EQUITABLE vs.

SADAC GR 164772 June 8, 2006

FACTS:

Sadac became Vice President of the Legal Department of Equitable Banking Corporation in Augst
1981 then General Counsel in December, same year.

In 1989, letter-complaint was received by the Chairman of the Board from nine lawyers of the
Bank, accusing Sadac of abusive conduct and a change in leadership of the legal department was
petitioned.

On grounds of loss of confidence between lawyer and client, the Bank instructed Sadac to turn-
over all documents in all cases where he appears as counsel of record.

Sadac then filed a complaint for illegal dismissal. The NLRC decided in favor of Sadac and in its
1991 decision granted the following: reinstatement of Sadac to former position without loss of
seniority rights and other privileges, payment of backwages from termination to actual
reinstatement, moral damages, exemplary damages, attorneys fees equivalent to 10% of the
monetary award

On appeal, the SC in GR 102647 dated June 13, 1997, which became final and executory on July
28, 1997, upheld the NLRC decision with the following modifications: entitled to backwages from
termination until turning 60 yrs. of age (in 1995), retirements benefits, additional P5,000,
deletion of moral and exemplary damages, all due from the Bank (no solidary liability with other
petitioners).

Sadac then filed a Motion for Execution with the Labor Arbiter claiming monetary award of
P6.03M representing backwages including salary increases which he should have earned during
the period of his illegal termination. He said he started with a salary of P12,500 in 1981 which
became P29,365 as of November 1989, with a computed 15% salary increase yearly.

The Bank appealed and deemed it is ready to pay Sadac the amount of P2.98M, after which it
demanded that a certification be issued saying it has already fulfilled all of its financial
obligations to Sadac.

ISSUES:

WON Sadac was entitled to salary increase in the computation of his backwages and other
allowances;

WON Sadac was entitled to attorneys fees of 10% based on the monetary award; and

WON Sadac is entitled to the legal interest of 12% based on the monetary award.
HELD:

No. Sadac is not entitled to salary increases in the computation of his backwages though he was
awarded payment of backwages from the time of his termination up to the age of retirement of
60 in 1995. Backwages shall be computed based on his latest monthly salary.

o We look into the evolution of the computation of the backwages rule.

o In the East Asiatic doctrine, the amount of backwages paid to an illegally separated
employee was salary with salary increases during the period of termination but with the
qualification to deduct earnings earned elsewhere.

o This was superseded by RA 6715 where the definition of full backwages was provided
for. Therein it is expressed that as a general rule, backwages awarded to an illegally
dismissed employee should not be diminished or reduced by earnings derived elsewhere
during the period of illegal dismissal since he must still earn a living to support himself
and his family.

o However, in the spirit of equity and to speed up the recovery of backwages to illegally
dismissed employees, the Mercury Drug case imposed a three-year limitation.

o Then in Bustamante, full backwages was interpreted to have absolutely no deductions

regardless of the duration of the illegal dismissal and no longer regarded equity as a
basis when dealing with illegal dismissal since it is now viewed as the price or penalty
the employer has to pay for in illegally dismissing his employee.

o The applicable modern definition is now found in Millares v. NLRC in the determination
of employees wage rate which included transportation and emergency living allowance.

o It was also emphasized in the Paramount case, that the meaning of unqualified
backwages is the wage rate that the employee is paid at the time of his dismissal.

o In the Pan-Philippine Life Insurance case, the court expressed that the base figure in the
computation of backwages should include the basic salary, but also the regular
allowances that he had been receiving.

o As drawn by the court in Paguio v. PLDT, where the expected salary increases was
predicated on the supposed merit increases he would have received based on above
average or outstanding performance. This degree of assuredness cannot be applied to
the case of Sadac since salary increases are mere expectancy and has no lawful decree
or order to support his claim.

o As with the claim for other allowances, mere allegation without sufficient proof is not
allowed. The only additional benefit confirmed by the Bank is rice subsidy, tuition fee,
and medical allowance.
 Yes. Sadac is entitled to the 10% attorneys fees.

o When a final judgment has become final and executory, it becomes immutable and
unalterable. It cannot be modified in any respect even if to correct what is perceived to
be an erroneous conclusion of fact or law.

o Since the previous decision din not modify NLRCs award of 10% of attorneys fees based
on the amount of monetary award, the award stands.

Yes. Sadac is entitled to 12% legal interest to be computed from the date that the Courts
decision became final and executor in July 28, 1997.

o In Eastern Shipping Lines, when an obligation regardless of its source (law, contract,
quasi-contracts, delicts, quasi-delicts) is breached, the contravenor can be held liable for
damages.

1. When an obligation for payment of sum of money is breached, the interest

in writing shall govern. In the absence of stipulation, the rate of interest shall
be 12% per annum (p.a.) to be computed from default subject to provisions
of Art. 1169 of the CC.

2. If obligation is not a loan or forbearance of money, the interest of 6% may be

awarded at the discretion of the court.

3. When the judgment of the court awarding a sum of money becomes final
and executor, the rate of legal interest (whether falling under 1 or 2 above),
shall be 12% p.a. from such finality until its satisfaction, this interim period
deemed to be equivalent to a forbearance of credit.

o The Bank has been ordered and directed to pay Sadac the following:

Backwages excluding salary increase, check-up benefit, clothing allowance,

and converted vacation leaves;

Attorneys fees equal to 10% of the total sum of monetary award; and

Legal interest of 12% p.a. on the total sum of monetary award from July 28,
1997 (date of finality of previous decision) until full payment of monetary
award. (Maygas, from July 28, 1997 to June 8, 2006 and onwards pa! Tiba-
tiba si Sadac! Tara magpa illegal dismiss sa banko pag abogado na tayo!)

o Petition to refer to the Court En Banc was also denied.