THIRD DIVISION

EASTERN SHIPPING LINES, G.R. No. 159354

INC., and/or ERWIN L.
CHIONGBIAN, Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO,
- versus - CARPIO MORALES, and
TINGA, JJ.

DIOSCORO D. SEDAN, Promulgated:

Respondent. April 7, 2006
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DECISION

QUISUMBING, J.:

For review on certiorari are the Decision[1] and Resolution,[2] dated

February 14, 2003 and August 7, 2003, respectively, of the Court of
Appeals in CA-G.R. SP No. 70836, which reversed the October 4,
2001[3] Resolution of the National Labor Relations Commission affirming
the Labor Arbiters Decision of June 15, 2000.[4]

The antecedent facts, as culled from the records, are as follows:

On December 30, 1973, petitioners hired on a per-voyage basis

private respondent Dioscoro[5] Sedan as 3rd marine engineer and oiler in
one of the vessels owned by petitioners. His last voyage was on July 27,
1997 on board the vessel M/V Eastern Universe. His monthly pay
was P22,000.[6]Additionally, after each voyage his earned leave credits
are monetized and paid in cash. He said he was disembarking because he
was going to take the board examinations for marine engineers.

Two months later, on September 27, 1997, Sedan sent a letter to

petitioners applying for optional retirement, citing as reason the death of
his only daughter, hence the retirement benefits he would receive would
ease his financial burden. However, petitioners deferred action on his
application for optional retirement since his services on board ship were
still needed. Nonetheless, according to petitioners, the company
expressed intention to extend him a loan in order to defray the costs
incurred for the burial and funeral expenses of his daughter.

On October 28, 1997, Sedan sent petitioners another

[7]
letter insisting on the release of half of his optional retirement benefits.
Later, he said that he no longer wanted to continue working on board a
vessel for reasons of health.[8]

On December 1, 1997, Sedan sent another letter to petitioners

threatening to file a complaint if his application was not granted. In reply,
according to petitioners, the company management sent a telegram
on December 9, 1997 informing Sedan that his services were needed on
board a vessel and that he should report immediately for work as there
was no available replacement. Sedan claims he did not receive the
telegram, nor was this fact proved by the company before the Labor
Arbiter or the NLRC.

Sedan proceeded to file a complaint with the Labor Arbiter against

petitioners, docketed as NLRC-NCR CASE NO. 00-12-08578-97,
demanding payment of his retirement benefits, leave pay, 13 th month pay
and attorneys fees. The Labor Arbiter ruled in favor of Sedan, as follows:

WHEREFORE, premises all considered, judgment is

hereby rendered as follows:

1. Ordering respondents to pay complainant retirement

gratuity/separation pay of P253,000.00 (23 yrs. x
P22,000.00 at month for every year of service).

2. Ordering respondents to pay complainant 10% of the

total monetary award by way of attorneys fees.

All other claims are dismissed for lack of merit.

SO ORDERED.[9]

Petitioners appealed the said decision to the National Labor

Relations Commission. However, the NLRC found the factual findings of
the Labor Arbiter consistent with the evidence on record. Hence, the
NLRC dismissed the appeal for lack of merit. Petitioners motion for
reconsideration was likewise denied.

Dissatisfied, petitioners filed a special civil action for certiorari

with the Court of Appeals anchored on the following grounds:

1. PUBLIC RESPONDENT NLRC COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION IN AWARDING
RETIREMENT GRATUITY/SEPARATION PAY TO THE
PRIVATE RESPONDENT BY HOLDING THAT THERE
WAS NO EVIDENCE TO SHOW THAT PRIVATE
RESPONDENT WAS INFORMED/NOTIFIED OF
PETITIONERS NEED FOR HIS SERVICES OR
DIRECTING HIM TO REPORT FOR WORK, INCLUDING
[ACTION] ON HIS APPLICATION FOR OPTIONAL
RETIREMENT.

2. PUBLIC RESPONDENT NLRC COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION IN AWARDING
ATTORNEYS FEES TO THE PRIVATE RESPONDENT
CONSIDERING THAT PETITIONERS ACTED IN GOOD
FAITH IN REFUSING THE SUBJECT CLAIM.[10]

