FIRST DIVISION

G.R. No. 164772             June 8, 2006

EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI BANK), petitioner, 

vs.
RICARDO SADAC, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En
Banc filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to
reverse the Decision1 and Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004,
respectively, as amended by the Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No.
75013, which reversed and set aside the Resolutions of the National Labor Relations Commission
(NLRC), dated 28 March 2001 and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89.

The Antecedents

As culled from the records, respondent Sadac was appointed Vice President of the Legal
Department of petitioner Bank effective 1 August 1981, and subsequently General Counsel thereof
on 8 December 1981. On 26 June 1989, nine lawyers of petitioner Bank’s Legal Department, in a
letter-petition to the Chairman of the Board of Directors, accused respondent Sadac of abusive
conduct, inter alia, and ultimately, petitioned for a change in leadership of the department. On the
ground of lack of confidence in respondent Sadac, under the rules of client and lawyer relationship,
petitioner Bank instructed respondent Sadac to deliver all materials in his custody in all cases in
which the latter was appearing as its counsel of record. In reaction thereto, respondent Sadac
requested for a full hearing and formal investigation but the same remained unheeded. On 9
November 1989, respondent Sadac filed a complaint for illegal dismissal with damages against
petitioner Bank and individual members of the Board of Directors thereof. After learning of the filing
of the complaint, petitioner Bank terminated the services of respondent Sadac. Finally, on 10 August
1989, respondent Sadac was removed from his office and ordered disentitled to any compensation
and other benefits.4

In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the complaint
for lack of merit. On appeal, the NLRC in its Resolution6 of 24 September 1991 reversed the Labor
Arbiter and declared respondent Sadac’s dismissal as illegal. The decretal portion thereof reads,
thus:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as
it is hereby, SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as
illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority rights and other
privileges, and to pay him full backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages
of P50,000.00, and attorney’s fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents are ordered likewise
jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorney’s fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53. 7

Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the
NLRC Resolution of 24 September 1991 in Equitable Banking Corporation v. National Labor
Relations Commission, docketed as G.R. No. 102467. 8

In our Decision9 of 13 June 1997, we held respondent Sadac’s dismissal illegal. We said that the
existence of the employer-employee relationship between petitioner Bank and respondent Sadac
had been duly established bringing the case within the coverage of the Labor Code, hence, we did
not permit petitioner Bank to rely on Sec. 26, Rule 138 10 of the Rules of Court, claiming that the
association between the parties was one of a client-lawyer relationship, and, thus, it could terminate
at any time the services of respondent Sadac. Moreover, we did not find that respondent Sadac’s
dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. We similarly
found that petitioner Bank disregarded the procedural requirements in terminating respondent
Sadac’s employment as so required by Section 2 and Section 5, Rule XIV, Book V of the
Implementing Rules of the Labor Code. We decreed:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability herein pronounced
shall be due from petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.11

On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and
executory.12

Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution 13 thereof.
Likewise, petitioner Bank filed a Manifestation and Motion14 praying that the award in favor of
respondent Sadac be computed and that after payment is made, petitioner Bank be ordered forever
released from liability under said judgment.

Per respondent Sadac’s computation, the total amount of the monetary award is P6,030,456.59,
representing his backwages and other benefits, including the general increases which he should
have earned during the period of his illegal termination. Respondent Sadac theorized that he started
with a monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice
President of petitioner Bank’s Legal Department and later as its General Counsel in December 1981.
As of November 1989, when he was dismissed illegally, his monthly compensation amounted to
P29,365.00 or more than twice his original compensation. The difference, he posited, can be
attributed to the annual salary increases which he received equivalent to 15 percent (15%) of his
monthly salary.
Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and cited
as authority the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations, 15 St. Louis
College of Tuguegarao v. National Labor Relations Commission, 16 and Sigma Personnel Services v.
National Labor Relations Commission. 17According to respondent Sadac, the catena of cases
uniformly holds that it is the obligation of the employer to pay an illegally dismissed employee the
whole amount of the salaries or wages, plus all other benefits and bonuses and general increases to
which he would have been normally entitled had he not been dismissed; and therefore, salary
increases should be deemed a component in the computation of backwages. Moreover, respondent
Sadac contended that his check-up benefit, clothing allowance, and cash conversion of vacation
leaves must be included in the computation of his backwages.

Petitioner Bank disputed respondent Sadac’s computation. Per its computation, the amount of
monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latter’s general
salary increases and other claimed benefits which, it maintained, were unsubstantiated. The
jurisprudential precedent relied upon by petitioner Bank in assailing respondent Sadac’s computation
is Evangelista v. National Labor Relations Commission, 18 citing Paramount Vinyl Products Corp. v.
National Labor Relations Commission, 19 holding that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner Bank
argued before the Labor Arbiter that the award of salary differentials is not allowed, the established
rule being that upon reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other benefits that may have been
received by their co-workers who were not dismissed or did not go on strike.

On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order 20 adopting respondent
Sadac’s computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations
Commission21 concluded that respondent Sadac is entitled to the general increases as a component
in the computation of his backwages. Accordingly, he awarded respondent Sadac the amount of
P6,030,456.59 representing his backwages inclusive of allowances and other claimed benefits,
namely check-up benefit, clothing allowance, and cash conversion of vacation leave plus 12 percent
(12%) interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total of
P7,398,047.48. However, considering that respondent Sadac had already received the amount of
P1,055,740.48 by virtue of a Writ of Execution 22 earlier issued on 18 January 1999, the Labor Arbiter
directed petitioner Bank to pay respondent Sadac the amount of P6,342,307.00. The Labor Arbiter
also granted an award of attorney’s fees equivalent to ten percent (10%) of all monetary awards, and
imposed a 12 percent (12%) interest per annum reckoned from the finality of the judgment until the
satisfaction thereof.

