The principal issue facing us in this Petition is whether or not the petitioner, upon his retirement as the president of the respondent Pacific Memorial Plans, Inc., is entitled to Overriding Commissions, arising from the sales of Memorial Plans effected during his presidency, but the premium payments of which are collected after his retirement.
When petitioner Enrique A. Sobrepeña, Jr. retired from the Pacific Memorial Plans, Inc., he was the company’s president for 13 years (from 1966 to 1979), and had been in its service for an aggregate of 20 years and ten months, having previously held various other positions. He was 53 years old at the time of his retirement.
As president of the respondent corporation, petitioner received, by way of compensation, overriding commissions, derived from premium payments on memorial plans sold by Pacific Memorial Plans, and computed upon the net sales of the corporation’s operations, until October 1974, when the computation was based by the company on gross sales. As acknowledged by the petitioner, the overriding commission became due and payable only upon receipt by the respondent corporation of seven percentum (7%) of the purchase price of a memorial plan sold.
Upon his retirement, petitioner received from the company the balance of overriding commissions due him in the amount of P86,266.28, and retirement benefits amounting to P47,558.62, as computed by the respondent corporation. 1 Petitioner, however, disagreed with the computation of the said amounts, and wrote the respondent corporation for recomputation of his benefits. 2 Without the parties agreeing upon a mutually acceptable accounting of petitioner’s benefits, the latter instituted this present action for damages in the Regional Trial Court of Quezon City. The suit was docketed as Civil Case No. Q-31590 in Branch 90 of the said Court.
In his complaint, 3 petitioner alleged that he was entitled to overriding commissions and other benefits, but which amounts were refused to be given him by the respondent corporation, computed as follows: a) Unpaid commissions-totaling 991,390.75; b) Unused vacation leaves equivalent to 240 days or eight months commuted into cash at P50,000 per month, totaling P400,000; and c) Retirement benefits amounting to P614,292.00, all of which amount to P2,005,682.75. Petitioner prayed for payment of such amount as actual damages, besides moral and exemplary damages and attorney’s fees.
In its answer, 4 private respondent corporation traversed the material allegations of the complaint, counter-alleging that the petitioner’ s overriding commissions and retirement benefits were overpaid as a result of petitioner’s machinations, and pleaded in counterclaim the refund of said overpayments, besides claiming damages as well.
After trial, the Regional Trial Court ruled in favor of the private Respondent
. The dispositive portion of the court’s decision 5 dated May 27, 1991, reads:jgc:chanrobles.com.ph
"ACCORDINGLY, judgment is hereby rendered;
1. Dismissing the instant complaint;
2. Ordering plaintiff to pay defendant the following:chanrob1es virtual 1aw library
a. The sum of P94,903.06 representing the overpayment made by defendant to plaintiff as retirement benefits;
b. The sum of P50,000 as exemplary damages; and,
c. The sum of P150,000.00 as attorney’s fees and expenses of litigation.
With costs against the plaintiff.
SO ORDERED."cralaw virtua1aw library
While striking out the respondent’s claim of overpayment of overriding commissions, the court, in the same breath, dismissed the petitioner’s claim for unpaid commissions, the same being bereft of any factual basis. It declared that the petitioner’s right to overriding commissions was coterminous with his employment with the respondent company, or only up to November, 1979, there being no evidence pointing to the petitioner’s entitlement to the same beyond his employment with defendant. The court, in sum found that petitioner was paid all his overriding commissions due him from 1966 until his retirement in November, 1979.chanrobles.com : virtual lawlibrary
The court likewise dismissed plaintiff’s claims for commutation of unused vacation leaves and unpaid retirement benefits. On the contrary, the court found sufficient evidence to sustain the respondent’s claim that petitioner’s retirement benefits were overpaid to the extent of P94,903.06. This became the basis of the court’s award of one of the counterclaims of the private Respondent
Unable to accept the foregoing ruling, petitioner appealed the trial court’s decision to the Court of Appeals raising the following as errors.
1. THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT.
A. THE COURT A QUO ERRED IN FINDING THAT PLAINTIFF-APPELLANT FAILED TO PRESENT SUFFICIENT DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM FOR UNPAID OVERRIDING COMMISSIONS (ORCs).
