CB Richard Ellis Philippines, Inc. v. Lynch

FIRST DIVISION

[G.R. No. 256180. September 14, 2021.]

CB RICHARD ELLIS PHILIPPINES, INC. [NOW KNOWN AS "SANTOS KNIGHT FRANK, INC."], petitioner, vs.DANIEL PAUL LYNCH, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution datedSeptember 14, 2021which reads as follows:

"G.R. No. 256180 (CB Richard Ellis Philippines, Inc. [now known as "Santos Knight Frank, Inc."] v. Daniel Paul Lynch). — Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court assailing the Decision 2 dated November 24, 2020 and Resolution 3 dated March 11, 2021 rendered by the Court of Appeals (CA), which affirmed the Decision 4 dated August 31, 2017 and Resolution 5 dated August 31, 2018 of the National Labor Relations Commission (NLRC), affirming the Decision 6 dated December 28, 2016 rendered by the Labor Arbiter that awarded monetary claims in favor of Daniel Paul Lynch.

Facts

On June 21, 2012, petitioner CB Richard Ellis (petitioner) hired respondent Daniel Paul Lynch (respondent) as an Associate for Office Services for its Head Office. The contract of employment contained negative and restrictive covenants (i.e., confidentiality clause and non-compete clause), and the authority to deduct respondent's debt from his salaries. 7

On October 1, 2014, petitioner promoted respondent as Manager and was asked to sign an Addendum to his employment contract. It was stipulated therein that in the event of resignation, respondent would give a written notice of at least forty five (45) days prior to the effectivity of his resignation. Further, if it were found that respondent violated the confidentiality and the non-compete clauses in the employment contract, he shall be liable for liquidated damages equivalent to five (5) months' worth of his salary. 8

On January 22, 2016, respondent tendered his letter of resignation. He stated therein that his last day would be on February 17, 2016, which was 22 days short of the agreed 45-day notice. 9 Respondent likewise sent petitioner an e-mail on April 11, 2016 requesting for a computation of his last pay. Carole dela Merced-Ramirez, an Assistant Manager working for petitioner, replied on April 13, 2016 assuring respondent that they would release his last pay on or before April 29, 2016. She also informed respondent that there will be a "deduction of 14 days absences, unliquidated Cash Advance amounting to P5,000.00 and a commission of P133,267.86" to his last pay. Despite repeated demands, petitioner failed to pay respondent his last pay, which amounted to Forty Three Thousand Five Hundred Pesos (P43,500.00), his proportionate thirteenth month pay worth Ten Thousand Six Hundred Twenty Five Pesos (P10,625.00) and his commissions equivalent to One Hundred Thirty Three Thousand Two Hundred Sixty Seven Pesos and Eighty Six centavos (P133,267.86). 10 AacCIT

Aggrieved, respondent filed a complaint 11 with the Labor Arbiter claiming that petitioner withheld his salaries, an act proscribed under the Labor Code. He also stated that petitioner could not show that the withholding of his salary was authorized by law. Thus, respondent asked the Labor Arbiter to order petitioner to pay his last pay and moral and exemplary damages and attorney's fees. 12

In its defense, petitioner claimed that it withheld respondent's last pay, proportionate thirteenth month pay, and unpaid commissions to off-set respondent's liquidated damages. Petitioner asseverated that it discovered that respondent transferred to the KMC MAG Group, Inc. (KMC), petitioner's direct competitor, within the prohibited period. Petitioner confirmed this from the webpage of KMC and respondent's own LinkedIn Account. Petitioner then maintained that respondent's act of transferring to KMC amounted to a breach of the confidentiality and non-compete clauses in the employment contract. In a letter dated March 1, 2016, petitioner demanded respondent to comply with his obligation under the employment contract. Specifically, petitioner asked respondent to resign from KMC and to pay it liquidated damages amounting to Four Hundred Twenty Five Thousand Pesos (P425,000.00). Petitioner's demands fell on deaf ears. This pushed petitioner to file a civil case for breach of contract and damages against respondent before the Regional Trial Court of Makati City (RTC). 13

On December 28, 2016, Labor Arbiter Romelita N. Rioflorido rendered a Decision 14 granting respondent's complaint. The Labor Arbiter ruled that petitioner failed to prove that the deductions from the salaries of respondent, arising from liquidated damages are authorized by law, or by regulations issued by the Secretary of Labor and Employment. Contrary to its asseverations, petitioner cannot validly withhold respondent's salaries because liquidated damages are not debts. As respondent's alleged breach of the employment contract was pending before the RTC, petitioner should enforce its claim before the said court. 15 Thus, the Labor Arbiter disposed the case as follows:

WHEREFORE, premises considered, Respondent CB RICHARD ELLIS PHILIPPINES, INC. is directed to pay the Complainant his undisputed claims, without deduction, consisting of:

1. One-half month pay for February 2016 at P43,500.00;

2. Proportionate 13th month pay of P10,625.00;

3. Unpaid commissions in the amount of P133,267.86.

Respondent is also directed to pay nominal damages in the amount of P20,000 and attorney's fees in the amount of ten percent (10%) of the total award.

