SECOND DIVISION

[G.R. No. 143998. April 29, 2005.]

MERCURY DRUG CORPORATION, petitioner, vs. ARACELI
DOMINGO, respondent.

DECISION

CHICO-NAZARIO, J :
p

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the Decision 1(1) of 22 March 2000 and the
Resolution of 10 July 2000 of the Court of Appeals in CA-G.R. SP No. 49227. The
appellate court set aside and reversed the Decision 2(2) of the National Labor Relations
Commission (NLRC), Third Division, dated 30 April 1998, and reinstated the
Decision 3(3) of the Labor Arbiter dated 30 October 1996 in NLRC NCR
00-07-03639-92 with modifications. The case before the Labor Arbiter was for illegal
suspension, constructive dismissal and nonpayment of wages, with the latter ruling in
favor of the respondent herein.
The Facts of the Case
On 18 April 1977, herein respondent Araceli Domingo started working for
herein petitioner Mercury Drug Corporation as a Sales Clerk Trainee at its Padilla
Arcade branch in Greenhills, San Juan. On 01 January 1978, the respondent became a
regular Sales Clerk until her promotion and transfer as a Pharmacy Assistant at the
petitioner's Pasig-Rosario branch on 01 February 1982. Finally, on 01 July 1985, until
she was preventively suspended on 10 June 1992, the respondent occupied the
position of Cashier at the petitioner's Cubao-Romulo branch.
On the day of 09 June 1992, the respondent was ordered to report to the
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Assistant Vice-President for Chainstore Operations, Mr. Angelito Dizon, in the main
office. Upon her arrival at the said office, she was confronted by three of her
supervisors, namely, Monette de la Cruz, Olivia Reotutar and Artemio Tolilio, and
Rico Marasigan and Eladio Sioson, both Senior Pharmacy Assistants at the
Cubao-Romulo branch. The respondent, along with Mr. Eladio Sioson, her
co-worker, were being accused of leaking confidential information or data to
outsiders. As quoted in the Decision 4(4) of the Labor Arbiter, Mr. Dizon verbally
accused the respondent of divulging confidential information to her husband, Gene
Domingo, who was at one time a Branch Manager of the petitioner at its Paco-Paz
branch, but who was at that time the current Operations Manager of Shoe Mart's
drugstore business, to wit:
TIHDAa

Traydor Ka! Dahil sa kabalbalan n'yo ng asawa mo, maraming taong

matatanggal sa trabaho; kaya mabuti pang mag-resign ka na lang at magsama
na kayo sa Shoe Mart. Itong kasama mong si Boy Sioson, tatanggalin ko na sa
trabaho dahil ginagamit ninyo sa kabalbalan ninyo. 5(5)

The respondent then asked what wrong she committed and Mr. Dizon angrily
remarked:
Marami! Kahit anong kaso ibibintang ko sa iyo matanggal ka lang sa
kompanyang ito. Kahit na abutin tayo ng sampu (10) hanggang dalawampung
(20) taon sa korte, lalabanan kita. 6(6)

Thereafter, the respondent was asked to sign a letter 7(7) putting her on
preventive suspension from 10 June 1992 until further notice. Eladio Sioson was also
served with same Memorandum 8(8) placing him on preventive suspension from 10
June 1992 until further notice.
A Special Investigating Committee was subsequently created by the petitioner
to investigate the matter. The committee, composed of three rank-and-file employees
and three managerial employees, was tasked to conduct a formal investigation.
Aggrieved, the respondent, as well as Sioson, filed on 06 July 1992 a
complaint for illegal preventive suspension, constructive dismissal and nonpayment
of wages against the petitioner company, with the NLRC National Capital Region
(NCR) Arbitration Branch, docketed as NLRC NCR 00-07-03639-92.
On 10 July 1992, with the investigation still ongoing, the petitioner informed
both the respondent and Sioson that they could start getting their salaries again but
their suspension would still be in effect until such time that the committee comes out
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with its findings. 9(9)