The Labor Arbiter decreed, thus:

WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued
commanding the Sheriff, this Branch, to collect from respondent Bank the amount of Ph6,342,307.00
representing the backwages with 12% interest per annum due complainant. 23

Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,24promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as
component in computing backwages in Sigma Personnel Services and St. Louis was merely obiter
dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that the original
circumstances therein are not only peculiar to the said case but also completely strange to the case
of respondent Sadac. Further, the NLRC disallowed respondent Sadac’s claim to check-up benefit
ratiocinating that there was no clear and substantial proof that the same was being granted and
enjoyed by other employees of petitioner Bank. The award of attorney’s fees was similarly deleted.
The dispositive portion of the Resolution states:

WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation
prepared by respondent Equitable Banking Corporation on the award of backwages in favor of
complainant Ricardo Sadac under the decision promulgated by the Supreme Court on June 13,
1997 in G.R. No. 102476 in the aggregate amount of P2,981,442.98 is hereby ordered. 25

Respondent Sadac’s Motion for Reconsideration thereon was denied by the NLRC in its
Resolution,26 promulgated on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking
nullification of the twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as
well as praying for the reinstatement of the 2 August 1999 Order of the Labor Arbiter.

For the resolution of the Court of Appeals were the following issues, viz.:

(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance,
and cash conversion of vacation leave are included in the computation of full backwages for
illegally dismissed employees;

(2) Whether respondent is entitled to attorney’s fees; and

(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all
accounts outstanding until full payment thereof.

Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision on 6
April 2004, the dispositive portion of which is quoted hereunder:

WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions
of the National Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August
2, 1999 Order of the Labor Arbiter is REVIVED to the effect that private respondent is DIRECTED
TO PAY petitioner the sum of PhP6,342,307.00, representing full back wages (sic) which sum
includes annual general increases in basic salary, check-up benefit, clothing allowance, cash
conversion of vacation leave and other sundry benefits plus 12% per annum interest on outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent. 27

The Court of Appeals, citing East Asiatic held that respondent Sadac’s general increases should be
added as part of his backwages. According to the appellate court, respondent Sadac’s entitlement to
the annual general increases has been duly proven by substantial evidence that the latter, in fact,
enjoyed an annual increase of more or less 15 percent (15%). Respondent Sadac’s check-up
benefit, clothing allowance, and cash conversion of vacation leave were similarly ordered added in
the computation of respondent Sadac’s basic wage.

Anent the matter of attorney’s fees, the Court of Appeals sustained the NLRC. It ruled that our
Decision28 of 13 June 1997 did not award attorney’s fees in respondent Sadac’s favor as there was
nothing in the aforesaid Decision, either in the dispositive portion or the body thereof that supported
the grant of attorney’s fees. Resolving the final issue, the Court of Appeals imposed a 12 percent
(12%) interest per annum on the total monetary award to be computed from 28 July 1997 or the date
our judgment in G.R. No. 102467 became final and executory until fully paid at which time the
quantification of the amount may be deemed to have been reasonably ascertained.

On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration 29 of the 6 April 2004
Court of Appeals Decision insofar as the appellate court did not award him attorney’s fees. Similarly,
petitioner Bank filed a Motion for Partial Reconsideration thereon. Following an exchange of
pleadings between the parties, the Court of Appeals rendered a Resolution, 30 dated 28 July 2004,
denying petitioner Bank’s Motion for Partial Reconsideration for lack of merit.

Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to
wit:

(a) The Hon. Court of Appeals erred in ruling that general salary increases should be
included in the computation of full backwages.

(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are:
(i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v.
NLRC, 177 SCRA 151 (1989); (iii) Sigma Personnel Services v. NLRC, 224 SCRA 181
(1993); and (iv) Millares v. NLRC, 305 SCRA 500 (1999) and not (i) Art. 279 of the Labor
Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990); (iii) Evangelista v. NLRC,
249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit,
clothing allowance and cash conversion of vacation leaves notwithstanding that respondent
did not present any evidence to prove entitlement to these claims.

(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal
interest even if the principal amount due him has not yet been correctly and finally
determined.31

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision granting
respondent Sadac’s Partial Motion for Reconsideration and amending the dispositive portion of the 6
April 2004 Decision in this wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002
Resolutions of the National Labor Relations Commission are hereby REVERSED and SET ASIDE
and the August 2, 1999 Order of the Labor Arbiter is hereby REVIVED to the effect that private
respondent is hereby DIRECTED TO PAY petitioner the sum of P6,342,307.00, representing full
backwages which sum includes annual general increases in basic salary, check-up benefit, clothing
allowance, cash conversion of vacation leave and other sundry benefits "and attorney’s fees equal to
TEN PERCENT (10%) of all the monetary award" plus 12% per annum interest on all outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent. 32

On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review 33 contending in the
main that the Court of Appeals erred in issuing the Supplemental Decision by directing petitioner
Bank to pay an additional amount to respondent Sadac representing attorney’s fees equal to ten
percent (10%) of all the monetary award.
The Court’s Ruling

I.

We are called to write finis to a controversy that comes to us for the second time. At the core of the
instant case are the divergent contentions of the parties on the manner of computation of
backwages.

Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not
contemplate the inclusion of salary increases in the definition of "full backwages." It controverts the
reliance by the appellate court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel;
and (iv) Millares. While it is in accord with the pronouncement of the Court of Appeals that Republic
Act No. 6715, in amending Article 279, intends to give more benefits to workers, petitioner Bank
submits that the Court of Appeals was in error in relying on East Asiatic to support its finding that
salary increases should be included in the computation of backwages as nowhere in Article 279, as
amended, are salary increases spoken of. The prevailing rule in the milieu of the East Asiatic
doctrine was to deduct earnings earned elsewhere from the amount of backwages payable to an
illegally dismissed employee.

Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in the
computation of backwages, it was because the inclusion was purposely to cushion the blow of the
deduction of earnings derived elsewhere; with the amendment of Article 279 and the consequent
elimination of the rule on the deduction of earnings derived elsewhere, the rationale for including
salary increases in the computation of backwages no longer exists. On the references of salary
increases in the aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares,
petitioner Bank contends that the same were merely obiter dicta. In fine, petitioner Bank anchors its
claim on the cases of (i) Paramount Vinyl Products Corp. v. National Labor Relations
Commission;34 (ii) Evangelista v. National Labor Relations Commission; 35 and (iii) Espejo v. National
Labor Relations Commission,36 which ruled that an unqualified award of backwages is exclusive of
general salary increases and the employee is paid at the wage rate at the time of the dismissal.

For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that his
backwages should include the general increases on the basis of the following cases, to wit: (i) East
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares.

