G.R. No. L-20238 January 30, 1965
DAMASO P. PEREZ, petitioner, vs. COURT OF APPEALS and ARMANDO HERRADURA, respondents.

FACTS

On August 1, 1958, respondent Armando Herradura was appointed by petitioner Damaso P. Perez as manager of the D. P. Perez Insurance Agency with a monthly salary of P400.00. On January 15, 1959, petitioner informed respondent that due to his failure to produce the promised amount of business, his employment arrangement was changed effective that date to manager of the Non-Life department on a commission basis only. Respondent resigned the following day. Respondent filed a claim for separation pay and unpaid salaries with the Department of Labor and a criminal complaint for estafa with the City Fiscal’s office. While the criminal complaint was pending, petitioner filed a consignation case (Civil Case No. 41080) in the Court of First Instance of Manila, alleging he had tendered payment of P600.00 for unpaid salaries which respondent refused, and thus deposited the amount in court. Respondent denied the tender and filed a counterclaim for moral damages and attorney’s fees. The City Fiscal later dropped the criminal complaint. The trial court ruled in favor of respondent, ordering petitioner to pay P600.00 for unpaid salaries, P400.00 separation pay, P2,000.00 moral damages, and P500.00 attorney’s fees. The Court of Appeals affirmed but modified the award by reducing moral damages to P1,000.00 and eliminating attorney’s fees. Petitioner filed the instant petition for review.

ISSUE

1. Whether respondent, having worked for only five and a half months, is entitled to separation pay.
2. Whether the award of moral damages to respondent is proper.

RULING

1. Yes, respondent is entitled to separation pay. Under Republic Act No. 1052 (before its amendment by Republic Act No. 1787 ), an employer cannot terminate an employment for an indefinite period without serving one month’s advance notice or paying separation pay equivalent to one month’s salary. The law made no distinction based on the length of service or whether the dismissal was justified or not. The amendment introduced by Republic Act No. 1787 , which considers length of service, applies only to dismissals without just cause and still provides for a minimum of one month’s notice or pay irrespective of service length. Since it was not proved that respondent’s separation was for a just cause as defined by law, he is entitled to separation pay of one month’s salary (P400.00).
2. No, the award of moral damages is not proper. The Court of Appeals based the award on respondent’s suffering and financial difficulties after his termination. However, the Supreme Court held that in breach of contract cases, moral damages may be awarded only where the breach was wanton, deliberately injurious, fraudulent, malicious, or in bad faith. The decision under review contained no finding that petitioner’s non-payment of salary was malicious, fraudulent, or in bad faith. Therefore, the award of moral damages is eliminated.
The decision of the Court of Appeals is AFFIRMED with MODIFICATION, eliminating the award of moral damages. Petitioner’s deposit of P600.00 in court is applied to the unpaid salaries. Costs against petitioner.