary up until his appointment as [a] regular officer (Direct Command) to his position at the time of his death as Senior Police Superintendent, he was found to be physically, medically and mentally fit for the service. It was also concluded that it [was] highly believable that the late S/Supt. Liwanag acquired his illness in the course of his employment with the PNP considering that there are some personnels [sic] in his office who [tested] positive [for] Hepatitis B (reactive virus). In conclusion, it was recommended that death benefits due to the legal heirs be granted. Conformably, said evidences [sic] are sufficient under P.D. 626.
The degree of proof required under PD 62[6] is merely substantial evidence, which means relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Besides under the law, it is not required that the employment [is] the sole factor in the growth, development and acceleration of his illness. It is enough if his employment had contributed, even in a small degree, to the development or acceleration of the disease. (Magistrado vs. ECC, 174 SCRA 605 [1989])
The above proofs were not rebutted. No contrary' evidence was presented to counter attack the conclusions arrived at that the cause of death of P/Supt. Jaime Liwanag is work-connected and acquired from his said employment. After all, the policy of Presidential Decree 626 is to provide a [sic] meaningful and appropriate compensation to workers in the event of work related contingencies. As the law is social in character for the promotion and development of a tax exempt employee's compensation program whereby employees and their dependents, in the event of work related disability of death, may promptly secure adequate income or medical benefits, it is only fitting and proper that all doubts be interpreted in favor of labor. In this way, the very essence and creation of employment compensation laws will be given more meaning.
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby REVERSED and SET ASIDE and a new one entered declaring [private respondent] entitled to the death benefits under Presidential Decree No. 626, as amended. No pronouncement as to costs. 10
Petitioner now takes respondent court to task for "taking into consideration only the records of the proceedings conducted by the . . . PNP," as what the Court of Appeals seems to have forgotten was that "the investigation was [only] for the purpose of determining the line of duty status of the [deceased] and if his ailment was work connected." Moreover, petitioner argues that Hepatitis B cannot be acquired by mere mingling with other people who test positive for the illness, hence reliance by respondent Court on the PNP investigation constituted reversible error as the same, by itself, did not constitute substantial evidence. Petitioner likewise hastens to add:
It should be remembered that Hepatitis B is not just acquired by simple association. There was no medical proof/evidence presented how the [deceased] could have acquired his illness. Hepatitis B. [sic] According to the medical view point (Merk [sic] Manu[a]l p. 100) HBV is often transmitted parenterally, typically by contaminated blood or blood products. Routine screening of donor blood for H B s Ag has dramatically diminished posttransfusion HBV infection but transmission via needles shared by drug abusers remain[s] an important problem. There is an increased risk in patients in renal dialysis and oncology units and to hospital personnel in contact with blood. HBV is associated with a wide spectrum carrier state to acute-hepatitis, chronic hepatitis, cirrhosis, and hepatocellular carcinoma. While it was mentioned that there were some personnel in the office of the [deceased] who [were] positive with Hepatitis B, it was not medically shown or proven that he had any association with them that might have transferred the disease to him in a medically proven means as stated above. 11
We grant the petitioner.

At the outset, certain basic postulates governing employees' compensation benefits under P.D. No. 626 be reviewed. First, said Decree abandoned the presumption of compensability and the theory of aggravation under the Workmen's Compensation Act. 12 Second, for the sickness and resulting disability or death to be compensable, the claimant must prove either of two (2) things: (a) that the sickness was the result of an occupational disease listed under Annex "A" of the Rules on Employees' Compensation; or (b) if the sickness is not so listed, that the risk of contracting the disease was increased by the claimant's working conditions. Third, the claimant must prove this causal relation between the ailment and working conditions by substantial evidence, since the proceeding is taken before the ECC, an administrative or quasi-judicial body. Within the field of administrative law, while strict rules of evidence are not applicable to quasi-judicial proceedings, nevertheless, in adducing evidence constitutive of substantial evidence, the basic rule that mere allegation is not evidence cannot be disregarded. 13 Finally, in case of doubt in construction and interpretation of social legislation statutes, the liberality of the law in favor of the working man and woman prevails in light of the Constitution's social justice policy. 14
On the other side of the coin, however, there is a competing, yet equally vital interest to heed in passing upon undeserving claims for compensation. It is well to remember that if diseases not intended by the law to be compensated are inadvertently or recklessly include, the integrity of the State Insurance Fund is endangered. Compassion for the victims of diseases not covered by the law ignores the need to show a greater concern for the trust fund to which the tens of millions of workers and their families look to for compensation whenever covered accidents, diseases and deaths occur. 15 This stems from the development in the law that no longer is the poor employee still arrayed against the might and power of his rich corporate employer, hence the necessity of affording all kinds of favorable presumptions to the employee. This reasoning is no longer good policy. It is now the trust fund and not the employer which suffers if benefits are paid to claimants who are not entitled under the law. The employer joins the employee in trying to have their claims approved. The employer is spared the problem the problem of proving a negative proposition that the disease was not caused by employment. 16 Moreover, the new system instituted by the new law has discarded, among others, the concept of "presumption of compensability and aggravation" and substituted one based on social security principles. The new system is administered by social insurance agencies — the GSIS and the SSS — under the ECC. The purpose of this innovation was to restore a sensible equilibrium between the employer's obligation to pay workmen's compensation and the employee's right to receive reparation for work-connected death or disability. 17
Applying these principles to the instant case, there is no dispute that Hepatitis B, the disease which caused the demise of the decedent, is not listed as an occupational disease under Annex "A" of the Rules on Employees' Compensation. As such, private respondent's burden of evidence before the ECC was to prove, by substantial evidence, the causal relationship between her deceased husband's illness and his working conditions. This she failed to do, as will be discussed below. In the same vein and for the same reasons, respondent court, in reversing the ECC, committed an error of law by misappreciating the legal standard of what constitutes substantial evidence; and in according full credence to the proceedings before the PNP Board and thus shifting the burden of evidence to petitioner to rebut private respondent's claim, when private respondent's evidence was sorely wanting to justify the award of compensation benefits under P.D. No. 626, as amended.