A.1. THE LOWER COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT FAILED TO PRESENT CONVINCING EVIDENCE THAT ENTITLEMENT TO THE ORCs MAY EVEN EXTEND BEYOND HIS EMPLOYMENT WITH DEFENDANT-APPELLEE.
B. THE COURT A QUO ERRED IN FINDING THAT PLAINTIFF APPELLANT IS NOT ENTITLED TO HIS CLAIM FOR UNUSED VACATION LEAVES COMMUTED INTO CASH.
C. THE COURT A QUO ERRED IN FINDING THAT PLAINTIFF-APPELLANT IS NOT ENTITLED TO HIS CLAIM FOR UNPAID RETIREMENT BENEFITS AND THAT, ON THE OTHER HAND, IT IS PLAINTIFF-APPELLANT WHO HAS BEEN OVERPAID HIS RETIREMENT BENEFITS.
II. THE COURT A QUO ERRED IN AWARDING EXEMPLARY DAMAGES, ATTORNEY’S FEES, EXPENSES OF LITIGATION AND COSTS OF SUIT TO DEFENDANT-APPELLEE.
III. THE LOWER COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT IS NOT ENTITLED TO DAMAGES, ATTORNEY’S FEES AND COSTS.
The appellate court, in its decision dated February 24, 1993, 6 upheld the findings of the lower court and dismissed the petitioner’s claim for overriding commissions. The court said:jgc:chanrobles.com.ph
"With respect to the first argument, appellant refers to several pieces of documentary evidence, viz.; Exhibit "BB", Exhibit "FF", Exhibits "EE" to "EE-39" and ORC payments for Guam operations, which according to him were not considered by the court a quo in deciding the instant case. However, as shown in the preceding paragraphs, these pieces of documents will not suffice to render a judgment of reversal.
Exhibit "BB" is appellee’s own computer hard copy which shows that there were 78.756 commissionable plans or plans where 7% of the purchase price have already been paid as of August 31, 1984 with a total purchase price of P205,668,708.25 sold during appellant’s term as appellee’s president. It will be noteworthy to observe, however, that the exhibit at hand indicates the number of commissionable plans sold as of August 31, 1984 or more than four (4) years after appellant retired from appellee in November 1979. Said retirement should therefore divest him of any right to claim ORCs after the severance of ties inasmuch as such entitlement is coterminous with his continued employment with the appellee corporation.
Conjunctively, appellant’s contention that he is entitled to ORCs beyond November 1979 (an argument ascribed corollarily with the first argument) must necessarily fail." 7
On the issues of commutation of unused vacation leave benefits and underpayment of retirement benefits, the appellate court adopted the pronouncements of the trial court, thus:jgc:chanrobles.com.ph
"On the issue of entitlement of monetization of unused vacation leaves, We find that the trial court correctly declared that cash conversion of unused vacation is not possible considering the clarity of the pertinent provisions of Administrative Standard No. 1005. Thus:chanrob1es virtual 1aw library
‘On the issue of vacation leaves, this Court finds for defendant in that plaintiffs claim for the cash conversion of his alleged unused vacation leaves has both no factual and legal bases. Both parties admitted during the trial that Administrative Standard and operative policy of defendant with respect to vacation leave benefits of its employees. The said Administrative Standard contains no provision whatsoever to support plaintiff’s claim for conversion into cash of unused vacation leaves of 240 days. While Section 12.0 of the said Administrative Standard deals with commutation of leave, this section deals with a situation where an employee is not allowed by defendant to enjoy his vacation leave on the dates scheduled, thus, the employee shall have the option either to commute the unenjoyed vacation into cash or to carry over the unenjoyed vacation to the succeeding year. In the instant case, plaintiff failed to submit convincing evidence to prove that the abovestated section of the Administrative Standard should apply to his case. Neither was plaintiff able to present convincing evidence that other employees of defendant received the cash conversion of their unused vacation leaves in excess of thirty (30) days. On the other hand, defendant was able to present documentary evidence (Ex. "13") to prove that an employee may only commute into cash unused vacation leave credits to a maximum of only thirty (30) days.’ (Decision, pp. 7-8 Original Records, pp. 678-679)
x x x
Clearly, Section 12.00 of Administrative Standard No. 1005 provides for only one instance wherein an employee may be allowed to have his unused vacation leaves commuted into cash is when the said employee is not allowed by the appellee to enjoy his scheduled vacation leave, thus, giving the employee the option either to commute the unenjoyed vacation leave to the succeeding year. Appellant’s case, therefore, is evidently obtaining.
