G.R. No. 170904 , November 13, 2013
BANI RURAL BANK INC., ENOC THEATER I AND II and/or RAFAEL DE GUZMAN, Petitioners, vs. TERESA DE GUZMAN, EDGAR C. TAN and TERESA G. TAN, Respondents.

FACTS

Respondents Teresa de Guzman and Edgar C. Tan, employees of petitioners Bani Rural Bank, Inc. and ENOC Theatre I and II, filed a complaint for illegal dismissal. The Labor Arbiter initially dismissed the complaint. On appeal, the National Labor Relations Commission (NLRC) reversed the decision in a Resolution dated March 17, 1995, declaring the respondents illegally dismissed and ordering their reinstatement with full backwages from the time of dismissal until actual reinstatement, less earnings elsewhere. This resolution became final and executory.
For execution, the computation of backwages was remanded to Labor Arbiter Rolando D. Gambito. He computed backwages only until August 25, 1995, the date he deemed respondents manifested they no longer wanted reinstatement. Respondents appealed this computation to the NLRC. In a Decision dated July 31, 1998, the NLRC modified the final March 17, 1995 resolution. It clarified that “earnings elsewhere” excluded salaries from the Rural Bank of Mangantarem and, citing strained relations, ordered payment of separation pay in lieu of reinstatement, computed from the start of employment up to the finality of the decision. This July 31, 1998 decision became final and executory on January 29, 1999.
A second recomputation was then conducted by Labor Arbiter Gambito pursuant to the July 31, 1998 decision. Petitioners moved to quash the writ, insisting backwages should end only on August 25, 1995. Labor Arbiter Gambito agreed in an Order dated July 12, 2000. Respondents appealed to the NLRC, which reversed the Labor Arbiter in a Decision dated September 28, 2001. The NLRC ruled that backwages should be computed until January 29, 1999 (the date of finality of the July 31, 1998 decision), as reinstatement was ordered in the original final judgment (March 17, 1995) and was only superseded by the award of separation pay in the subsequent final judgment (July 31, 1998). The NLRC denied petitioners’ motion for reconsideration.
Petitioners filed a petition for certiorari with the Court of Appeals, arguing the NLRC committed grave abuse of discretion by ordering backwages beyond August 25, 1995. The CA dismissed the petition, finding no grave abuse of discretion and upholding the NLRC’s computation of backwages until January 29, 1999.

ISSUE

Whether the Court of Appeals erred in affirming the NLRC’s ruling that the computation of the illegally dismissed employees’ backwages should cover the period until January 29, 1999 (the date of finality of the decision awarding separation pay in lieu of reinstatement), and not only until August 25, 1995.

RULING

The Supreme Court DENIED the petition and AFFIRMED the assailed Court of Appeals decision.
The Court held that the NLRC did not commit grave abuse of discretion. The controlling rule is that backwages are awarded from the time of illegal dismissal until the date of actual reinstatement. If reinstatement is no longer viable and separation pay is awarded in its place, backwages are to be computed until the finality of the decision ordering the separation pay. This is because the judgment for reinstatement continues to be in effect until it is superseded by a subsequent final judgment, such as one granting separation pay due to strained relations.
In this case, the final and executory NLRC Resolution dated March 17, 1995, ordered reinstatement with backwages until actual reinstatement. The subsequent final and executory NLRC Decision dated July 31, 1998, modified this by awarding separation pay in lieu of reinstatement, computed up to its finality. Consequently, the entitlement to backwages under the first final judgment persisted until it was replaced by the second final judgment. Therefore, the computation of backwages correctly ended on January 29, 1999, the date the July 31, 1998 decision awarding separation pay became final. The petitioners’ claim that backwages should end on August 25, 1995, based on an alleged manifestation of disinterest in reinstatement, was unsubstantiated and could not override the clear periods established by the final judgments. The NLRC’s interpretation and application of its own final decisions in the execution stage was within its jurisdiction and constituted a lawful exercise thereof, not a grave abuse of discretion.