THIRD DIVISION

[G.R. No. 201483. August 4, 2014.]

CONRADO A. LIM , petitioner, vs . HMR PHILIPPINES, INC., TERESA SANTOS-

CASTRO, HENRY BUNAG and NELSON CAMILLER , respondents.

DECISION

MENDOZA , J : p

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the March 30, 2012 1 Decision of the Court of Appeals (CA). in CA G.R. SP No. 112708,
a case involving the computation of the backwages of an illegally dismissed employee.
The Facts
On February 8, 2001, petitioner Conrado A. Lim (Lim) led a case for illegal dismissal and
money claims against respondents, HMR Philippines, Inc. (HMR) and its o cers, Teresa G.
Santos-Castro, Henry G. Bunag and Nelson S. Camiller. The Labor Arbiter (LA) dismissed the
complaint for lack of merit. On April 11, 2003, the National Labor Relations Commission (NLRC)
in NLRC NCR No. 02-00926-01, reversed the LA and declared Lim to have been illegally
dismissed. The dispositive portion of the NLRC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the
appealed Decision REVERSED and SET ASIDE; that the dismissal of herein complainant-
appellant was illegal and the respondent-appellee Company is hereby ordered to
reinstate immediately the said employee to his former position without loss of seniority
rights and other privileges. Furthermore, the respondent-appellee Company is hereby
ordered to pay the complainant-appellant his full backwages, reckoned from
his dismissal on February 3, 2001 up to the promulgation of this Decision .

All other claims are hereby DISMISSED for lack of merit.

The Computation and Research Unit (CRU) of this Commission is hereby directed
to compute the backwages and the 10% annual increase from 1998 to 2000 .

SO ORDERED. 2

[Emphases supplied]

Both Lim and HMR led their respective petitions for certiorari before the CA, docketed as
CA-G.R. SP No. 80379 and CA-G.R. SP No. 80630, respectively, which were consolidated. Pending
resolution of the petitions, the CA issued the Temporary Restraining Order (TRO) enjoining the
execution of the NLRC decision. DISaEA

On November 15, 2005, the CA affirmed the NLRC decision with modification as follows:
WHEREFORE, the Decision of the National Labor Relations Commission is
AFFIRMED, with MODIFICATION by awarding moral damages and exemplary damages
to Conrado A. Lim in the amount of P50,000.00 and P20,000.00, respectively, as well as
attorney's fees equivalent to 10% of the total amount due him.

SO ORDERED. 3

On February 7, 2007, this Court, in G.R. No. 175950-51, dismissed the petition for certiorari
4 led by HMR assailing the November 15, 2005 CA decision. Entry of judgment was ordered on
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 July 27, 2007. 5
On September 24, 2007, Lim moved for execution. 6 On November 28, 2007, the
Computation and Research Unit (CRU) of the NLRC computed the total award to amount to
P2,020,053.46, 7 which computed the backwages from February 3, 2001, the date of the illegal
dismissal, up to October 31, 2007, the date of actual reinstatement.
HMR opposed the computation arguing that the backwages should be computed until
April 11, 2003 only, the date of promulgation of the NLRC decision, as stated in the dispositive
portion of the NLRC decision, which provided that backwages shall be "reckoned from his
dismissal on February 3, 2001 up to the promulgation of this Decision." It also noted that the 10%
annual increase was computed from 1998 to 2007, instead of only from 1998 to 2000 as
decreed. 8
In his Comment, Lim argued that the body of the NLRC decision explicitly stated that he
was entitled to full backwages from the time he was illegally dismissed until his actual
reinstatement, which was also in accord with Article 279 of the Labor Code and all prevailing
jurisprudence. 9 ACETID

Ruling of the LA
On April 21, 2009, the LA issued the order 10 granting the motion for execution filed by Lim.
Holding that the backwages should be reckoned until April 11, 2003 only in accordance with the
NLRC decision, the LA disposed:
Accordingly, in computing complainant's backwages, the following conditions
must apply: 1) that the backwages cover the period February 3, 2001 up to April 11,
2003; 2) that the base rate applicable is his salary as of February 3, 2001 inclusive of the
ten percent adjustment due at the time, or P12,500.00 plus ten percent (10%) or
P13,750.00; 3) that the computation should include his 13th month pay; and 4) 15 days
vacation pay in accordance with the personnel policy handbook, in lieu of 5 days service
incentive leave pay.
While complainant claims that he is entitled to 15 days sick leave pay, a perusal
of the personnel policy handbook on the grant of said bene t shows that sick leave pay
is availed of only upon notification of illness and conversion thereof to cash is subject to
the discretion of management.