The parties failed to reach an amicable settlement before the Labor Arbiter,
hence, they were required to submit their respective position papers.
Petitioner Mercury Drug Corporation, through its District Manager, Mrs. Elena
Martin, denied that the respondent was treated badly during the said confrontation.
She alleged that the confrontation was done in a civil, interrogative manner and not
accusatory "with bombardment of wild accusations and uncharitable remarks; . . . that
there were strong evidence to support a suspicion that complainant Domingo was
supplying confidential information, thus, abetting business competitors."
CAHaST

In the meantime, both the respondent and Sioson were informed in writing that
the Special Investigating Committee found them innocent of the charges filed against
them. Accordingly, all charges filed against them have been dropped and the
preventive suspension lifted.
Both employees were then notified to return to work. However, the petitioner
company "perceived that animosity had arisen between respondent and Mr. Sioson,
and the employees in the Cubao-Romulo Branch who testified against them," 10(10)
thus, Sioson was directed to report to his new assignment at the Murphy branch of the
petitioner whilst the respondent was told to report for work at the Divisoria or
Baclaran branch, at her option. The petitioner company likewise filed a Manifestation
11(11) with the Labor Arbiter stating that the respondent can no longer be reinstated to
her former position as Cashier in its Cubao-Romulo branch because it already filled
up said position during the preventive suspension of the respondent and the only
vacant position at that time was in its Divisoria and Baclaran branches.
Sioson accepted the new assignment and thereafter desisted from further
prosecuting the complaints earlier filed. The respondent, however, objected to being
"thrown away" to another branch "to deliberately inconvenience and harass her for
filing and prosecuting her complaint" against the petitioner, 12(12) thus, she refused to
report for work. One year later, or in August 1994, the respondent was again ordered
to report to the petitioner's San Juan branch within ten days, otherwise, she would be
considered to have abandoned her job.
The Labor Arbiter, in his disputed Decision
adjudged:

13(13)

of 30 October 1996,

WHEREFORE, the foregoing premises considered, judgment is hereby

rendered declaring the suspension of complainant Araceli C. Domingo starting
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June 10, 1992 up to the present as illegal; that suspension in perpetua

constituted as an illegal (constructive) dismissal of the said complainant; and
hereby order respondent Mercury Drug Corporation to:
a)

reinstate immediately complainant Araceli C. Domingo to her

former position as a cashier in Mercury Cubao-Romulo Branch,
Quezon City, with full backwages until her actual reinstatement,
less than total basic salaries paid to her during the period of her
payroll reinstatement, without loss of seniority right and other
benefits, including average merit increase which up to this
writing is in the amount of P111,960.30;

b)

pay complainant Domingo the accumulated amount for rice

subsidy since 1992 computed at the rate of P700.00 every other
month or in the total amount of P18,200.00;

c)

pay complainant Domingo the appropriate unpaid anniversary

bonuses since 1992;

d)

pay complainant Domingo moral and exemplary damages in the

total amount of P250,000.00; and
DACaTI

e)

pay complainant Domingo the amount equivalent to 10% of the

total awards as attorney's fees or in the total amount of
P69,755.11.

Aggrieved by the said decision, herein petitioner company filed an appeal with
the NLRC. On 30 April 1998, the NLRC, Third Division, promulgated its judgment
14(14) modifying the decision of the Labor Arbiter. The NLRC held that:
We are not in full accord with the conclusions of the Labor Arbiter.
We agree that complainant was placed under preventive suspension
illegally. Complainants alleged actuation of taking home empty medicine boxes
already thrown to garbage did not pose a serious and imminent threat to the life
and property of the respondent company nor to her co-employees. That
complainant took the empty medicine boxes for her husband's use in a seminar
at respondent's competitor company had not been duly established; Complainant
positively stated that she took the boxes for her children.
We disagree, however, that complainant was constructively dismissed
when she was given another assignment after she was cleared of the charges.
For such transfer was justified. Complainant had actually exceeded the five year
assignment policy adopted by respondent and that her return to old assignment
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would create animosity therein as her co-employees testified against her. We