All other claims and counterclaims are denied for lack of merit or legal basis.

SO ORDERED.

Disagreeing with the ruling of the Labor Arbiter, petitioner filed an appeal with the NLRC. After due proceedings, the NLRC rendered a Decision 16 dated August 31, 2017 denying petitioner's appeal. The NLRC concurred with the ruling of the Labor Arbiter that the clause prohibiting respondent from engaging in "relevant services" after resigning from petitioner cannot be enforced because it is tantamount to an unnecessary restraint of trade. Also, withholding respondent's last pay is not allowed under the law. Hence, the Labor Arbiter did not err in ordering petitioner to pay respondent's claims. 17 Thus, the NLRC disposed the appeal as follows:

WHEREFORE, premises considered, the Appeal dated 26 January 2017 is DENIED. The assailed Decision dated 28 December 2016 is AFFIRMED.

SO ORDERED.

Aggrieved, petitioner asked for a reconsideration of the aforesaid decision, which was denied in the Resolution 18 dated August 31, 2018 issued by the NLRC.

Undeterred, petitioner filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. In its Decision 19 dated November 24, 2020, the CA partially granted the petition. The CA clarified that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in ruling on the issue of the validity of the non-compete clause as this was not raised in the appeal of petitioner. 20 The CA further held that withholding of respondent's salary was in violation of Article 113 of the Labor Code. Contrary to petitioner's assertions, Article 1706 of the Civil Code does not apply in the instant case as there was no showing that respondent is indebted to petitioner. Regardless, it has been held that an employee's money claims for unpaid salaries may not be off-set against the employer's claims for liquidated damages. 21 Lastly, the CA agreed that respondent is entitled to an award of damages as there was a violation of his legal right to receive his final pay. Likewise, respondent was compelled to litigate to enforce his legal right. As such, he is also entitled to the payment of his attorney's fees. 22 Accordingly, the CA disposed the petition as follows: TIEHSA

ACCORDINGLY, we MODIFY the Decision dated 31 August 2017 and the Resolution dated 31 August 2018 issued by the National Labor Relations Commission, thus: we delete the ruling regarding the issue of the validity of the non-compete clause, but AFFIRM the rest of the Labor Arbiter's decision dated 28 December 2016, as affirmed by the National Labor Relations Commission.

SO ORDERED.23

Petitioner filed a motion for reconsideration but the same was denied by the CA in its Resolution 24 dated March 11, 2021. Left without recourse, petitioner filed the present petition for review on certiorari before this Court.

Issues:

1. Whether the CA committed a reversible error in ruling that the withholding of respondent's wages is against his employment contract, the law and jurisprudence.

2. Whether the CA committed a reversible error in ruling that respondent is entitled to nominal damages and attorney's fees.

Ruling

At the onset, it should be pointed out that petitioner elevated its case before this Court via petition for review for certiorari under Rule 45 of the Rules of Court. Section 6 of Rule 45 of the Rules of Court has been interpreted to mean that petitions for review on certiorari will only be entertained if the questions raised therein are of significant consequence and value. Accordingly, this Court may exercise its exclusive discretion to deny outright such an appeal if "there is no novel legal question involved, or when a case presents no doctrinal or pedagogical value that warrants this Court's review and expound on, rectify, modify and/or clarify existing legal policy, or lay out novel principles and delve into unexplored areas of law." Also, such an appeal may not be entertained if there is no manifest or demonstrable departure from legal provisions and/or jurisprudence or deviation from settled procedural norms. 25

Here, petitioner primarily avers that it was legally authorized to withhold respondent's salary for two reasons. First, Article 113 (c) of the Labor Code, in relation to Article 1706 of the Civil Code, permits it to withhold the salary of its employees for a debt due to it. Petitioner postulates that respondent owes it liquidated damages for deliberately violating the non-compete clause in the employment contract. Second, respondent knowingly and voluntarily authorized it to make the necessary deductions should he violate any provision in the employment contract. Hence, contrary to the pronouncement of the courts a quo, respondent is not entitled to an award of nominal damages and the award of attorney's fees finds no support in law or jurisprudence. 26

Petitioner's contentions lack merit.