Accordingly, complainant's monetary award, which is the proper subject of

enforcement through a writ of execution, in accordance with the Decision of the
Commission as modified by the Court of Appeals, is computed as follows:

A. Backwages:
2/3/01 to 4/11/03 = 26.26
P13,750.00 x 26.26 = P361,075.00
13th month pay (P366,575.00/12) = 30,089.58
Vacation Leave (P687.50 x 15 x 26.26/12) = 22,859.37 P414,023.95
B. Moral Damages = 50,000.00
C. Exemplary Damages = 20,000.00
P484,023.95
D. Attorney's Fees = 48,402.39
––––––––––
P532,426.34
=========

WHEREFORE, complainant's Motion for Issuance of Writ of Execution is

GRANTED. A Writ of Execution is hereby issued for the satisfaction of the judgment
award rendered in this case.
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 SO ORDERED. 11 ISHaTA

Ruling of the NLRC

Lim led his "Motion Ad Cautelam for Reconsideration or Recomputation and Partial
Execution of Monetary Award," insisting that his backwages should be computed up to his actual
reinstatement. 12 On August 28, 2009, the NLRC treated the motion as an appeal and sustained
the computation of the LA, explaining that the dispositive portion was clear, and that it could not
alter or amend the amount based on the nal decision of the NLRC which was a rmed by both
the CA and this Court. 13 Aggrieved, petitioner filed a petition for certiorari before the CA.
Ruling of the CA
In its assailed March 30, 2012 Decision, 14 the CA dismissed the petition. It emphasized
that the April 11, 2003 NLRC decision had long become nal and executory after it was a rmed
by the Court and, as such, it may no longer be amended or corrected. While noting that the body
of the NLRC decision stated that petitioner was entitled to backwages until his actual
reinstatement, the CA ruled that when there was a con ict between the dispositive portion and
the body of the decision, the former must prevail as the dispositive portion was the nal order,
and that it was the dispositive portion which was the subject of execution. It wrote that the fallo
was clear and unequivocal and could, therefore, be given effect without going to the body of the
decision or further interpretation or construction.
The CA found that although the NLRC had recognized that petitioner was entitled to
backwages until actual reinstatement, nonetheless, it expressly limited the computation of
backwages to the promulgation date of its decision. It wrote that the issue of whether such
limitation was lawful or improper could no longer be ventilated due to the nality of the
judgment.
Hence, the present petition.
ISSUES AND ARGUMENTS
I

Whether or not the Court of Appeals erred in peremptorily applying the

doctrine laid down in P H Credit Corporation v. Court of Ap peals and contrary
to law as well as the established jurisprudence mandating the payment of
backwages until the illegally dismissed employee is actually reinstated. IaHDcT

II

Whether or not the Court of Appeals erred in not a rming the

applicability of Eas tern Shipping Lines v. Court of App eals in the computation
of interest since the Decision on the illegal termination case had become
nal and executory on June 6, 2007 inconsistent with existing jurisprudence
by its failure to include interest payments . 15

Petitioner Lim argues that Article 279 of the Labor Code and the prevailing jurisprudence
provide that illegally dismissed workers are entitled to an award of backwages from the time of
the illegal dismissal until they are actually reinstated. He states that the body of the NLRC
decision was explicit in its intent to award backwages until actual reinstatement, especially when
read with its fallo, which ordered his immediate reinstatement. He further avers that it has been
held that the dispositive part of a decision must nd support from the decision's ratio decidendi,
because, while the opinion of the court is not part of the judgment, it may, in case of uncertainty
or ambiguity, be referred to for the purpose of construing the judgment, where the court may
clarify by amendment even after judgment has become final. DSEaHT

Lim also points out that the LA completely failed to include in the computation the unpaid
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 10% annual increase in his salary from 1998 to 2000, as awarded in the fallo of the NLRC
decision. He posits that the LA also failed to include the payment of other bene ts, such as a
10% increase in salary per annum, 15 days vacation leave and 15 days sick leave per annum, all as
part of employee benefits found in HMR's Personnel Policy.
Petitioner Lim also argues that in accordance with the rules laid down in Eastern Shipping
Lines v. Court of Appeals, 16 the monetary awards should be subject to interest. He prays that the
respondents be made to pay, jointly and severally, additional moral and exemplary damages on
account of their bad faith in delaying the payment and reinstatement of the petitioner, which
prompted him to file the present petition.
Respondents' Comment
In their Comment, 17 the respondents argue that the August 28, 2009 NLRC Resolution had
already become nal and executory and could no longer be modi ed as the petitioner belatedly
led his motion for reconsideration. In the same vein, they argue that the April 21, 2009 LA Order
had also become nal and executory considering that the petitioner's motion ad
cautelam/appeal was not seasonably filed.
The respondents insist that the "decretal portion of the NLRC decision, dated April 11,
2003 limited the amount of petitioner's backwages from February 3, 2001 and up to
promulgation of such Decision on April 11, 2003 only. 18 Granting that the body of such decision
controls, they aver that the recoverable backwages cannot go beyond December 26, 2007, the
date HMR offered to reinstate Lim, who refused to be reinstated and abandoned his job. They
add that it was also clear from the dispositive portion that the 10% annual salary increase
awarded was only for the years 1998 to 2000.
They also point out that the P12,500.00 base pay of Lim was already inclusive of holiday
pay, and that the conversion of sick leave to cash was subject to management discretion in
accordance with company policy. IDESTH

