Documente Academic
Documente Profesional
Documente Cultură
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DECISION
NACHURA, J.:
The Constitution affords full protection to labor, but the policy is not to be blindly
followed at the expense of capital. Always, the interests of both sides must be
balanced in light of the evidence adduced and the peculiar circumstances
surrounding each case.
2000 2001
Income from Hotel P 78,434,103 P 12,230,248
Operations
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-
Other Deductions
Meanwhile, on August 31, 2001, the Union filed a notice of strike due to a
bargaining deadlock before the National Conciliation Mediation Board (NCMB),
docketed as NCMB-NCR-NS 08-253-01.[9] In the course of the proceedings, HEPI
submitted its economic proposals for the rank-and-file employees covering the
years 2001, 2002, and 2003. The proposal included manning and staffing standards
for the 248 regular rank-and-file employees. The Union accepted the economic
proposals. Hence, a new collective bargaining agreement (CBA) was signed on
November 21, 2001, adopting the manning standards for the 248 rank-and-file
employees.[10]
On April 12, 2002, the Union filed a notice of strike based on unfair labor
practice (ULP) against HEPI. The case was docketed as NCMB-NCR-NS-04-139-
02.[27] On April 25, 2002, a strike vote was conducted with majority in the
bargaining unit voting in favor of the strike. [28] The result of the strike vote was
sent to NCMB-NCR Director Leopoldo de Jesus also on April 25, 2002.[29]
On April 29, 2002, HEPI filed a motion to dismiss notice of strike which
was opposed by the Union. On May 3, 2002, the Union filed a petition to suspend
the effects of termination before the Office of the Secretary of Labor. On May 5,
2002, the hotel management began implementing its downsizing plan immediately
terminating seven (7) employees due to redundancy and 41 more due to
retrenchment or abolition of positions.[30] All were given separation pay equivalent
to one (1) months salary for every year of service.[31]
On June 14, 2002, Acting Labor Secretary Manuel Imson issued an order in
NCM-NCR-NS-04-139-02 (thence, NLRC Certified Case No. 000220-02),
certifying the labor dispute to the NLRC for compulsory arbitration and directing
the striking workers, except the 48 workers earlier terminated, to return to work
within 24 hours. On June 16, 2002, after receiving a copy of the order, members of
respondent Union returned to work.[32] On August 1, 2002, HEPI filed a
manifestation informing the NLRC of the pending petition to declare the strike
illegal. Because of this, the NLRC, on November 15, 2002, issued an order
directing Labor Arbiter Aliman Mangandog to immediately suspend the
proceedings in the pending petition to declare the strike illegal and to elevate the
records of the said case for consolidation with the certified case. [33] However, the
labor arbiter had already issued a Decision [34] dated October 30, 2002 declaring the
strike legal.[35] Aggrieved, HEPI filed an appeal ad cautelam before the NLRC
questioning the October 30, 2002 decision.[36] The Union, on the other hand, filed a
motion for reconsideration of the November 15, 2002 Order on the ground that a
decision was already issued in one of the cases ordered to be consolidated.[37]
Respondent Union moved for reconsideration, while petitioner HEPI filed its
partial motion for reconsideration. Both were denied in a Resolution [40] dated
September 24, 2003.
The Union filed a petition for certiorari with the CA on December 19,
[41]
2003 questioning in the main the validity of the NLRCs reversal of the labor
arbiters decision.[42] But while the petition was pending, the hotel management, on
December 29, 2003, issued separate notices of suspension against each of the 12
Union officers involved in the strike in line with the April 3, 2003 resolution of the
NLRC.[43]
On July 20, 2004, the CA promulgated the assailed Decision,[44] reversing the
resolution of the NLRC and reinstating the October 30, 2002 decision of the Labor
Arbiter which declared the strike valid. The CA also ordered the reinstatement of
the 48 terminated employees on account of the hotel managements illegal
redundancy and retrenchment scheme and the payment of their backwages from
the time they were illegally dismissed until their actual reinstatement. [45] HEPI
moved for reconsideration but the same was denied for lack of merit.[46]
The issue boils down to whether the CAs decision, reversing the NLRC
ruling, is in accordance with law and established facts.
To resolve the correlative issues (i.e., the validity of the strike; the charges of
ULP against petitioner; the propriety of petitioners act of hiring contractual
employees from employment agencies; and the entitlement of Union officers and
terminated employees to reinstatement, backwages and strike duration pay), we
answer first the most basic question: Was petitioners downsizing scheme valid?
The pertinent provision of the Labor Code states:
ART. 283. x x x
In case of redundancy, the employer must prove that: (1) a written notice
was served on both the employees and the DOLE at least one month prior to the
intended date of retrenchment; (2) separation pay equivalent to at least one month
pay or at least one month pay for every year of service, whichever is higher, has
been paid; (3) good faith in abolishing the redundant positions; and (4) adoption of
fair and reasonable criteria in ascertaining which positions are to be declared
redundant and accordingly abolished.[52]
It is the employer who bears the onus of proving compliance with these
requirements, retrenchment and redundancy being in the nature of affirmative
defenses.[53] Otherwise, the dismissal is not justified.[54]
In the case at bar, petitioner justifies the downsizing scheme on the ground
of serious business losses it suffered in 2001. Some positions had to be declared
redundant to cut losses. In this context, what may technically be considered as
redundancy may verily be considered as a retrenchment measure.[55] To substantiate
its claim, petitioner presented a financial report covering the years 2000 and 2001
submitted by the SGV & Co., an independent external auditing firm. [56] From an
impressive gross operating profit of P48,608,612.00 in 2000, it nose-dived to
negative P16,137,217.00 the following year. This was the same financial report
submitted to the SEC and later on examined by respondent Unions auditor. The
only difference is that, in respondents analysis, Hyatt Regency Manila was still
earning because its net income from hotel operations in 2001 was P12,230,248.00.
However, if provisions for hotel rehabilitation as well as replacement of and
additions to the hotels furnishings and equipments are included, which respondent
Union failed to consider, the result is indeed a staggering deficit of more than P16
million. The hotel was already operating not only on a slump in income, but on a
huge deficit as well. In short, while the hotel did earn, its earnings were not enough
to cover its expenses and other liabilities; hence, the deficit. With the local and
international economic conditions equally unstable, belt-tightening measures
logically had to be implemented to forestall eventual cessation of business.
This Court will not hesitate to strike down a companys redundancy program
structured to downsize its personnel, solely for the purpose of weakening the union
leadership.[59] Our labor laws only allow retrenchment or downsizing as a valid
exercise of management prerogative if all other else fail. But in this case, petitioner
did implement various cost-saving measures and even transferred some of its
employees to other viable positions just to avoid the premature termination of
employment of its affected workers. It was when the same proved insufficient and
the amount of loss became certain that petitioner had to resort to drastic measures
to stave off P9,981,267.00 in losses, and be able to survive.
If we see reason in allowing an employer not to keep all its employees until
after its losses shall have fully materialized,[60]with more reason should we allow
an employer to let go of some of its employees to prevent further financial slide.
This, in turn, gives rise to another question: Does the implementation of the
downsizing scheme preclude petitioner from availing the services of contractual
and agency-hired employees?
Given the foregoing finding, the only remaining question that begs
resolution is whether the strike was staged in good faith. On this issue, we find for
the respondent.
Procedurally, a strike to be valid must comply with Article 263 of the Labor
Code, which pertinently reads:
Article 263. x x x
xxxx
Here, respondent Union went on strike in the honest belief that petitioner
was committing ULP after the latter decided to downsize its workforce contrary to
the staffing/manning standards adopted by both parties under a CBA forged only
four (4) short months earlier. The belief was bolstered when the management hired
100 contractual workers to replace the 48 terminated regular rank-and-file
employees who were all Union members. [65] Indeed, those circumstances
showed prima facie that the hotel committed ULP. Thus, even if technically there
was no legal ground to stage a strike based on ULP, since the attendant
circumstances support the belief in good faith that petitioners retrenchment scheme
was structured to weaken the bargaining power of the Union, the strike, by
exception, may be considered legal.
Because of this, we view the NLRCs decision to suspend all the Union
officers for six (6) months without pay to be too harsh a punishment. A suspension
of two (2) months without pay should have been more reasonable and just. Be it
noted that the striking workers are not entitled to receive strike-duration pay, the
ULP allegation against the employer being unfounded. But since reinstatement is
no longer feasible, the hotel having permanently ceased operations on July 2, 2007,
[66]
we hereby order the Labor Arbiter to instead make the necessary adjustments in
the computation of the separation pay to be received by the Union officers
concerned.