Article 116 27 of the Labor Code specifically states that employers cannot withhold the wages of its employees. Article 113 of the same Code enumerates the only instances when employers are permitted to withhold the wages of its employees, which are as follows:

1. In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance;

2. For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and TDAcCa

3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment. 28

In relation to the third item as above-mentioned, Article 1706 of the Civil Code provides that employers may withhold the wages of its employees for a debt due to it. Article 1706, however, should be read together with Articles 1278 and 1279 of the same Code, which read as follows:

Article 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Compensation is the extinguishment to the concurrent amount of the debts of two persons who, in their own right, are debtors and creditors of each other.

ARTICLE 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable; and

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

Accordingly, there have been several cases where this Court allowed the employer to withhold the wage of its employee because he or she obtained loans and obligations during his or her employment with the company. 29 Contrary to petitioner's assertions and as held by the CA, the liquidated damages provided in the employment contract is not considered as a debt that would fall under the exception provided under Article 1706 of the Civil Code. This Court explained the concept of "debt" in the case of La Compañia General de Tabacos de Filipinas v. French30 to be as follows:

To be indebted is to owe a debt. The word "debt," in legal parlance, is of more restricted meaning than the terms "obligation" or "liability." "A debt" says Sir John Cross, in Ex parte Thompson (Mon. & B., 219), "is a demand for a sum certain." A debt is an amount actually ascertained. That there must be an ascertained debt and not a mere unliquidated demand or liability, "is sustained by all the cases, legal and equitable." (In re Adams [N. Y.], 12 Daly, 454.) In Bacon's Abridgement the term "debt" is defined as limited to cases in which the certainty of the sum is made to appear and that therefore "the plaintiff is to recover the same in numero and not to be repaired in damages by the jury as in those actions sounding the damage." (Watson vs. McNairy, 4 Ky., 356.)

"A debt is properly opposed to unliquidated damages . . . ." (Commercial National Bank vs. Taylor, 19 N. Y. Supp., 533.) It seems to us, therefore, quite clear that the authority conferred upon the Auditor by Section 624 of the Administrative Code of 1917 to set-off "debts" to the Government against "money due" the debtor does not extend to unliquidated, disputed claims arising from tort or breach of contract.

The Act of Congress of March 3, 1807, which allows set-offs against claims by the Government, has been most liberally construed by the Supreme Court of the United States (U.S. vs. Ripley, 7 Peters, 18); but no claims based upon unliquidated damages have ever been permitted as a set-off. (U.S. vs. Robeson, 9 Peters, 319.) It is reasonable that this should be so, for the theory of set-off, like the compensatio of the Civil Law, is that one of the debts extinguishes the other by operation of law. As stated by Comptroller Lawrence, in the Kansas Case (Lawrence, First Comptroller's Decisions, vol. 2, p. 315):

"The object of compensatio, as in set-off, was the prevention of unnecessary suits and payments." EDATSI

Compensation and set-off are, therefore, forms of payment by the mutual extinction, by operation of law, of concurring debts. In our Civil Code the subject is dealt with under the general heading "The Extinction of Obligations"; and it is provided in Article 1196 that in order for compensation to take place (1) both debts must "consist of a sum of money . . ."; (2) that both debts be due and demandable; and (3) that both be liquidated. The Code in this respect is merely declaratory of the earlier law, for in its decision of April 6, 1889, cited by Manresa (vol. 8, P.378) the supreme court of Spain had ruled that "compensation can only take place between certain and liquidated debts, and in no event can it include the unliquidated claims of one of the parties for alleged damages or for untaxed court costs."31

Recently, this Court clarified the term "debt" that falls under the coverage of Article 1706 of the Civil Code in relation to Article 113 (c) of the Labor Code, to wit:

"Debt" in this case refers to any obligation due from the employee to the employer. It includes any accountability that the employee may have to the employer. There is no reason to limit its scope to uniforms and equipment, as petitioners would argue.

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the release of petitioners' benefits shall be "less accountabilities."

"Accountability," in its ordinary sense, means obligation or debt. The ordinary meaning of the term "accountability" does not limit the definition of accountability to those incurred in the worksite. As long as the debt or obligation was incurred by virtue of the employer-employee relationship, generally, it shall be included in the employee's accountabilities that are subject to clearance procedures. 32

It can be gleaned from the foregoing that respondent's alleged liability for the payment of liquidated damages on account of his violation of the non-compete clause in the employment contract is not the "debt" that falls under the exception provided for under Article 1706 of the Civil Code, in relation to Article 113 (c) of the Labor Code. Neither can there be a set-off or legal compensation between the parties as they are not mutually creditor and debtor of each other. 33

Assuming arguendo that the liquidated damages can be deemed a debt due to petitioner and as such may be offset from respondent's last pay, the ruling of this Court in the case of Century Properties, Inc. v. Babiano, et al., 34 would still not apply in the instant case. In the said case, the petitioner therein was able to institute an administrative hearing to ascertain if there was a violation of the non-compete clause a few days before the respondent therein resigned. Hence, the parties were able to thresh out the issue of whether the respondent should be terminated and be made liable for liquidated damages for committing such breach in the employment contract. 35

There was no such administrative proceeding in the instant case. Consequently, there was no substantial proof that respondent violated the non-compete clause in the employment agency. While petitioner presented in evidence the screenshot of the website of KMC and respondent's LinkedIn profile, it cannot be ascertained therein if respondent started working for KMC even before he resigned with the petitioner. Notably, it was stated in respondent's LinkedIn account and in the website of KMC that he started working for the latter in February 2016, while it was stated in respondent's letter that his resignation will take effect on February 17, 2016. Hence, it was possible that respondent started working for KMC on a date later than February 17, 2016.

