Philippine Advertising Counselors, Inc. v. NLRC

G.R. No. 120008 (October 18, 1996)

SC upheld Diaz's dismissal award, modifying damages to P100k and P50k for poor working conditions.

Facts:

Private respondent Teodoro M. Diaz began his employment with Philippine Advertising Counselors, Inc. (PAC) in 1976 as an Executive Account Trainee and eventually rose to the position of Vice President and head of the Account Management Group. In December 1990, during a senior management meeting, PAC's Chairman, Antonio G. Cumagun, accused Elenita C. Panganiban, a major shareholder, of attempting to manipulate the company's stock value. Cumagun expressed his intention to form a new advertising agency and invited Diaz to join him, which Diaz declined, suggesting instead that the management should reconcile their differences.

Following this, Diaz experienced a shift in treatment from PAC's management, particularly from PAC President Adriel C. PeAa, who expressed disappointment over Diaz's refusal to join the new venture. Subsequently, after the Cumagun faction bought out the Panganiban group, a major reorganization occurred at PAC, resulting in the abolition of Diaz's position and his reassignment to head a division within the Account Management Group.

On June 27, 1991, Diaz submitted a notice of constructive dismissal, claiming that the changes in his position and the treatment he received constituted a dismissal. He filed a complaint against PAC for illegal dismissal, non-payment of 13th month pay, separation pay, and other monetary claims.

On November 29, 1993, Labor Arbiter Manuel R. Caday ruled that Diaz was not dismissed but had voluntarily severed his employment. The Arbiter ordered PAC to pay Diaz certain monetary benefits, including accrued vacation leave and proportionate 13th month pay, but denied his claim for separation pay.

Dissatisfied, Diaz appealed to the National Labor Relations Commission (NLRC), which, on December 29, 1994, modified the Labor Arbiter's decision. The NLRC ordered PAC to pay Diaz separation pay, moral and exemplary damages, and attorney's fees.

Petitioners PAC and PeAa subsequently filed a petition for certiorari with the Supreme Court, challenging the NLRC's decision.

Legal Issues:

  1. Whether the NLRC acted with grave abuse of discretion in reversing the Labor Arbiter's decision and awarding separation pay and damages to Diaz.
  2. Whether Diaz was constructively dismissed from his employment.
  3. The appropriateness of the awards for moral and exemplary damages.

Arguments:

Petitioners' Arguments:

  • Petitioners contended that the NLRC ignored the Labor Arbiter's factual findings, which were based on the credibility of witnesses and evidence presented during the trial.
  • They argued that the NLRC's award of moral and exemplary damages was excessive and lacked factual or legal basis, citing a previous ruling that limited such awards.

Respondent's Arguments:

  • Diaz maintained that he was constructively dismissed due to the hostile work environment and the demotion of his position, which made his continued employment intolerable.
  • He argued that the NLRC's findings were supported by substantial evidence and that the damages awarded were justified given the circumstances of his dismissal.

Court's Decision and Legal Reasoning:

The Supreme Court affirmed the NLRC's decision with modifications. The Court held that the NLRC did not commit grave abuse of discretion in reversing the Labor Arbiter's ruling. It emphasized that the NLRC has the authority to review and modify decisions of Labor Arbiters, and its factual findings, when supported by evidence, are entitled to respect.

The Court clarified that constructive dismissal occurs when an employee is subjected to intolerable working conditions, which was applicable in Diaz's case. The Court found that Diaz did not abandon his employment, as abandonment requires a clear intention to sever the employer-employee relationship, which was not present.

Regarding the awards for moral and exemplary damages, the Court acknowledged that while such damages are intended to compensate for suffering and to serve as a deterrent against oppressive conduct, they should not lead to unjust enrichment. The Court reduced the moral damages to P100,000 and exemplary damages to P50,000, citing the need for a more reasonable assessment of the circumstances.

Significant Legal Principles Established:

  • The NLRC has the authority to review and modify Labor Arbiter decisions, and its factual findings are generally respected unless shown to be unsupported by evidence.
  • Constructive dismissal can occur even without formal demotion if the working conditions become intolerable.
  • Awards for moral and exemplary damages should be reasonable and not intended for unjust enrichment.