then uphold respondent's prerogative to transfer complainant to another
assignment at her option. . . [W]e cannot also fault complainant for insisting on
her reinstatement to same position in the belief that she was constructively
dismissed. Hence, complainant need not refund the salaries received for it was
voluntarily given by respondent. She is not however, entitled to other benefits
decreed in the Decision.
xxx

xxx

xxx

PREMISES CONSIDERED, the Decision of October 30, 1996 is hereby

MODIFIED by deleting the award of balance of backwages, other benefits,
moral/exemplary damages and attorney's fees as decreed in the Decision. The
other findings stand affirmed. Respondent is directed to assign complainant as
Cashier in a different branch at her option without loss of seniority rights and
benefits.

Both parties moved to have the above-quoted decision reconsidered.

On 22 June 1998, the NLRC promulgated a Resolution 15(15) denying the
Motion for Reconsideration filed by herein petitioner company for lack of merit.
Subsequently, on 17 July 1998, the commission resolved 16(16) to dismiss the motion
filed by herein respondent Domingo as there was "no cogent reason or sufficient
justification to disturb the same which is substantially supported by evidence on
record as well as applicable law and jurisprudence."
aSDCIE

Herein respondent Domingo filed a Petition for Certiorari with the Court of
Appeals assailing the decision and resolution of the Commission.
On 22 March 2000, the Court of Appeals rendered its questioned decision, the
dispositive portion of which states that:
IN LIGHT OF ALL THE FOREGOING, the Decision of the Public
Respondent, Annex "S" of the Petition, and its Resolution, Annex "V" of the
Petition, are hereby SET ASIDE and REVERSED. Another Decision is hereby
rendered affirming the Decision of the Labor Arbiter, with MODIFICATIONS,
ordering the Private Respondent to:
a) Reinstate immediately complainant Araceli C. Domingo to
her former position as a cashier in Mercury Cubao-Romulo Branch,
Quezon City, with full backwages until her actual reinstatement, less the
total basic salaries paid to her during the period of her payroll
reinstatement, without loss of seniority right and other benefits,
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including average merit increase;

b) Pay Petitioner the accumulated amount for rice subsidy
since 1992 computed at the rate of P700.00 every other month;
c) Pay Petitioner the appropriate unpaid anniversary bonuses
since 1992;
d) Pay Petitioner moral damages in the amount of P50,000.00
and exemplary damages in the amount of P50,000.00; [and]
e) Pay Petitioner the amount equivalent to 10% of the total
award for backwages as attorney's fees. 17(17)

Its motion for reconsideration having been denied, petitioner company filed
this instant petition.
The Issue
In its Memorandum before us, the petitioner imputes the following errors to
the appellate court:
A
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT RULED THAT PETITIONER CANNOT LAWFULLY EMPLOY
ANOTHER BY WAY OF REPLACEMENT OF THE RESPONDENT
BEFORE THE TERMINATION OF ADMINISTRATIVE INVESTIGATION
AGAINST THE LATTER.
IASTDE

B
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT RULED THAT RESPONDENT JUSTIFIABLY REJECTED HER NEW
ASSIGNMENT.
C
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT APPLIED THE RULING IN THE CASE OF REMEDIOS ASIS VS. NLRC
(252 SCRA 379).
D
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
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IT REFUSED TO UPHOLD PETITIONER'S PREROGATIVE TO

TRANSFER RESPONDENT FROM CUBAO-ROMULO BRANCH, SUCH
TRANSFER BEING (sic).
E
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT
RULING THAT RESPONDENT HAS NO VESTED RIGHT IN HER
PREVIOUS PLACE OF ASSIGNMENT AND THAT HER WISHES
CANNOT PREVAIL OVER PETITIONER'S PREROGATIVE.
F
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT DID NOT RULE THAT RESPONDENT WAS NOT DISMISSED,
ACTUALLY OR CONSTRUCTIVELY.
G
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
APPLYING THE RULING OF THIS HONORABLE COURT IN
GLOBE-MACKAY CABLE VS. NLRC, (206 SCRA 701).
H
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
TOTALLY REINSTATING THE LABOR ARBITER'S DECISION.
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT DID NOT DECLARE RESPONDENT TO HAVE LOST HER
EMPLOYMENT STATUS.
J
ON THE ASSUMPTION THAT RESPONDENT CANNOT BE DECLARED
TO HAVE LOST HER EMPLOYMENT STATUS, THE HONORABLE
COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT
ORDERING PAYMENT TO HER OF SEPARATION PAY IN LIEU OF
REINSTATEMENT. 18(18)