Resolving the protracted litigation between the parties necessitates us to revisit our pronouncements
on the interpretation of the term backwages. We said that backwages in general are granted on
grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. 37 It is
not private compensation or damages but is awarded in furtherance and effectuation of the public
objective of the Labor Code. Nor is it a redress of a private right but rather in the nature of a
command to the employer to make public reparation for dismissing an employee either due to the
former’s unlawful act or bad faith.38 The Court, in the landmark case of Bustamante v. National Labor
Relations Commission,39 had the occasion to explicate on the meaning of full backwages as
contemplated by Article 27940 of the Labor Code of the Philippines, as amended by Section 34 of
Rep. Act No. 6715. The Court in Bustamante said, thus:

The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of
backwages as enunciated in said Pines City Educational Center case, by now holding that
conformably with the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted,
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived by him elsewhere during the period of his illegal
dismissal. The underlying reason for this ruling is that the employee, while litigating the legality
(illegality) of his dismissal, must still earn a living to support himself and family, while full backwages
have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing
his employee. The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more
benefits to workers than was previously given them under the Mercury Drug rule or the "deduction of
earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No.
6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the
earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. In
other words, the provision calling for "full backwages" to illegally dismissed employees is clear, plain
and free from ambiguity and, therefore, must be applied without attempted or strained interpretation.
Index animi sermo est.41

Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved. In
Mercury Drug Co., Inc. v. Court of Industrial Relations, 42 the rule was that backwages were granted
for a period of three years without qualification and without deduction, meaning, the award of
backwages was not reduced by earnings actually earned by the dismissed employee during the
interim period of the separation. This came to be known as the Mercury Drug rule. 43 Prior to the
Mercury Drug ruling in 1974, the total amount of backwages was reduced by earnings obtained by
the employee elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule
was subsequently modified in Ferrer v. National Labor Relations Commission 44 and Pines City
Educational Center v. National Labor Relations Commission, 45 where we allowed the recovery of
backwages for the duration of the illegal dismissal minus the total amount of earnings which the
employee derived elsewhere from the date of dismissal up to the date of reinstatement, if any. In
Ferrer and in Pines, the three-year period was deleted, and instead, the dismissed employee was
paid backwages for the entire period that he was without work subject to the deductions, as
mentioned. Finally came our ruling in Bustamante which superseded Pines City Educational Center
and allowed full recovery of backwages without deduction and without qualification pursuant to the
express provisions of Article 279 of the Labor Code, as amended by Rep. Act No. 6715, i.e., without
any deduction of income the employee may have derived from employment elsewhere from the date
of his dismissal up to his reinstatement, that is, covering the entirety of the period of the dismissal.

The first issue for our resolution involves another aspect in the computation of full backwages,
mainly, the basis of the computation thereof. Otherwise stated, whether general salary increases
should be included in the base figure to be used in the computation of backwages.

In so concluding that general salary increases should be made a component in the computation of
backwages, the Court of Appeals ratiocinated, thus:

The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971)
that "general increases" should be added as a part of full backwages, to wit:

In other words, the just and equitable rule regarding the point under discussion is this: It is the
obligation of the employer to pay an illegally dismissed employee or worker the whole amount of the
salaries or wages, plus all other benefits and bonuses and general increases, to which he would
have been normally entitled had he not been dismissed and had not stopped working, but it is the
right, on the other hand of the employer to deduct from the total of these, the amount equivalent to
the salaries or wages the employee or worker would have earned in his old employment on the
corresponding days he was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned.
The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of
Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181
(1993) and Millares v. National Labor Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioner’s contention, alleged in his Memorandum that only the
wage rate at the time of the employee’s illegal dismissal should be considered – private respondent
citing the following decisions of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525
(1990); Evangelista v. NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA 430 (1996) which
rendered obsolete the ruling in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521
(1971).

We are not convinced.

The Supreme Court had consistently held that payment of full backwages is the price or penalty that
the employer must pay for having illegally dismissed an employee.

In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and
Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear legislative intent
in the amendment in Republic Act 6715 was to give more benefits to workers than was previously
given them under the Mercury Drug rule or the "deductions of earnings elsewhere" rule.

The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are inapplicable to
the case at bar. The doctrines therein came about as a result of the old Mercury Drug rule, which
was repealed with the passage of Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255
SCRA 430 (1993) when the Supreme Court returned to the doctrine in East Asiatic, which was soon
supplanted by the case of Bustamante v. NLRC and Evergreen Farms, Inc., which held that the
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived from him during the period of his illegal dismissal.
Furthermore, the Mercury Drug rule was never meant to prejudice the workers, but merely to speed
the recovery of their backwages.

Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the Supreme
Court to increase the backwages due an illegally dismissed employee. In the Mercury Drug case, full
backwages was to be recovered even though a three-year limitation on recovery of full backwages
was imposed in the name of equity. Then in Bustamante, full backwages was interpreted to mean
absolutely no deductions regardless of the duration of the illegal dismissal. In Bustamante, the
Supreme Court no longer regarded equity as a basis when dealing with illegal dismissal cases
because it is not equity at play in illegal dismissals but rather, it is employer’s obligation to pay full
back wages (sic). It is an obligation of the employer because it is "the price or penalty the employer
has to pay for illegally dismissing his employee."

The applicable modern definition of full backwages is now found in Millares v. National Labor
Relations Commission 305 SCRA 500 (1999), where although the issue in Millares concerned
separation pay – separation pay and backwages both have employee’s wage rate at their
foundation.

x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally
dismissed employee the whole amount of his salaries plus all other benefits, bonuses and general
increases to which he would have been normally entitled had he not been dismissed and had not
stopped working. The same holds true in case of retrenched employees. x x x

xxxx
x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)

We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section
34 of Rep. Act No. 6715. The law provides as follows:

ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. (Emphasis supplied.)