For this reason, this Court strongly admonishes petitioner and its counsel for
making its former employees sign quitclaim documents without indicating therein
the consideration for the release and waiver of their employees rights. Such
conduct on the part of petitioner and its counsel is reprehensible and puts in serious
doubt the candor and fairness required of them in their relations with their hapless
employees. They are reminded to observe common decency and good faith in their
dealings with their unsuspecting employees, particularly in undertakings that
ultimately lead to waiver of workers rights. This Court will not renege on its duty
to protect the weak against the strong, and the gullible against the wicked, be it for
labor or for capital.
However, with respect to the second batch of quitclaims signed by 85 of the
remaining 160 employees who were terminated following Hyatts permanent
closure,[70] we hold that these are valid and binding undertakings. The said
documents indicate that the amount received by each of the employees represents a
reasonable settlement of their monetary claims against petitioner and were even
signed in the presence of a DOLE representative. A quitclaim, with clear and
unambiguous contents and executed for a valid consideration received in full by
the employee who signed the same, cannot be later invalidated because its
signatory claims that he was pressured into signing it on account of his dire
financial need. When it is shown that the person executing the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration
for the quitclaim is credible and reasonable, the transaction must be recognized as
a valid and binding undertaking.[71]
SO ORDERED.
2. FIRST DIVISION
DECISION
PANGANIBAN, J.:
To justify retrenchment, the employer must prove, among other things, serious business
losses, and not just any kind or amount of loss. Furthermore, if the requisites provided in Article
283 of the Labor Code are not fulfilled, a deed of quitclaim and release is unavailing to exculpate
an employer from liability for illegal retrenchment.
The Case
In this special civil action for certiorari filed before this Court, petitioners seek the reversal
of the November 12, 1990 Decision[1] and the March 4, 1991 Resolution of the National Labor
Relations Commission in NLRC NCR Case No. RAB VII-0801-85, both of which affirmed the
labor arbiters Decision finding them liable for illegal dismissal.
Acting on private respondents amended Complaint for illegal dismissal and unfair labor
practice, Executive Labor Arbiter Irenea E. Ceniza rendered a Decision dated May 5, 1989,
which disposed as follows:[2]
and to pay the [private respondents] counsel 10% of the foregoing amount or the sum
of FORTY THREE THOUSAND SEVEN HUNDRED EIGHTY NINE AND 14/100
(P43,789.14) as attorneys fees; ordering further the [petitioners] to deposit the
[aggregate] amount of FOUR HUNDRED EIGHTY ONE THOUSAND SIX
HUNDRED EIGHTY PESOS AND 56/100 (P481,680.56) with this Branch of the
Commission within ten (10) days from receipt of this decision.
On appeal, the National Labor Relations Commission (Cebu Branch), in its assailed
Decision, affirmed with modification the labor arbiters judgment:4
WHEREFORE, in view of all the foregoing, the decision appealed from is
MODIFIED by setting aside the award for the money claims of the [private
respondents] as contained in the decision and directing the recomputation thereof in
accordance with Section 3, Rule XI of the NLRC Rules to determine [the] correct
amount to be awarded to the [private respondents].
Except for the foregoing modification the rest of the decision stands AFFIRMED.
The Facts
As found by the labor arbiter, the facts of this case are as follows:6
They performed the functions of computer, sampler and scalers. [O]n May 31,
1985, the [private respondents] joined and became members of [Private
Respondent] Associated Labor Unions, with [Private Respondent] Bonifacio
Montilla as its [l]ocal [p]resident. With 13 original members[,] Bonifacio Montilla
being the president actively campaigned and convinced the rest of their co-
employees to join with the union. While campaigning among his co-employees
for union membership, the [t]reasurer of respondent firm Mr. Jose Mari Miranda
called [Private Respondent] Montilla to his office and told him to withdraw his
membership from the Associated Labor Unions or else they will not be hired at
the start of the milling season and will be dismissed. That he and the [private
respondents] herein did not heed the warning of Mr. Miranda and stuck to their
membership with the private respondent union. As a consequence and as earlier
warned of being dismissed if they persist[ed] in their union activities, notices of
termination were sent to [Private Respondents] Bernardo Dela Rama, Ildefonso
Carredo, Bonifacio Montilla and Jose Ybaez, Jr. (Exhibits 4-7), informing them
that their services will be terminated due to financial difficulties. While the said
notices stated that their services will be terminated 30 days from date[,] they were
not allowed to work within that 30 day period and Montilla was immediately
replaced by Gavino Negapatan (TSN June 18, 1987, p. 31). The [private
respondents] alleged that their dismissal was sought due to their membership [in]
the private respondent union as they have not violated any company rules and
regulations. There is also no allegation to this effect by the respondents and the
latter strongly advocated retrenchment to prevent losses as their basis in
terminating the [private respondents]. Aggrieved of the respondents actuations
they filed the present complaint on December 20, 1985, or before the expiration
of the 30 days notice dated November 28, 1985. On December 28, 1985, or just
on the 30th day of the notice of termination[,] four of the [private respondents],
namely Bonifacio Montilla, [I]ldefonso Carredo, Bernardo Dela Rama and Jose
Ybaez, Jr., were paid their corresponding separation/gratuity pay and accordingly
signed their Quitclaim and Release (Exhibit 8-11).
The respondents on the other hand strongly maintained that the dismissal of the
[private respondents] was validly carried out in accordance with corporate powers
to prevent losses. To support this stand they submitted a comparative statement of
Revenue and Expenses for the crop years 1983-1984 and 1984-1985, to show they
suffered losses in the amount of P54,692.31 in the crop year ending August
1985. In addition they claimed that the [private respondents] [were] already
barred from filing this present case by virtue of their Quitclaim and Release.
While Respondent Commission agreed with petitioners that management had the
prerogative to terminate employment on account of business reversals, it held, however, that
petitioners failed to present adequate proof of such losses. First, the Comparative Statement of
Revenue and Expenses submitted by Petitioner Corporation was neither sufficient nor substantial
to support the claim that private respondents were retrenched pursuant to Article 283 of the
Labor Code.
Second, petitioners failed to show that, in undertaking the retrenchment, fair and reasonable
standards were used in determining who among its employees would be separated from the
service.
Third, petitioners failed to show that they gave the required 30-day notice to the labor
department before effecting the retrenchment.
Fourth, petitioners hired additional personnel after the private respondents were
retrenched. Such actuation strengthened, rather than negated, private respondents contention that
their dismissal was an orchestrated move to ease them out of employment due to their union
activities.
Fifth, Respondent Commission gave credence to Private Respondent Montillas
testimony, thus upholding the ruling of the labor arbiter who was in a unique position [to
observe] the demeanor of the witness.
It also rejected the posturing of the petitioners that the execution of a deed of quitclaim and
release exculpated them from liability, as such undertaking did not bar the private respondents
from questioning the legality of their dismissal.
Hence, this petition.7
Assignment of Errors
[I]: Respondent xxx Commission erred in setting aside the deeds of quitclaim and
release signed and executed by individual [private respondents] as
without any legal effect to bar and preclude them from proceeding
against petitioners, the same being contrary to law and jurisprudence.
[II]: Respondent xxx Commission disregarded the fact that said deeds of quitclaim
and release were signed and executed by individual private respondents
after they filed their complaints in its regional arbitration branch.
[III]: Respondent xxx Commission erred in sustaining the findings and conclusion
of the executive labor arbiter as to the illegality of the dismissal of the
[private respondents] which is tantamount to grave abuse of discretion.
[IV]: Assuming arguendo there was illegal dismissal, it was error to find
Petitioner Horacio Franco personally liable, jointly and severally, with
petitioner association.
[V]: Respondent xxx Commission erred in giving due credence to the testimony
of Respondent Bonifacio Montilla and deciding the case in favor of
[private respondents] and finding [petitioners] liable for the alleged
claims and for unfair labor practice on the sole basis of his testimony.
[VI]: Respondent xxx Commission commit[ted] grave abuse of discretion in
rendering a decision in favor of [private respondents] who did not appear
at all in the case to prosecute their claims and support their charges
against herein petitioners, thus denying the latter due process of law
guaranteed by the Constitution.
1. Whether private respondents retrenchment was valid and legal under Article 283 of
the Labor Code
2. Whether the Quitclaim and Release barred the private respondents from charging
petitioners with illegal dismissal
3. Whether a corporate officer could be held liable for illegal dismissal without a
showing that he acted maliciously and in bad faith in dismissing private respondents
In a number of cases, the Court has laid down the following requisites of a valid
retrenchment: (1) the losses incurred are substantial and not de minimis; (2) the losses are actual
or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective
in preventing the expected losses; and (d) the alleged losses, if already incurred, or the expected
imminent losses sought to be forestalled, are proven by sufficient and convincing evidence. 12 In
the present case, petitioners miserably failed to prove (1) substantial losses and (2) the
reasonable necessity of the retrenchment.