What is striking as regards private respondent's advocacy was that throughout the course of this dispute, private respondent merely relied on the PNP Reports, and nothing more, to substantiate her claim. However, the PNP Reports, as quoted above in full, merely contained sweeping statements and conclusions and treated the matter in a most perfunctory manner.

Notably, the Result of Hepatitis B Lab Test of all ODPL Personnel was made available to the PNP Investigation Board, but the details of the lab test not disclosed and there was merely the general averment that five (5) out of 45 ODPL personnel contracted Hepatitis B. Likewise noteworthy was the statement of P/SInsp. Ritualo before the PNP Board that Hepatitis B is transmitted through body fluid or secretion, but there was no showing whatsoever as to the degree of contact, if any, between the deceased and his office mates who contracted Hepatitis B. In this light, petitioner properly maintains in its Reply: "Further, the report on the investigation on the ailment of the [deceased] merely stated 'it is highly believable that his illness was acquired in the course in the course of his employment.' This statement was not based on medical findings but on a layman's point of view which should not be given weight by the Honorable Court for such is tantamount to hearsay." 18 On this score, as early as 1940, in the landmark case of Ang Tibay v. The Court of Industrial Relations, 19 this Court already declared that as regards the standard of substantial evidence required in administrative proceedings, "[m]ere uncorroborated hearsay or rumor does not constitute substantial evidence."
As to the definition, nature and workings of substantial evidence in administrative proceedings, Ang Tibay declared:
Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, [citations omitted] The statute provides that "the rules of evidence prevailing in courts of law and equity shall not be controlling," The obvious purpose of this and similar provisions is to free administrative boards from the compulsion of technical rules so that the mere admission of matter which would be deemed incompetent in judicial proceedings would not invalidate the administrative order. [citations omitted] But this assurance of a desirable flexibility in administrative procedure does not go so far as to justify orders without a basis in evidence having rational probative force. 20
While the PNP Reports may have sufficed to grant private respondent whatever benefits were due her under PNP Rules and Regulations, clearly, the dearth of evidence adduced by private respondent militates against the grant of compensation benefits under P.D. No. 626, as amended. On this note, what is worth mentioning is that the PNP Board's conclusions were founded upon the Ministry of National Defense Department Order Number 162 dated 15 January 1965, i.e., that a member of the military who died while in active service is presumed to have died in the line of duty and not as a result of his own misconduct unless there is substantial evidence to rebut such presumption.
This only buttresses our observation that the proceedings before the PNP Board and the ECC are separate and distinct, treating of two (2) totally different subjects; moreover, the PNP Board's conclusions here may not be used as basis to find that private respondent is respondent is entitled to compensation under P.D. No. 626, as amended. The presumption afforded by the Order relied upon by the PNP Board concerns itself merely with the query as to whether one died in the line of duty, while P.D. No. 626 addresses the issue of whether a causal relation existed between a claimant's ailment and his working conditions. Plainly, these are different issues calling for differing forms of proof or evidence, thus accounting for the existence of a favorable presumption in favor of a claimant under the Defense Department Order, but not under P.D. No. 626 when the disease is not listed under Annex "A" of the Amended Rules on Employees' Compensation.
It would likewise not be remiss to point out that Police Chief Inspector Gonzalodo, having prepared the Investigation Report dated 14 September 1994 wherein he recommended the grant of benefits to private respondent, should have inhibited himself from the proceedings subsequently conducted by the PNP Board on 4 October 1994. Having already pre-judged the matter by way of his recommendation that the deceased passed away while in the line of duty and to grant benefits to his heirs or beneficiaries, Police Chief Inspector Gonzalodo could hardly have been said to have been able to subsequently act in an impartial and unbiased capacity as a member of the PNP Investigating Board.

