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56 SUPREME COURT REPORTS ANNOTATED

San Miguel Corporation vs. Secretary of Labor

*
No. L-39195. May 16, 1975.

THE SAN MIGUEL CORPORATION and FRANCISCO

ANDRES, petitioners, vs. THE HONORABLE
SECRETARY OF LABOR, NATIONAL LABOR
RELATIONS COMMISSION and GREGORIO
YANGLAY, JR, respondents.

Labor law; Judicial review; Courts; Courts have the power to

review acts of administrative agencies exercising quasi-judicial or
legislative powers.—Yanglay raised a jurisdictional question
which was not brought up by respondent public officials. He
contends that this Court has no jurisdiction to review the
decisions of the NLRC and the Secretary of Labor “under the
principle of separation of powers” and that judicial review is not
provided for in Presidential Decree No. 21. That contention is a
flagrant error. “It is generally understood that as to
administrative agencies exercising quasi-judicial or legislative
power there is an underlying power in the courts to scrutinize the
acts of such agencies on questions of law and jurisdiction even
though no right of review is given by statute” (73 C.J.S. 506, note
56). x x x Judicial review is proper in case of lack of jurisdiction,
grave abuse of discretion, error of law, fraud or collusion
(Timbancaya vs. Vicente, 82 O.G. 9424; Macatangay vs. Secretary
of Public Works and Communication, 63 O.G. 11236; Ortua vs.
Singson Encarnacion, 59 Phil. 440).
Same; Due process; National Labor Relations Commission;
NLRC may decide a labor dispute without giving employer chance
to submit case for arbitration provided record shows the parties
were duly heard.—The San Miguel Corporation contends that the
NLRC gravely abused its discretion and denied the employer due
process of law when it decided the case without giving the
employer a chance to submit the case for arbitration, as provided
in section 4 of Presidential Decree No. 21 and in section 14 of its
Rules and Regulations. The Solicitor General counters that there

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was no denial of due process because the NLRC and the mediator
decided the case on the basis of the investigation which was
conducted by a lawyer of the company pursuant to the grievance
procedure indicated in the collective bargaining agreement. x x x
The ultimate issue in this case is not whether the San Miguel
Corporation was denied due process because the NLRC did not
adhere strictly to the procedure for arbitration. It is undeniable
that the company was given a chance to be heard. To refer now
this case to an arbitrator would only unduly delay its final
disposition.

_________________

* SECOND DIVISION.

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San Miguel Corporation vs. Secretary of Labor

Same; Dismissal of an employee who bought drugs worth

P267.00 from his co-workers which were being given gratis by the
company to its employees and which said workers are not supposed
to sell is unjustified. However, said employee is not entitled to
backwages during period he was out of work.—The misconduct of
employees or workers in misrepresenting to the company that
they needed medicines when in fact their purpose was to sell the
same should not be tolerated. For such misrepresentations or
deceptions, appropriate disciplinary action should be taken
against them. On the other hand, in view of the high cost of living
and the difficulties of supporting a family, it is not surprising that
members of the wage-earning class would do anything possible to
augment their small income. (Compare with People vs. Macbul, 74
Phil. 436). Taking into account the circumstances of the case,
particularly Yanglay’s initial attitude of confessing that his error
was dictated by necessity and his promise not to repeat the same
mistake, we are of the opinion, that his dismissal was a drastic
punishment. He should be reinstated but without back wages
because the company acted in good faith in dismissing him. He
has been sufficiently penalized by the loss of his wages from July
19, 1972 up to this time.

SPECIAL CIVIL ACTION in the Supreme Court.

Certiorari.
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The facts are stated in the opinion of the Court.

          Seguion Reynay Montecillo & Ongsiako for
petitioners.
     Zerrudo & Caling Law Office for private respondent.
     Porfirio E. Villanueva & Apolinario N. Lomabao, Jr.
for respondents Secretary of Labor and The
Commission.