No Sufficient and Substantial Evidence of Business Loss
To justify retrenchment, the employer must prove serious business losses. 13 Indeed, not all
business losses suffered by the employer would
justifyretrenchment under this article. The Court has held that the loss referred to in Article 283
14
cannot be just any kind or amount of loss; otherwise, a company could easily feign excuses to
suit its whims and prejudices or to rid itself of unwanted employees.15
In the case at bar, Petitioner Corporation claimed that the retrenchment of private
respondents was justified, because it suffered business losses, as evidenced by its Comparative
Statement of Revenue and Expenses for crop years 1983-1984 and 1984-1985.16
On the other hand, Respondent Commission and the executive labor arbiter held that this
evidence was neither sufficient nor substantial, viz.:17
The only evidence adduced by the [petitioners] to prove that they suffered economic
losses and [had] therefore to cut down expenses and reduce personnel is [E]xhibit 3
which is a [C]omparative [S]tatement of Revenue and Expenses for two crop years,
1983-1984 and 1984-1985, which was allegedly submitted to the [B]ureau of Internal
Revenue on November 12, 1985. This piece of evidence was prepared by Ligaya R.
Arcenas, [o]ffice [m]anager, certified correct by Jose Mari M. Miranda, [t]reasurer,
Rosendo S. Hernaez, [a]uditor[,] and attested [to] by its president Mr. Horacio M.
Franco. xxxx.
In the present case no financial statement, or statement of profit and loss or books of
account have been presented to substantiate the alleged losses. It is also dubious why
the said [C]omparative [S]tatement of Revenue and Expenses was prepared by the
office manager instead of their accountant. Besides the said [C]omparative
[S]tatement of [R]evenue and [E]xpenses is inconsistent with the statement of Jose
Mari M. Miranda that the [petitioners had] to cut down expenses and do some
retrenchment to prevent further losses and that they [had] been incurring losses
of P54,692.21 for crop year 1984-1985, and P54,110.94 for the previous crop year
1983-1984 (TSN December 7, 1 988, [pp.] 12-13). A closer scrutiny of Exhibit 3
[C]omparative [S]tatement of Revenue and Expenses [would] readily reveal that for
the crop year 1983-1984, the [petitioners] had a net income of P54,110.94. The total
revenue indicated therein being P798,750.20 while the total expenses is
only P744,639.26. Another instance which would clearly negate that the [petitioners]
did cut down on expenses to prevent any further losses are the marked increase in the
amount of over P13,000.00 in the expenses for conferences, meetings and conventions
in 1984-1985 over the previous year, the increase in the printing of office supplies xxx
for over P13,000.00 and the National Federation dues [which] were [unpaid] in 1983-
1984[,] but in 1984-1985 the amount of P36,410.59 was paid. In this light the alleged
losses become unjustifiable to warrant the dismissal of the [private respondents]. As
earlier observed the [petitioners] should have come out with their books of accounts,
profit and loss statements and better still should have presented their accountant to
competently amplify their financial position.
In their rebuttal, petitioners allege the following: (1) the comparative financial statement of
the corporation duly reflects its income and expenses in a given taxable year and, despite its
different nomenclature, is substantially the same as a profit and loss statement or any other
financial statement; and (2) the National Internal Revenue Code (NIRC) requires the certification
of an independent certified public accountant only if the taxpayers gross receipts exceed P25,000
in any quarter of any taxable year.
The contentions of petitioners are untenable. A comparative statement of revenue and
expenses for two years, by itself, is not conclusive proof of serious business losses. The Court
has previously ruled that financial statements audited by independent external auditors constitute
the normal method of proof of the profit and loss performance of a company.18 While Petitioner
Corporation avers that it was not required to file audited financial statements under Section 232
of the Tax Code, it failed to establish its exemption through any evidence showing that its
quarterly gross revenues did not exceed P25,000. Thus, its claim that it did not need to have its
financial statements certified by a certified public accountant is without basis in fact and in law
and does not excuse it from complying with the usual requirement. Besides, the requirement of
the Tax Code is one thing, and the requirement of the Labor Code is quite another.
Moreover, the financial statement of Petitioner Corporation for two crop years is insufficient
proof of serious business losses that would justify the retrenchment of private respondents. Thus,
the Court held in Somerville Stainless Steel Corporation v. NLRC:19
xxx The failure of petitioner to show its income or loss for the immediately preceding
years or to prove that it expected no abatement of such losses in the coming years
bespeaks the weakness of its cause. The financial statement for 1992, by itself, does
not sufficiently prove petitioners allegation that it already suffered actual serious
losses,20 because it does not show whether its losses increased or decreased. Although
petitioner posted a loss for 1992, it is also possible that such loss was considerably
less than those previously incurred, thereby indicating the companys improving
condition.
Petitioners further assail the labor arbiter and the NLRC for giving credence to Private
Respondent Montillas testimony, as the same was replete with substantial contradictions and
material inconsistencies. Petitioners maintain that Montilla failed to substantiate his claim that he
had been forced and intimidated to sign the quitclaim and release. They add that the new
workers, who allegedly replaced the private respondents, had been working for Petitioner
Corporation several months before the retrenchment.
Montillas testimony regarding the hiring of replacements after he and his co-private
respondents had been retrenched was given credence by Respondent Commission in this wise:23
xxx [C]ertain persons were hired or rehired after [private respondents] were
dismissed. Why would [petitioners] take in additional workers if it had to
retrench? It becomes immaterial whether the persons hired had previously worked
for [petitioners]. The fact that there was hiring of additional personnel right after
[private respondents] were retrenched is enough to destroy whatever pretense
[petitioners] ha[d] with respect to retrenchment.Whether those hired were
intended to replace [private respondents] or not is immaterial. The crucial point is
that immediately after the so-called retrenchment, [petitioners] hired other
workers. Such actuation is inconsistent with retrenchment and merely
strengthen[s] the observation that there was an orchestrated move to terminate the
[private respondents] on account of their union activities.
The Court finds no sufficient reason to modify or reverse the assessments of the labor arbiter
and the Respondent Commission on the credibility of Montilla and his testimony. In fact, the
testimony of Parilla and Florita that they used to be extras, who substituted for absent workers,
corroborate Montillas claims. They were taken in, after the retrenchment of the private
respondents, and made to perform the tasks formerly assigned to the latter.
It is well-settled that factual findings of Respondent Commission affirming those of the
labor arbiter, when sufficiently supported by evidence on record, are accorded respect if not
finality.24
Petitioners brush aside the procedural notice which Article 283 of the Code requires to be
sent to the labor department before the retrenchment can be effected. The written notice to the
labor department has been previously declared to be a mandatory requirement. 25 Although the
absence of this notice renders the dismissal merely defective, not illegal, 26 the failure of
petitioners to comply with this requirement shows nonetheless the bankruptcy of their cause.
Petitioners pray that the present action should be barred, because private respondents have
voluntarily executed quitclaims and releases and received their separation pay. Petitioners claim
that the present suit is a grave derogation of the fundamental principle that obligations arising
from a valid contract have the force of law between the parties and must be complied with in
good faith.
The Court disagrees. Jurisprudence holds that the constitutional guarantee of non-
impairment of contracts is subject to the police power of the state and to reasonable legislative
regulations promoting public health, morals, safety and welfare. Not all quitclaims are per
se invalid or against public policy, except (1) where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are
unconscionable on their face. In these cases, the law will step in to annul the questionable
transactions.27 Such quitclaim and release agreements are regarded as ineffective to bar the
workers from claiming the full measure of their legal rights.28
In the case at bar, the private respondents agreed to the quitclaim and release in
consideration of their separation pay. Since they were dismissed allegedly for business losses,
they are entitled to separation pay under Article 283 of the Labor Code. And since there was thus
no extra consideration for the private respondents to give up their employment, such
undertakings cannot be allowed to bar the action for illegal dismissal.
Unless they have exceeded their authority, corporate officers are, as a general rule, not
personally liable for their official acts, because a corporation, by legal fiction, has a personality
separate and distinct from its officers, stockholders and members. 29 However, this fictional veil
may be pierced whenever the corporate personality is used as a means of perpetuating a fraud or
an illegal act, evading an existing obligation, or confusing a legitimate issue.30 In cases of illegal
dismissal, corporate directors and officers are solidarily liable with the corporation, where
terminations of employment are done with malice or in bad faith.31
Respondent Commission adopted the executive labor arbiters findings and held that it can be
reasonably inferred that private respondents dismissal was tainted with bad faith. However,
nowhere in the records is there such evidence to show malice or bad faith on Petitioner Francos
part. The executive labor arbiter found that it was Miranda, the corporate treasurer, who told
Private Respondent Montilla to withdraw membership from the union and threatened not to
rehire him and his companions if they refused. Petitioner Francos liability is based only on his
being the chief executive officer ofPetitioner Corporation and the lone signatory to the Notice of
Termination received by the private respondents. These findings, however, do not in themselves
support the allegation of bad faith or malice and are, therefore, insufficient to hold him solidarily
liable with Petitioner Corporation for illegal dismissal.