On the imperative of ensuring due process in administrative proceedings, Ang Tibay 21 laid down the guidelines for administrative tribunals to observe. However, what Ang Tibay failed to explicitly state was, prescinding from the general principles governing due process, the requirement of an impartial tribunal which, needless to say, dictates that one called upon to resolve a dispute may not sit as judge and jury simultaneously, neither may he review his decision on appeal.
In Rivera v. Civil Service Commission, 22 this Court, sitting en banc, unanimously set aside a Resolution issued by respondent Commission as it was shown that Civil Service Commissioner Thelma P. Gaminde, who took part only in the deliberations for the assailed Resolution (but not the deliberations prior to promulgation of respondent Commission's Decision), had earlier participated in the case as Board Chairman of the Merit Systems Protection Board (MSPB). As it was the MSPB's decision which was appealed to respondent Commission, then even the mere participation of Commissioner Gaminde, at the appellate level, in issuing the questioned Resolution (but not the Decision) violated procedural due process. Thus the Court there declared that Commissioner Gaminde should have inhibited herself totally from participating in the resolution of the appeal and remanded the case to respondent Commission, sans the participation of Commissioner Gaminde, in order to "give full meaning and consequence to a fundamental aspect of due process." This Court moreover noted:

This is not the first time that the Court has been confronted with this kind of prejudicial issue.
In Zambales Chromite Mining Company vs. Court of Appeals [94 SCRA 261], the decision of the Secretary of Agriculture and Natural Resources was set aside by this Court after it had been established that the case concerned an appeal from the Secretary's own previous decision he handed down while he was yet the incumbent Director of Mines. Caling the act of the Secretary a "mockery of administrative justice," the Court said:
In order that the review of the decision of a subordinate officer might not turn out to be a farce, the reviewing officer must perforce be other than the officer whose decision is under review; otherwise, there could be no different view or there would be no real review of the case. The decision of the reviewing officer would be a biased view; inevitably, it would be the same view since being human, he would not admit that he was mistaken in his first view of the case.
The Court similarly struck down a decision of Presidential Executive Assistance Jacobo Clave over a resolution of the Civil Service Commission, in which he, then concurrently its Chairman, had earlier "concurred." [Anzaldo v. Clave, 119 SCRA 353 (1982)] 23
In fealty then to due process and this Court's rulings, and in absence of any showing that Police Chief Inspector Gonzalodo acted in the capacity of a Board-designated commissioner merely tasked to receive evidence on behalf of the PNP Board, it should have behooved Police Chief Inspector Gonzalodo to recuse himself from the proceedings before the PNP Board. While this matter was not assigned as error, we have taken it upon ourselves to comment on this irregularity, if only for the guidance of PNP Investigating Boards constituted in the future.

To further evince the paucity of evidence extant on the record to support private respondent's cause, in both her Comment to the Petition 24 and Memorandum 25 filed with this Court, in lieu of any discussion of the issues, private respondent merely adopted the following pleadings and/or documents to convince this Court to uphold the decision of the Court of Appeals: her Petition for Review filed with the Court of Appeals; petitioner's Comment filed with the Court of Appeals; the Comment of the Employees' Compensation Commission filed with the Court of Appeals; and the Notice of Judgment and Decision of respondent court. The total absence of any semblance of discussion on the issues betrays a deplorable degree of want of industry on the part of private respondent's counsel, both as far as his client and the courts are concerned.
All told, what the Court of Appeals should have done here was to respect the findings of the ECC on the technical matter concerning the nature of the deceased's illness, Hepatitis B. As likewise quoted above, plainly, the ECC's rejection of private respondent's claim was not unfounded, in fact, the ECC even took the pains to quote from a medical manual in order to substantiate its holding. This is one instance when, pursuant to prudence and judicial restraint, a tribunal's zeal in bestowing compassion should have yielded to the precept in administrative law that in absence of grave abuse of discretion, courts are loathe to interfere with and should respect the findings of quasi-judicial agencies in fields where they are deemed and held to be experts due to their special technical knowledge and training. 26
WHEREFORE, the instant petition is GRANTED and the decision of respondent Court of Appeals dated 26 February 1997 in CA G.R. SP No. 41976 is hereby REVERSED and SET ASIDE and the decision of the Employees' Compensation Commission dated 27 December 1995 in ECC Case No. 7633 is hereby REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, Vitug, Panganiban and Quisumbing, JJ., concur.
Footnotes 1 Rollo, 23-26. Per Vasquez, C.M., Jr., J., with Purisima, F.P. and Sandoval Gutierrez, A., JJ., concurring.
