G.R. No. 164856 ; January 20, 2009
JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners, vs. PHILIPPINE AIRLINES, INC., Respondent.

FACTS

Petitioners Juanito A. Garcia and Alberto J. Dumago were employees of respondent Philippine Airlines, Inc. (PAL). PAL dismissed them on October 9, 1995, after they were allegedly caught sniffing shabu during a raid. Petitioners filed a complaint for illegal dismissal. On January 11, 1999, the Labor Arbiter decided in favor of petitioners, ordering, among other things, their immediate reinstatement. Prior to this decision, the SEC had placed PAL, which was suffering severe financial losses, under an Interim Rehabilitation Receiver (later a Permanent Rehabilitation Receiver). PAL appealed the Labor Arbiter’s decision to the NLRC. On January 31, 2000, the NLRC reversed the Labor Arbiter’s decision and dismissed petitioners’ complaint, finding the dismissal valid. This NLRC decision became final on July 13, 2000. However, on October 5, 2000, the Labor Arbiter issued a Writ of Execution for the reinstatement aspect of his January 11, 1999 decision, and a Notice of Garnishment on October 25, 2000. PAL moved to quash these. The NLRC, by Resolutions dated November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and Notice but suspended the action and referred it to the Rehabilitation Receiver. PAL elevated the matter to the Court of Appeals, which nullified the NLRC Resolutions, ruling that a subsequent finding of valid dismissal removes the basis for reinstatement pending appeal, and that corporate rehabilitation justified PAL’s failure to exercise the reinstatement options. Petitioners assailed this decision. On August 29, 2007, the Supreme Court partially granted the petition and suspended the proceedings until further notice, directing PAL to update the Court on its rehabilitation status. PAL later informed the Court that the SEC, by Order dated September 28, 2007, granted its exit from rehabilitation proceedings. With the rehabilitation concluded, the Supreme Court proceeded to resolve the remaining issue.

ISSUE

Whether petitioners may collect their wages during the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC decision reversing the Labor Arbiter, now that PAL has exited from rehabilitation proceedings.

RULING

Yes. The Supreme Court granted the petition. The Court held that petitioners are entitled to receive their salaries during the period from the Labor Arbiter’s order of reinstatement pending appeal until its reversal by the NLRC. The right to reinstatement pending appeal is immediately executory under Article 223 of the Labor Code. This right vested upon the rendition of the Labor Arbiter’s decision. The subsequent reversal of the reinstatement order by the NLRC does not negate this right to accrued wages during the appeal period. The Court rejected the “refund doctrine” suggested in the Genuino case, which would require an employee on payroll reinstatement to refund salaries if the dismissal is later found valid, as it would render the rationale of reinstatement pending appeal inutile and could harm the employee. The social justice principles of labor law outweigh the civil law doctrine of unjust enrichment in this context. The Court also held that PAL’s corporate rehabilitation did not negate petitioners’ vested right to reinstatement pending appeal; it only prevented PAL from exercising its option to physically reinstate or payroll reinstate, but did not defeat the right itself. Since the rehabilitation proceedings have been terminated, there is no longer any legal impediment to hold PAL liable for petitioners’ accrued salaries for the stated period.