Article 279 mandates that an employee’s full backwages shall be inclusive of allowances and other
benefits or their monetary equivalent. Contrary to the ruling of the Court of Appeals, we do not see
that a salary increase can be interpreted as either an allowance or a benefit. Salary increases are
not akin to allowances or benefits, and cannot be confused with either. The term "allowances" is
sometimes used synonymously with "emoluments," as indirect or contingent remuneration, which
may or may not be earned, but which is sometimes in the nature of compensation, and sometimes in
the nature of reimbursement.47 Allowances and benefits are granted to the employee apart or
separate from, and in addition to the wage or salary. In contrast, salary increases are amounts which
are added to the employee’s salary as an increment thereto for varied reasons deemed appropriate
by the employer. Salary increases are not separate grants by themselves but once granted, they are
deemed part of the employee’s salary. To extend the coverage of an allowance or a benefit to
include salary increases would be to strain both the imagination of the Court and the language of
law. As aptly observed by the NLRC, "to otherwise give the meaning other than what the law speaks
for by itself, will open the floodgates to various interpretations." 48 Indeed, if the intent were to include
salary increases as basis in the computation of backwages, the same should have been explicitly
stated in the same manner that the law used clear and unambiguous terms in expressly providing for
the inclusion of allowances and other benefits.

Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East
Asiatic Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad
A. Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of the salaries plus all
general increases and bonuses she would have received during the period of her lay-off with the
corresponding right of the employer to deduct from the total amounts, all the earnings earned by the
employee during her lay-off. The emphasis in East Asiatic is the duty of both the employer and the
employee to disclose the material facts and competent evidence within their peculiar knowledge
relative to the proper determination of backwages, especially as the earnings derived by the
employee elsewhere are deductions to which the employer are entitled. However, East Asiatic does
not find relevance in the resolution of the issue before us. First, the material date to consider is 21
March 1989, when the law amending Article 279 of the Labor Code, Rep. Act No. 6715, otherwise
known as the Herrera-Veloso Law, took effect. It is obvious that the backdrop of East Asiatic,
decided by this Court on 31 August 1971 was prior to the current state of the law on the definition of
full backwages. Second, it bears stressing that East Asiatic was decided at a time when even as an
illegally dismissed employee is entitled to the whole amount of the salaries or wages, it was the
recognized right of the employer to deduct from the total of these, the amount equivalent to the
salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned. 49 It is for this reason the Court centered its discussion on the
duty of both parties to be candid and open about facts within their knowledge to establish the
amount of the deductions, and not leave the burden on the employee alone to establish his claim, as
well as on the duty of the court to compel the parties to cooperate in disclosing such material facts.
The inapplicability of East Asiatic to respondent Sadac was sufficiently elucidated upon by the
NLRC, viz.:

A full discernment of the pertinent portion of the judgment sought to be executed in East Asiatic Co.,
Ltd. would reveal as follows:

"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from
September 1, 1958 until actually reinstated with all the rights and privileges acquired and due her,
including seniority and such other terms and conditions of employment AT THE TIME OF HER LAY-
OFF"

The basis on which this doctrine was laid out was summed up by the Supreme Court which
ratiocinated in this light. To quote:

"x x x on the other hand, of the employer to deduct from the total of these, the amount equivalent to
these salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct
only what has been actually earned x x x" (Ibid, pp. 547-548).

But the Supreme Court, in the instant case, pronounced a clear but different judgment from that of
East Asiatic Co. decretal portion, in this wise:

"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: that private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; xxx"

Undisputably (sic), it was decreed in plain and unambiguous language that complainant Sadac "shall
be entitled to backwages." No more, no less.

Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with the
award of backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd. 50

In the same vein, we cannot accept the Court of Appeals’ reliance on the doctrine as espoused in
Millares. It is evident that Millares concerns itself with the computation of the salary base used in
computing the separation pay of petitioners therein. The distinction between backwages and
separation pay is elementary. Separation pay is granted where reinstatement is no longer advisable
because of strained relations between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected because of the unjust dismissal.
The bases for computing the two are different, the first being usually the length of the employee’s
service and the second the actual period when he was unlawfully prevented from working. 51

The issue that confronted the Court in Millares was whether petitioners’ housing and transportation
allowances therein which they allegedly received on a monthly basis during their employment should
have been included in the computation of their separation pay. It is plain to see that the reference to
general increases in Millares citing East Asiatic was a mere obiter. The crux in Millares was our
pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize
it as regular and forming part of salary because the nature of the grant is a factor worth considering.
Whether salary increases are deemed part of the salary base in the computation of backwages was
not the issue in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly
contentious therein was the inclusion of fringe benefits in the computation of the award of
backwages, in particular additional vacation and sick leaves granted to therein concerned
employees, it evidently appearing that the reference to East Asiatic in a footnote was a mere obiter
dictum. Salary increases are not akin to fringe benefits 52 and neither is it logical to conceive of both
as belonging to the same taxonomy.

We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The
basic issue before the Court therein was whether the employee, Susan Sumatre, a domestic helper
in Abu Dhabi, United Arab Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was a mere probationary
employee who was, on top of this status, mentally unsound. 53 Even a cursory reading of Sigma
Personnel Services citing St. Louis College of Tuguegarao would readily show that inclusion of
salary increases in the computation of backwages was not at issue. The same was not on all fours
with the instant petition.

What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner
Bank’s favor and against respondent Sadac’s claim for the inclusion of general increases in the
computation of his backwages.

We stressed in Paramount that an unqualified award of backwages means that the employee is paid
at the wage rate at the time of his dismissal, thus:

The determination of the salary base for the computation of backwages requires simply an
application of judicial precedents defining the term "backwages". Unfortunately, the Labor Arbiter
erred in this regard. An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal [Davao Free Worker Front v. Court of Industrial Relations,
G.R. No. L-29356, October 27, 1975, 67 SCRA 418; Capital Garments Corporation v. Ople, G.R. No.
53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant & Company v. NLRC, G.R.
No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that the base figure to be
used in the computation of backwages due to the employee should include not just the basic salary,
but also the regular allowances that he had been receiving, such as the emergency living allowances
and the 13th month pay mandated under the law [See Pan-Philippine Life Insurance Corporation v.
NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721,
September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155
SCRA 124; Insular Life Assurance Co., Ltd. v. NLRC, supra.] 54 (Emphasis supplied.)

There is no ambivalence in Paramount, that the base figure to be used in the computation of
backwages is pegged at the wage rate at the time of the employee’s dismissal, inclusive of regular
allowances that the employee had been receiving such as the emergency living allowances and the
13th month pay mandated under the law.