They further argue that the claims for legal interest and additional moral and exemplary
damages are without merit because these were not awarded in the decision and they simply
acted in good faith in pursuing the legal remedies available to them.
Petitioner's Reply
In his Reply, 19 Lim counters that his pleadings before the NLRC and the LA were timely
led as the notices of their respective orders had not been received by an authorized
representative. As to HMR's offer of reinstatement, the petitioner explains that the respondent
company never responded to his reply-letter asking for a meeting to discuss the matter of his
compensation upon reinstatement. Lim also argued that holiday pay was not shown by HMR to
be included in his salary, and that it is unjust to leave the sick leave conversion to management
discretion.
Specifically, the Court has to address the following cACTaI

ISSUES:
1. Whether the petitioner's motion for reconsideration and motion ad
cautelam /appeal were belatedly filed?
2. Whether the computation of backwages should be reckoned until the
promulgation of the NLRC Decision on April 11, 2003 or until actual
reinstatement?
3. Whether the petitioner is entitled to the unpaid 10% annual salary
increase from 1998-2000?

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 4. Whether the petitioner is entitled to the 10% annual salary increase
after the year 2000?
5. Whether the petitioner is entitled to holiday pay?
6. Whether the petitioner is entitled to sick leave pay?
7. Whether the respondents should be held jointly and severally liable for
additional moral and exemplary damages?
8. Whether the interest in accordance with Eastern Shipping should be
awarded?
Ruling of the Court
The petition is partly meritorious.
Preliminarily, the Court shall rst dispose of the lone procedural issue. The respondents
argue that the August 28, 2009 NLRC Resolution was already nal and executory and could no
longer be modi ed as the petitioner belatedly led his motion for reconsideration thereto. In the
same vein, they aver that the April 21, 2009 LA Order was also nal and executory considering
that petitioner's motion ad cautelam/appeal was not seasonably led. The petitioner counters
that his pleadings were timely led because the aforementioned NLRC Resolution and LA Order
were not duly received by an authorized representative. aITDAE

It appears that the respondents raised this issue before the NLRC and the CA. The lower
courts, nonetheless, ruled on the merits of the assailed pleadings of the petitioner. The lower
courts, thus, gave credence to the petitioner's argument that the notices were not received by an
authorized representative. The Court sees no reason to deviate from their ndings. In any case,
this issue is a question of fact which is beyond the Court's ambit of review under Rule 45 of the
Rules of Court, considering that a resolution of the issue would require a review of the evidence
presented in connection therewith.
The Court now moves on to the substantive issues.
Backwages
It is beyond question that Lim was illegally dismissed by HMR. All that remains to be
settled is the exact amount owing to petitioner as an illegally dismissed employee.
Article 279 of the Labor Code is clear in providing that an illegally dismissed employee is
entitled to his full backwages computed from the time his compensation was withheld up to the
time of his actual reinstatement, to wit:
Art. 279. Security of tenure . In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages , inclusive of allowances, and to his other
bene ts or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement . SDITAC

[Emphases and underscoring supplied]

In accordance with this provision, the body of the April 11, 2003 NLRC decision expressly
recognizes that Lim is entitled to his full backwages until his actual reinstatement, as follows:
In ne, the act of complainant-appellant herein, do not constitute a serious
misconduct as to justify his dismissal. As such, he is, thus, entitled to reinstatement to
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 his former position as Assistant Technical Manager, unless such position no longer
exists, in which case, he shall be given a substantially equivalent position without loss of
seniority rights. He is, likewise, entitled to his full backwages from the time he
was illegally dismissed until his actual reinstatement . 20

[Emphasis and underscoring supplied]

Nowhere in the body of the NLRC decision was there a discussion restricting the award of
backwages. Nonetheless, the fallo of the said decision limited the computation of the
backwages up to its promulgation on April 11, 2003, in this wise: ITScAE

WHEREFORE, premises considered, judgment is hereby rendered declaring the

appealed Decision REVERSED and SET ASIDE; that the dismissal of herein complainant-
appellant was illegal and the respondent-appellee Company is hereby ordered to
reinstate immediately the said employee to his former position without loss of seniority
rights and other privileges. Furthermore, the respondent-appellee Company is
hereby ordered to pay the complainant-appellant his full backwages, reckoned
from his dismissal on February 3, 2001 up to the promulgation of this
Decision .

All other claims are hereby DISMISSED for lack of merit.