Third. On the issue of whether or not appellant is still entitled to unpaid retirement benefits in the amount of P612,292.00 (sic), We agree with the trial court’s findings, hence, We hereby quote the same with approval to wit:chanrob1es virtual 1aw library
‘With respect to the third issue on whether or not plaintiff is entitled to his claim for unpaid retirement benefits in the amount of P614,292.00, the parties’ respective contentions are as follows:chanrob1es virtual 1aw library
Plaintiff claims that his retirement benefits should be computed on the basis of the terminal five (5) years earnings average, thus resulting to a total amount of P614,292.00.
On the other hand, defendant alleged that plaintiff has been overpaid his retirement benefits in an amount of equivalent to P94,903.06. To support its claim, defendant alleged that there was an error in the computation of plaintiff’s retirement benefits since the latter’s gross salary, including commissions was taken into account when the computation should only pertain to the basic pay.
It has been established that the retirement plan applicable to plaintiff’s case at the time he retired in 1979 was the Amended Employees’ Retirement Plan amended on January 1, 1972 (Exh. "4"). Article V of the said Plan clearly states that for a retiree to be entitled to retirement benefits equivalent to one month’s pay per year of employment based on the average monthly salary during the last five (5) years of employment, he must have rendered at least 20 years of continuous service upon attainment of age 65. In sum, these two conditions, at least 20 years of continuous service and attainment of age 65 must exist together. Such a situation clearly does not apply to plaintiff’s case since there is no dispute that while he rendered over 20 years of continuous service with the Grepalife group of companies, he was only 53 years old when he opted to retire in November 1979. Thus, he is only entitled to retirement benefits equivalent to a lump sum payment of one month’s pay per year of employment based on the average monthly salary over his entire employment with the defendant company (career average). There is, therefore, no basis for plaintiff to claim the amount of P614,292.00 as retirement benefits which he computed on the basis of his terminal five (5) years earning average (Decision, pp. 9-10; Original Records, pp. 680-681)." 8chanroblesvirtuallawlibrary:red
The award of attorney’s fees was found to be exorbitant, and was thus reduced to P50,000.00. In such wise, the trial court’s judgment was affirmed by the appellate court, which held:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, the judgment appealed from is hereby AFFIRMED subject to the reduction of the attorney’s fees to P50,000.00.
SO ORDERED." 9
Petitioner filed a motion for reconsideration of the appellate court’s decision, arguing mainly that the ruling of the honorable court that petitioner is not entitled to commissions which accrued during his employment but became payable after he retired from the respondent corporation is contrary to law. Petitioner likewise reiterated his claim for unused vacation leave and unpaid retirement benefits.
On July 20, 1993, the appellate court denied petitioner’s motion for reconsideration, 10 ruling that the issue of the legality of appellant’s non-entitlement to overriding commissions after his retirement was never raised in the proceedings below, and cannot therefore be entertained at this late stage. His other claims were similarly denied.
Petitioner is now before the Court, seeking the reversal of the lower courts’ pronouncements. The thrust of the petition is that the petitioner should be awarded overriding commissions on gains derived from memorial plans sold by the respondent corporation during his tenure, even though 7% of the collectible premiums thereon were paid only after the petitioner’s retirement. Thus:jgc:chanrobles.com.ph
"I. WHETHER OR NOT RESPONDENT COURT ERRED IN FINDING THAT THE ILLEGALITY OF PRIVATE RESPONDENT’S POLICY, NAMELY, THAT AN EMPLOYEE’S RIGHT TO COMMISSION IS COTERMINOUS WITH HIS EMPLOYMENT WAS NOT PART OF THE ISSUES RAISED IN THE TRIAL COURT AND IN THE APPEAL.
