Appeal bond is intended to guarantee the payment of valid and legal claims against the employer.

Nicanor F. Malcaba, et al. vs. Prohealth Pharma Philippines, et al.
G.R. No. 209085, June 6, 2018

Jurisdiction; Corporate officer; loss of trust and confidence; willful disobedience; Penalty is too harsh; Appeal bond; Substantial compliance on appeal bond


ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation engaged in the sale of pharmaceutical products and health food on a wholesale and retail basis. Generoso Del Castillo (Del Castillo) is the Chair of the Board of Directors and Chief Executive Officer while Dante Busto (Busto) is the Executive Vice President. Malcaba, Tomas Adona, Jr. (Adona), Nepomuceno, and Palit-Ang were employed as its President, Marketing Manager, Business Manager, and Finance Officer, respectively.

Malcaba had been employed with ProHealth since it started in 1997. He was one of its incorporators together with Del Castillo and Busto, and they were all members of the Board of Directors in 2004. He held 1,000,000 shares in the corporation. He was initially the Vice President for Sales then became President in 2005.

Malcaba alleged that Del Castillo did acts that made his job difficult. He asked to take a leave. When he attempted to return, Del Castillo insisted that he had already resigned and had his things removed from his office. He attested that he was paid a lower salary in December 2007 and his benefits were withheld. Malcaba tendered his resignation subsequently.

Nepomuceno, for his part, alleged that he was initially hired as a medical representative but was eventually promoted to District Business Manager for South Luzon. He later applied for vacation leave for several days which Busto approved. When he left for Malaysia, ProHealth sent him a Memorandum asking him to explain his absence. He replied through email that he tried to call ProHealth to inform them that his flight was on April 22, 2008 at 9:00 p.m. and not on April 23, 2008 but was unable to connect on the phone. He tried to explain again on May 2, 2008 and requested for a personal dialogue with Del Castillo. Nepomuceno was given a notice of termination on the ground of fraud and willful breach of trust.

Palit-Ang, on the other hand, was hired to join ProHealth’s audit team. She was later promoted to Finance Officer. Del Castillo instructed Palit-Ang to give P3,000.00 from the training funds to Johnmer Gamboa (Gamboa), a District Business Manager, to serve as cash advance. Busto issued a show cause memorandum for Palit-Ang’s failure to release the cash advance. Palit-Ang was also relieved of her duties and reassigned to the Office of the Personnel and Administration Manager.

In her explanation, Palit-Ang alleged that when Gamboa saw that she was busy receiving cash sales from another District Business Manager, he told her that he would just return the next day to collect his cash advance. When he told her that the cash advance was for car repairs, Palit-Ang told him to get the cash from his revolving fund, which she would reimburse after the repairs   were done. Del Castillo was dissatisfied with her explanation and transferred her to another office.

Palit-Ang was invited to a fact-finding investigation where Palit-Ang was again asked to explain her actions. Thereafter, she was handed a notice of termination effective for disobeying the order of ProHealth ‘s highest official.

Malcaba, Nepomuceno, Palit-Ang, and Adona (Malcaba, et al.) separately filed Complaints before the Labor Arbiter for illegal dismissal, nonpayment of salaries and 13th month pay, damages, and attorney’s fees against ProHealth Pharma Philippines, Inc., Generoso R. Del Castillo, Jr., and Dante M. Busto (ProHealth, et al.).

LA Ruling:

The Labor Arbiter (LA) found Malcaba, et al. to have been illegally dismissed.

The LA held that Malcaba was constructively dismissed. He found that ProHealth never controverted the allegation that Del Castillo made it difficult for Malcaba to effectively fulfill his duties. He likewise ruled that ProHealth’s insistence that Malcaba’s leave of absence in October 2007 was an act of resignation was false since Malcaba continued to perform his duties as President through December 2007.

The LA declared that Nepomuceno’s failure to state the actual date of his flight was an excusable mistake on his part, considering that this was his first infraction in his nine (9) years of service. He noted that no administrative proceedings were conducted before Nepomuceno’s dismissal, thereby violating his right to due process.

Palit-Ang’s dismissal was also found to have been illegal as delay in complying with a lawful order was not tantamount to disobedience. The Labor Arbiter further noted that delay in giving a cash advance for car maintenance would not have affected the company’s operations. He declared that Palit-Ang’s dismissal was too harsh of a penalty.

ProHealth appealed to the National Labor Relations Commission (NLRC).