In Evangelista v. National Labor Relations Commission, 55 we addressed the sole issue of whether
the computation of the award of backwages should be based on current wage level or the wage
levels at the time of the dismissal. We resolved that an unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal, thus:
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the determination of the salary
base for the computation of backwages requires simply an application of judicial precedents defining
the term "backwages." An unqualified award of backwages means that the employee is paid at the
wage rate at the time of his dismissal. Furthermore, the award of salary differentials is not allowed,
the established rule being that upon reinstatement, illegally dismissed employees are to be paid their
backwages without deduction and qualification as to any wage increases or other benefits that may
have been received by their co-workers who were not dismissed or did not go on strike. 56

The case of Paramount was relied upon by the Court in the latter case of Espejo v. National Labor
Relations Commission,57 where we reiterated that the computation of backwages should be based
on the basic salary at the time of the employee’s dismissal plus the regular allowances that he had
been receiving. Further, the clarification made by the Court in General Baptist Bible College v.
National Labor Relations Commission, 58 settles the issue, thus:

We also want to clarify that when there is an award of backwages this actually refers to backwages
without qualifications and deductions. Thus, We held that:

"The term ‘backwages without qualification and deduction’ means that the workers are to be paid
their backwages fixed as of the time of the dismissal or strike without deduction for their earnings
elsewhere during their layoff and without qualification of their wages as thus fixed; i.e., unqualified by
any wage increases or other benefits that may have been received by their co-workers who are not
dismissed or did not go on strike. Awards including salary differentials are not allowed. The salary
base properly used should, however, include not only the basic salary but also the emergency cost
of living allowances and also transportation allowances if the workers are entitled thereto." 59 (Italics
supplied.)

Indeed, even a cursory reading of the dispositive portion of the Court’s Decision of 13 June 1997 in
G.R. No. 102467, awarding backwages to respondent Sadac, readily shows that the award of
backwages therein is unqualified, ergo, without qualification of the wage as thus fixed at the time of
the dismissal and without deduction.

A demarcation line between salary increases and backwages was drawn by the Court in Paguio v.
Philippine Long Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on account of his
illegal transfer sought backwages, including an amount equal to 16 percent (16%) of his monthly
salary representing his salary increases during the period of his demotion, contending that he had
been consistently granted salary increases because of his above average or outstanding
performance. We said:

In several cases, the Court had the opportunity to elucidate on the reason for the grant of
backwages. Backwages are granted on grounds of equity to workers for earnings lost due to their
illegal dismissal from work. They are a reparation for the illegal dismissal of an employee based on
earnings which the employee would have obtained, either by virtue of a lawful decree or order, as in
the case of a wage increase under a wage order, or by rightful expectation, as in the case of one’s
salary or wage. The outstanding feature of backwages is thus the degree of assuredness to an
employee that he would have had them as earnings had he not been illegally terminated from his
employment.

Petitioner’s claim, however, is based simply on expectancy or his assumption that, because in the
past he had been consistently rated for his outstanding performance and his salary correspondingly
increased, it is probable that he would similarly have been given high ratings and salary increases
but for his transfer to another position in the company.
In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is
based merely on speculation. Furthermore, it assumes that in the other position to which he had
been transferred petitioner had not been given any performance evaluation. As held by the Court of
Appeals, however, the mere fact that petitioner had been previously granted salary increases by
reason of his excellent performance does not necessarily guarantee that he would have performed
in the same manner and, therefore, qualify for the said increase later. What is more, his claim is
tantamount to saying that he had a vested right to remain as Head of the Garnet Exchange and
given salary increases simply because he had performed well in such position, and thus he should
not be moved to any other position where management would require his services. 61

Applying Paguio to the case at bar, we are not prepared to accept that this degree of assuredness
applies to respondent Sadac’s salary increases. There was no lawful decree or order supporting his
claim, such that his salary increases can be made a component in the computation of backwages.
What is evident is that salary increases are a mere expectancy. They are, by its nature volatile and
are dependent on numerous variables, including the company’s fiscal situation and even the
employee’s future performance on the job, or the employee’s continued stay in a position subject to
management prerogative to transfer him to another position where his services are needed. In short,
there is no vested right to salary increases. That respondent Sadac may have received salary
increases in the past only proves fact of receipt but does not establish a degree of assuredness that
is inherent in backwages. From the foregoing, the plain conclusion is that respondent Sadac’s
computation of his full backwages which includes his prospective salary increases cannot be
permitted.

Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage and
not salary, and therefore, the rule is inapplicable to him. It is respondent Sadac’s stance that he was
not paid at the wage rate nor was he engaged in some form of manual or physical labor as he was
hired as Vice President of petitioner Bank. He cites Gaa v. Court of Appeals 62 where the Court
distinguished between wage and salary.

The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose of
Article 1708 of the Civil Code which mandates that, "[t]he laborer’s wage shall not be subject to
execution or attachment, except for debts incurred for food, shelter, clothing and medical
attendance." In labor law, however, the distinction appears to be merely semantics. Paramount and
Evangelista may have involved wage earners, but the petitioner in Espejo was a General Manager
with a monthly salary of P9,000.00 plus privileges. That wage and salary are synonymous has been
settled in Songco v. National Labor Relations Commission. 63 We said:

Broadly, the word "salary" means a recompense or consideration made to a person for his pains or
industry in another man’s business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for
services rendered. Indeed, there is eminent authority for holding that the words "wages" and "salary"
are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins
vs. Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of
which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of
which is the Middle English word "wagen". Both words generally refer to one and the same meaning,
that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages"
and "salary" (Black’s Law Dictionary, 5th Ed). x x x64 (Italics supplied.)

II.