In sum, the following issues can be stated in one concise statement, that is,
whether or not the petitioner's order to transfer respondent Domingo from its
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Cubao-Romulo branch to its Divisoria or Baclaran branch was a valid exercise of its
management prerogative and, thus, did not amount to constructive dismissal.
DHESca

Petitioner contends that it only exercised its management prerogative when it

ordered the transfer of the respondent from the Cubao-Romulo branch to one of its
branches in Divisoria or Baclaran. According to the petitioner, the use of said
prerogative was perfectly justified by the following circumstances: (1) its hiring of
another person to perform the work of an employee under preventive suspension; (2)
its company policy of transferring employees every five years; and (3) to avoid
animosity that is likely [to] arise between the respondent and the employees in the
Cubao-Romulo branch who testified against her, and to its judgment and perception,
it would not be conducive to a healthy working condition. 19(19)
Conversely, the respondent argues that the Court of Appeals correctly held that
the petitioner was mandated to reinstate her to her former position as Cashier at the
Cubao-Romulo branch as a result of her being exonerated of the administrative
charges for which she was investigated.
The Ruling of the Court
The petition has no merit.
The resolution of the basic issue of the case at bar depends upon a
determination of the validity of the petitioner's order of transfer and the respondent's
subsequent refusal to obey said transfer. To put an end to this controversy between
the parties, the scope and limits of the exercise of management prerogative must be
balanced against the security of tenure given to labor. At the outset, we have
recognized that management has a wide latitude to regulate, according to its own
discretion and judgment, all aspects of employment, including the freedom to transfer
and reassign employees according to the requirements of its business. 20(20)
But of course, like other prerogatives, the right to transfer or reassign is subject
to limitations arising under the law, contract or general principles of fair play and
justice. 21(21) Jurisprudence proscribes transfers or reassignments of employees when
such acts are unreasonable and cause inconvenience or prejudice to them. 22(22)
The petitioner avers that the order of transfer was well within its managerial
prerogative to make and that there was never any agreement that private respondent
had to be assigned at a fixed place.
The appellate court, on the other hand, explains that the order of transfer was
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effected with bad faith, as it was issued in response to the illegal dismissal case filed
by the respondent.
The records of the present case sustain the findings of the appellate court.
The petitioner advances the claim that it had already employed a replacement
for the position left vacant by the respondent when the latter was preventively
suspended. It further justifies the said transfer by an alleged existing company policy
that an employee who has stayed at a certain branch or place of assignment for five
years is already due for transfer to another place.
SAHIaD

Basically, the foregoing assertions are well and good if such were really the
basis for the transfer. Considering the factual circumstances of the case at bar,
however, such claims are nothing more than specious arguments or mere afterthought
advanced to put credence to the order of transfer. In its memorandum submitted
before us, the petitioner explicitly stated that its main reason for ordering the transfer
of the respondent was "to avoid animosity that is likely (to) arise between the
respondent and the employees in the Cubao-Romulo branch who testified against her,
and to its judgment and perception, it would not be conducive to a healthy working
condition." 23(23) In other words, the petitioner's foremost concern was the anticipated
animosity that would arise in the workplace and not because of any company policy
or lack of vacant position.
Moreover, if indeed, the company policy was being strictly followed, or if
there was one in the first place, the respondent should have been transferred long
before the controversy ever started or sometime in 1989 or 1990 upon her reaching
five years in the same branch. On the contrary, the respondent continued working at
the petitioner's Cubao-Romulo branch from 1985 up to 1992 when the controversy
began. Verily, it was only in 1993, while the legal controversy was in progress, that
the respondent was informed of the order of transfer.
In the case at bar, we find no compelling reason to justify the petitioner's order
of transfer. The petitioner's bare assertion that the transfer or reassignment was done
in anticipation of the ill feelings that will permeate the workplace at its
Cubao-Romulo branch does not convince. The Court of Appeals hit it squarely on the
head when it stated that:
. . . while a friction may be, in the interim, expected between the
Petitioner and the said employees, as an aftermath of the investigation, however,
the same does not justify the transfer of the Petitioner to another Branch of the
Private Respondent, prejudicial to her. For if it were, reinstatement can never be
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possible simply because some hostility is invariably engendered between the