2 Rollo, 56-61.
3 Id., 23-24.
4 Rollo, 58-60.
5 Rollo, 36-53.
6 Id., 67-68.
7 Rollo, 69-71.
8 Rollo, 72-79.
9 Rollo, 80-85.
10 Rollo, 25-26.
11 Rollo, 16-17.
12 See Latagan v. Employees' Compensation Commission, 213 SCRA 715, 718 [1992] as regards the operation of the old rule: "[P]rior to the effectivity of the New Labor Code . . . once it was established that the illness supervened during employment, there existed a rebuttable presumption that such illness arose out of the employment or was at least aggravated by it. Consequently, the employer assumed, by force of this presumption, the burden of establishing the contrary by substantial evidence. But this rule has been abandoned under the compensation scheme in the present Labor Code, which took effect 1 January 1975."
13 See Narazo v. Employees' Compensation Commission, 181 SCRA 874, 877 [1990].
14 See Employees' Compensation Commission v. Court of Appeals, 264 SCRA 248, 255-257 [1996].
15 See Raro v. Employees' Compensation Commission, 172 SCRA 845, 852 [1989].
16 Santos v. Employees' Compensation Commission, 221 SCRA 182, 187 [1993], citing Raro v. Employees' Compensation Commission, supra note 15.
17 See Tria v. Employees' Compensation Commission, 208 SCRA 834, 841-842 [1992].
18 Rollo, 94.
19 69 Phil. 635, 643, citing Consolidated Edison Co. v. National Labor Relations Board, 59 S. Ct. 206, 83 Law. Ed. No. 4, Adv. Op., p. 131.
20 Supra note 19 at 642-643.
21 Supra note 19 at 642-644.
22 240 SCRA 43 [1995].
23 Rivera v. Civil Service Commission, 240 SCRA 43, 47-48 [1995]. See also Miguel Singson v. NLRC, G.R. No. 122389, 19 June 1997.
24 Rollo, 32-35.
25 Id., 113-119.
26 See First Lepanto Ceramics, Inc. v. Court of Appeals, 253 SCRA 552, 558 [1996], citing Felipe Ysmael, Jr. & Co., Inc. v. Deputy Executive Secretary, 190 SCRA 673, 683-684 [1990].
Posted by at No comments:

FELIX B. PEREZ and AMANTE G. DORIA

EN BANC
G.R. No. 152048               April 7, 2009
FELIX B. PEREZ and AMANTE G. DORIA, Petitioners,
vs.
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY and JOSE LUIS SANTIAGO, Respondents.
D E C I S I O N
CORONA, J.:
Petitioners Felix B. Perez and Amante G. Doria were employed by respondent Philippine Telegraph and Telephone Company (PT&T) as shipping clerk and supervisor, respectively, in PT&T’s Shipping Section, Materials Management Group.
Acting on an alleged unsigned letter regarding anomalous transactions at the Shipping Section, respondents formed a special audit team to investigate the matter. It was discovered that the Shipping Section jacked up the value of the freight costs for goods shipped and that the duplicates of the shipping documents allegedly showed traces of tampering, alteration and superimposition.
On September 3, 1993, petitioners were placed on preventive suspension for 30 days for their alleged involvement in the anomaly.1 Their suspension was extended for 15 days twice: first on October 3, 19932 and second on October 18, 1993.3
On October 29, 1993, a memorandum with the following tenor was issued by respondents:
In line with the recommendation of the AVP-Audit as presented in his report of October 15, 1993 (copy attached) and the subsequent filing of criminal charges against the parties mentioned therein, [Mr. Felix Perez and Mr. Amante Doria are] hereby dismissed from the service for having falsified company documents.4 (emphasis supplied)
On November 9, 1993, petitioners filed a complaint for illegal suspension and illegal dismissal.5 They alleged that they were dismissed on November 8, 1993, the date they received the above-mentioned memorandum.
The labor arbiter found that the 30-day extension of petitioners’ suspension and their subsequent dismissal were both illegal. He ordered respondents to pay petitioners their salaries during their 30-day illegal suspension, as well as to reinstate them with backwages and 13th month pay.
The National Labor Relations Commission (NLRC) reversed the decision of the labor arbiter. It ruled that petitioners were dismissed for just cause, that they were accorded due process and that they were illegally suspended for only 15 days (without stating the reason for the reduction of the period of petitioners’ illegal suspension).6
Petitioners appealed to the Court of Appeals (CA). In its January 29, 2002 decision,7 the CA affirmed the NLRC decision insofar as petitioners’ illegal suspension for 15 days and dismissal for just cause were concerned. However, it found that petitioners were dismissed without due process.
Petitioners now seek a reversal of the CA decision. They contend that there was no just cause for their dismissal, that they were not accorded due process and that they were illegally suspended for 30 days.
We rule in favor of petitioners.
Respondents Failed to Prove Just
Cause and to Observe Due Process
The CA, in upholding the NLRC’s decision, reasoned that there was sufficient basis for respondents to lose their confidence in petitioners8 for allegedly tampering with the shipping documents. Respondents emphasized the importance of a shipping order or request, as it was the basis of their liability to a cargo forwarder.9
We disagree.