The Court of Appeals granted the petition and ruled that the
retirement gratuity and attorneys fees awarded by the Labor Arbiter and
the NLRC had no basis in fact or law since pursuant to the Agreement
between the company and the employees, the granting of optional
retirement is the exclusive prerogative of the employer, herein
petitioners. Unless such prerogative was exercised arbitrarily or
capriciously, private respondent cannot demand it as a right. Nonetheless,
the Court of Appeals ordered petitioners to pay private
respondent P200,000 as financial assistance, to wit:
WHEREFORE, FOREGOING PREMISES
CONSIDERED, this petition is GRANTED. The assailed
Decision dated October 4, 2001 and the Resolution dated April
22, 2002 of public respondent National Labor Relations
Commission in NLRC NCR Case No. 00-12-08578-97/NLRC
CA No. 026697-00 entitled, Dioscoro D. Sedan,
complainant-appellee vs. Eastern Shipping Lines, Inc. and/or
 Erwin L. Chiongbian, respondents-appellants are
hereby reversed and set asidefor having been rendered/issued
with grave abuse of discretion amounting to lack or in excess
of jurisdiction and, in lieu thereof, petitioners are hereby
ordered to pay respondent Dioscoro D. Sedan the amount of
Two Hundred Thousand (P200,000.00) Pesos as financial
assistance.

SO ORDERED.[11]

Petitioners filed a motion for reconsideration, but it was denied by

the Court of Appeals.

Hence, the instant petition raising as sole issue:

WHETHER OR NOT THE COURT OF APPEALS
ERRED IN GIVING THE RESPONDENT
PHP200,000.00 AS FINANCIAL ASSISTANCE WHEN IN
FACT IT WAS THE RESPONDENT WHO REFUSED TO
REPORT FOR WORK.[12]

Petitioners contend that by refusing to report for work and insisting

on applying for optional retirement, private respondent wrongly assumed
that he was justified in abandoning his job. Petitioners maintain that
private respondents refusal to report back to work, despite being duly
notified of the need for his service, is tantamount to voluntary
resignation. Therefore, petitioners contend, the respondent should not be
entitled to any financial assistance.
Moreover, granting arguendo that private respondent was entitled
to financial assistance, petitioners protest the amount of the financial
assistance awarded by the Court of Appeals for being disproportionately
excessive. Petitioners cite Manggagawa ng Komunikasyon sa Pilipinas v.
NLRC,[13] where the employee was given only P10,000 as financial
assistance.

In his Comment, private respondent argues that the Court of

Appeals awarded him P200,000 for equity consideration. Private
respondent claims that the retirement policy of the company, which states
that [i]t will be the exclusive prerogative and sole option of this company
to retire any covered employee,[14] must be interpreted in favor of the
working class. Otherwise, private respondent laments, he will be placed
at the mercy of the company, contrary to the constitutional mandate to
afford full protection to labor.
 At the outset, we rule for petitioners on the matter of optional
retirement benefits.

Private respondent is not entitled to retirement benefits. The

pertinent law governing retirement is found in the Labor Code, which
provides:
ART. 287. Retirement. Any employee may be retired
upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to

receive such retirement benefits as he may have earned under
existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employees retirement
benefits under any collective bargaining and other agreements
shall not be less than those provided herein.

In the absence of a retirement plan or agreement

providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has
served at least five (5) years in the said establishment may
retire and shall be entitled to retirement pay equivalent to at
least one half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one
whole year.
xxx

The age of retirement is primarily determined by the existing

agreement between the employer and the employees. However, in the
absence of such agreement, the retirement age shall be fixed by
law. Under the aforecited article of the Labor Code, the legally mandated
age for compulsory retirement is 65 years, while the set minimum age for
optional retirement is 60 years.
In the instant case, there is an agreement[15] between petitioner shipping
company and its employees. The agreement states:
xxx

B. Retirement under the Labor Code:

Any employee whether land-based office personnel or
shipboard employee who shall reach the age of sixty (60) while
in active employment with this company may retire from the
service upon his written request in accordance with the
provisions of Art. 277 of the Labor Code and its Implementing
Rules, Book 6, Rule 1, Sec. 13 and he shall be paid termination
pay equivalent to fifteen (15) days pay for every year of
service as stated in said Labor Code and its Implementing
Rules. However, the company may at its own volition grant
him a higher benefit which shall not exceed the benefits
provided for in the Retirement Gratuity table mentioned
elsewhere in this policy.