Petitioner and said employees or even the officers of the Private Respondent
concerned, for that matter, as a result of the investigation. The principle of
animosity or strained relations cannot be applied indiscriminately:
Obviously, the principle of "strained relations" cannot be applied
indiscriminately. Otherwise, reinstatement can never be possible simply
because some hostility is invariably engendered between the parties as a result
of litigation. That is human nature.
Besides, no strained relations should arise from a valid and legal act of
asserting one's right; otherwise an employee who shall assert his right could be
easily separated from the service, by merely paying his separation pay on the
pretext that his relationship with his employer had already become strained.
(Globe-Mackay Cable and Radio Corp. v. NLRC, G.R. No. 82511, 03 March
1992, 206 SCRA 701, 712) 24(24)

Admittedly, the petitioner has the right, conformably with its power of control
over its employees, to transfer the latter from one place of assignment to another.
Nonetheless, as earlier stated, the prerogative right of management is not absolute. It
is subject to limitations.
EHITaS

In the case before us, it has not been shown that if the respondent is reinstated
to her old position in her old place of work, there may well be strained relations
between her and her co-employees. For this reason, the order of transfer is tinged with
bad faith.
To reiterate, we have long stated that "the objection to the transfer being
grounded on solely upon the personal inconvenience or hardship that will be caused
to the employee by reason of the transfer is not a valid reason to disobey an order of
transfer." 25(25) Be that as it may, if the said order is one identical to what was issued
in the case at bar, we have no alternative but to strike it down as being one made in
bad faith in order to make life difficult for a perceived undesirable employee. The
resultant effect would be that of constructive dismissal.
In case of a constructive dismissal, the employer has the burden of proving that
the transfer of an employee is for valid and legitimate grounds such as genuine
business necessity. Particularly, for a transfer not to be considered a constructive
dismissal the employer must be able to show that such transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or
a diminution of his salaries, privileges and other benefits. Failure of the employer to
overcome this burden of proof, the employee's transfer shall no doubt be tantamount
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to unlawful constructive dismissal.

To reiterate, the bare assertions offered by the petitioner company to justify the
assailed orders of transfer of the respondent reeked with bad faith, and as such, was
rightly declared by the Labor Arbiter as one that resulted in the unlawful constructive
dismissal of the respondent.
Finally, while it may be true that the award of moral and exemplary damages is
discretionary upon the courts, the amount thereof must be reasonable and justified. In
the present case, we find the award of damages excessive and unconscionable.
Consequently, we reduce the award of P50,000 for moral damages and
P50,000 for exemplary damages to P20,000 each.
WHEREFORE, the instant petition is DENIED. The assailed 22 March 2000
Decision and 10 July 2000 Resolution of the Court of Appeals are hereby
AFFIRMED subject to the following modifications: 1) that in the event that
reinstatement can no longer be effected in view of the long passage of time as this
case has been in litigation for thirteen years, more or less, plus the fact that the
respondent appears to have relocated to Cabanatuan City, Nueva Ecija, 26(26)
separation pay be paid in the amount of one month salary for every year of service;
and 2) that the award for moral damages is reduced to P20,000.00 and the award for
exemplary damages is likewise reduced to P20,000.00. The ten percent (10%)
awarded for attorney's fees shall accordingly be based on the amounts as herein
modified. No costs.
THDIaC

SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.
Footnotes
1.
2.
3.
4.
5.
6.
7.
8.
9.