Petitioners deny liability for the illegal dismissal of Private Respondents Fortunato Migabon
Jr. and Roseto Canales, since said employees neither appeared before the hearing officer nor
presented any evidence to support their claim. Therefore, to hold them liable will be a violation
of their right to due process.
The Court disagrees. The amendment of the complaint32 to include Private Respondents
Fortunato Migabon Jr. and Roseto Canales was filed on April 24, 1986 or twenty-five days
before May 19, 1986, when petitioners submitted their position paper.33Petitioners were not
denied their day in court, because they were given an opportunity to rebut and refute said private
respondents allegations in their position paper. The case was even further appealed
to Respondent Commission, where petitioners were undeniably accorded due process.34
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution are
hereby AFFIRMED, with the MODIFICATION that Petitioner Franco is exempted from liability
for the illegal dismissal of private respondents. Costs against Petitioner Corporation.
SO ORDERED.
SECOND DIVISION
PUNO, J.:
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C. Martinez, Rafael
H. Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo, was valid on the twin
grounds of redundancy and retrenchment to prevent business losses, petitioner Asian Alcohol
Corporation (hereinafter referred to as Asian Alcohol) filed this petition for certiorari. Asian Alcohol
ascribes grave abuse of discretion to public respondent National Labor Relations
Commission 1 (hereinafter referred to as NLRC) when, on May 30, 1997, it set aside 2 the decision 3 of
the Executive Labor Arbiter dismissing the illegal termination complaints filed by private respondents.
In September, 1991, the Parsons family, who originally owned the controlling stocks in Asian Alcohol,
were driven by mounting business losses to sell their majority rights to Prior Holdings, Inc.
(hereinafter referred to as Prior Holdings). The next month, Prior Holdings took over its management
and operation. 4
To thwart further losses, Prior Holding implemented are organizational plan and other cost-saving
measures. Some one hundred seventeen (117) employees out of a total workforce of three hundred
sixty (360) were separated. Seventy two (72) of them occupied redundant positions that were
abolished. Of these positions, twenty one (21) held by union members and fifty one (51) by non-
union members.
The six (6) private respondents are among those union members 5 whose positions were abolished
due to redundancy. Private respondents Carias, Martinez, and Sendon were water pump tenders; Amacio
was a machine shop mechanic; Verayo was a briquetting plant operator while Tormo was a plant helper
under him. They were all assigned at the Repair and Maintenance Section of the Pulupandan plant. 6
In October, 1992, they received individual notices of termination effective November 30, 1992. 7 They
were paid the equivalent of one month salary for every year of service as separation pay, the money
value of their unused sick, vacation, emergency and seniority leave credits, thirteenth (13th) month pay
for the year 1992, medicine allowance, tax refunds, and goodwill cash bonuses for those with at least ten
(10) years of service. 8 All of them executed sworn releases, waivers and quitclaims. 9 Except for Verayo
and Tormo, they all signed sworn statements of conformity to the company retrenchment program. 10 And
except for Martinez, they all tendered letters of resignation. 11
On December 18, 1992 the six (6) private respondents filed with the NLRC Regional Arbitration
Branch VI, Bacolod City, complaints for illegal dismissal with a prayer for reinstatement with
backwages, moral damages and attorney's fees. They alleged that Asian Alcohol used the
retrenchment program as a subterfuge for union busting. They claimed that they were singled out for
separation by reason of their active participation in the union. They also asseverated that Asian
Alcohol was not bankrupt as it has engaged in an aggressive scheme of contractual hiring.
The fact that respondent AAC incurred losses in its business operations was not
seriously challenged by the complainants. The fact that it incurred losses in its
business operations prior to the implementation of its retrenchment program is amply
supported by the documents on records, (sic) namely: (1) Balance Sheet of AAC as
December 31, 1991 . . . , (2) Statement of Income and Deficit for the year ended
December 31, 1991 . . . , (3) Income Tax for Fiscal Year ending September 30, 1989 .
. . , (4) Income Tax Return for Fiscal Year ending December 31, 1989 . . . , (5)
Income Tax Return for Fiscal Year ending December 31, 1990 . . . , and (6) Income
Tax Return for Fiscal Year ending December 31, 1991 . . . , indicating an
accumulated deficit of P26,117,889.00.
It has to be emphasized that the law allows an employer to retrench some of its
employees to prevent of its employees to prevent losses. In the case of respondent
AAC, it implemented its retrenchment program not only to prevent losses but to
prevent further losses as it was then incurring huge losses in it operations.
Complainants would want us to believe that their positions were abolished because
they are union members, and that they were replaced by casual employees.
Complainants' pretense is rather untenable. For one thing, the retrenchment program
of AAC affected not only union members but also the non-union members. As earlier
said, there were 117 employees of AAC who were affected by the reorganization. Of
the 117 positions, 72 positions were abolished due to redundancy, 21 of which were
occupied by unions members, while 51 were held by non-union members. Thus, the
theory of complainants that they were terminated from work on ground of their union
membership is far from the truth.
On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and
Rafael Sendon who were all Water Pump Tenders assigned to AAC's water wells in
Ubay, Pulupandan, Negros Occidental which were drilled and operated before under
the old management by virtue of a right-of-way with the landowner, were
retrenchment as an offshoot to the termination of the lease agreement as the water
thereunder had become salty due to extensive prawn farming nearby, so that AAC
could no longer use the water for its purpose. As a consequence, the services of
Ernesto Carias, Roberto Martinez and Rafael Sendon had become unnecessary,
redundant and superfluous.
As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by
respondent AAC in support of its decision to retrench them are too convincing to be
ignored. According to respondent AAC, its boiler before was 100% coal fired. The
boiler was manned by a briquetting plant operator in the person of Leandro Verago
and three (3) briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and
Rudy Javier, Jr. Since AAC had shifted to the use of bunker fuel by about 70% to fire
its boiler, its usage of coal had been drastically reduced to only 30% of its total fuel
usage in its production plant, thereby saving on fuel cost. For this reason, there was
no more need for the position of briquetting plant operator and the services of only
two briquetting helpers were determined to be adequate for the job of briquetting
coal. Of the three (3) briquetting helpers, Ereneo Tormo was the oldest, being
already 41 years old, the other two, Javier and Songaling, being only 28 and 35,
respectively. Considering the manual nature of the work of coal briquetting, younger
workers are always preferred for reasons of efficiency [sic]. Hence the abolition of the
position of Ereneo Tormo. We have to stress that Eriberto Songaling, Jr. and Rudy
Javier, Jr. are also union member. . . .
With respect to Carlos Amacio, he was retrenched not because of his being a union
member but because of his poor health condition which greatly affect[ed] his work
efficiency. Records show that Carlos Amacio was among the ten machine shop
mechanics employed by respondent AAC. Under AAC's reorganization plan, it needs
only nine mechanics.
On May 30,1997, the NLRC rendered the challenged decision. It rejected the evidence proffered by
Asian Alcohol to prove its business reversals. It ruled that the positions of private respondents were
not redundant for the simple reason that they were replaced by casuals. The NLRC essayed this
explanation:
In this case, [that] the respondent terminated complainants "to protect the company
from future losses," does not create an impression of imminent loss. The company at
the time of retrenchment was not then in the state of business reverses. There is
therefore no reason to retrench. . . .
The alleged deficits of the corporation did not prove anything for the respondent. The
financial status as shown in the Statement of Income and Deficits and Income Tax
Returns from 1989 to 1991, submitted by respondent was before the respondent,
new management of Prior Holdings, Inc., took over the operation and management
of the corporation in October, 199[1]. This is no proof that on November 30, 1992
when the termination of complainant[s] took effect the company was experiencing
losses or at least imminent losses. Possible future losses do not authorize
retrenchment.
Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were
operated by contractors. Otherwise stated, complainant[s] who are regular workers of
the respondent, performing jobs necessary and desirable to the business or
redundancy [so that] their jobs [will be performed by workers belonging to a
contractor.
SO ORDERED. 14
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing decision. On September
25, 1997, the NLRC denied the motion. 15
On January 12 l998, Asian Alcohol filed in this Court a petition for certiorari assailing both the
decision of the NLRC and the resolution denying its reconsideration. It invoked the following
grounds:
6.1 Public respondent has committed as hereinafter shown, a manifest grave abuse
of discretion amounting to lack or excess of jurisdiction in declaring in its assailed
Decision . . . and Resolution . . . that the termination of the employment of private
respondents by the petitioner herein is illegal and ordering their reinstatement with
full backwages from the time they were dismissed on November 30, 1992 up to their
actual reinstatement, plus 10% attorney's fees, said Decision and Resolution of the
public respondent being contrary to the established facts of the case, well settled
jurisprudence and the law on the matter.