AQUINO, J.:

The San Miguel Corporation in this special civil action of

certiorari seeks to annul the decision of the old National
Labor Relations Commission (NLRC) dated February 27,
1973, ordering the reinstatement (with back wages) of
Gregorio Yanglay, Jr. to his position of operator in the
crown cork department of its Metal Closure and
Lithography Plant located at Cristobal Street, Paco,
Manila. On July 9, 1974 the Secretary of Labor affirmed
that decision which also absolved the company from the
charge of unfair labor practice.
Yanglay worked in the said plant with a daily wage of
fourteen pesos from June 9, 1963 to July 19, 1972, when he
was dismissed by Francisco Andres, the plant manager.
The cause of his dismissal was illegal trafficking in
company medicines.
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58 SUPREME COURT REPORTS ANNOTATED

San Miguel Corporation vs. Secretary of Labor

(According to the company Yanglay was suspended

sixteen times for continuous absences during the period
from November 16, 1964 to December 16, 1971).
The record of NLRC Case No. MC-180, “Gregorio
Yanglay, Jr. versus The San Miguel Corporation and
Francisco Andres”, reveals that Yanglay, a thirty-year old
married man residing at Cavite City, after leaving the
plant at three o’clock in the afternoon of April 22, 1972,
was apprehended by Patrolman E. Reyes of the Manila
Police Department outside the company compound.
Yanglay was carrying a bagful of drugs, such as prothiona
tablets, arlidin, dexopan, rovicon, etc., worth P267, which
were turned over to Salvacion Mercurio, the nurse in
charge of the company’s clinic.

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Yanglay, in his written statement taken by Sergeant

Francisco Enriquez of the company’s security force at
around three-forty of that same afternoon, admitted that
he was caught in possession of the said drugs which he
had bought from his coworkers and which had been given
to them free of charge so as to keep them in the “pink of
health”. Yanglay further admitted:

“Opo, hindi ko na po uulitin ang mga bagay na ito, dala po lamang

ng pangangailangan kaya ko binibili ito, hindi na po mauulit.”

Yanglay was investigated on May 15 and June 23 and 27,

1972 by Beda Gonzalez of the management in the
presence of the union counsel, a union vice-president, the
shop steward and the plant superintendent.
At the investigation on June 27 Yanglay denied that he
was trafficking illegally in drugs of the company. He said
that he bought the drugs from his coworkers in the same
way that some workers bought the rice rations of their
coworkers. He contended that he had not violated any rule
of the company. He clarified that some of the medicines
were given to him by his coworkers.
On the basis of that investigation, Yanglay was
dismissed on July 19, 1972. At the meeting of the union
and management panels on September 22, 1972 to thresh
out Yanglay’s grievance, the union representative
contended that there was no company rule against
trafficking in drugs, which were no longer owned by the
company after having been issued to its workers, and that
the sale of the drugs was like the sale of rice rations
which sale was allegedly tolerated by the company
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San Miguel Corporation vs. Secretary of Labor

officials. The union conceded that suspension should be

the proper disciplinary action but not dismissal. Yanglay
had been in the service of the company for nine years.
The management panel countered that it is evident that
Yanglay’s dismissal was not due to union activities; that
the sale of the drugs was a subversion of the company’s
efforts to give medical benefits to its workers and that
trafficking in rice rations cannot be cited as a justification

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because the value of the rice is reflected in the workers’

income tax returns.
On December 4, 1972 Yanglay filed a complaint with
the NLRC alleging that there was no evidence to justify his
dismissal, that the truth was that he owned the medicines
in question and that he was dismissed because of his union
activities as a “militant shop steward of the Haw at
Buklod ng Manggagawa”, the union representing the
workers of the corporation (NLRC Case No. MC-180).
An NLRC commissioner sent telegrams dated December
5, 1972, notifying the parties that the case was set for
hearing on December 18. On that date Enrique C. Cruz, as
mediatorfactfinder, conducted a preliminary hearing. He
found that an amicable settlement was not possible
because the San Miguel Corporation insisted on the
dismissal of Yanglay.
The case was scheduled for mediation on January 10,
1973. The record does not show what transpired on that
date. On January 12, 1973 the corporation filed a
memorandum wherein it contended (1) that Yanglay’s case
was outside the NLRC’s jurisdiction which extends only to
disputes and grievances occurring after September 21,
1972; (2) that Yanglay’s dismissal was justified and (3)
that, if the dismissal was not justified, his remedy was to
ask for separation pay under the Termination Pay Law.
Yanglay did not submit any memorandum. On
February 21, 1973 the mediator submitted a report
wherein he concluded that Yanglay “was dismissed on a
shaky ground” because the employer had not shown any
violation of any company rule or regulation and that the
persons to be penalized should be those who sold or
delivered the drugs to Yanglay.
Cruz admitted that the San Miguel Corporation “had
not committed unfair labor practice”. He recommended
Yanglay’s reinstatement with back wages from July 19,
1972 (when he was dismissed) up to the date of his
reinstatement.