As regards the award of nominal damages, the court a quo did not err in granting the same considering that respondent's right as a regular employee of petitioner to receive his wages was violated. 36 Further, to assert his right, respondent was constrained to seek legal assistance and file a labor complaint. This then entitles him to an award of attorney's fees, in accordance with Article 2208 of the Civil Code. TaDSCA

Finally, pursuant to the ruling of this Court in the case of Nacar v. Gallery Frames, 37 the monetary awards in favor of respondent should be subjected to a six percent (6%) interest per annum from the finality of this Resolution until full payment.

IN VIEW OF THE FOREGOING, the instant petition is DENIED. CB Richard Ellis Philippines, Inc., now known as Santos Knight Frank, Inc., is DIRECTED to PAY Daniel Paul Lynch his monetary claims, without deduction, consisting of:

1. One-half month pay for February 2016 at P43,500.00;

2. Proportionate 13th month pay of P10,625.00; and

3. Unpaid commissions in the amount of P133,267.86.

The company is also directed to pay nominal damages in the amount of P20,000 and attorney's fees in the amount of ten percent (10%) of the total award in favor of Daniel Paul Lynch. All the monetary awards shall earn six percent (6%) interest per annum from the finality of this Resolution until full payment.

SO ORDERED."

By authority of the Court:

(SGD.) LIBRADA C. BUENADivision Clerk of Court

By:

MARIA TERESA B. SIBULODeputy Division Clerk of Court

 

Footnotes

1.Rollo Volume I, pp. 3-37.

2. Penned by Associate Justice Nina G. Antonio-Valenzuela with Associate Justices Remedios A. Salazar-Fernando and Tita Marilyn B. Payoyo-Villordon, concurring; id. at 45-58.

3.Id. at 60-61.

4. Penned by Commissioner Leonard Vinz O. Ignacio with Commissioners Grace M. Venus and Bernardino B. Julve, concurring; id. at 136-158.

5. Penned by Commissioner Leonard Vinz O. Ignacio with Commissioners Grace M. Venus and Mary Ann F. Plata-Daytia, concurring; id. at 159-175.

6. Penned by Labor Arbiter Romelita N. Rioflorido; id. at 177-189.

7.Id. at 178.

8.Id. at 179-180, 249.

9.Id. at 46, 250.

10.Id. at 46.

11.Id. at 177.

12.Id.

13.Id. at 294-303.

14.Id. at 177-189.

15.Id. at 180-189.

16.Id. at 136-158.

17.Id. at 143-157.

18.Id. at 159-175.

19.Id. at 45-58.

20.Id. at 54-55.

21.Id. at 55-56.

22.Id. at 56-57.

23.Id. at 45-58.

24.Id. at 60-61.

25.Kumar vs. People of the Philippines, G.R. No. 247661, June 15, 2020.

26.Rollo Volume I, pp. 16-35.

27. Article 116 of the Labor Code reads as follows:

Art. 116. Withholding of wages and kickbacks prohibited. — It shall be unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation, threat or by any other means whatsoever without the worker's consent.

28. Article 113 of the Labor Code.

29. See Logwin Air+Ocean Philippines, Inc. v. Taki, G.R. No. 252259, August 26, 2020; Marby Food Ventures Corp. v. Dela Cruz, G.R. No. 244629, July 28, 2020; Cebu People's Multi-Purpose Cooperative v. Carbonilla, Jr., 779 Phil. 563 (2016); and Deoferio v. Intel Technology Philippines, Inc., 736 Phil. 625 (2014).

30. 39 Phil. 34 (1918).

31.Id. at 50-51.

32.Milan v. National Labor Relations Commission, 753 Phil. 217, 236 (2015).

33. See Special Steel Products, Inc. v. Villareal, 478 Phil. 24, 33 (2004).

34. 789 Phil. 270 (2016).

35.Id. at 274-275.

36.SeeGeneral Milling Corp. v. Constantino, citingLibcap Marketing Corporation, et al. vs. Baquial, 737 Phil. 349, 361 (2014).

37. 716 Phil. 267 (2013).