Without undermining the importance of a shipping order or request, we find respondents’ evidence insufficient to clearly and convincingly establish the facts from which the loss of confidence resulted.10 Other than their bare allegations and the fact that such documents came into petitioners’ hands at some point, respondents should have provided evidence of petitioners’ functions, the extent of their duties, the procedure in the handling and approval of shipping requests and the fact that no personnel other than petitioners were involved. There was, therefore, a patent paucity of proof connecting petitioners to the alleged tampering of shipping documents.
The alterations on the shipping documents could not reasonably be attributed to petitioners because it was never proven that petitioners alone had control of or access to these documents. Unless duly proved or sufficiently substantiated otherwise, impartial tribunals should not rely only on the statement of the employer that it has lost confidence in its employee.11
Willful breach by the employee of the trust reposed in him by his employer or duly authorized representative is a just cause for termination.12 However, in General Bank and Trust Co. v. CA,13 we said:
[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith.
The burden of proof rests on the employer to establish that the dismissal is for cause in view of the security of tenure that employees enjoy under the Constitution and the Labor Code. The employer’s evidence must clearly and convincingly show the facts on which the loss of confidence in the employee may be fairly made to rest.14 It must be adequately proven by substantial evidence.15 Respondents failed to discharge this burden.
Respondents’ illegal act of dismissing petitioners was aggravated by their failure to observe due process. To meet the requirements of due process in the dismissal of an employee, an employer must furnish the worker with two written notices: (1) a written notice specifying the grounds for termination and giving to said employee a reasonable opportunity to explain his side and (2) another written notice indicating that, upon due consideration of all circumstances, grounds have been established to justify the employer's decision to dismiss the employee.16
Petitioners were neither apprised of the charges against them nor given a chance to defend themselves. They were simply and arbitrarily separated from work and served notices of termination in total disregard of their rights to due process and security of tenure. The labor arbiter and the CA correctly found that respondents failed to comply with the two-notice requirement for terminating employees.
Petitioners likewise contended that due process was not observed in the absence of a hearing in which they could have explained their side and refuted the evidence against them.
There is no need for a hearing or conference. We note a marked difference in the standards of due process to be followed as prescribed in the Labor Code and its implementing rules. The Labor Code, on one hand, provides that an employer must provide the employee ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires:
ART. 277. Miscellaneous provisions. — x x x
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer. (emphasis supplied)
The omnibus rules implementing the Labor Code, on the other hand, require a hearing and conference during which the employee concerned is given the opportunity to respond to the charge, present his evidence or rebut the evidence presented against him:17
Section 2. Security of Tenure. — x x x
(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:
For termination of employment based on just causes as defined in Article 282 of the Labor Code:
(i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side.
(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. (emphasis supplied)
Which one should be followed? Is a hearing (or conference) mandatory in cases involving the dismissal of an employee? Can the apparent conflict between the law and its IRR be reconciled?
At the outset, we reaffirm the time-honored doctrine that, in case of conflict, the law prevails over the administrative regulations implementing it.18 The authority to promulgate implementing rules proceeds from the law itself. To be valid, a rule or regulation must conform to and be consistent with the provisions of the enabling statute.19 As such, it cannot amend the law either by abridging or expanding its scope.20
Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an employee must be given "ample opportunity to be heard and to defend himself." Thus, the opportunity to be heard afforded by law to the employee is qualified by the word "ample" which ordinarily means "considerably more than adequate or sufficient."21 In this regard, the phrase "ample opportunity to be heard" can be reasonably interpreted as extensive enough to cover actual hearing or conference. To this extent, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code is in conformity with Article 277(b).
Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should not be taken to mean that holding an actual hearing or conference is a condition sine qua non for compliance with the due process requirement in termination of employment. The test for the fair procedure guaranteed under Article 277(b) cannot be whether there has been a formal pretermination confrontation between the employer and the employee. The "ample opportunity to be heard" standard is neither synonymous nor similar to a formal hearing. To confine the employee’s right to be heard to a solitary form narrows down that right. It deprives him of other equally effective forms of adducing evidence in his defense. Certainly, such an exclusivist and absolutist interpretation is overly restrictive. The "very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation."22
The standard for the hearing requirement, ample opportunity, is couched in general language revealing the legislative intent to give some degree of flexibility or adaptability to meet the peculiarities of a given situation. To confine it to a single rigid proceeding such as a formal hearing will defeat its spirit.
Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code itself provides that the so-called standards of due process outlined therein shall be observed "substantially," not strictly. This is a recognition that while a formal hearing or conference is ideal, it is not an absolute, mandatory or exclusive avenue of due process.
An employee’s right to be heard in termination cases under Article 277(b) as implemented by Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should be interpreted in broad strokes. It is satisfied not only by a formal face to face confrontation but by any meaningful opportunity to controvert the charges against him and to submit evidence in support thereof.