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San Miguel Corporation vs. Secretary of Labor

The NLRC composed of Amado G. Inciong, Diego P.

Atienza and Ricardo C. Castro, in its aforementioned

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decision adopted the report of Cruz in its entirety.

The San Miguel Corporation moved for the
reconsideration of the decision on the ground that it was
premature because section 14 of the NLRC’s Rules and
Regulations requires that the mediator’s factfinding report
be passed upon by an arbitrator. The motion was treated
as an appeal by the Secretary of Labor. As already
stated, he denied it in his resolution dated July 9, 1974.
Thereafter, the company instituted this certiorari
proceeding.
Yanglay raised a jurisdictional question which was not
brought up by respondent public officials. He contends that
this Court has no jurisdiction to review the decisions of
the NLRC and the Secretary of Labor “under the
principle of separation of powers” and that judicial review
is not provided for in Presidential Decree No. 21.
That contention is a flagrant error. “It is generally
understood that as to administrative agencies exercising
quasijudicial or legislative power there is an underlying
power in the courts to scrutinize the acts of such agencies
on questions of law and jurisdiction even though no right
of review is given by statute” (73 C.J.S. 506, note 56).
“The purpose of judicial review is to keep the
administrative agency within its jurisdiction and protect
substantial rights of parties affected by its decisions” (73
C. J. S. 507, Sec. 165). It is part of the system of checks
and balances which restricts the separation of powers and
forestalls arbitrary and unjust adjudications.
Judicial review is proper in case of lack of jurisdiction,
grave abuse of discretion, error of law, fraud or collusion
(Timbancaya vs. Vicente, 62 O.G. 9424; Macatangay vs.
Secretary of Public Works and Communications, 63 O. G.
11236; Ortua vs. Singson Encarnacion, 59 Phil. 440).
“The courts may declare an action or resolution of an
administrative authority to be illegal (1) because it violates
or fails to comply with some mandatory provision of the
law or (2) because it is corrupt, arbitrary or capricious”
(Borromeo vs. City of Manila and Rodriguez Lanuza, 62
Phil. 512, 516; Villegas vs. Auditor General, L-21352,
November 29, 1966, 18 SCRA 877, 891).

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The San Miguel Corporation contends that the NLRC

gravely abused its discretion and denied the employer due
process of law when it decided the case without giving the
employer a chance to submit the case for arbitration, as
provided in section 4 of Presidential Decree No. 21 and in
section 14 of its Rules and Regulations.
The Solicitor General counters that there was no denial
of due process because the NLRC and the mediator
decided the case on the basis of the investigation which
was conducted by a lawyer of the company pursuant to
the grievance procedure indicated in the collective
bargaining agreement.
The Solicitor General made the following cogent and
judicious observations to support his contention that the
San Miguel Corporation was not denied due process:

“1. x x x in said grievance procedure, a lengthy recorded

investigation was conducted wherein the parties were duly
represented by their respective counsel and wherein the
petitioner herein was granted every opportunity to present its
evidence and cross-examine witnesses in support of its then
contemplated and consequent action in the premises; that after
the filing of the complaint by the private respondent, a
preliminary factfinding was had with both parties present and/or
duly represented wherein a preliminary factfinding report was
rendered stating that the respondents (petitioners herein) were
adamant in their stand regarding complainant’s dismissal and
that the possibility of settlement between the parties was ruled
out x x x; that thereafter, mediation and further factfinding were
held at which hearings petitioners, instead of presenting their
evidence, opted to merely file a memorandum while complainant
(private respondent herein) elected to submit the records of the
proceedings in the grievance stage; that thereafter, a mediation
Factfinding Report was rendered on February 21, 1973, on the
basis of which a decision was rendered by the respondent NLRC
on February 27, 1973.

