DAMASO P. PEREZ, PETITIONER, VS. COURT OF APPEALS AND ARMANDO HERRADURA, RESPONDENTS.

From the decision of the Court of Appeals affirming with modification the
decision of the Court of First Instance of Manila (in Civil Case No. 41080),
Damaso P. Perez filed, the instant petition for
review, contesting the correctness of the ruling ordering him to pay to
respondent Armando Herradura P600.00 for unpaid
salaries, P400.00 separation pay, and Pl,000.00 as
moral damages.

On August 1, 1958,
respondent Herradura was appointed by petitioner as
manager of the D. P. Perez Insurance Agency with a monthly salary of P400.00.
Respondent forthwith discharged the functions thereof. However, in a letter
dated January 15, 1959, petitioner Damaso Perez
informed respondent that because respondent failed to produce the promised
amount of business, the agency would no longer be in a position to continue with
his services under the original arrangement and, consequently, the latter was
being appointed, effective that date, as manager of its Non-Life department with
compensation on commission basis only. As a result thereof, respondent resigned
the following day, from his employment in the agency.

On February 11, 1959,
respondent filed in Regional office No. 3 of the Department of Labor a claim for
separation pay^[1] against petitioner Damaso P. Perez. On February 24, 1959, respondent, likewise, filed a
complaint for estafa in the City Fiscal’s office against petitioner, for the same act of
alleged non-payment of his salaries (I.S. 4482).

On August 4, 1959, or while this criminal complaint was pending
investigation, petitioner instituted in the Court of First Instance of Manila
Civil Case No. 41080 (the present action), for consignation and declaratory
relief, alleging that notwithstanding his offers for payment of the sum of
P600.00 demanded by respondent as unpaid salaries, the latter refused to accept
the same. Thus, petitioner deposited said amount in court. In his answer to this
petition, respondent denied the allegation that there was tender of payment made
by petitioner, and in turn made a counterclaim for moral damages and attorney’s
fees. Thereafter, the City Fiscal dropped the criminal complaint against
petitioner by reason of the alleged satisfaction of the unpaid salaries subject
of the complaint, and due to defendant’s desistance to prosecute.

In the consignation-case, the lower court, after hearing, rendered judgment
finding petitioner liable for unpaid salaries of respondent for the period of
from December 1, 1958 to
January 15, 1959. Petitioner
was also ordered to pay him separation pay corresponding to respondents one
month salary, or P400.00, moral damages in the sum of P2,000.00 and P500.00 as attorney’s fees. On appeal by
petitioner, the Court of Appeals modified the lower court’s decision only by
reducing the moral damages from P2,000.00 to P1,000.00
and eliminating the provision for attorney’s fees. Hence, the
filing of the instant petition for review.

There is no disagreement as to the fact that respondent worked for
petitioner’s agency for five and one-half months from August 1, 1958 to January
15, 1959) that he was informed of the change of the nature of his employment,
from monthly salary to commission basis, on January 15, 1959 said arrangement to
take effect on the same day; that this new appointment forced him to resign from
his employment. In assailing the award of separation pay to respondent,
petitioner contends that the former was not entitled thereto, respondent having
rendered service for less than six months. The contention is without merit.

