INTERCONTINENTAL BROADCASTING CORPORATION, PETITIONER, VS. REYNALDO BENEDICTO, DECEASED, SUBSTITUTED BY HIS SURVIVING SPOUSE LOURDES V. BENEDICTO, AND CHILDREN, NAMELY: REYNALDO…

Intercontinental Broadcasting versus Benedicto

The Case

This is a labor case that began as a complaint for illegal dismissal and damages filed by Reynaldo Benedicto against his former employer, Intercontinental Broadcasting Corporation, the government-owned broadcasting entity that operates television Channel 13. Benedicto, who had served as marketing manager, was terminated by a letter of the company president in October 1994, and he claimed there was neither just nor authorized cause for his separation. The case matters for two reasons a reviewee must hold onto: it teaches the rule on perfecting an employer's appeal by posting a bond under the Labor Code, and it fixes the outer limit of backwages and commissions at the employee's compulsory retirement age of sixty-five.

Procedural History

The complaint was filed with the National Labor Relations Commission in December 1996. The labor arbiter, Jovencio Mayor, Jr., ruled in August 1998 that Benedicto was illegally dismissed, and ordered reinstatement with full backwages, payment of his one percent commission on the VTV Corporation contract, and attorney's fees, while dismissing the claim for moral and exemplary damages. The company appealed to the National Labor Relations Commission but posted its appeal bond only after the ten-day period had lapsed, having first filed a motion to re-compute the award on which the bond was to be based. The Commission dismissed the appeal in March 1999 for failure to perfect it, and the Court of Appeals affirmed in October 2001, denying reconsideration in March 2002. The company then came to the Supreme Court by petition for review on certiorari, and the Court issued a temporary restraining order in June 2002. Benedicto died in November 2002 and was substituted by his surviving spouse and children.

Facts

In 1993, Reynaldo Benedicto was appointed marketing manager of Intercontinental Broadcasting Corporation by its then general manager, with a monthly compensation of twenty thousand pesos plus a one percent commission from collections of all advertising contracts consummated. He claimed that he improved the network's audience ratings and financial strength, and that in 1994 he initiated and consummated a five-year advertising contract with VTV Corporation worth six hundred million pesos.

On October 11, 1994, the company president, Tomas Gomez III, wrote Benedicto a letter relieving him of his position effective immediately, citing loss of management confidence in his capacity and competence. Benedicto was sixty-four years old at the time, and he turned sixty-five on December 1, 1994.

He filed his complaint in December 1996. The labor arbiter found illegal dismissal and made the monetary awards already described, later increasing the backwages by one hundred eighty thousand pesos and awarding an additional commission. The company's appeal was dismissed on technical grounds, and the case reached the Supreme Court, where Benedicto's death mooted the question of reinstatement and left the money judgment to be resolved.

Issues

• Whether or not the company perfected its appeal to the National Labor Relations Commission despite posting the appeal bond after the reglementary period.
• Whether or not the company is estopped from denying that Benedicto was its employee, and whether the finding of illegal dismissal stands.
• Whether or not the award of backwages should be limited to the period ending when Benedicto reached the compulsory retirement age of sixty-five.
• Whether or not the award of commissions should likewise be limited to that same period.
• Whether or not the company is liable for attorney's fees, and how the claim of Atty. Rodolfo Barriga for his own fees should be resolved.

Applicable Provisions

The second paragraph of Article 223 of the Labor Code governs perfection of an employer's appeal in a case involving a monetary award:

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.

This is the provision the Court liberally interpreted, because the bond secures the workers' award and discourages employers from using appeal to delay payment.

Article 287 of the Labor Code, as amended by Republic Act Number 7641, fixes the compulsory retirement age:

Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one half (½) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

This is the measure the Court used to cut off backwages and commissions at age sixty-five.

Article 1378 of the New Civil Code supplies the rule on interpreting doubtful stipulations:

When it is absolutely impossible to settle doubts by the rules established in the preceding articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission of rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interest.

The Court invoked this to reject a reading of the commission clause that would burden the employer indefinitely.

Ruling

On the first issue, the Court held that the appeal was substantially compliant and should be liberally treated. The company posted the bond when the Commission failed to act on its motion to re-compute the award, and it raised a meritorious ground on the computation of backwages. The Court quoted its earlier ruling in Buenaobra versus Lim King Guan:

It is true that the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of making the judgment final and executory. However, technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.

On the second issue, the Court held the company estopped from denying the employment, since its own president wrote the termination letter, and it never contested the finding of illegal dismissal. Those factual findings, supported by substantial evidence, bind the Court.

On the third issue, the Court agreed that backwages stop at compulsory retirement. Benedicto was sixty-four when dismissed and turned sixty-five on December 1, 1994, so backwages run only from October 11 to December 1, 1994, because backwages are granted on grounds of equity for earnings lost, and he could have worked no longer than that.

On the fourth issue, the Court held that the commission is coterminous with employment and ends at retirement, since commissions reward effort that produces income and cannot be received indefinitely. The stipulation did not fix a period, and under Article 1378 doubts in onerous contracts are settled in favor of the greatest reciprocity of interests. The labor arbiter must therefore re-compute the commission for the same period.

On the fifth issue, the Court sustained attorney's fees at ten percent of the total award, but held that Atty. Barriga's claim requires factual determination and must be heard by the labor arbiter executing the judgment.

Doctrine

First, under the second paragraph of Article 223 of the Labor Code, an employer's appeal in a monetary award case is perfected only by posting a cash or surety bond equivalent to the award, but this requirement is liberally construed, and substantial compliance justifies relaxing the period where the appellant moved to reduce the bond and posted it when no action was taken.

Second, backwages are granted on grounds of equity for earnings lost, and they cease at the employee's compulsory retirement age of sixty-five under Article 287 of the Labor Code.

Third, commissions are compensation for services tied to the employment, so the right to them is coterminous with employment and ends at compulsory retirement; a commission clause with no stated period is read under Article 1378 of the New Civil Code in favor of the greatest reciprocity of interests.

Disposition

The Court reversed and set aside the Court of Appeals decision and resolution, ordered the company to pay backwages and commissions for the period from October 11, 1994 to December 1, 1994 plus ten percent attorney's fees, remanded the case to the labor arbiter for re-computation and for hearing Atty. Barriga's claim, and lifted the temporary restraining order.

Remember This

Memorize the line that backwages and commissions are both cut off at the compulsory retirement age of sixty-five, because the employee could not have earned beyond it. Examiners use this case to test the liberal interpretation of the appeal bond under Article 223 and the equity rule limiting backwages at retirement.