On March 25, 1998 we issued a Temporary Restraining Order 17 enjoining the NLRC from enjoining its
Decision and Resolution dated May 30, 1997 and September 25, 1997, respectively.
Out of its concern for those with less privilege in life, this Court has inclined towards the worker and
upheld his cause in his conflicts with the employer. 18 This favored treatment is directed by the social
justice policy of the Constitution. 19 But while tilting the scales of justice in favor of workers, the
fundamental law also guarantees the right of the employer to reasonable returns from his
investment. 20 Corollarily, the law allows an employer to downsize his business to meet clear and
continuing economic threats. 21 Thus, this Court has upheld reductions in the work force to forestall
business losses or stop the hemorrhaging of capital. 22
The right of management to dismiss workers during periods of business recession and to install
labor saving devices to prevent losses is governed by Art. 283 of the labor Code, as amended. It
provides, viz.:
Art. 283. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment, to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in case of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay at least one-half (1/2), month pay for
every year of service, whichever is higher. A fraction of at least six (6) month shall be
considered one (1) whole year. [emphasis ours]
Under the foregoing provision, retrenchment and redundancy are just causes for the employer to
terminate the services of workers to preserve the viability of the business. In exercising its right,
however, management must faithfully comply with the substantive and procedural requirements laid
down law and jurisprudence. 23
The requirements for valid retrenchment which must be proved by clear and convincing evidence
are: (1) that the retrenchment is reasonably necessary and likely to prevent business losses, which,
if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by the
employer; 24 (2) that the employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intend date of retrenchment; 25 (3) that the
employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is higher; 26 (4) that the employer exercises its prerogative
to retrench employees in good faith for the advancement of its interest of its interest and not to defeat or
circumvent the employees' right to security of tenure; 27 and (5) that the employer used fair and
reasonable
criteria 28 in ascertaining who would be dismissed and who would be retained among the employees, such
as status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency,
seniority, 29 physical fitness, age, and financial hardship for certain workers. 30
The condition of business losses is normally shown by audited financial documents like yearly
balance sheets and profit and loss statements as well as annual income tax returns. 31 It is our ruling
that financial statements must be prepared and signed by independent auditors. 32 Unless duly audited,
they can be assailed as self-serving documents. 33But it is not enough that only the financial statements
for the year during which retrenchment was undertaken, are, presented in evidence. For it may happen
that while the company has indeed been losing, its losses may be on a downward trend, indicating that
business is picking up and retrenchment, being a drastic move, should no longer be resorted to. 34Thus,
the failure of the employer to show its income or loss for the immediately preceding year or to prove that it
expected no abatement of such losses in the coming years, may be speak the weakness of its cause. 35 It
is necessary that the employer also show that its losses increased through a period of time and that the
condition of the company is not likely to improve in the near future. 36
In the instant case, private respondents never contested the veracity of the audited financial
documents proffered by Asian Alcohol before the Executive Labor Arbiter. Neither did they object to
their admissibility. They show that petitioner has accumulated losses amounting to P306,764,349.00
and showing nary a sign of abating in the near future. The allegation of union busting is bereft of
proof. Union and non-union members were treated alike. The records show that the positions of fifty
one (51) other non-union members were abolished due to business losses.
In rejecting petitioner's claim of business losses, the NLRC stated that "the alleged deficits, of the
corporation did not prove anything for the [petitioner]" 37 since they were incurred before the take over
of Prior Holdings. Theorizing that proof of losses before the take over is no proof of losses after the take
over, it faulted Asian Alcohol for retrenching private respondents on the ground of mere "possible future
losses." 38
We do not agree. It should be observed that Article 283 of the Labor Code uses the phrase
"retrenchment to prevent losses". In its ordinary connotation, this phrase means that retrenchment
must be undertaken by the employer before losses are actually sustained. 39 We have, however,
interpreted the law to mean that the employer need not keep all his employees until after his losses shall
have materialized. 40 Otherwise, the law could be vulnerable of attack as undue taking of property for the
benefit of another. 41
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to
see, the last quarter losses in 1991 were already incurred under the new management. There were
no signs that these losses would abate. Irrefutable was the fact that losses have bled Asian Alcohol
incessantly over a span of several years. They were incurred under the management of the Parsons
family and continued to be suffered under the new management of Prior Holdings. Ultimately, it is
Prior Holdings that will absorb all the losses, including those incurred under the former owners of the
company. The law gives the new management every right to undertake measures to save the
company from bankruptcy.
We find that the reorganizational plan and comprehensive cost-saving program to turn the business
around were not designed to bust the union of the private respondents. Retrenched were one
hundred seventeen (117) employees. Seventy two (72) of them including private respondents were
separated because their positions had become redundant. In this context, what may technically be
considered as redundancy may verily be considered as retrenchment
measures. 42 Their positions had to be declared redundant to cut losses.
Redundancy exists when the service capability of the work force is in excess of what is reasonably
needed to meet the demands on the enterprise. A redundant position is one rendered superfluous by
any number of factors, such as overhiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company or phasing out of a service activity
priorly undertaken by the business. 43 Under these conditions, the employer has no legal obligation to
keep in its payroll more employees than are necessary for the operation of its business. 44
For the implementation of a redundancy program to be valid, the employer must comply with the
following requisites: (1) written notice served on both the employees and the Department of Labor
and Employment at least one month prior to the intended date of retrenchment; 45 (2) payment of
separation pay equivalent to at least one month pay or at least one month pay for every year of service,
whichever is higher; (3) good faith in abolishing the redundant
positions; 46 and (4) fair and reasonable criteria in ascertaining what positions are to be declared
redundant and accordingly abolished. 47
In the case at bar, private respondents Carias, Martinez and Sendon were water pump tenders.
They tended the water wells of Asian Alcohol located in Ubay, Pulupanban, Negros Occidental.
However, Asian Alcohol did not own the land where the wells stood. It only leased them.
In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was
terminated. Also, the water from the wells had become salty due to extensive prawn farming nearby
and could no longer be used by Asian Alcohol for its purpose. The wells had to be closed and
needless to say, the services of Carias, Martinez and Sendon had to be terminated on the twin
grounds of redundancy and retrenchment.
Private respondent Verayo was the briquetting plant operator in charge of the coal-fired boiler.
Private respondent Tormo was one of the three briquetting helpers. To enhance production
efficiency, the new management team shifted to the use of bunker fuel by about seventy percent
(70%) to fire its boiler. The shift meant substantial fuel cost savings. In the process, however, the
need for a briquetting plant operator ceased as the services of only two (2) helpers were all that was
necessary to attend to the much lesser amount of coal required to run the boiler. Thus, the position
of private respondent Verayo had to be abolished. Of the three (3) briquetting helpers, Tormo was
the oldest, being already 41 years old. The other two, Rudy Javier, Jr. and Eriberto Songaling, Jr.,
were younger, being only 28 and 35, respectively. Age, with the physical strength that comes with it,
was particularly taken into consideration by the management team in deciding whom to separate.
Hence, it was private respondent Tormo who was separated from service. The management choice
rested on a rational basis.
Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at
the plant site. At their current production level, the new management found that it was more cost
efficient to maintain only nine (9) mechanics. In choosing whom to separate among the ten (10)
mechanics, the management examined employment records and reports to determine the least
efficient among them. It was private respondent Amacio who appeared the least efficient because of
his poor health condition.
Not one of the private respondents refuted the foregoing facts. They only contend that the new
management should have followed the policy of "first in, last out" in choosing which positions to
declare as redundant or whom to retrench to prevent further business losses. No law mandates such
a policy. And the reason is simple enough. A host of relevant factors come into play in determining
cost efficient measures and in choosing the employees who will be retained or separated to save the
company from closing shop. In determining these issues, management has to enjoy a pre-eminent
role. The characterization of positions as redundant is an exercise of business judgment on the part
of the employers. 48 It will be upheld as long as it passes the test of arbitrariness. 49
Private respondents call our attention to their allegation that casuals were hired to replace Carias,
Martinez and Sendon as water pump tenders at the Ubay wells. They rely on the testimony of Engr.
Federico Palmares, Jr., the head of the Mechanical Engineering Services Department who admitted
the engagement of independent contractors to operate the wells. A reading of the testimony of Engr.
Palmares, however, will reveal that he referred not to the Ubay wells which were tended by private
respondent Carias, Martinez and sendon, but to the Laura wells. Thus, he declared in cross
examination:
WITNESS:
ATTY. YMBALLA:
Q In other words, the persons mentioned are all workers of
independent contractors?