The Computation and Research Unit (CRU) of this Commission is hereby directed
to compute the backwages and the 10% annual increase from 1998 to 2000.
SO ORDERED. 21
[Emphasis and underscoring supplied]

Considering that the judgment decreeing the computation of backwages up to the

promulgation of the NLRC decision has long become nal and executory, the key question is
whether a recomputation of backwages up to the date of the actual reinstatement of Lim would
violate the principle of immutability of judgments.
The rule is that it is the dispositive portion that categorically states the rights and
obligations of the parties to the dispute as against each other. Thus, it is the dispositive portion
that must be enforced to ensure the validity of the execution. That a judgment should be
implemented according to the terms of its dispositive portion is a long and well-established rule.
A companion to this rule is the principle of immutability of nal judgments. Save for recognized
exceptions, a nal judgment may no longer be altered, amended or modi ed, even if the
alteration, amendment or modi cation is meant to correct what is perceived to be an erroneous
conclusion of fact or law and regardless of what court renders it. Any attempt to insert, change
or add matters not clearly contemplated in the dispositive portion violates the rule on
immutability of judgments. 22 CASIEa

The cases of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Session
Delights) 23 and Nacar v. Gallery Frames (Nacar) 24 shed much light on the apparent discrepancy
in the case at hand. As in the present case, both involve labor cases nding that the employees
therein were illegally dismissed. At the LA level, in awarding backwages, a precise computation
was provided from the time of illegal dismissal up to the promulgation of the LA decision. 25
Additionally, the dispositive portion of the LA decision in Nacar also made a declaration that
separation pay in lieu of reinstatement be "computed only up to promulgation of this decision." 26
The LA decisions in these cases were a rmed by the NLRC and the CA and subsequently
became nal and executory. At the execution stage, the computation of backwages came into
issue.
Session Delights made clear that a case for illegal dismissal is one that relates to status,
where the decision or ruling is essentially declaratory of the status and of the rights, obligations
and monetary consequences that ow from the declared status, such as, the payment of
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 separation pay and backwages. In execution, what is primarily implemented is the declaratory
nding on the status and the rights and obligations of the parties therein; the arising monetary
consequences from the declaration only follow as component of the parties' rights and
obligations. 27 The precise amount of backwages should ideally be stated in the nal decision;
otherwise, the matter is for handling and computation by the LA of origin as the labor o cial
charged with the implementation of decisions before the NLRC. 28 ETaHCD

The Court's disquisition in Session Delights, also referenced with approval in Nacar, is
enlightening:
A source of misunderstanding in implementing the nal decision in this case
proceeds from the way the original labor arbiter framed his decision. The decision
consists essentially of two parts.
The rst is that part of the decision that cannot now be disputed because it has
been con rmed with nality. This is the nding of the illegality of the dismissal and the
awards of separation pay in lieu of reinstatement, backwages, attorney's fees, and legal
interests.
The second part is the computation of the awards made. On its face, the
computation the labor arbiter made shows that it was time-bound as can be seen from
the gures used in the computation. This part, being merely a computation of what the
rst part of the decision established and declared, can, by its nature, be re-computed.
This is the part, too, that the petitioner now posits should no longer be re-computed
because the computation is already in the labor arbiter's decision that the CA had
a rmed. The public and private respondents, on the other hand, posit that a re-
computation is necessary because the relief in an illegal dismissal decision goes all the
way up to reinstatement if reinstatement is to be made, or up to the nality of the
decision, if separation pay is to be given in lieu of reinstatement.
xxx xxx xxx
Clearly implied from this original computation is its currency up to the nality of
the labor arbiter's decision. As we noted above, this implication is apparent from the
terms of the computation itself, and no question would have arisen had the parties
terminated the case and implemented the decision at that point.
However, the petitioner disagreed with the labor arbiter's ndings on all counts —
i.e., on the nding of illegality as well as on all the consequent awards made. Hence, the
petitioner appealed the case to the NLRC which, in turn, a rmed the labor arbiter's
decision. By law, the NLRC decision is nal, reviewable only by the CA on jurisdictional
grounds.

The petitioner appropriately sought to nullify the NLRC decision on jurisdictional

grounds through a timely led Rule 65 petition for certiorari. The CA decision, nding
that NLRC exceeded its authority in a rming the payment of 13th month pay and
indemnity, lapsed to nality and was subsequently returned to the labor arbiter of origin
for execution. aEcDTC

It was at this point that the present case arose. Focusing on the core illegal
dismissal portion of the original labor arbiter's decision, the implementing labor arbiter
ordered the award re-computed; he apparently read the gures originally ordered to be
paid to be the computation due had the case been terminated and implemented at the
labor arbiter's level. Thus, the labor arbiter recomputed the award to include the
separation pay and the backwages due up to the nality of the CA decision that fully
terminated the case on the merits. Unfortunately, the labor arbiter's approved
computation went beyond the nality of the CA decision (July 29, 2003) and included as
well the payment for awards the nal CA decision had deleted — speci cally, the
proportionate 13th month pay and the indemnity awards. Hence, the CA issued the
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 decision now questioned in the present petition.
We see no error in the CA decision con rming that a recomputation is necessary
as it essentially considered the labor arbiter's original decision in accordance with its
basic component parts as we discussed above. To reiterate, the rst part contains the
nding of illegality and its monetary consequences; the second part is the computation
of the awards or monetary consequences of the illegal dismissal, computed as of the
time of the labor arbiter's original decision.
To illustrate these points, had the case involved a pure money claim for a speci c
sum (e.g. salary for a speci c period) or a speci c bene t ( e.g. 13th month pay for a
speci c year) made by a former employee, the labor arbiter's computation would
admittedly have continuing currency because the sum is speci c and any variation may
only be on the interests that may run from the nality of the decision ordering the
payment of the specific sum.
In contrast with a ruling on a speci c pure money claim, is a claim that relates to
status (as in this case, where the claim is the legality of the termination of the
employment relationship). In this type of cases, the decision or ruling is essentially
declaratory of the status and of the rights, obligations and monetary consequences that
ow from the declared status (in this case, the payment of separation pay and
backwages and attorney's fees when illegal dismissal is found). When this type of
decision is executed, what is primarily implemented is the declaratory nding on the
status and the rights and obligations of the parties therein; the arising monetary
consequences from the declaration only follow as component of the parties' rights and
obligations. ADCEaH