II. WHETHER OR NOT RESPONDENT COURT ERRED IN REFUSING TO CONSIDER AND RULE ON THE AFORESAID ISSUE ON THE ALLEGED GROUND THAT THE LAW OR JURISPRUDENCE HAS NOT GRANTED RESPONDENT COURT THE POWER TO CONSIDER MATTERS NOT RAISED IN THE ASSIGNMENT OF ERRORS.
III. WHETHER OR NOT RESPONDENT COURT ERRED IN FINDING THAT PETITIONER IS NOT ENTITLED TO COMMISSIONS WHICH ACCRUED DURING HIS EMPLOYMENT BUT BECAME PAYABLE AFTER HE RETIRED FROM PRIVATE RESPONDENT AS IT IS CONTRARY TO LAW, PUBLIC POLICY, EQUITY AND EVIDENCE." 11
Petitioner asserts that commissions on memorial plans, 7% of the purchase price of which were made even after his retirement, had already accrued to him during his employment when the sale of such plans were effected. The ruling of respondent court that Petitioner is not entitled to commissions upon the same is contrary to law, public policy and equity, considering that commissions are part of an employee’s compensation, and that the private respondent would be unjustly enriched at the expense of the petitioner. In support of this, it is emphasized that petitioner’s contract of employment did not provide that his entitlement to commission was coterminous with his employment.
Private respondent, on the other hand, contends that while it is true that there is nothing in the written contract of petitioner which states that his entitlement to the overriding commissions is coterminous with his employment with private respondent, there is also absolutely nothing in his contract which would indicate that the right to commissions for plans sold during the petitioner’s incumbency had accrued at the moment of sale, extending his entitlement to the same beyond his retirement. It was therefore incumbent upon the parties to prove their positions by sufficient evidence. Both the trial court and the appellate court found petitioner’s evidence to be wanting, and declared the right of petitioner to receive overriding commissions to be coterminous with his tenure as president of respondent company, thereby discounting petitioner’s entitlement to further commissions beyond the date of his retirement.
At the outset, it must be clarified that it was within the authority of the appellate court to consider the propriety of the respondent company’s policy that an employee’s right to overriding commissions is coterminous with his employment. This issue was sufficiently raised even during the trial level when the petitioner’s contention that he was entitled to payment from the private respondent of unpaid overriding commissions, amounting to P991,390.75, on policies sold during his presidency, but premium payments over which were made only thereafter, was denied by the private respondent in its answer. Private respondent alleged therein that petitioner’s computation of the overriding commissions due him was erroneous, and that his overriding commissions were, in fact, overdrawn. The trial court in its decision, even categorically upheld the coterminous nature of the right to overriding commissions by the petitioner. The assertion of petitioner’s right and private respondent’s insistence on its policy did not only create the issue of factual evidence to prove such right but also put into question the legality itself of private respondent’s policy.
Nevertheless, we do not agree with the petitioner’s assertion that the coterminous nature of respondent company’ s grant of overriding commissions to petitioner is against the law or public policy, nor is it an inequitable rule. In the first place, when petitioner assumed the position of president of the respondent corporation, he is deemed to have already assumed and agreed to such policy. It cannot be said that petitioner was in no position to object to the policy, or that such policy was imposed on him. For thirteen years, there was no indication that as president, petitioner ever raised any objection to his compensation package, which included the right to overriding commissions.
Also, as president, petitioner was never directly involved in the sale of policies and plans by the respondent corporation. Thus, it cannot be said that petitioner’s right to overriding commissions accrued at the time the policies were sold, as petitioner’s participation in the sale of such policies is admittedly remote. It cannot, therefore, be argued that respondent had enriched itself at the expense of the petitioner.