WITNESS:
In any event, we have held that an employer's good faith in implementing a redundancy program is
not necessarily destroyed by availment of the services of an independent contractor to replace the
services of the terminated employees. We have previously ruled that the reduction of the number of
workers in a company made necessary by the introduction of an independent contractor is justified
when the latter is undertaken in order to effectuate more economic and efficient methods of
production. 51 In the case at bar, private respondents failed to proffer any proof that the management
acted in a malicious or arbitrary manner in engaging the services of an independent contractor to operate
the Laura wells. Absent such proof, the Court has no basis to interfere with the bona fide decision of
management to effect more economic and efficient methods of production.
Finally, private respondent now claim that they signed the quitclaims, waivers and voluntary
resignation letters only to get their separation package. They maintain that in principle, they did not
believe that their dismissal was valid.
It is true that this Court has generally held that quit claims and releases are contrary to public policy
and therefore, void. Nonetheless, voluntary agreements that represent a reasonable settlement are
binding on the parties and should not later be disowned. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of the settlement are
unconscionable, that the law will step in to bail out the employee. While it is our duty to prevent the
exploitation of employees, it also behooves us to protect the sanctity of contracts that do not
contravene our laws.
In the case at bar, there is no showing that the quitclaims, waivers and voluntary resignation letters
were executed by the private respondents under force or duress. In truth, the documents embodied
separation benefits that were well beyond what the company was legally required to give private
respondents. We note that out of the more than one hundred workers that were retrenched by Asian
Alcohol, only these six (6) private respondents were not impressed by the generosity of their
employer. Their late complainants have no basis and deserves our scant consideration.
In VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor Relations
Commission dated May 30, 1997 and its Resolution dated September 25, 1997 are ANNULLED
AND SET ASIDE. The Decision of the Executive Labor Arbiter dated January 10, 1996 in RAB Case
No. 06-12-10893-92 is ORDERED REINSTATED. The complainants for illegal dismissal filed by
private respondents against Asian Alcohol Corporation are hereby ORDERED DISMISSED FOR
LACK OF MERIT. No costs.
SO ORDERED.
4. SECOND DIVISION
DECISION
Before us is a special civil action for certiorari to set aside and annul two (2)
resolutions of the National Labor Relations Commission promulgated on April
[1]
24, 1996 and August 29, 1996 denying the award of separation pay to
[2] [3]
petitioners.
Petitioners are bona fide members of the National Federation of Labor (NFL),
a legitimate labor organization duly registered with the Department of Labor
and Employment. They were employed by private respondents Charlie Reith
and Susie Galle Reith, general manager and owner, respectively, of the 354-
hectare Patalon Coconut Estate located at Patalon, Zamboanga City. Patalon
Coconut Estate was engaged in growing agricultural products and in raising
livestock.
In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law (CARL), which mandated
the compulsory acquisition of all covered agricultural lands for distribution to
qualified farmer beneficiaries under the so-called Comprehensive Agrarian
Reform Programme (CARP).
Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to the
Patalon Estate Agrarian Reform Association (PEARA), a cooperative
accredited by the Department of Agrarian Reform (DAR), of which petitioners
are members and co-owners.
On August 1, 1994, the cooperative took over the estate. A certain Abelardo
Sangadan informed respondents of such takeover via a letter which was
received by the respondents on July 26, 1994. Being beneficiaries of the
Patalon Coconut Estate pursuant to the CARP, the petitioners became part-
owners of the land.[4]
On April 25, 1995, petitioners filed individual complaints before the Regional
Arbitration Branch (RAB) of the National Labor Relations Commission (NLRC)
in Zamboanga City, praying for their reinstatement with full backwages on the
ground that they were illegally dismissed. The petitioners were represented by
their labor organization, the NFL.
On December 12, 1995, the RAB rendered a decision, the dispositive portion
of which provides:
"FURTHER, complainants claim for Muslim Holiday, overtime pay and rest day
pay should be dismissed for lack of merit, too."[5]
On April 24, 1996, the NLRC issued a resolution, the dispositive portion of
which provides:
SO ORDERED. [7]
Petitioners filed a motion for reconsideration which was denied by the NLRC
in its resolution dated August 29, 1996.
[8]
The issue is whether or not an employer that was compelled to cease its
operation because of the compulsory acquisition by the government of its land
for purposes of agrarian reform, is liable to pay separation pay to its affected
employees.
Petitioners contend that they are entitled to separation pay citing Article 283 of
the Labor Code which reads:
It is clear that Article 283 of the Labor Code applies in cases of closures of
establishment and reduction of personnel. The peculiar circumstances in the
case at bar, however, involves neither the closure of an establishment nor a
reduction of personnel as contemplated under the aforesaid article. When the
Patalon Coconut Estate was closed because a large portion of the estate was
acquired by DAR pursuant to CARP, the ownership of that large portion of the
estate was precisely transferred to PEARA and ultimately to the petitioners as
members thereof and as agrarian lot beneficiaries. Hence, Article 283 of the
Labor Code is not applicable to the case at bench.
Even assuming, arguendo, that the situation in this case were a closure of the
business establishment called Patalon Coconut Estate of private respondents,
still the petitioners/employees are not entitled to separation pay. The closure
contemplated under Article 283 of the Labor Code is a unilateral and voluntary
act on the part of the employer to close the business establishment as may be
gleaned from the wording of the said legal provision that "The
employer may also terminate the employment of any employee due to...".
The use of the word "may," in a statute, denotes that it is directory in nature
[9]
and generally permissive only. The "plain meaning rule" or verba legis in
[10]
In other words, Article 283 of the Labor Code does not contemplate a situation
where the closure of the business establishment is forced upon the employer
and ultimately for the benefit of the employees.
As earlier stated, the Patalon Coconut Estate was closed down because a
large portion of the said estate was acquired by the DAR pursuant to the
CARP. Hence, the closure of the Patalon Coconut Estate was not effected
voluntarily by private respondents who even filed a petition to have said estate
exempted from the coverage of RA 6657. Unfortunately, their petition was
denied by the Department of Agrarain Reform. Since the closure was due to
the act of the government to benefit the petitioners, as members of the
Patalon Estate Agrarian Reform Association, by making them agrarian lot
beneficiaries of said estate, the petitioners are not entitled to separation pay.
The termination of their employment was not caused by the private
respondents. The blame, if any, for the termination of petitioners employment
can even be laid upon the petitioner-employees themselves inasmuch as they
formed themselves into a cooperative, PEARA, ultimately to take over, as
agrarian lot beneficiaries, of private respondents landed estate pursuant to RA
6657. The resulting closure of the business establishment, Patalon Coconut
Estate, when it was placed under CARP, occurred through no fault of the
private respondents.
While the Constitution provides that "the State x x x shall protect the rights of
workers and promote their welfare", that constitutional policy of providing full
protection to labor is not intended to oppress or destroy capital and
management. Thus, the capital and management sectors must also be
protected under a regime of justice and the rule of law.
SO ORDERED.
5.
Petitioner,
Present:
- versus -
CORONA, C.J.,
Chairperson,
VELASCO, JR.,
EASTERN TELECOMMUNICATIONS LEONARDO-DE CASTRO,
PHILIPPINES, INC., SALVADOR
HIZON (President and Chief Executive DEL CASTILLO, and
Officer), EMILIANO JURADO PEREZ, JJ.
(Chairman of the Board), VIRGILIO
GARCIA (Vice President) and STELLA Promulgated:
GARCIA (Assistant Vice President),
March 8, 1999
To: N. Culili
From: AVP-HRD
---------------------------------------------------------------------------------
---------
(Signed)
Stella J. Garcia[19]
This letter was similar to the memo shown to Culili by the
union president weeks before Culili was dismissed. The memo was
dated December 7, 1998, and was advising him of his dismissal
effective January 4, 1999 due to the Right-Sizing Program ETPI
was going to implement to cut costs and avoid losses. [20]
c. Leave Benefits
e. Uniform Allowance
P949,699.72
II. Damages
a. MoralP500,000.00
b. ExemplaryP250,000.00
Culili is now before this Court praying for the reversal of the Court
of Appeals decision and the reinstatement of the NLRCs decision
based on the following grounds:
II
THE COURT OF APPEALS DECIDED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN FINDING THAT NO UNFAIR LABOR
PRACTICE ACTS WERE COMMITTED AGAINST THE
PETITIONER.
III
IV
In the case at bar, ETPI was upfront with its employees about
its plan to implement a Right-Sizing Program. Even in the face of
initial opposition from and rejection of the said program by ETEU,
ETPI patiently negotiated with ETEUs officers to make them
understand ETPIs business dilemma and its need to reduce its
workforce and streamline its organization. This evidently rules out
bad faith on the part of ETPI.