In the present case, the CA con rmed that indeed an illegal dismissal had taken
place, so that separation pay in lieu of reinstatement and backwages should be paid.
How much that separation pay would be, would ideally be stated in the nal CA decision;
if not, the matter is for handling and computation by the labor arbiter of origin as the
labor official charged with the implementation of decisions before the NLRC.
xxx xxx xxx

Consistent with what we discussed above, we hold that under the terms of the
decision under execution, no essential change is made by a re-computation as
this step is a necessary consequence that ows from the nature of the
illegality of dismissal declared in that decision. A re-computation ( or an
original computation, if no previous computation has been made ) is a part of
the law — speci cally, Article 279 of the La bor Co de and the established
jurisprudence on this provision — that is read into the decision. By the nature
of an illegal dismissal case, the reliefs continue to add on until full
satisfaction, as expressed under Article 279 of the La bor Co de. The re-
computation of the consequences of illegal dismissal upon execution of the
decision does not constitute an alteration or amendment of the nal decision
being implemented. The illegal dismissal ruling stands; only the computation
of monetary consequences of this dismissal is affected and this is not a
violation of the principle of immutability of final judgments. TaEIcS

xxx xxx xxx

That the amount the petitioner shall now pay has greatly increased is a
consequence that it cannot avoid as it is the risk that it ran when it continued
to seek recourses against the labor arbiter's decision . Article 279 provides for the
consequences of illegal dismissal in no uncertain terms, quali ed only by jurisprudence
in its interpretation of when separation pay in lieu of reinstatement is allowed. When that
happens, the nality of the illegal dismissal decision becomes the reckoning point
instead of the reinstatement that the law decrees. In allowing separation pay, the nal
decision effectively declares that the employment relationship ended so that separation
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 pay and backwages are to be computed up to that point. . . . 29
[Emphases and underscoring supplied]

Although the NLRC decision in the present case did not provide a precise computation, the
principles enunciated in Session Delights still equally apply. In Session Delights, the computation
of the LA was found to be time-bound, which implied the currency of the computation up to the
nality of the LA decision. In the present case, the NLRC declared backwages to be reckoned "up
to the promulgation" of its decision, which was an express declaration of the currency of the
computation up to the nality of the NLRC decision, especially considering that HMR was
"ordered to reinstate immediately" petitioner Lim. The decisions in both cases are premised on
their immediate execution, in that no question would have arisen had the parties terminated the
case and the decision implemented at that point. 30 TaHDAS

As discussed above, no essential change is being made by a recomputation because such

is a necessary consequence which ows from the nature of the illegality of the dismissal. To
reiterate, a recomputation, or an original computation, if no previous computation was
made , as in the present case, is a part of the law that is read into the decision ,
namely, Article 279 of the Labor Code and established jurisprudence. 31 Article 279
provides for the consequences of illegal dismissal, one of which is the payment of full
backwages until actual reinstatement, quali ed only by jurisprudence when
separation pay in lieu of reinstatement is allowed, where the nality of the illegal
dismissal decision instead becomes the reckoning point . 32
The nature of an illegal dismissal case requires that backwages continue to add on until
full satisfaction. The computation required to re ect full satisfaction does not constitute an
alteration or amendment of the nal decision being implemented as the illegal dismissal ruling
stands. Thus, in the present case, a computation of backwages until actual reinstatement
is not a violation of the principle of immutability of final judgments . 33
The respondents aver that the recoverable backwages cannot go beyond December 26,
2007, the date HMR offered to reinstate Lim, who allegedly refused to be reinstated and
abandoned his job.
HMR sent the petitioner a letter, 34 dated December 22, 2007, directing him to report for
work on December 26, 2007, with an offer of separation pay in the amount of P150,000.00 in lieu
of reinstatement which he could avail of not later than December 26, 2007. Lim replied in a letter,
35 dated December 24, 2007, requesting for a meeting in January 2008, considering that his
counsel was out of the country; that the NLRC was still in the process of computing the amount
of the award which was necessary to consider the offer of separation pay; and that a writ of
execution had not yet been issued. HMR never responded to the petitioner's request, and up to
the present, the latter has yet to be reinstated. DTESIA