Petitioner Bank ascribes as its second assignment of error the Court of Appeals’ ruling that
respondent Sadac is entitled to check-up benefit, clothing allowance and cash conversion of
vacation leaves notwithstanding that respondent Sadac did not present any evidence to prove
entitlement to these claims.65

The determination of respondent Sadac’s entitlement to check-up benefit, clothing allowance, and
cash conversion of vacation leaves involves a question of fact. The well-entrenched rule is that only
errors of law not of facts are reviewable by this Court in a petition for review. 66 The jurisdiction of this
Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, is limited to reviewing only errors of law, not of fact, unless the factual findings being
assailed are not supported by evidence on record or the impugned judgment is based on a
misapprehension of facts.67 This Court is also not precluded from delving into and resolving issues of
facts, particularly if the findings of the Labor Arbiter are inconsistent with those of the NLRC and the
Court of Appeals.68 Such is the case in the instant petition. The Labor Arbiter and the Court of
Appeals are in agreement anent the entitlement of respondent Sadac to check-up benefit, clothing
allowance, and cash conversion of vacation leaves, but the findings of the NLRC were to the
contrary. The Labor Arbiter sustained respondent Sadac’s entitlement to check-up benefit, clothing
allowance and cash conversion of vacation leaves. He gave weight to petitioner Bank’s
acknowledgment in its computation that respondent Sadac is entitled to certain benefits, namely, rice
subsidy, tuition fee allowance, and medicine allowance, thus, there exists no reason to deprive
respondent Sadac of his other benefits. The Labor Arbiter also reasoned that the petitioner Bank did
not adduce evidence to support its claim that the benefits sought by respondent Sadac are not
granted to its employees and officers. Similarly, the Court of Appeals ratiocinated that if ordinary
employees are entitled to receive these benefits, so it is with more reason for a Vice President, like
herein respondent Sadac to receive the same.

We find in the records that, per petitioner Bank’s computation, the benefits to be received by
respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance per
year.69 Contained nowhere is an acknowledgment of herein claimed benefits, namely, check-up
benefit, clothing allowance, and cash conversion of vacation leaves. We cannot sustain the
rationalization that the acknowledgment by petitioner Bank in its computation of certain benefits
granted to respondent Sadac means that the latter is also entitled to the other benefits as claimed by
him but not acknowledged by petitioner Bank. The rule is, he who alleges, not he who denies, must
prove. Mere allegations by respondent Sadac does not suffice in the absence of proof supporting the
same.

III.

We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition for
Review, assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which
amended the fallo of its 6 April 2004 Decision to include "attorney’s fees equal to TEN PERCENT
(10%) of all the monetary award" granted to respondent Sadac. Petitioner Bank posits that neither
the dispositive portion of our 13 June 1997 Decision in G.R. No. 102467 nor the body thereof awards
attorney’s fees to respondent Sadac. It is postulated that the body of the 13 June 1997 Decision
does not contain any findings of facts or conclusions of law relating to attorney’s fees, thus, this
Court did not intend to grant to respondent Sadac the same, especially in the light of its finding that
the petitioner Bank was not motivated by malice or bad faith and that it did not act in a wanton,
oppressive, or malevolent manner in terminating the services of respondent Sadac. 70

We do not agree.

At the outset it must be emphasized that when a final judgment becomes executory, it thereby
becomes immutable and unalterable. The judgment may no longer be modified in any respect, even
if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law,
and regardless of whether the modification is attempted to be made by the Court rendering it or by
the highest Court of the land. The only recognized exceptions are the correction of clerical errors or
the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course,
where the judgment is void.71 The Court’s 13 June 1997 Decision in G.R. No. 102467 became final
and executory on 28 July 1997. This renders moot whatever argument petitioner Bank raised against
the grant of attorney’s fees to respondent Sadac. Of even greater import is the settled rule that it is
the dispositive part of the judgment that actually settles and declares the rights and obligations of the
parties, finally, definitively, and authoritatively, notwithstanding the existence of inconsistent
statements in the body that may tend to confuse.72

Proceeding therefrom, we make a determination of whether the Court in Equitable Banking

Corporation v. National Labor Relations Commission, 73 G.R. No. 102467, dated 13 June 1997,
awarded attorney’s fees to respondent Sadac. In recapitulation, the dispositive portion of the
aforesaid Decision is hereunder quoted:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of
employment until turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in
accordance with law; that private respondent shall be paid an additional amount of P5,000.00; that
the award of moral and exemplary damages are deleted; and that the liability herein pronounced
shall be due from petitioner bank alone, the other petitioners being absolved from solidary liability.
No costs.74

The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent Sadac
attorney’s fees equivalent to ten percent (10%) of the monetary award, viz:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as
it is hereby, SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as
illegal, and consequently ordering the respondents jointly and severally to reinstate him to his former
position as bank Vice-President and General Counsel without loss of seniority rights and other
privileges, and to pay him full backwages and other benefits from the time his compensation was
withheld to his actual reinstatement, as well as moral damages of P100,000.00, exemplary damages
of P50,000.00, and attorney’s fees equivalent to Ten Percent (10%) of the monetary award. Should
reinstatement be no longer possible due to strained relations, the respondents are ordered likewise
jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991
(cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00
(moral damages), P50,000.00 (exemplary damages) and attorney’s fees equal to Ten Percent (10%)
of all the monetary award, or a grand total of P1,649,329.53. 75 (Italics Ours.)

As can be gleaned from the foregoing, the Court’s Decision of 13 June 1997 AFFIRMED with
MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch upon
the award of attorney’s fees as granted, hence, the award stands. Juxtaposing the decretal portions
of the NLRC Decision of 24 September 1991 with that of the Court’s Decision of 13 June 1997, we
find that what was deleted by the Court was "the award of moral and exemplary damages," but not
the award of "attorney’s fees equivalent to Ten Percent (10%) of the monetary award." The issue on
the grant of attorney’s fees to respondent Sadac has been adequately and definitively threshed out
and settled with finality when petitioner Bank came to us for the first time on a Petition for Certiorari
in Equitable Banking Corporation v. National Labor Relations Commission, docketed as G.R. No.
102467. The Court had spoken in its Decision of 13 June 1997 in the said case which attained
finality on 28 July 1997. It is now immutable.
 IV.

We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve percent
(12%) interest per annum on the outstanding balance as of 28 July 1997, the date when our
Decision in G.R. No. 102467 became final and executory.

In Eastern Shipping Lines, Inc. v. Court of Appeals, 76 the Court, speaking through the Honorable
Justice Jose C. Vitug, laid down the following rules of thumb:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for damages. The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the concept of actual or compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of

money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Article 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2 above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.77

It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from the
time judgment becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank
is liable to pay interest from 28 July 1997, the finality of our Decision in G.R. No. 102467. 78 The Court
of Appeals was not in error in imposing the same notwithstanding that the parties were at variance in
the computation of respondent Sadac’s backwages. What is significant is that the Decision of 13
June 1997 which awarded backwages to respondent Sadac became final and executory on 28 July
1997.
 V.