Penned by Associate Justice Romeo J. Callejo, Sr., with Associate Justices Cancio C.
Garcia and Martin S. Villarama, Jr., concurring, Rollo, p. 49.
CA Rollo, p. 98.
CA Rollo, p. 65.
Rollo, p. 179.
Ibid., p. 51.
Ibid., p. 87.
CA Rollo, p. 47.
CA Rollo, p. 46.
CA Rollo pp. 66-67.

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10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.

Rollo, p. 13.
CA Rollo, pp. 90-91.
CA Rollo, pp. 88-89.
Rollo, pp. 176-188.
Rollo, pp. 225-234. Penned by Commissioner Lourdes C. Javier and concurred in by
Commissioner Ireneo B. Bernardo.
Rollo, p. 255.
Rollo, p. 258.
Rollo, p. 61.
Rollo, pp. 406-408.
Rollo, p. 412.
Benguet Electric Cooperative and Versoza v. Fianza, G.R. No. 158606, 09 March
2004.
Abbott Laboratories (Phils.), Inc. v. NLRC, G.R. No. L-76959, 12 October 1987, 154
SCRA 713.
Philippine Japan Active Carbon Corp. v. NLRC, G.R. No. 83239, 08 March 1989,
171 SCRA 164, 1989.
Rollo, p. 412.
Rollo, pp. 59-60.
Phil. Telegraph and Telephone Corp. v. Laplana, G.R. No. 76645, 23 July 1991, 199
SCRA 485.
Rollo, p. 463.

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Endnotes
1 (Popup - Popup)
1.

Penned by Associate Justice Romeo J. Callejo, Sr., with Associate Justices Cancio C.
Garcia and Martin S. Villarama, Jr., concurring, Rollo, p. 49.

2 (Popup - Popup)
2.

CA Rollo, p. 98.

3 (Popup - Popup)
3.

CA Rollo, p. 65.

4 (Popup - Popup)
4.

Rollo, p. 179.

5 (Popup - Popup)
5.

Ibid., p. 51.

6 (Popup - Popup)
6.

Ibid., p. 87.

7 (Popup - Popup)
7.

CA Rollo, p. 47.

8 (Popup - Popup)
8.

CA Rollo, p. 46.

9 (Popup - Popup)
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9.

CA Rollo pp. 66-67.

10 (Popup - Popup)
10.

Rollo, p. 13.

11 (Popup - Popup)
11.

CA Rollo, pp. 90-91.

12 (Popup - Popup)
12.

CA Rollo, pp. 88-89.

13 (Popup - Popup)
13.

Rollo, pp. 176-188.

14 (Popup - Popup)
14.

Rollo, pp. 225-234. Penned by Commissioner Lourdes C. Javier and concurred in by

Commissioner Ireneo B. Bernardo.

15 (Popup - Popup)
15.

Rollo, p. 255.

16 (Popup - Popup)
16.

Rollo, p. 258.

17 (Popup - Popup)
17.

Rollo, p. 61.

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18 (Popup - Popup)
18.

Rollo, pp. 406-408.

19 (Popup - Popup)
19.

Rollo, p. 412.

20 (Popup - Popup)
20.

Benguet Electric Cooperative and Versoza v. Fianza, G.R. No. 158606, 09 March
2004.

21 (Popup - Popup)
21.

Abbott Laboratories (Phils.), Inc. v. NLRC, G.R. No. L-76959, 12 October 1987, 154
SCRA 713.

22 (Popup - Popup)
22.

Philippine Japan Active Carbon Corp. v. NLRC, G.R. No. 83239, 08 March 1989,
171 SCRA 164, 1989.

23 (Popup - Popup)
23.

Rollo, p. 412.

24 (Popup - Popup)
24.

Rollo, pp. 59-60.

25 (Popup - Popup)
25.

Phil. Telegraph and Telephone Corp. v. Laplana, G.R. No. 76645, 23 July 1991, 199
SCRA 485.

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26 (Popup - Popup)
26.

Rollo, p. 463.

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