From the above, it is apparent that the petitioner cannot be deemed to have refused
reinstatement or to have abandoned his job. HMR's offer of reinstatement appeared super cial
and insincere considering that it never replied to the petitioner's letter. It did not make any further
attempt to reinstate the petitioner either. The recoverable backwages, thus, continue to run, and
must be reckoned up until the petitioner's actual reinstatement.
10% annual salary increase
Petitioner Lim argues that the LA completely failed to include in its computation the unpaid
10% annual increase in his salary from 1998 to 2000, as stated in the fallo of the NLRC decision,
and the 10% salary increase per annum in backwages until actual reinstatement.
The pertinent portion of the fallo of the NLRC decision reads:
The Computation and Research Unit (CRU) of this Commission is hereby directed
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 to compute the backwages and the 10% annual increase from 1998 to 2000. 36

In awarding the 10% annual salary increase from 1998 to 2000, the body of the NLRC
decision explained:
We see no reason, therefore, why complainant-appellant herein, being a regular
employee, should be deprived of what he is entitled to under Company policy. As such,
he should be paid his unpaid 10% annual increase for the years 1998, 1999
and 2000. 37
[Emphasis and underscoring supplied]

Lim is, thus, entitled to be paid his unpaid 10% annual salary increase for the years 1998-
2000.
A reading of the assailed order of the LA would reveal that it made the following
adjustment in connection to the 10% annual salary increase:
2) that the base rate applicable is his salary as of February 3, 2003 inclusive of
the ten percent adjustment due at the time, or P12,500.00 plus ten percent (10%) or
P13,750.00; 38 SAaTHc

This is incorrect on two counts. First, the LA failed to include the actual unpaid 10% annual
increase from 1998-2000. The rst computation of the LA, 39 as well as the suggested
computation of respondent HMR itself, 40 gave the correct computation of the unpaid salary
increase from 1998-2000, as follows:
Year Rate (P) Increase Monthly Annual
Increase (P) Increase (P)

1998 12,500.00 10% 1,250.00 15,000.00

1999 13,750.00 10% 1,375.00 16,500.00
2000 15,125.00 10% 1,512.50 18,150.00
––––––––
Total 49,650.00
========

Second, based on the above, the applicable base rate for the computation of the
petitioner's backwages from the time he was illegally dismissed on February 3, 2001 should be
P15,125.00.
Lim cannot, however, insist that the 10% annual salary increase be applied to his
backwages past the year 2000 up to his actual reinstatement. In Equitable Banking Corporation
v. Sadac , 41 the Court held that although Article 279 of the Labor Code mandates that an
employee's full backwages be inclusive of allowances and other benefits, salary increases cannot
be interpreted as either an allowance or a bene t, as allowances and bene ts are separate from
salary, while a salary increase is added to salary as an increment thereto. 42 It was further held
therein that the base gure to be used in the computation of backwages was pegged at the
wage rate at the time of the employee's dismissal, inclusive of regular allowances that the
employee had been receiving such as the emergency living allowances and the 13th month pay
mandated by law. The award of salary differentials was not allowed, the rule being that upon
reinstatement, illegally dismissed employees were to be paid their backwages without deduction
and quali cation as to any wage increases or other bene ts that might have been received by
their co-workers who were not dismissed. 43 cCDAHE

It must be noted that the NLRC did not err in awarding the unpaid salary increase for the
years 1998-2000 as such did not constitute backwages as a consequence of the petitioner's
illegal dismissal, but was earned and owing to the petitioner before he was illegally terminated.
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 Holiday pay
The respondents insist that the base pay of Lim is already inclusive of holiday pay. The
records, however, are insu cient to determine whether holiday pay is indeed included in the
petitioner's base pay.
Under Article 94 of the Labor Code, every worker shall be paid his regular daily wage during
regular holidays. Thus, an employee must receive his daily wage even if he does not work on a
regular holiday. The purpose of holiday pay is to prevent diminution of the monthly income of
workers on account of work interruptions declared by the State. 44 SCaDAE

Whether or not holiday pay is included in the monthly salary of an employee, may be
gleaned from the divisors used by the company in the computation of overtime pay and
employees' absences. To illustrate, if all nonworking days are paid, the divisor of the monthly
salary to obtain daily rate should be 365. If nonworking days are not paid, the divisor is 251,
which is a result of subtracting all Saturdays, Sundays, and the ten legal holidays. 45 Hence, if the
petitioner's base pay does not yet include holiday pay, it must be added to his monetary award.
This matter is clearly for the LA to determine being the labor o cial charged with the
implementation of decision 46 and concomitant computations.
Sick leave pay
The LA found that that the petitioner was not entitled to have his sick leaves converted to
cash because such was subject to the discretion of management in accordance with company
policy.
The pertinent provision on sick leave conversion in the Personnel Policy handbook of HMR
reads:
d) Accumulated days of unused sick leave may be converted into cash, time-off
or vacation allowance at the end of the calendar year, any of these upon the discretion
of the General Manager. 47