In his affidavit dated April 10, 2000,[42] Mr. Arnel D. Reyel, the
Head of both the Business Services Department and the Finance
Department of ETPI, described how ETPI went about in
reorganizing its departments. Mr. Reyel said that in the course of
ETPIs reorganization, new departments were created, some were
transferred, and two were abolished. Among the departments
abolished was the Service Quality Department. Mr. Reyel said that
ETPI felt that the functions of the Service Quality Department,
which catered to both corporate and small and medium-sized
clients, overlapped and were too large for a single department,
thus, the functions of this department were split and simplified
into two smaller but more focused and efficient departments. In
arriving at the decision to abolish the position of Senior
Technician, Mr. Reyel explained:
Culili also alleged that ETPI is guilty of unfair labor practice for violating
Article 248(c) and (e) of the Labor Code, to wit:
xxxx
xxxx
Culili asserted that ETPI is guilty of unfair labor practice because his
functions were sourced out to labor-only contractors and he was discriminated
against when his co-employees were treated differently when they were each
offered an additional motorcycle to induce them to avail of the Special Retirement
Program. ETPI denied hiring outside contractors and averred that the motorcycles
were not given to his co-employees but were purchased by them pursuant to their
Collective Bargaining Agreement, which allowed a retiring employee to purchase
the motorcycle he was assigned during his employment.
Both the Labor Arbiter and the NLRC found ETPI guilty of unfair labor
practice because of its failure to dispute Culilis allegations.
xxxx
For termination of employment as defined in Article
283 of the Labor Code, the requirement of due process
shall be deemed complied with upon service of a written
notice to the employee and the appropriate Regional
Office of the Department of Labor and Employment at
least thirty days before effectivity of the termination,
specifying the ground or grounds for termination.
ETPI does not deny its failure to provide DOLE with a written
notice regarding Culilis termination. It, however, insists that it has
complied with the requirement to serve a written notice to Culili
as evidenced by his admission of having received it and
forwarding it to his union president.
SO ORDERED.
Nachura,
Peralta, and
Bersamin,* JJ.
OF APPEALS,
x ----------------------------------------------------------------------------------------
x
RESOLUTION
YNARES-SANTIAGO, J.:
SO ORDERED.
In its Motion for Reconsideration, PAL maintains that it was
suffering from financial distress which justified the retrenchment
of more than 1,400 of its flight attendants. This, it argued, was an
established fact. Furthermore, FASAP never assailed the economic
basis for the retrenchment, but only the allegedly discriminatory
and baseless manner by which it was carried out.
PAL asserts further that the Court should have accorded the
SECs findings as regards its financial condition respect and
finality, considering that said findings were based on the financial
statements and other documents submitted to it, which PAL now
submits, albeit belatedly, via the instant Motion for
Reconsideration. It cites the case of Clarion Printing House Inc. v.
National Labor Relations Commission,[2] where the Court declared
that the appointment of a receiver or management committee by
the SEC presupposes a finding that, inter alia, a company
possesses sufficient property to cover all its debts but foresees
the impossibility of meeting them when they respectively fall due
and there is imminent danger of dissipation, loss, wastage or
destruction of assets or other properties or paralyzation of
business operations. On the other hand, it claims that in Rivera v.
Espiritu,[3] the Court made a finding that as a result of the pilots
three-week strike that began on June 5, 1998, PALs financial
situation went from bad to worse and it was faced with
bankruptcy, requiring it to seek rehabilitation and downsize its
labor force by more than one-third; and that said pilots strike was
immediately followed by another four-day employee-wide strike
on July 22, 1998, which involved 1,899 union[4] members.
PAL claims that it did not act with undue haste in effecting
the mass retrenchment of cabin attendants since, as early as
February 17, 1998, consultations were being held in connection
with the proposed retrenchment, and that twice-weekly meetings
between the union and the airline were being held since February
12, 1998. It claims that it took PAL four months before the
retrenchment scheme was finally implemented.
xxxx
xxxx
xxxx
Finally, PAL begs the Court to reconsider its finding that the
retrenchment scheme in question did not pass the test of fairness
and reasonableness with respect to the criteria used in selecting
those whose services should be retained or terminated. That it
merely used the criteria stipulated in its CBA with FASAP where
efficiency rating and inverse seniority are the basic considerations
as carried over from the parties previous CBAs could allegedly be
seen from the manner the retrenchment plan was carried out. The
rating variables contained in the Performance Evaluation Form of
each and every cabin crew personnels Grooming and Appearance
Handbook are fair and reasonable since they are inherent
requirements (necessarily intertwined, as PAL would put it) for
employment as flight attendant or steward. More significantly, it
claims that the criteria used in the implementation of the
retrenchment scheme in question was based on the ratified PAL-
FASAP 1996-2000 CBA, which should be considered as the law
between the parties.
xxxx
Ultimately, we held therein that the employer did not violate the
LIFO rule in the CBA. We explained therein that
Finally, FASAP claims that PAL did not provide reasons for
retrenching the more than 1,400 flight attendants; that it was
only when it filed its Supplemental Memorandum before the Labor
Arbiter in March 2000 that the airline submitted in evidence the
ICCD Masterank and Seniority 1997 Ratings, which allegedly took
into account the subjective factors such as appearance and good
grooming, which supposedly require the written conformity of its
members if they were to be considered at all, in accordance with
Section 124, Article XXVI of the CBA.
xxxx
xxxx
PAL argues that in its past two CBAs with FASAP prior to the
one under controversy, the same provisions and criteria for
appearance, grooming, efficiency and performance were used,
without objections having been advanced by FASAP.
ATTY. MENDOZA
xxxx
ATTY. MENDOZA
xxxx
ATTY. MENDOZA
xxxx
ATTY. MENDOZA
ATTY. MENDOZA
xxxx
ATTY. MENDOZA
PAL has all this time tried to convince the Court that its
decision to downsize its flight fleet was the principal reason why it
undertook a corresponding downsizing of cabin crew
personnel. This time, however, it significantly changed stance and
blamed the June 5, 1998 pilots strike as the real culprit which
drove it to undertake the massive retrenchment under
scrutiny. This time, PAL characterizes the retrenchment scheme
and the downsizing of aircraft as mere necessary reactions to or
unfortunate consequences of the pilots strike, which it claims
likewise necessitated a disregard of all previous negotiations for
the implementation of cost-cutting measures that could have
rendered the retrenchment scheme unnecessary, and which cost-
cutting measures it no longer found necessary to undertake.
We find this argument untenable. The strike was a temporary
occurrence that did not necessitate the immediate and sweeping
retrenchment of 1,400 cabin or flight attendants. By PALs own
account, some of the striking pilots went back to work in July
1998, or less than one month after the strike began. Moreover,
PAL admitted that it remedied the situation by employing
management pilots.[28] It could have hired new pilots as
well. Certainly, it could have implemented the cost-cutting
measures being discussed as a temporary measure to obviate the
adverse effects of the pilots strike. There was no reason to
drastically implement a permanent retrenchment scheme in
response to a temporarystrike, which could have ended at any
time, or remedied promptly, if management acted with
alacrity. Juxtaposed with its failure to implement the required
cost-cutting measures, the retrenchment scheme was a knee-jerk
solution to a temporary problem that beset PAL at the time.
In the instant case, PAL admitted that since the pilots strike
allegedly created a situation of extreme urgency, it no longer
implemented cost-cutting measures and proceeded directly to
retrench. This being so, it clearly did not abide by all the
requirements under Article 283 of the Labor Code. At the time it
was implemented, the retrenchment scheme under scrutiny was
not triggered directly by any financial difficulty PAL was
experiencing at the time, nor borne of an actual implementation
of its proposed downsizing of aircraft. It was brought about by and
resorted to as an immediate reaction to a pilots strike which, in
strict point of law and as herein earlier discussed, may not be
considered as a valid reason to retrench, nor may it be used to
excuse PAL for its non-observance of the requirements of the law
on retrenchment under the Labor Code.
PAL begs the compassion of this Court and alleges that the
monetary award it stands to pay to the affected flight attendants
totals a whopping P2.3 billion, the payment of which will certainly
paralyze its operations and even lead to its untimely
demise. However, a careful review of the records of the case, as
well as the respective allegations of the parties, shows that
several of the crew members do not need to be paid full
backwages or separation pay. A substantial fraction of the 1,400
flight attendants have already been either recalled, reinstated or
relieved from the service. Still, some of them have reached the
age of compulsory retirement or even died. Likewise, a significant
portion of these retrenched flight attendants have already
received separation pay and signed quitclaim. All of these factors,
to the mind of the Court, will greatly reduce the quoted amount of
the money judgment that PAL will have to pay.
In the case of Concept Placement Resources, Inc. v. Funk,[35] this Court reduced the
amount of attorneys fees which it ruled to be iniquitous and unconscionable after
finding that the lawyer did not encounter difficulty in representing his client. It was
held:
SO ORDERED.
FIRST DIVISION
LAMBERT PAWNBROKERS G.R. No. 170464
and JEWELRY CORPORATION
and LAMBERT LIM,
Petitioners, Present:
DECISION
It is fundamental that an employer is liable for illegal dismissal when it terminates the
services of the employee without just or authorized cause and without due process of law.