Under Republic Act 1052^[2] before
its amendment by Republic Act 1787, an employment for an indefinite period can
not be terminated by the employer without serving upon the employee, one month
advance notice thereof or paying him separation pay corresponding to his salary
for one month. Note that while the law imposes the obligation, to give one month
advance notice, on both the employer and employee, should the employee violate
the same, the latter is not subject at all to any liability. Also, the law makes
no distinction between justified and unjustified separation or dismissal. Neither is the employee’s length of service
taken as a factor in the matter of award of separation pay. ^[3] With the introduction of the amendment,
however, the law on termination pay became more specific. In the first place,
termination of employment was classified into two: those for just cause and
those without, the law itself providing what constitute just cause for severance
of employment. The employee who violates the injunction
against termination of employment without advance notice to his employer, may
now be held liable for damages. Upon the other hand, in determining the period
of notice or the corresponding compensation to which a dismissed employee shall
be entitled, the length of his service to the employer is taken into
consideration. It is clear, therefore, that while under Republic Act 1952, every
dismissed employee is entitled to one month advance notice or the equivalent
separation pay, under Republic Act 1787, an employee who was dismissed without
just cause shall be entitled to at least one month advance notice or severance
pay, or shall be credited with half-month for every year of service, whichever
is longer. In other words, if an employee had rendered services for 3
years—since he shall be credited half-month for every year of service—he will be
entitled to advance notice of one and one-half months or the equivalent salary
for said period. If he is credited with two years service, he is entitled to one
month notice. If he has served for at least one year and six months, he also
deserves one month notice, because the fraction of six months shall be
considered one year. Suppose the employee has worked for one year and five
months? Although the employee shall be credited with only half month for the one
year service, and the fraction of five months is not considered one year,
nevertheless, he is to be given one month notice, because under the law an
employee is entitled to at least one month notice, the length of service being
the basis of computation only if the result thereof will be more than one month.
Differently stated, the minimum period of notice to which an employee is
entitled, irrespective of the length of his service to the employer, is one
month. It is needless to emphasize that this provision applies only if the
termination of employment has been made without just cause. In the present case,
it has not been proved that respondent’s separation from the service was for any
of the causes mentioned in the law as justifying termination of his
employment.

Petitioner, likewise, assails the award of moral damages to respondent in the
sum of Pl,000.00. In this connection, the only basis
mentioned by the Court of Appeals for the award of moral damages was that “from
the time his (respondent’s) services were terminated by the plaintiff on January
15, 1959, up to the time that he was able to land a job with the Stanvac Company, he had suffered much, being the father of a
family with five children; he was downtrodden and had no other recourse than to
pawn the small pieces of jewelry belonging to his wife.” We do not believe this
is sufficient ground to award moral damages. In no part of the decision under
review is a finding that the non-payment of respondent’s salary in due time was
malicious, fraudulent or in bad faith. And we have held in various cases that in
breach of contracts, moral damages may be awarded only where the breach was
wanton or deliberately injurious, or the one responsible acted fraudulently or
with malice or bad faith.^[4]

As petitioner acknowledges his liability for respondents unpaid salaries for
one and one-half months, the sum of P600.00 deposited in court may accordingly
be disposed of for this purpose.

WHEREFORE, as thus modified, by eliminating the award, of moral
damages, the decision of the Court of Appeals is hereby affirmed, with costs
against petitioner.

SO ORDERED.

Bengzon, C.J., Bautista Angelo, Reyes,
.J.B.L., Paredes, JJ., concur.

^[1] This
claim was later amended to include demand for unpaid salary for one and a half
months.

^[2] “An act to provide for the
manner of terminating employment without a definite period in a commercial,
industrial, or agricultural establishment or enterprise.

“SEC. 1. In cases of employment, without a definite
period, in a commercial, industrial or agricultural establishment or enterprise,
neither the employer nor the employee shall terminate the employment without
serving notice on the other at least one month in advance.

“The employee, upon whom no such notice was served, shall be entitled to one
month’s compensation from the date of termination of his employment.

“SEC 3. This Act shall take effect upon its
approval.” (Republic Act 1052).

^[3] “SEC. 1. In cases of
employment, without definite period, in a commercial, industrial, or
agricultural establishment or enterprise, the employer or the employee may
terminate at any time the employment with just cause; or without just cause in
case of an employee by serving notice on the employer at least one month in
advance, or in the case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every year of service of the
employee, whichever is longer, a fraction of at least six months being
considered as one whole year.

“The employer, upon whom no such notice was served in case of termination of
employment without just cause may hold the employee liable for damages.

“The employee, upon whom no such notice was served
in case of termination of employment without just cause shall be entitled to
compensation from the date of termination of his employment in an amount
equivalent to his salaries or wages corresponding to the required period of
notice. (Republic Act 1787).

^[4] Nacesito, et. al., vs. Pares, et. al., 104 Phil. 75; Tamayo vs.
Aquino, 105 Phil.949; Francisco vs. GSIS, et. al., and cases cited therein, 1959; Francisco vs. GSIS,
et. al., G.R. No. L-18287,
Nov. 30, 1963.