A hearing means that a party should be given a chance to adduce his evidence to support his side of the case and that the evidence should be taken into account in the adjudication of the controversy.23 "To be heard" does not mean verbal argumentation alone inasmuch as one may be heard just as effectively through written explanations, submissions or pleadings.24 Therefore, while the phrase "ample opportunity to be heard" may in fact include an actual hearing, it is not limited to a formal hearing only. In other words, the existence of an actual, formal "trial-type" hearing, although preferred, is not absolutely necessary to satisfy the employee’s right to be heard.
This Court has consistently ruled that the due process requirement in cases of termination of employment does not require an actual or formal hearing. Thus, we categorically declared in Skipper’s United Pacific, Inc. v. Maguad:25
The Labor Code does not, of course, require a formal or trial type proceeding before an erring employee may be dismissed. (emphasis supplied)
In Autobus Workers’ Union v. NLRC,26 we ruled:
The twin requirements of notice and hearing constitute the essential elements of due process. Due process of law simply means giving opportunity to be heard before judgment is rendered. In fact, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy. What is frowned upon is the denial of the opportunity to be heard.
x x x x x x x x x
A formal trial-type hearing is not even essential to due process. It is enough that the parties are given a fair and reasonable opportunity to explain their respective sides of the controversy and to present supporting evidence on which a fair decision can be based. This type of hearing is not even mandatory in cases of complaints lodged before the Labor Arbiter. (emphasis supplied)
In Solid Development Corporation Workers Association v. Solid Development Corporation,27 we had the occasion to state:
[W]ell-settled is the dictum that the twin requirements of notice and hearing constitute the essential elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the employee of the employer’s decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted.
In separate infraction reports, petitioners were both apprised of the particular acts or omissions constituting the charges against them. They were also required to submit their written explanation within 12 hours from receipt of the reports. Yet, neither of them complied. Had they found the 12-hour period too short, they should have requested for an extension of time. Further, notices of termination were also sent to them informing them of the basis of their dismissal. In fine, petitioners were given due process before they were dismissed. Even if no hearing was conducted, the requirement of due process had been met since they were accorded a chance to explain their side of the controversy. (emphasis supplied)
Our holding in National Semiconductor HK Distribution, Ltd. v. NLRC28 is of similar import:
That the investigations conducted by petitioner may not be considered formal or recorded hearings or investigations is immaterial. A formal or trial type hearing is not at all times and in all instances essential to due process, the requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy. It is deemed sufficient for the employer to follow the natural sequence of notice, hearing and judgment.
The above rulings are a clear recognition that the employer may provide an employee with ample opportunity to be heard and defend himself with the assistance of a representative or counsel in ways other than a formal hearing. The employee can be fully afforded a chance to respond to the charges against him, adduce his evidence or rebut the evidence against him through a wide array of methods, verbal or written.
After receiving the first notice apprising him of the charges against him, the employee may submit a written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in support thereof, like relevant company records (such as his 201 file and daily time records) and the sworn statements of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His written explanation may also include a request that a formal hearing or conference be held. In such a case, the conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary disputes29 or where company rules or practice requires an actual hearing as part of employment pretermination procedure. To this extent, we refine the decisions we have rendered so far on this point of law.
This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code reasonably implements the "ample opportunity to be heard" standard under Article 277(b) of the Labor Code without unduly restricting the language of the law or excessively burdening the employer. This not only respects the power vested in the Secretary of Labor and Employment to promulgate rules and regulations that will lay down the guidelines for the implementation of Article 277(b). More importantly, this is faithful to the mandate of Article 4 of the Labor Code that "[a]ll doubts in the implementation and interpretation of the provisions of [the Labor Code], including its implementing rules and regulations shall be resolved in favor of labor."
In sum, the following are the guiding principles in connection with the hearing requirement in dismissal cases:
(a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written) given to the employee to answer the charges against him and submit evidence in support of his defense, whether in a hearing, conference or some other fair, just and reasonable way.
(b) a formal hearing or conference becomes mandatory only when requested by the employee in writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances justify it.
(c) the "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or conference" requirement in the implementing rules and regulations.
Petitioners Were Illegally
Suspended for 30 Days
An employee may be validly suspended by the employer for just cause provided by law. Such suspension shall only be for a period of 30 days, after which the employee shall either be reinstated or paid his wages during the extended period.30
In this case, petitioners contended that they were not paid during the two 15-day extensions, or a total of 30 days, of their preventive suspension. Respondents failed to adduce evidence to the contrary. Thus, we uphold the ruling of the labor arbiter on this point.
