G.R. No. 166208 , June 29, 2007
King of Kings Transport Inc., Claire Dela Fuente and Melissa Lim, petitioners, vs. Santiago O. Mamac, respondent.

FACTS

Petitioner King of Kings Transport, Inc. (KKTI) dismissed respondent Santiago Mamac, a bus conductor and union president, for an act of dishonesty. An audit revealed that on October 28, 2001, Mamac erroneously declared sold tickets as returned tickets, causing a loss of income for the company. KKTI asked Mamac to explain the discrepancy in writing, which he did, attributing the error to confusion following an incident where the bus windshield was smashed. Subsequently, on November 26, 2001, Mamac received a termination letter citing the October 28 irregularity as an act of fraud and listing other past alleged offenses. Mamac filed a complaint for illegal dismissal, arguing his termination was due to union activities and was effected without due process.
The Labor Arbiter dismissed the complaint, finding just cause for dismissal. The NLRC affirmed the existence of just cause but ordered KKTI to pay Mamac PhP 10,000 as indemnity for procedural due process violation. The Court of Appeals affirmed the NLRC on just cause but modified the award, ordering KKTI to pay Mamac full backwages for the due process violation and 13th-month pay. KKTI elevated the case to the Supreme Court.

ISSUE

The primary issues were: (1) whether KKTI complied with procedural due process in terminating Mamac; and (2) whether Mamac was entitled to 13th-month pay.

RULING

The Supreme Court ruled that KKTI did not comply with procedural due process but that Mamac was not entitled to 13th-month pay. The Court found just cause for dismissal based on Mamac’s act of dishonesty. However, KKTI failed to satisfy the twin-notice requirement. While the company asked for a written explanation (the first notice), it did not furnish Mamac with a written notice of charge prior to his termination. The termination letter itself, which also cited past infractions, served as the notice of decision, not a proper notice of charge. This omission constituted a denial of procedural due process.
Regarding the sanction for this omission, the Court applied the rule in Agabon v. NLRC, which governs dismissals for just cause but without due process. The award of full backwages by the CA, based on the abandoned Serrano doctrine, was incorrect. Instead, the proper sanction was an indemnity in the form of nominal damages, which the Court set at PhP 30,000. On the 13th-month pay claim, the Court ruled Mamac was not entitled. Presidential Decree No. 851 excludes employees paid purely on commission basis. Since Mamac admitted he was paid on commission only, as evidenced by his pay slips, he fell under this exclusion. The petition was partly granted; the award of backwages and 13th-month pay was deleted and replaced with an order for KKTI to pay PhP 30,000 in nominal damages.