It is clear from the above that the provision does not give HMR the absolute discretion to
decide whether or not to grant sick leave conversion. The discretion of the general manager only
pertains to what form the sick leave conversion may take, and not to whether or not sick leave
conversion will be granted at all. An HMR employee is, therefore, entitled to conversion of unused
sick leave, subject only to the general manager's discretion as to the form it will take, namely —
cash, time-off, or vacation allowance. Considering that the conversion options of time-off and
vacation allowance are no longer feasible because the petitioner was illegally dismissed, he is
now entitled to have his unused sick leaves converted to cash. DASEac

Additional moral and exemplary damages

Petitioner Lim prays that the respondents be made to pay, jointly and severally, additional
moral and exemplary damages on account of their bad faith in delaying the payment and his
reinstatement.
There appears, however, no basis to award additional damages considering that the
respondents simply availed of the remedies available to them under the law in good faith.
Legal interest
The petitioner argues that legal interest in accordance with the case of Eastern Shipping
must also be awarded, as follows:
1. the unpaid 10% annual increase from 1998 to 2000 shall earn a 6% interest
annually starting 1998 until October 23, 2003 (Entry of Judgment of the
April 11, 2003 NLRC decision); and 12% legal interest per annum thereafter
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 until the same is fully paid; and
2. the backwages, 13th month pay as well as unpaid vacation and sick leaves shall
earn a 6% per annum interest starting at the time of petitioner's illegal
dismissal on February 3, 2001 until October 23, 2003; and 12% legal interest
per annum thereafter until the same is fully paid. 48
The respondents counter that interest may no longer be added considering that such was
not included in the any of the courts' decisions before the judgment became nal and executory.
HcSETI

In both Session Delights and Nacar, no interest was expressly awarded before the
judgments became nal and executory, yet in both cases, the Court, nonetheless, awarded legal
interest. Session Delights explained that the decision had become a judgment for money from
which another consequence owed, namely, the payment of interest in case of delay in
accordance with Eastern Shipping Lines v. Court of Appeals . It was held therein that when the
judgment of the court awarding a sum of money became nal and executory, the rate of legal
interest, should be 12% per annum from finality until satisfaction. 49
The rules on legal interest in Eastern Shipping have, however, been recently modi ed by
Nacar in accordance with Bangko Sentral ng Pilipinas Monetary Board (BSP-MB) Circular No.
799, which became effective on July 1, 2013. Pertinently, it amended the rate of legal interest in
judgments from 12% to 6% per annum, with the quali cation that the new rate be applied
prospectively. Thus, the 12% per annum legal interest in judgments under Eastern Shipping shall
apply only until June 30, 2013, and the new rate of 6% per annum shall be applied from July 1,
2013 onwards. 50
Petitioner also prays that he be awarded interest at a rate of 6% per annum on the
amounts awarded from the time they became legally due him until entry of judgment, presumably
under the second paragraph in Eastern Shipping (which was not modi ed by Nacar), which
states:
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the quanti cation of
damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged. 51aTCAcI

[Emphasis supplied]

It is plain from the above that the interest of 6% per annum for obligations not constituting
a loan or forbearance of money is one that may be imposed at the discretion of the court. This
form of interest is not mandatory but discretionary in nature and therefore, not necessarily owing
to the petitioner in the present case.
WHEREFORE , the petition is PARTLY GRANTED , the March 30, 2012 Decision of the
Court of Appeals, in CA-G.R. SP No. 112708 is REVERSED and SET ASIDE . Respondent HMR
Philippines, Inc. is ORDERED to PAY petitioner Conrado A. Lim:
(1) backwages computed from the time the petitioner was illegally dismissed on
February 3, 2001 up to his actual reinstatement, with a monthly base pay in
the amount of P15,125.00; HCTEDa

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 (2) the unpaid 10% annual salary increase from 1998-2000 in the amount of
P49,650.00;
(3) 13th month pay;
(4) vacation pay in accordance with the personnel policy handbook;
(5) the cash value of his unused sick leaves;
(6) holiday pay, provided that the Labor Arbiter nds that such is not yet included
in the base pay;
(7) moral damages in the amount of P50,000.00;
(8) exemplary damages in the amount of P20,000.00;
(9) attorney's fees equivalent to 10% of the total amount due to the petitioner; and
(10) legal interest of 12% per annum of the total monetary awards computed from
July 27, 2007 to June 30, 2013, and 6% per annum from July 1, 2013 until
their full satisfaction.
The Labor Arbiter is ORDERED to compute the total monetary bene ts awarded and due
the petitioner in accordance with this decision.
SO ORDERED .
Carpio, * Velasco, Jr., Villarama, Jr. ** and Leonen, JJ., concur.

