Kwok v. Philippine Carpet Manufacturing Corporation
REITERATIONFacts
The Antecedents: Petitioner Donald Kwok, a founder and executive vice-president/general manager of respondent Philippine Carpet Manufacturing Corporation (PCMC), retired after 36 years of service. Upon retirement, he demanded the cash equivalent of his accumulated vacation and sick leave credits from November 16, 1965, to October 31, 1996, totaling ₱7,080,546.00, plus interest, based on an alleged verbal promise by Patricio L. Lim, PCMC's president and chairman of the board, to grant him unlimited sick and vacation leave benefits and their cash conversion upon retirement. Procedural History: The Labor Arbiter ruled in favor of Kwok, ordering PCMC to pay the claimed amount plus attorney's fees. The National Labor Relations Commission (NLRC), by majority vote, reversed the Labor Arbiter's decision, dismissing Kwok's complaint. The Court of Appeals (CA) affirmed the NLRC's decision, dismissing Kwok's petition for review. The CA denied Kwok's motion for reconsideration. The Petition: Kwok filed a petition for review on certiorari with the Supreme Court, assailing the CA's decision, arguing that he adduced sufficient evidence for the verbal promise, that the promise was enforceable, that the board implicitly ratified it, and that the CA ignored established jurisprudence and evidence of prevalent practice.
Issue(s)
Whether the verbal promise of Patricio L. Lim to grant petitioner Donald Kwok the cash conversion of his accumulated vacation and sick leave credits upon retirement is binding on respondent Philippine Carpet Manufacturing Corporation (PCMC), and whether petitioner Donald Kwok adduced substantial evidence to prove his claim for the cash conversion of his accumulated vacation and sick leave credits. Whether petitioner Donald Kwok is covered by the November 6, 1981 Memorandum regarding vacation and sick leave credits. Whether petitioner Donald Kwok's claims are barred by prescription. Whether the binding effect of the promise requires a Board resolution, and whether the alleged "awesome powers" of the President and ratification by silence are applicable. Whether the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in its rulings.
Ruling
The petition is DENIED for lack of merit. The Supreme Court affirmed the decision of the Court of Appeals, which upheld the majority decision of the National Labor Relations Commission dismissing the complaint of Donald Kwok for the cash conversion of his accumulated vacation and sick leave credits.
Ratio Decidendi
On the enforceability of the verbal promise and the requirement of substantial evidence: The Court held that while contracts need not be in writing unless required by law, a verbal promise made by a corporate officer is binding only if the officer acted within the scope of their authority or if the corporation ratified the contract. Petitioner Kwok relied principally on his own testimony to prove the alleged verbal promise. The Court found that Kwok failed to discharge his burden of proving his claim by substantial evidence. The Court cannot presume the existence of such privileges or benefits, especially when they are not inherent to the positions occupied by the petitioner. The findings of fact of the Court of Appeals, which affirmed those of the NLRC, were given conclusive effect as they were not found to be capricious or arbitrary. The petitioner's claim for ₱7,080,546.00 was deemed baseless without sufficient proof. On whether petitioner Donald Kwok is covered by the November 6, 1981 Memorandum: The Court agreed with the CA that the company policy of conversion into equivalent cash of unused vacation and sick leave credits applied only to its regular employees. The petitioner failed to offer evidence to rebut the testimony of the Chief Accountant that he was not among the regular employees covered by the policy because he had unlimited vacation leave benefits. The petitioner himself corroborated this testimony, admitting that his position as Executive Vice-President and General Manager was not covered by the said policy and that it did not apply to him. Therefore, he was not entitled to the benefits under the memorandum. On the prescription of claims: The Court noted that even assuming the petitioner was included among the "regular employees" and entitled to the benefits, there was no evidence that he complied with the cut-off dates for filing the cash conversion of vacation and sick leaves. Consequently, the Court found merit in the respondent's argument that the petitioner's money claims were barred by the three-year prescriptive period under Article 291 of the Labor Code, as amended. Furthermore, there was no proof that petitioner filed vacation and sick leaves, making the determination of actual leave credits impossible and the claimed amount baseless. On the binding effect of the promise without Board resolution and the alleged "awesome powers" of the President and ratification by silence: The Court reiterated the general rule that in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. The personal act of the company president cannot bind the corporation unless the officer acted within the scope of authority or the corporation ratified the contract. In this case, there was no showing that PCMC recognized, approved, or ratified the cash conversion of petitioner's leave credits as purportedly promised by Lim. On the contrary, PCMC maintained that its corporate officers in the top two positions were granted unlimited leave benefits, incompatible with cash conversion. While jurisprudence holds that a president can enter into a contract if the conduct of both the president and the corporation shows a habit of acting on behalf of the company and that the company authorized or ratified such actions, there was no such showing here. PCMC steadfastly maintained its policy of granting unlimited leave benefits to top officers, denying cash conversion. The petitioner did not appeal to the board for the implementation of the privilege, and even if Lim was president and chairman, the rest of the board could have overruled him. The petitioner's admission that the board granted him salary increases after his retirement further indicated that the board was involved in corporate decisions. The Court of Appeals did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in its rulings. The findings of fact of the Court of Appeals, which affirmed those of the NLRC, were given conclusive effect as they were not found to be capricious or arbitrary.
Main Doctrine
A verbal promise made by a corporate officer to grant benefits, such as the cash conversion of accumulated vacation and sick leave credits upon retirement, is binding on the corporation only if the officer acted within the scope of their authority or if the corporation ratified the contract. The burden of proof lies with the claimant to substantiate such claims with substantial evidence, especially when the benefits are not inherent to the position and lack formal board approval.