There is no doubt now that petitioner’s right to overriding commissions was effective only until his retirement from the respondent corporation. Both the trial court and the appellate court are in agreement as to this arrangement, and both find sufficient support in the evidence on record to support this finding. There being no serious contention as to this matter, the Court has to bow to the appellate court, who is recognized as the final arbiter when it comes to matters of fact. 12chanroblesvirtuallawlibrary
"IV. WHETHER OR NOT RESPONDENT COURT’S FINDING THAT PETITIONER IS NOT ENTITLED TO HIS CLAIMS AGAINST PRIVATE RESPONDENT FOR UNPAID COMMISSIONS, CASH EQUIVALENT OF HIS UNUSED VACATION LEAVES, UNPAID RETIREMENT BENEFITS, DAMAGES, ATTORNEY’S FEES AND COSTS IS CONTRARY TO LAW AND/OR EVIDENCE."cralaw virtua1aw library
Petitioner maintains his entitlement to commutation of 240 days of unused vacation leave into cash amounting to P400,000.00. In support of this, petitioner cites the alleged company policy extant until April 19, 1975 when Administrative Standard No. 1005, embodying the company’s policy on commutation of unused vacation leave in certain instances came into effect, that the yearly vacation leave accorded to the employees of private respondent was commutable to cash. Petitioner presents Exhibit "Q", an Inter-office Memorandum issued by Emetrio Roa, Jr., a member of Pacific Memorial Plan’s Executive Committee to the Petitioner as President, approving the request of an employee, Espiridion Ga Heceta, Jr., for commutation of his 15 days unused vacation leave. To clarify, Exhibit "Q" is hereby reproduced in its entirety:chanrob1es virtual 1aw library
PACIFIC MEMORIAL PLAN
To: Atty. Enrique A. Sobrepeña, Jr.
From: Emetrio Roa, Jr.
Member, Executive Committee
Subject: REQUEST FOR COMMUTATION OF
VACATION LEAVE —
ESPIRIDION GA HECETA, JR.
In Reply to your query:chanrob1es virtual 1aw library
1) Okay to commute 15 days vacation leave into cash.
2) Under separate cover, Mr. Villa-Real will send you current rules and regulations in GPL regarding vacation leave.
cc: Mr. Antonio S. Villa-Real"
It should take no great effort to discern that such document in no way exemplifies an unequivocal management policy to make all unused vacation leaves commutable to cash. At best, this Memorandum speaks of an instance where a single employee’s request for monetization of vacation leave was okayed by the employer. It does not state that such a practice has been institutionalized into company policy. In fact, no other instance of monetization of vacation leave was demonstrated. In any case, since the establishment of Administrative Standard No. 1005, there appears to be no other instance of commutation of vacation leave, except as specifically allowed in the cited Administrative Standard, the pertinent portions of which are hereby reproduced:jgc:chanrobles.com.ph
"12.00 COMMUTATION OF LEAVE
12.1. If, for any reason, an employee is not allowed by the Company to enjoy his vacation leave on the dates scheduled, the employee shall have the option either to commute the unenjoyed vacation into cash, in which case the money value of the unenjoyed vacation shall be paid to him on the day he is supposed to have started his scheduled vacation, or to carry over the unenjoyed vacation to the succeeding year.
12.2. If, on the succeeding year, the employee is not allowed by the Company to enjoy the vacation leave carried over from the previous year on the dates scheduled, the money value thereof shall be paid to the employee on the day he is supposed to have started the vacation leave carried over from the previous year." 13
As observed by the appellate court, clearly, the above cited rules provide for only one instance wherein an employee may be allowed to have his unused vacation leave commuted into cash, and that is when that employee is not allowed by the company to enjoy his vacation leave, thus giving the employee the option either to encash the unused leave, or to carry it over to the next year. Petitioner’s submissions are indeed, unobtaining.
In the grant of vacation leave privileges to employees, the employer is given the lee-way to impose conditions on the entitlement to and commutation of the same, as the grant of vacation leave is not a standard of law, but a prerogative of management.
Thus, it was held in Cuajao v. Chua Lo Tan: 14
"The purpose of vacation leave is to afford to a laborer a chance to get a much-needed rest to replenish his worn out energies and acquire a new vitality to enable him to efficiently perform his duties, and not merely to give him additional salary and bounty. This privilege must be demanded in its opportune time and if he allows the year to go by in silence, he waives it. It becomes a mere concession or act of grace of the employer."cralaw virtua1aw library
Petitioner admits having received retirement benefits in the amount of P47,558.00, representing his actual benefits of P169,099.52 less his advances and other loans. Petitioner, however, claims for unpaid retirement benefits amounting to P614,292.00, computed on the basis of his terminal five (5) years earnings average.