Footnotes
* Designated Member per Raffle, dated June 11, 2012, in lieu of Associate Justice Diosdado M.
Peralta, no part, as his spouse Court of Appeals Justice Fernanda Lampas-Peralta concurred in
the assailed Court of Appeals decision.
** Designated Acting Member in view of the vacancy in the Third Division. per Special Order No. 1691
dated May 22, 2014.

1. Rollo, pp. 194-202: penned by Associate Justice Mario V. Lopez, and concurred in by Associate
Justice Fernanda Lampas-Peralta and Associate Justice Socorro B. Inting.
2. Id. at 81-82.
3. Id. at 91-114.
4. Id. at 119.

5. Id. at 122.
6. Id. at 124-125.
7. Id. at 126-127.
8. Id. at 128-132.
9. Id. at 136-141.
10. Id. at 147-154.
11. Id. at 153-154.
12. Id. at 155-159.

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 13. Id. at 162-167.
14. Id. at 194-202.

15. Id. at 19.

16. G.R. No. 97412, July 12, 1994, 234 SCRA 78.
17. Rollo, pp. 210-222.
18. Id. at 216.
19. Rollo, pp. 336-373.
20. Id. at 78-79.
21. Id. at 81-82.
22. Session Delights v. Court of Appeals, G.R. No. 172149, February 8, 2010, 612 SCRA 10, 19-20.

23. Id.
24. G.R. No. 189871, August 13, 2013, 703 SCRA 439.
25. Session Delights v. Court of Appeals, supra note 22, at 14:
WHEREFORE, judgment is hereby rendered declaring private respondent guilty of illegal dismissal.
Accordingly, private respondent SESSION DELIGHTS is ordered to pay complainant the
following:
a) Backwages:
P170.00 x 154 days P26,180.00
Proportional 13th month pay
P26,180/12 2,181.65 28,361.65
b) Separation Pay:
P170.00 x 314/12 x 1 4,448.35
c) Indemnity of P5,000.00 for failure to observe due process
d) Attorney's fees which is 10% of the total award in the amount of P3,781.00.

SO ORDERED.
Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 443-444:
With the foregoing, we find and so rule that respondents failed to discharge the burden of showing
that complainant was dismissed from employment for a just or valid cause. All the more, it is
clear from the records that complainant was never afforded due process before he was
terminated. As such, we are perforce constrained to grant complainant's prayer for the
payments of separation pay in lieu of reinstatement to his former position, considering the
strained relationship between the parties, and his apparent reluctance to be reinstated,
computed only up to promulgation of this decision as follows:
SEPARATION PAY
Date Hired = August 1990
Rate = P198/day
Date of Decision = Aug. 18, 1998
Length of Service = 8 yrs. & 1 month
P198.00 x 26 days x 8 months = P41,184.00

BACKWAGES
Date Dismissed = January 24, 1997
Rate per day = P196.00
Date of Decisions = Aug. 18, 1998
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 a) 1/24/97 to 2/5/98 = 12.36 mos.
P196.00/day x 12.36 mos. = P62,986.56
b) 2/6/98 to 8/18/98 = 6.4 months
Prevailing Rate per day = P62,986.00
P198.00 x 26 days x 6.4 mos. = P32,947.20
–––––––––––
TOTAL P95,933.76
=========

xxx xxx xxx

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of

constructive dismissal and are therefore, ordered:
1. To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred
eighty-six pesos and 56/100 (P62,986.56) Pesos representing his separation pay;
2. To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred
thirty-three and 36/100 (P95,933.36) representing his backwages; and
3. All other claims are hereby dismissed for lack of merit.

SO ORDERED. 4
26. Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 443.
27. Session Delights v. Court of Appeals, supra note 22, at 24.
28. Sections 2 and 4, Rule XI of the 2005 NLRC Rules of Procedure.
29. Session Delights v. Court of Appeals, supra note 22, at 21-26.
30. Session Delights v. Court of Appeals, supra note 22, at 22.
31. Session Delights v. Court of Appeals, supra note 22, at 25.
32. Session Delights v. Court of Appeals, supra note 22, at 26.
33. Session Delights v. Court of Appeals, supra note 22, at 25-26.

34. Rollo, p. 245.

35. Id. at 247.
36. Id. at 81.
37. Id. at 80.
38. Id. at 153.
39. Id. at 127.
40. Id. at 133.
41. 523 Phil. 781, 811 (2006).

42. Id.
43. Equitable Banking Corporation v. Sadac, supra note 41, at 817 (2006); citing Evangelista v. NLRC,
319 Phil. 299 (1995).
44. Jose Rizal College v. NLRC, 240 Phil. 27, 33 (1987).
45. The Chartered Bank Employees Association v. Ople, 222 Phil. 570, 577-578 (1985).

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 46. Sections 2 and 4, Rule XI of the 2005 NLRC Rules of Procedure.
47. Rollo, p. 186.
48. Rollo, p. 33.
49. Supra note 16, at 97.
50. Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 456-459.

51. Eastern Shipping Lines v. Court of Appeals, supra note 16, at 96-97.

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