x x x      x x x      x x x

“3. It is evident from the report of the mediator factfinder that

he had considered all the facts and evidence presented by both
parties. Likewise indubitably clear is the fact that the parties no
longer intended to present further evidence on the matter. Faced
therefore with the foregoing circumstances, the NLRC was left
without recourse but to exercise its power of arbitration as per
section 4 of Presidential Decree No. 21 and after assessing the
evidence before it rendered its decision thereunder. So should it

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be in cases of this nature, since it would have been futile to

further prolong the proceedings by again setting the case for
hearing when the parties

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San Miguel Corporation vs. Secretary of Labor

themselves no longer intended to present further evidence. In

short, while the action of the NLRC may have been summary, it
cannot and does not constitute a denial of due process.”

The ultimate issue in this case is not whether the San

Miguel Corporation was denied due process because the
NLRC did not adhere strictly to the procedure for
arbitration. It is undeniable that the company was given a
chance to be heard. To refer now this case to an arbitrator
would only unduly delay its final disposition.
The real issue is whether, considering the undisputed
facts that Yanglay bought from his coworkers drugs worth
P267 which were given to them gratis, which they were not
supposed to sell and which, after seizure from Yanglay,
were returned to the company, his dismissal from
employment was justified.
That was the first time he was caught trafficking in
company-supplied drugs. He confessed that necessity
forced him to buy the drugs. He promised not to do it
again. His impression was that, like the rice rations whose
sale was tolerated by the company officials, he could
engage in the buy-and-sell of the drugs. He argued that
his coworkers, who gave or sold to him the drugs, were
equally culpable in sabotaging the company’s practice of
rendering free medical assistance to its employees.
The misconduct of employees or workers in
misrepresenting to the company that they needed
medicines when in fact their purpose was to sell the same
should not be tolerated. For such misrepresentations or
deceptions, appropriate disciplinary action should be taken
against them. On the other hand, in view of the high cost
of living and the difficulties of supporting a family, it is
not surprising that members of the wage-earning class
would do anything possible to augment their small income.
(Compare with People vs. Macbul, 74 Phil. 436).
Taking into account the circumstances of the case,
particularly Yanglay’s initial attitude of confessing that
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his error was dictated by necessity and his promise not to

repeat the same mistake, we are of the opinion that his
dismissal was a drastic punishment. He should be
reinstated but without back wages because the company
acted in good faith in dismissing him (Findlay Millar
Timber Company vs. Philippine Land-Air-Sea Labor
Union, L-18217 and L-18222, September 29, 1962, 6 SCRA
226). He has been sufficiently penalized by the loss of his
wages from July 19, 1972 up to this time.

63

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Denila vs. Bellosillo

WHEREFORE, the resolution of the Secretary of Labor

and the decision of the defunct National Labor
Relations Commission are modified in the sense that
Gregorio Yanglay, Jr. should be reinstated without back
wages. Costs against the petitioners.
SO ORDERED.

          Fernando (Chairman), Barredo, Antonio and

Concepcion Jr., JJ., concur.

Resolution and decision modified.

Notes.—Whatever a dismissed employee actually

earned during the period which is the basis for the
computation of the backwages due to the said illegally
dismissed employee must be deducted from the award of
backwages. (Phil. Fiber Processing Co., Inc. vs. Court of
Industrial Relations, 52 SCRA 118).
If, between the time of the occurrence of the wrongful
discharge and the proposed order of reinstatement, the
employer’s commercial or financial circumstances have
changed, the Court of Industrial Relations (now the
National Labor Relations Commission), despite the
employer’s unfair labor practice, cannot compel the
employer to reinstate such a number of employees as may
exceed his needs under the altered conditions. However,
the court has the right to order that such employees be
given precedence in future hiring. (Columbian Rope Co. vs.
Tacloban Association of Laborers and Employees, L-14848,
October 31, 1962).

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The Court has the power to set a fixed amount of

backwages in favor of an illegally dismissed employee
without further qualifications. (Mercury Drug Co., Inc. vs.
Court of Industrial Relations, 56 SCRA 710).

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