Finally, petitioner Bank’s Motion to Refer the Petition En Banc must necessarily be denied as
established in our foregoing discussion. We are not herein modifying or reversing a doctrine or
principle laid down by the Court en banc or in a division. The instant case is not one that should be
heard by the Court en banc.79 1avvphil.net

Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the
backwages, respondent Sadac’s claimed prospective salary increases, check-up benefit, clothing
allowance, and cash conversion of vacation leaves are excluded. The petition is PARTIALLY
DENIED insofar as we AFFIRMED the grant of attorney’s fees equal to ten percent (10%) of all the
monetary award and the imposition of twelve percent (12%) interest per annum on the outstanding
balance as of 28 July 1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 75013, dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental Decision
dated 26 October 2004 are MODIFIED in the following manner, to wit:

Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:

(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467
with a clarification that the award of backwages EXCLUDES respondent Sadac’s claimed
prospective salary increases, check-up benefit, clothing allowance, and cash conversion of
vacation leaves;

(2) ATTORNEY’S FEES equal to TEN PERCENT (10%) of the total sum of all monetary
award; and

(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum
of all monetary award from 28 July 1997, the date of finality of Our Decision in G.R. No.
102467 until full payment of the said monetary award.

The Motion to Refer the Petition to the Court En Banc is DENIED.

No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

On Leave
MA. ALICIA AUSTRIA-MARTINEZ
CONSUELO YNARES-SANTIAGO
Asscociate Justice
Associate Justice
Acting Chairman
 ROMEO J. CALLEJO, SR.
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in
the above Decision were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes

 Rollo, pp. 30-40; Penned by Associate Justice Vicente Q. Roxas with Associate Justices
1

Rodrigo V. Cosico and Mariano C. Del Castillo, concurring.

2
 Id. at 55-56.

3
 Id. at 90-94.

4
 Equitable Banking Corporation v. National Labor Relations Commission, 339 Phil. 541, 550-
551 (1997).

5
 CA rollo, pp. 49-68.

6
 Id. at 69-104.

7
 Id. at 102-103.

8
 Supra note 4; See also CA rollo, pp. 106-136.

9
 Penned by Associate Justice Jose C. Vitug.

10
 Sec. 26, Rule 138, Rules of Court, now reads:

Sec. 26. Change of Attorneys. – x x x

A client may at any time dismiss his attorney or substitute another in his place, but if
the contract between client and attorney has been reduced to writing and the
dismissal of the attorney was without justifiable cause, he shall be entitled to recover
from the client the full compensation stipulated in the contract. However, the attorney
may, in the discretion of the court, intervene in the case to protect his rights. For the
payment of his compensation the attorney shall have a lien upon all judgments for
the payment of money, and executions issued in pursuance of such judgment,
rendered in the case wherein his services had been retained by the client.
  Equitable Banking Corporation v. National Labor Relations Commission, supra note 4 at
11

569-570.

12
 See CA rollo, p. 137.

13
 Id. at 167-169.

14
 Id. at 164-166.

15
 148-B Phil. 401, 414-415 (1971).

16
 G.R. No. 74214, 31 August 1989, 177 SCRA 151, 156.

17
 G.R. No. 108284, 30 June 1998, 224 SCRA 181, 188.

18
 319 Phil. 299, 301 (1995).

19
 G.R. No. 81200, 17 October 1990, 190 SCRA 525, 537.

20
 Rollo, pp. 113-123.

21
 365 Phil. 42, 54 (1999).

22
 CA rollo, pp. 180-183.

23
 Rollo, pp. 122-123.

24
 Id. at 57-71.

25
 Id. at 71.

26
 Id. at 72-79.

27
 Id. at 39-40.

28
 CA rollo, pp. 102-103.

29
 Id. at 330-337.

30
 Rollo, pp. 55-56.

31
 Id. at 6.

32
 Id. at 93-94.

33
 Id. at 81-87.

34
 Supra note 19.
35
 Supra note 18.

36
 325 Phil. 753, 760 (1996).

 Torillo v. Leogardo, Jr., 274 Phil. 758, 765 (1991), citing Philippine Airlines, Inc. v. National
37

Labor Relations Commission, G.R. No. 55159, 22 December 1989, 180 SCRA 555, 565.

 Tomas Claudio Memorial College, Inc. v. Court of Appeals, G.R. No. 152568, 16 February
38

2004, 423 SCRA 122, 134, citing Imperial Textile Mills, Inc. v. National Labor Relations
Commission, G.R. No. 101527, 19 January 1993, 217 SCRA 237, 247; St. Theresa’s School
of Novaliches Foundation v. National Labor Relations Commission, 351 Phil. 1038, 1044-
1045 (1998).

39
 332 Phil. 833 (1996).

40
 ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.

41
 Bustamante v. National Labor Relations Commission, supra note 39 at 842-843.

42
 155 Phil. 636 (1974).

 See Mercury Drug Co. Inc. v. Court of Industrial Relations, Id.; Lepanto Consolidated
43

Mining Co. v. Olegario, G.R. No. L-77437, 23 June 1988, 162 SCRA 512, 516; Hernandez v.
National Labor Relations Commission, G.R. No. 84302, 10 August 1989, 176 SCRA 269,
276; St. Louis College of Tuguegarao v. National Labor Relations Commission, supra note
16 at 157; Torillo v. Leogardo, Jr., supra note 37 at 479; Arms Taxi v. National Labor
Relations Commission, G.R. No. 104523, 8 March 1993, 219 SCRA 706, 713; JAM
Transportation Co. Inc. v. Flores, G.R. No. 82829, 19 March 1993, 220 SCRA 114, 123;
Philippine Airlines Inc. v. National Labor Relations Commission, G.R. No. 106374, 17 June
1993, 223 SCRA 463, 468.

44
 G.R. No. 100898, 5 July 1993, 224 SCRA 410, 423.

45
 G.R. No. 96779, 10 November 1993, 227 SCRA 655, 664.

46
 Rollo, pp. 33-36.

 Words and Phrases, Vol. 3, Permanent Edition, p. 360, citing Sherburne’s Adm’r v. United
47

States, 16 Ct.Cl. 491, 496, 500.