C. Optional Retirement:

It will be the exclusive prerogative and sole option of

this company to retire any covered employee who shall have
rendered at least fifteen (15) years of credited service for land
based employees and 3,650 days actually on board vessel for
shipboard personnel. Such employee shall be entitled to a
Retirement Gratuity which shall be computed in accordance
with the following table:

Years of Service Monthly Basic Pay

(Percentage)

15 years 55%
16 years 56%
17 years 57%
18 years 58%
19 years 59%
20 years 60%
21 years 63%
22 years 66%
23 years 69%
24 years 72%
25 years 75%
26 years 80%
27 years 85%
28 years 90%
29 years 95%
30 years or above 100%
 The computation of the benefit shall be based on the
final basic pay, for every year of credited service, a fraction of
at least six (6) months being considered as one whole year but
shall be exclusive of fringe benefits and other special
emoluments.[16]

xxx

Clearly, the eligibility age for optional retirement is set at 60

[17]
years. However, employees of herein petitioners who are under the age
of 60 years, but have rendered at least 3650 days (10 years) on board ship
or fifteen (15) years of service for land-based employees may also avail
of optional retirement, subject to the exclusive prerogative and sole
option of petitioner company.[18]
Records show that private respondent was only 48 years old [19] when he
applied for optional retirement. Thus he cannot claim optional retirement
benefits as a matter of right. His application for optional retirement was
subject to the exclusive prerogative and sole option of the shipping
company pursuant to the abovecited agreement between the workers and
the company. In this regard, no error was committed by the appellate
court when it set aside the ruling of the Labor Arbiter and the NLRC
granting herein private respondent P253,000 retirement
gratuity/separation pay.

So now we come to the grant of financial assistance by the

appellate court. We are not unmindful of the rule that financial assistance
is allowed only in instances where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on his moral
character.[20]Neither are we unmindful of this Courts pronouncements
in Arc-Men Food Industries Corporation v.
[21] [22]
NLRC, and Lemery Savings and Loan Bank v. NLRC, where the
Court ruled that when there is no dismissal to speak of, an award of
financial assistance is not in order.

But we must stress that this Court did allow, in several instances,
the grant of financial assistance.[23] In the words of Justice Sabino de
Leon, Jr., now deceased, financial assistance may be allowed as a
measure of social justice and exceptional circumstances, and as an
equitable concession.[24] The instant case equally calls for balancing the
interests of the employer with those of the worker, if only to approximate
what Justice Laurel calls justice in its secular sense.[25]
 In this instance, our attention has been called to the following
circumstances: that private respondent joined the company when he was a
young man of 25 years and stayed on until he was 48 years old; that he
had given to the company the best years of his youth, working on board
ship for almost 24 years; that in those years there was not a single report
of him transgressing any of the company rules and regulations; that he
applied for optional retirement under the companys non-contributory plan
when his daughter died and for his own health reasons; and that it would
appear that he had served the company well, since even the company said
that the reason it refused his application for optional retirement was that it
still needed his services; that he denies receiving the telegram asking him
to report back to work; but that considering his age and health, he
preferred to stay home rather than risk further working in a ship at sea.

In our view, with these special circumstances, we can call upon the
same social and compassionate justice cited in several cases [26] allowing
financial assistance. These circumstances indubitably merit equitable
concessions, via the principle of compassionate justice for the working
class.Thus, we agree with the Court of Appeals to grant financial
assistance to private respondent. The only catch is whether, as the
shipping company alleges, the amount of P200,000 that the Court of
Appeals granted him is arbitrary and excessive.

The propriety of awarding financial assistance has long been tackled by

this Court. In Philippine Long Distance Telephone Co. v. NLRC,[27] we
laid down the rule that henceforth separation pay shall be allowed as a
measure of social justice only in the instances where the employee is
validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. A contrary rule, we said would have the
effect of rewarding rather than punishing an erring employee.

Subsequent to PLDT, in the 2004 case of Piero v. NLRC,[28] Piero who

was dismissed for an illegal strike was granted one-half () months pay for
the 29 years of his service. His infraction was deemed
not so reprehensible nor unscrupulous as to warrant complete disregard of
his long years of service with no derogatory record. In Aparente, Sr. v.
NLRC,[29] for blatant disobedience of company rules, one-half () months
pay for every year of service was also deemed equitable. In the 1998 case
of Salavarria v. NLRC,[30] for the teacher who had previously been meted
with a two week suspension for the same offense, illegally soliciting
contributions from students, the Court granted one months salary for
every year of service because, said the Court, she never took custody of
the illegally solicited funds.
Considering the doctrine in the abovecited NLRC cases and taking into
account equitable results in those cases, we find the grant of two hundred
thousand pesos (P200,000) by the Court of Appeals, neither arbitrary nor
excessive. Private respondent who has no derogatory record in his 23
years of service should be granted equitable assistance equal to one-half
months pay for each of his 23 years of service.

To conclude, in the instant case, private respondent has no claim against

petitioners for retirement benefits. We agree with the appellate court,
however, that financial assistance could be awarded him but only as an
equitable concession under the special circumstances of this case.

WHEREFORE, the petition is DENIED. The decision of the Court of

Appeals granting assistance to private respondent in the amount of two
hundred thousand pesos (P200,000) is AFFIRMED. No pronouncement
as to cost.

SO ORDERED.