The lower court observed that the Amended Employees’ Retirement Plan of the respondent company states under Article V thereof that for a retiree to be entitled to retirement benefits equivalent to one month’s pay per year of employment based on the average monthly salary during the last five (5) years of employment, he must have rendered at lest 20 years of continuous service upon attainment of age 65. In sum, these two (2) conditions, at least 20 years of continuous service and age 65, must exist together, and that the petitioner does not fall under such requirements, since there is no dispute that while he rendered over 20 years of continuous service, he was only 53 years old when he opted to retire on November of 1979. Thus, he is only entitled to a lump sum payment of one month’s pay per year of employment based on the average monthly salary, or "career average." This is only proper insofar as the respondent’s Amended Employees’ Retirement Plan is unquestionably applicable to the petitioner who is the president, and was therefore an employee of Pacific Memorial Plans, Inc. at the time of his retirement. His argument that since he was also holding positions in the Grepalife Group of companies, and therefore should not be among those falling within the said Retirement Plan does not hold water, as this matter is irrelevant and immaterial.
The lower court also ruled that petitioner’s retirement benefits ,were overpaid to the extent of P94,903.06, as they should have been computed based on petitioner’s basic salary, i.e., P3,562.00 a month, excluding overriding commissions received by petitioner.
In this case, we must reverse. There was no overpayment of petitioner’s retirement benefits as there was no error including his commissions in the computation of his retirement benefits, as it appears that petitioner’s compensation consists entirely of such commissions. This fact is clearly evident in the factual findings of the appellate court, particularly when it observed that:jgc:chanrobles.com.ph
"As president of appellee corporation, appellant received, by way of compensation, overriding commissions (’ORCs’) computed on the basis of appellee’s net sales from its operations. The computation based on net sales existed only until October 1974 when the computation was based on gross sales. Moreover, the overriding commission became due and payable only upon receipt by the appellee corporation of seven percentum (7%) of the purchase price of a memorial plan sold. In addition to the ORCs, appellant received from appellee corporation guaranteed drawings per month to serve as his salary, as well as advances, which are both deductible from whatever ORCs may be owing to him."cralaw virtua1aw library
Petitioner likewise raises in issue the following:jgc:chanrobles.com.ph
"V. WHETHER OR NOT RESPONDENT COURT’S FINDING THAT PRIVATE RESPONDENT IS ENTITLED TO EXEMPLARY DAMAGES, ATTORNEY’S FEES, EXPENSES OF LITIGATION AND COSTS IS CONTRARY TO LAW AND/OR EVIDENCE."cralaw virtua1aw library
The trial court’s disposition, which was essentially upheld by the appellate court, awarded to private respondent exemplary damages worth P50,000, attorney’s fees amounting to P150,000 (reduced to P50,000 by the Court of Appeals) and ordered costs of the suit against the petitioner.
In this regard, the Court finds it proper to uphold the award of attorney’s fees, and costs of the suit against the petitioner. The award for exemplary damages, however, is improper, as the Court finds no compelling reason to award the same, and in the absence of the requisite award of moral, temperate, liquidated or compensatory damages to the private Respondent
WHEREFORE, in view of the foregoing considerations, the Decision appealed from is hereby MODIFIED, in that the orders for the petitioner to pay the private respondent a) the sum of P94,903.06 representing overpayment of retirement benefits to petitioner; and b) P50,000.00 as exemplary damages, are hereby DELETED.
All other pronouncements of the Court of Appeals are hereby AFFIRMED.
Regalado, Puno and Mendoza, JJ.
1. Exhibit "R", Book 2, Records.
2. Exhibit "S", Book 2, Records.
3. P. 7, Book 1, Records.
4. Ibid., at p. 15.
5. P. 83, Rollo.
6. Annex "A", Petition, p. 45, Rollo.
7. Ibid., at p. 50.
8. Ibid., at p. 52-55.
10. See Court of Appeal’s Resolution at p. 58, Rollo.
11. Petition, pp. 8-9, Rollo.
12. Meneses, v. Court of Appeals, G.R. No. 82220, July 14, 1995, 246 SCRA 162; Acebedo Optical v. Court of Appeals, G.R. No. 119933, November 29, 1995, 250 SCRA 409.
13. Original Records, p. 442.
14. No. L-16298, September 29, 1962, 6 SCRA 136.