48
 Rollo, p. 66.

49
 East Asiatic Company, Ltd. v. Court of Industrial Relations, supra note 15 at 429.

50
 Rollo, pp. 64-65.
  Lim v. National Labor Relations Commission, G.R. Nos. 79907 and 79975, 16 March 1989,
51

171 SCRA 328, 336.

52
 Fringe benefits are defined by Section 33(B) of the Tax Code of 1997, viz.:

Section 33. Special Treatment of Fringe Benefit. – x x x

(B) Fringe Benefit Defined. - For purposes of this Section, the term 'fringe benefit'
means any good, service or other benefit furnished or granted in cash or in kind by
an employer to an individual employee (except rank and file employees as defined
herein) such as, but not limited to, the following:

(1) Housing;

(2) Expense account;

(3) Vehicle of any kind;

(4) Household personnel, such as maid, driver and others;

(5) Interest on loan at less than market rate to the extent of the difference
between the market rate and actual rate granted;

(6) Membership fees, dues and other expenses borne by the employer for
the employee in social and athletic clubs or other similar organizations;

(7) Expenses for foreign travel;

(8) Holiday and vacation expenses;

(9) Educational assistance to the employee or his dependents; and

(10) Life or health insurance and other non-life insurance premiums or similar
amounts in excess of what the law allows.

53
 Sigma Personnel Services v. National Labor Relations Commission, supra note 17 at 184.

 Paramount Vinyl Products Corporation v. National Labor Relations Commission, supra

54

note 19 at 537.

55
 Supra note 18.

 Id. at 301, citing Insular Life Assurance Co., Ltd. v. National Labor Relations Commission,
56

G.R. No. L-74191, 21 December 1987, 156 SCRA 740, 749, citing Durabuilt Recapping Plant
& Co. v. National Labor Relations Commission, G.R. No. L-76746, 27 July 1987, 152 SCRA
328, 332; Insular Life Assurance Co., Ltd., Employees Association-NATU v. Insular Life
Assurance Co., Ltd., G.R. No. L-25291, 5 May 1977, 77 SCRA 3, 4.

57
 Supra note 36 at 436 (1996).
58
 G.R. No. 85534, 5 March 1993, 219 SCRA 549.

 Id. at 559-560, citing Samahang Manggagawa ng Rizal Park v. National Labor Relations
59

Commission, G.R. No. 94372, 9 October 1991, First Division, Minute Resolution, citing
Resolution in Central Azucarera de Tarlac v. Sampang, G.R. No. 84598, promulgated on 19
May 1989.

60
 441 Phil. 679 (2002).

61
 Id. at 690-691, citing cases.

62
 G.R. No. L-44169, 3 December 1985, 140 SCRA 304, 309.

63
 G.R. Nos. 50999-51000, 23 March 1990, 183 SCRA 610.

64
 Id. at 617-618.

65
 Rollo, p. 16.

 Blanco v. Quasha, 376 Phil. 480, 491 (1999), citing Boneng v. People, 363 Phil. 594, 600
66

(1999).

 Manila Bankers Life Insurance Corporation v. Ng Kok Wei, G.R. No. 139791, 12 December
67

2003, 418 SCRA 454, 459, citing Cosmos Bottling Corporation v. National Labor Relations
Commission, G.R. No. 146397, 1 July 2003, 405 SCRA 258, 263.

 Nasipit Lumber Company v. National Organization of Workingmen (NOWM), G.R. No.

68

146225, 25 November 2004, 444 SCRA 158, 170.

69
 CA rollo, p. 179.

70
 Rollo, pp. 81-87.

71
 Nuñal v. Court of Appeals, G.R. No. 94005, 6 April 1993, 221 SCRA 26, 32, citing Manning
International Corporation v. National Labor Relations Commission, G.R. No. 83018, 13
March 1991, 195 SCRA 155, 161; See also Ramos v. Ramos, 447 Phil. 114, 116 (2003);
Argel v. Pascua, 415 Phil. 608, 612 (2001); Sacdalan v. Court of Appeals, G.R. No. 128967,
20 May 2004, 428 SCRA 586, 599.

 Light Rail Transit Authority v. Court of Appeals, G.R. Nos. 139275-76 and 140949, 25
72

November 2004, 444 SCRA 125, 136, citing Espiritu v. Court of First Instance of Cavite, G.R.
No. L-44696, 18 October 1988, 166 SCRA 394, 399.

73
 Supra note 4.

74
 Id. at 569-570.

75
 CA Rollo, pp. 102-103.

76
 G.R. No. 97412, 12 July 1994, 234 SCRA 78.
77
 Id. at 95-97.

78
 Equitable Banking Corporation v. National Labor Relations Commission, supra note 4.

79
 Sec. 4(2), Article VIII, 1987 Constitution reads:

(2) All cases involving the constitutionality of a treaty, international or executive

agreement, or law, which shall be heard by the Supreme Court en banc, and all other
cases which under the Rules of Court are required to be heard en banc, including
those involving the constitutionality, application, or operation of presidential decrees,
proclamations, orders, instructions, ordinances, and other regulations, shall be
decided with the concurrence of a majority of the Members who actually took part in
the deliberations on the issues in the case and voted thereon. See also Firestone
Ceramics, Inc. v. Court of Appeals, 389 Phil. 810, 816-817 (2000), citing Supreme
Court Circular No. 2-89, dated February 7, 1989, as amended by the Resolution of
November 18, 1993, holding, viz.:

x x x the following are considered en banc cases:

1. Cases in which the constitutionality or validity of any treaty, international or

executive agreement, law, executive order, or presidential decree, proclamation,
order, instruction, ordinance, or regulation is in question;

2. Criminal cases in which the appealed decision imposes the death penalty;

3. Cases raising novel questions of law;

4. Cases affecting ambassadors, other public ministers and consuls;

5. Cases involving decisions, resolutions or orders of the Civil Service Commission,

Commission on Elections, and Commission on Audit;

6. Cases where the penalty to be imposed is the dismissal of a judge, officer or

employee of the judiciary, disbarment of a lawyer, or either the suspension of any of
them for a period of more than one (1) year or a fine exceeding P10,000.00 or both;

7. Cases where a doctrine or principle laid down by the court en banc or in division
may be modified or reversed;

8. Cases assigned to a division which in the opinion of at least three (3) members
thereof merit the attention of the court en banc and are acceptable to a majority of
the actual membership of the court en banc; and

9. All other cases as the court en banc by a majority of its actual membership may
deem of sufficient importance to merit its attention.