NLRC Ruling:

The NLRC rendered its Decision affirming the LA’S Decision with modifications in that in that complainant Adona was declared to have voluntarily resigned and is entitled only to his 13th month pay; the award of moral and, exemplary damages in favor of complainants Nepomuceno and Palit-Ang are deleted; and Castillo and Busto are held jointly and severally liable with ProHealth for the claims of complainant Malcaba.

ProHealth moved for reconsideration but it was denied by the NLRC. Thus, ProHealth, Del Castillo, and Busto filed a Petition for Certiorari before the Court of Appeals (CA).

CA Ruling:

The CA rendered its Decision reversing and setting aside the NLRC Decision.

The CA held that there was no employer-employee relationship between Malcaba and ProHealth since he was a corporate officer. Thus, he should have filed his complaint with the Regional Trial Court, not with the LA, since his dismissal from service was an intra-corporate dispute.

The Court of Appeals likewise concluded that ProHealth was justified in dismissing Nepomuceno and Palit-Ang since both were given opportunities to fully explain their sides.

Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but were denied. Hence, the Petition before the Supreme Court (SC).


Whether or not there was substantial compliance on the appeal bond if, despite was failure to collect on said appeal bond, claimants were able to garnish the bank account

SC Ruling:

The SC partially granted the petition. It declared Nepomuceno and Palit-Ang to have been illegally dismissed. The NLRC had no jurisdiction to adjudicate Malcaba’s claims. Malcaba was ordered to return the amount of P4, 937, 420.40 for having been erroneously awarded, without prejudice to his filing of claims before the proper forum.

Malcaba, et al. argued that the Court of Appeals should have dismissed outright the Petition for Certiorari of ProHealth, et al. since they failed to post a genuine appeal bond before the National Labor Relations Commission. They allege that when Sheriff Ramon Nonato P. Dayao attempted to enforce the judgment award against the appeal bond, he was informed that the appeal bond procured by respondents did not appear in the records of Alpha Insurance and Surety Company, Inc. (Alpha Insurance).

Malcaba, et al. also claim that ProHealth, et al. were notified by the NLRC four (4) times that their appeal bond was not genuine, showing that they did not comply with the requirement in good faith.

ProHealth, et al. on the other hand, counter that a liberal application of the procedural rules was necessary in their case since they acted in good faith in posting their appeal bond. They likewise contend that the issue should have already been considered moot since Malcaba, et al. were able to garnish and collect the amounts allegedly due to them.

ProHealth, et al. likewise insist that Malcaba was a corporate officer considering that he was not only an incorporator and stockholder, but also an elected Director and President of respondent ProHealth. They also point out that he filed his labor complaint seven (7) months after his resignation and that his voluntary resignation already disproves his claim of constructive dismissal.

The SC held that appeal is not a matter of right. Courts and tribunals have the discretion whether to give due course to an appeal or to dismiss it outright. The perfection of an appeal is, thus, jurisdictional. Non-compliance with the manner in which to file an appeal renders the judgment final and executory. In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to the monetary award under Article 229 [formerly 223] of the Labor Code, as amended.

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The purpose of requiring an appeal bond is “to guarantee the payment of valid and legal claims against the employer.” It is a measure of financial security granted to an illegally dismissed employee since the resolution of the employer’s appeal may take an indeterminable amount of time.

Procedural rules require that the appeal bond filed be “genuine.” An appeal bond determined by the National Labor Relations Commission to be “irregular or not genuine” shall cause the immediate dismissal of the appeal.

Thus, while the procedural rules strictly require the employer to submit a genuine bond, an appeal could still be perfected if there was substantial compliance with the requirement. In this instance, the NLRC certified that ProHealth, et al. filed a security deposit in the amount of P6,512,524.84 under Security Bank showing that the premium for the appeal bond was duly paid and that there was willingness to post it. They likewise attached documents proving that Alpha Insurance was a legitimate and accredited bonding company.

Despite Malcaba, et al.’s failure to collect on the appeal bond, they do not deny that they were eventually able to garnish the amount from ProHealth, et al.’s bank deposits. This fulfills the purpose of the bond, that is, “to guarantee the payment of valid and legal claims against the employer.” ProHealth, et al. are considered to have substantially complied with the requirements on the posting of an appeal bond.

Other issues resolved in this case:

Whether or not the president of a corporation is a corporate officer to which the LA has no jurisdiction

Whether or not the dismissal for willful breach of trust of an employee due to his failure to inform his superiors of the actual dates of his vacation leave is valid

Whether or not the failure to give the money as instructed as the employee told the collector to return the next day as she was busy constituted willful disobedience

Whether or not failure of the employer to inform the employee being charged of the right to counsel is a violation of the procedural due process

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