Where the dismissal was without just or authorized cause and there was no due process, Article 279 of the Labor Code, as amended, mandates that the employee is entitled to 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 the compensation was not paid up to the time of actual reinstatement.31 In this case, however, reinstatement is no longer possible because of the length of time that has passed from the date of the incident to final resolution.32 Fourteen years have transpired from the time petitioners were wrongfully dismissed. To order reinstatement at this juncture will no longer serve any prudent or practical purpose.33
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated January 29, 2002 in CA-G.R. SP No. 50536 finding that petitioners Felix B. Perez and Amante G. Doria were not illegally dismissed but were not accorded due process and were illegally suspended for 15 days, is SET ASIDE. The decision of the labor arbiter dated December 27, 1995 in NLRC NCR CN. 11-06930-93 is hereby AFFIRMED with the MODIFICATION that petitioners should be paid their separation pay in lieu of reinstatement.
SO ORDERED.
RENATO C. CORONA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING
Associate Justice		 CONSUELO YNARES-SANTIAGO
Associate Justice
ANTONIO T. CARPIO
Associate Justice		 (On Official Leave)
MA. ALICIA M. AUSTRIA-MARTINEZ*
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice		 DANTE O. TINGA
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice		 PRESBITERO J. VELASCO, JR.
Associate Justice
ANTONIO EDUARDO B. NACHURA
Associate Justice		 TERESITA J. LEONARDO-DE CASTRO
Associate Justice
ARTURO D. BRION
Associate Justice		 DIOSDADO M. PERALTA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.
REYNATO S. PUNO
Chief Justice

Footnotes
* On official leave.
1 Records, pp. 70-71.
2 Id., pp. 72-73.
3 Id., pp. 74-75.
4 Id., p. 76.
5 Id., p. 39.
6 Decision penned by Commissioner Ireneo B. Bernardo, and concurred in by Presiding Commissioner Lourdes C. Javier and Commissioner Joaquin A. Tanodra.
7 Decision of the Court of Appeals, penned by Associate Justice (now retired Associate Justice of the Supreme Court) Ruben T. Reyes, and concurred in by Associate Justices Renato C. Dacudao and Mariano C. del Castillo of the Ninth Division of the Court of Appeals.
8 Rollo, p. 34.
9 Records, p. 107.
10 Commercial Motors Corporation v. Commissioners, et al., G.R. No. 14762, 10 December 1990, 192 SCRA 191, 197.
11 Santos v. NLRC, G.R. No. L-76991, October 28, 1988, 166 SCRA 759, 765. De Leon v. NLRC, G.R. No. 52056, October 30, 1980, 100 SCRA 691, 700.
12 Labor Code, Book VI, Title 1, Art. 282 (c).
13 G.R. No. L-42724, 9 April 1985, 135 SCRA 569, 578.
14 Imperial Textile Mills, Inc. v. NLRC, G.R. No. 101527, 19 January 1993, 217 SCRA 237, 244-245.
15 Starlite Plastic Industrial Corp. v. NLRC, G.R. No. 78491, 16 March 1989, 171 SCRA 315, 324.
16 Omnibus Rules Implementing the Labor Code, Book VI, Rule 1, Sec. 2 (a) and (c).
17 Section 2(d), Rule I, Implementing Rules of Book VI of the Labor Code.
18 See Conte v. Palma, 332 Phil. 20 (1996) citing Kilusang Mayo Uno Labor Center v. Garcia, Jr., G.R. No. 115381, 23 December 1994, 239 SCRA 386.
19 Id. citing Lina Jr. v. Cariño, G.R. No. 100127, 23 April 1993, 221 SCRA 515.
20 Implementing rules and regulations may not enlarge, alter or restrict the provisions of the law they seek to implement; they cannot engraft additional requirements not contemplated by the legislature (Pilipinas Kao, Inc. v. Court of Appeals, 423 Phil. 834 [2001]).
21 Webster’s Third New Collegiate International Dictionary Of The English Language Unabridged, p. 74, 1993 edition.
22 Cafeteria Workers v. McElroy, 367 U.S. 886 (1961).
23 Gonzales v. Commission on Elections, G.R. No. 52789, 19 December 1980, 101 SCRA 752.
In the landmark case on administrative due process, Ang Tibay v. Court of Industrial Relations (69 Phil. 635 [1940]), this Court laid down seven cardinal primary rights:
(1) The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. x x x (2) Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. x x x
24 Rizal CommercialBanking Corporation v. Commissioner of Internal Revenue, G.R. No. 168498, 16 June 2006, 491 SCRA 213.
25 G.R. No. 166363, 15 August 2006, 498 SCRA 639.
26 353 Phil. 419 (1998).
27 G.R. No. 165995, 14 August 2007, 530 SCRA 132.
28 353 Phil. 551 (1998).
29 See Cleveland Board of Education v. Loudermill, 470 U.S. 532 (1985) (Brennan J., concurring in part and dissenting in part) citing Arnett v. Kennedy, 416 U.S. 134 (1974) (Marshall J., dissenting).
30 Omnibus Rules Implementing the Labor Code, Book V, Rule XXIII, Sec. 9, as amended by Department of Labor and Employment Order No. 9 (1997).
