G.R. No. 120008 October 18, 1996
PHILIPPINE ADVERTISING COUNSELORS, INC. and/or ADRIEL C. PEÑA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and TEODORO M. DIAZ, respondents.

FACTS

Private respondent Teodoro M. Diaz was a long-time employee of Philippine Advertising Counselors, Inc. (PAC), rising to the position of Vice President and head of the Account Management Group. In December 1990, during internal corporate strife, the company’s Chairman, Antonio Cumagun, invited Diaz to join a new agency he intended to form. Diaz declined, urging reconciliation instead. Subsequently, in January 1991, PAC President Adriel Peña expressed disappointment at Diaz’s stance and again pressured him to join the Cumagun group, which Diaz refused. Following the buyout of the opposing shareholder group by the Cumagun faction, a major reorganization ensued. Diaz’s position as head of the Account Management Group was abolished, and he was demoted to merely heading one of its divisions. On June 27, 1991, Diaz served notice that he considered himself constructively dismissed and filed a complaint for illegal dismissal and monetary claims.
The Labor Arbiter dismissed the complaint, ruling that Diaz voluntarily severed his employment and was not dismissed. However, the arbiter ordered the payment of Diaz’s retirement benefits, accrued vacation leave, and proportionate 13th month pay, totaling P285,350.32, but authorized the company to withhold this amount to offset Diaz’s outstanding car loan balance. On appeal, the NLRC reversed the Labor Arbiter, finding constructive dismissal. It awarded Diaz separation pay, proportionate 13th month pay, moral damages of P500,000, exemplary damages of P500,000, and attorney’s fees, all subject to a set-off for his car loan. Petitioners assailed the NLRC decision.

ISSUE

Whether the NLRC committed grave abuse of discretion in finding that Diaz was constructively dismissed and in awarding moral and exemplary damages.

RULING

The Supreme Court affirmed the NLRC’s finding of constructive dismissal but modified the awards for damages. The Court held that constructive dismissal exists when an act of clear discrimination, insensibility, or disdain by the employer becomes so unbearable that it leaves the employee with no choice but to resign. The demotion of Diaz from his position as head of the Account Management Group to merely heading a division, following his refusal to align with the new management’s faction, constituted a clear case of constructive dismissal. This demotion, a result of the employer’s hostility towards his neutral stance, made his continued employment untenable.
On the award of damages, the Court sustained the grant of moral and exemplary damages, as the dismissal was effected in a pernicious and oppressive manner. However, it ruled that such damages are not intended to enrich the employee but to provide compensation for suffering and serve as an example for the public good. Considering the circumstances, the Court deemed the NLRC’s awards excessive and reduced moral damages to P100,000.00 and exemplary damages to P50,000.00. The other monetary awards, including separation pay, were affirmed, subject to the lawful set-off for the car loan.