31 Agabon v. NLRC, G.R. No. 158693, 17 November 2004, 442 SCRA 573, 610.
32 Panday v. NLRC, G.R. No. 67664, 20 May 1992, 209 SCRA 122, 126-127.
33 Sealand Service, Inc. v. NLRC, G.R. No. 90500, 5 October 1990, 190 SCRA 347, 355.
Posted by at No comments:

VICTORIAS MILLING COMPANY, INC

EN BANC
G.R. No. L-16704             March 17, 1962
VICTORIAS MILLING COMPANY, INC., petitioner-appellant,
vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.
Ross, Selph and Carrascoso for petitioner-appellant.
Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.
BARRERA, J.:
On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following tenor: .
Effective November 1, 1958, all Employers in computing the premiums due the System, will take into consideration and include in the Employee's remuneration all bonuses and overtime pay, as well as the cash value of other media of remuneration. All these will comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500 for any one month.
Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the Social Security Commission in effect protesting against the circular as contradictory to a previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the computation of the employers' and employees' respective monthly premium contributions, and submitting, "In order to assist your System in arriving at a proper interpretation of the term 'compensation' for the purposes of" such computation, their observations on Republic Act 1161 and its amendment and on the general interpretation of the words "compensation", "remuneration" and "wages". Counsel further questioned the validity of the circular for lack of authority on the part of the Social Security Commission to promulgate it without the approval of the President and for lack of publication in the Official Gazette.
Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule or regulation that needed the approval of the President and publication in the Official Gazette to be effective, but a mere administrative interpretation of the statute, a mere statement of general policy or opinion as to how the law should be construed.
Not satisfied with this ruling, petitioner comes to this Court on appeal.
The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to adopt, amend and repeal subject to the approval of the President such rules and regulations as may be necessary to carry out the provisions and purposes of this Act."
There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations, it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of carrying out the law are often times left to the administrative agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal provisions that have the effect of law. (Davis, op. cit., p. 194.) .
A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means.
Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of the provisions of the Social Security Law defining the term "compensation" contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as follows: .
(f) Compensation — All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except (1) that part of the remuneration in excess of P500 received during the month; (2) bonuses, allowances or overtime pay; and (3) dismissal and all other payments which the employer may make, although not legally required to do so.
Republic Act No. 1792 changed the definition of "compensation" to:
(f) Compensation — All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except that part of the remuneration in excess of P500.00 received during the month.
It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given in addition to the regular or base pay were expressly excluded, or exempted from the definition of the term "compensation", such exemption or exclusion was deleted by the amendatory law. It thus became necessary for the Social Security Commission to interpret the effect of such deletion or elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding of the Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or detail that was not already in the law as amended. It merely stated and circularized the opinion of the Commission as to how the law should be construed. 1äwphï1.ñët
The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does not support its contention that the circular in question is a rule or regulation. What was there said was merely that a regulation may be incorporated in the form of a circular. Such statement simply meant that the substance and not the form of a regulation is decisive in determining its nature. It does not lay down a general proposition of law that any circular, regardless of its substance and even if it is only interpretative, constitutes a rule or regulation which must be published in the Official Gazette before it could take effect.
The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the present case, because the penalty that may be incurred by employers and employees if they refuse to pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays to his employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161.
We find, therefore, that Circular No. 22 purports merely to advise employers-members of the System of what, in the light of the amendment of the law, they should include in determining the monthly compensation of their employees upon which the social security contributions should be based, and that such circular did not require presidential approval and publication in the Official Gazette for its effectivity.
It hardly need be said that the Commission's interpretation of the amendment embodied in its Circular No. 22, is correct. The express elimination among the exemptions excluded in the old law, of all bonuses, allowances and overtime pay in the determination of the "compensation" paid to employees makes it imperative that such bonuses and overtime pay must now be included in the employee's remuneration in pursuance of the amendatory law. It is true that in previous cases, this Court has held that bonus is not demandable because it is not part of the wage, salary, or compensation of the employee. But the question in the instant case is not whether bonus is demandable or not as part of compensation, but whether, after the employer does, in fact, give or pay bonus to his employees, such bonuses shall be considered compensation under the Social Security Act after they have been received by the employees. While it is true that terms or words are to be interpreted in accordance with their well-accepted meaning in law, nevertheless, when such term or word is specifically defined in a particular law, such interpretation must be adopted in enforcing that particular law, for it can not be gainsaid that a particular phrase or term may have one meaning for one purpose and another meaning for some other purpose. Such is the case that is now before us. Republic Act 1161 specifically defined what "compensation" should mean "For the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions authorized in the original Act. By virtue of this express substantial change in the phraseology of the law, whatever prior executive or judicial construction may have been given to the phrase in question should give way to the clear mandate of the new law.
IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs against appellant. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon and De Leon, JJ., concur.
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