This Petition for Review on Certiorari[1] assails the Decision[2] dated August 4, 2005 of
the Court of Appeals (CA) in CA-G.R. CEB SP No. 00010, which reversed and set aside
the Resolutions dated July 30, 2003[3] and May 31, 2004[4] issued by the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000454-00 (RAB VII-01-0003-
99-B).
Factual Antecedents
On September 14, 1998, Helen received a letter[5] from Lim terminating her
employment effective that same day. Lim cited business losses necessitating
retrenchment as the reason for the termination.
Helen thus filed a case for illegal dismissal against petitioners docketed as NLRC
RAB-VII CASE NO. 01-0003-99-B.[6] In her Position Paper[7] Helen alleged that she was
dismissed without cause and the benefit of due process. She claimed that she was a mere
casualty of the war of attrition between Lim and the Binamira family. Moreover, she
claimed that there was no proof that the company was suffering from business losses.
In their Position Paper,[8] petitioners asserted that they had no choice but to
retrench respondent due to economic reverses. The corporation suffered a marked decline
in profits as well as substantial and persistent increase in losses. In its Statement of
Income and Expenses, its gross income for 1998 dropped from P1million
to P665,000.00.
SO ORDERED.[10]
SO ORDERED.[12]
Petitioners filed a Motion for Reconsideration.[13] On July 30, 2003, the NLRC set
aside its Decision dated September 27, 2002 and entered a new one, the dispositive
portion of which reads:
SO ORDERED.[14]
In arriving at this conclusion, the NLRC opined that what was actually
implemented by the petitioners was not retrenchment due to serious business losses but
termination due to redundancy. The NLRC observed that the Tagbilaran operations was
overstaffed thus necessitating the termination of some employees. Moreover, the
redundancy program was not properly implemented because no written notices were
furnished the employee and the DOLE one month before the intended date of
termination.
The Motion for Reconsideration filed by Helen was denied by the NLRC through
its Resolution[15] dated May 31, 2004.
On petition for certiorari,[16] the CA found that both the Labor Arbiter and the
NLRC failed to consider substantial evidence showing that the exercise of management
prerogative, in this instance, was done in bad faith and in violation of the employees right
to due process. The CA ruled that there was no redundancy because the position of vault
custodian is a requisite, necessary and desirable position in the pawnshop business. There
was likewise no retrenchment because none of the conditions for retrenchment is present
in this case.
WHEREFORE, the Resolution dated July 30, 2003 and May 31,
2004 issued by the National Labor Relations Commission in NLRC Case No.
V-000454-00 (RAB VII-01-0003-99-B), is hereby REVERSED and SET
ASIDE.
6. Costs.
SO ORDERED.[17]
The Motion for Reconsideration filed by petitioners was denied by the CA through its
Resolution[18] dated November 7, 2005.
Issues
I.
Whether the CA gravely erred in reversing, through the extra-ordinary remedy
of certiorari, the findings of facts of both the Labor Arbiter and the NLRC that
the dismissal of respondent was with valid and legal basis.
II.
Whether the CA gravely erred in reversing, through the extra-ordinary remedy
of certiorari, the unanimous findings of fact of both the Labor Arbiter and the
NLRC that the dismissal of respondent was not attended by bad faith or fraud.
III.
Whether the CA erred in reversing, through the extra-ordinary remedy of
certiorari, the findings of facts of both the Labor Arbiter and the NLRC based
merely on the allegations and evidences made and submitted by the former
counsel, adviser and business partner of petitioners.[19]
Petitioners Arguments
Petitioners assail the propriety of the reversal by the CA of the factual findings of both the
Labor Arbiter and the NLRC on a Petition for Certiorari under Rule 65. Petitioners posit
that a writ of certiorari is proper only to correct errors of jurisdiction or when there is
grave abuse of discretion tantamount to lack or excess of jurisdiction committed by the
labor tribunals. They asserted that where the issue or question involved affects the
wisdom or legal soundness of a decision, the same is beyond the province of a special
civil action for certiorari.
Petitioners further contend that the CA erred in ruling that the dismissal was not valid and
that it was done in bad faith.
Respondents Arguments
On the other hand, Helen avers that the contradictory findings of fact of the Labor
Arbiter and the NLRC justifies the CA to review the findings of fact of the labor
tribunals. She further submits that both labor tribunals failed to consider substantial
evidence showing that petitioners exercise of management prerogative was done in utter
bad faith and in violation of her right to due process.
Our Ruling
As a rule, a petition for certiorari under Rule 65 is valid only when the question involved
is an error of jurisdiction, or when there is grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the court or tribunals exercising quasi-judicial
functions. Hence, courts exercising certiorari jurisdiction should refrain from reviewing
factual assessments of the respondent court or agency. Occasionally, however, they are
constrained to wade into factual matters when the evidence on record does not support
those factual findings; or when too much is concluded, inferred or deduced from the bare
or incomplete facts appearing on record,[20] as in the present case.
We find that the CA rightfully reviewed the correctness of the labor tribunals factual
findings not only because of the foregoing inadequacies, but also because the NLRC and
the Labor Arbiter came up with conflicting findings. The Labor Arbiter found that Helens
dismissal was valid on account of retrenchment due to economic reverses. On the other
hand, the NLRC originally ruled that Helens dismissal was illegal as none of the
requisites of a valid retrenchment was present.However, upon motion for reconsideration,
the NLRC changed its posture and ruled that the dismissal was valid on the ground of
redundancy due to over-hiring. Considering the diverse findings of the Labor Arbiter and
the NLRC, it behooved upon the CA in the exercise of its certiorari jurisdiction to
determine which findings are more in conformity with the evidentiary facts.
retrenchment.
To effect a valid retrenchment, the following elements must be present: (1) the
retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious and real, or only if
expected, are reasonably imminent as perceived objectively and in good faith by the
employer; (2) the employer serves written notice both to the employee/s concerned and
the DOLE at least one month before the intended date of retrenchment; (3) the employer
pays the retrenched employee separation pay in an amount prescribed by the Code; (4)
the employer exercises its prerogative to retrench in good faith; and (5) the employer uses
fair and reasonable criteria in ascertaining who would be retrenched or retained.[22]
The losses must be supported by sufficient and convincing evidence. The normal method
of discharging this is by the submission of financial statements duly audited by
independent external auditors. In this case, however, the Statement of Income and
Expenses[23] for the year 1997-1998 submitted by the petitioners was prepared only
on January 12, 1999. Thus, it is highly improbable that the management already knew
on September 14, 1998, the date of Helens retrenchment, that they would be incurring
substantial losses.
At any rate, we perused over the financial statements submitted by petitioners and we
find no evidence at all that the company was suffering from business losses. In fact, in
their Position Paper, petitioners merely alleged a sharp drop in its income in 1998
from P1million to onlyP665,000.00. This is not the business losses contemplated by the
Labor Code that would justify a valid retrenchment. A mere decline in gross income
cannot in any manner be considered as serious business losses. It should be substantial,
sustained and real.
To make matters worse, there was also no showing that petitioners adopted other cost-
saving measures before resorting to retrenchment. They also did not use any fair and
reasonable criteria in ascertaining who would be retrenched. Finally, no written notices
were served on the employee and the DOLE prior to the implementation of the
retrenchment. Helen received her notice only on September 14, 1998, the day when her
termination would supposedly take effect. This is in clear violation of the Labor Code
provision which requires notice at least one month prior to the intended date of
termination.
Redundancy, on the other hand, exists when the service capability of the workforce is in
excess of what is reasonably needed to meet the demands of the enterprise. A redundant
position is one rendered superfluous by any number of factors, such as over hiring of
workers, decreased volume of business, dropping of a particular product line previously
manufactured by the company, or phasing out of a service activity previously undertaken
by the business. Under these conditions, the employer has no legal obligation to keep in
its payroll more employees than are necessary for the operation of its business.[24]
For the implementation of a redundancy program to be valid, the employer must comply
with the following requisites: (1) written notice served on both the employees and the
DOLE at least one month prior to the intended date of termination of employment; (2)
payment of separation pay equivalent to at least one month pay for every year of service;
(3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished.[25]
In this case, there is no proof that the essential requisites for a valid redundancy program
as a ground for the termination of the employment of respondent are present. There was
no showing that the function of respondent is superfluous or that the business was
suffering from a serious downturn that would warrant redundancy considering that such
serious business downturn was the ground cited by petitioners in the termination letter
sent to respondent.[26]
In fine, Helens dismissal is illegal for lack of just or authorized cause and failure to
observe due process of law.
In the present case, malice or bad faith on the part of Lim as a corporate officer was not
sufficiently proven to justify a ruling holding him solidarily liable with the
corporation. The lack of authorized or just cause to terminate ones employment and the
failure to observe due process do not ipso facto mean that the corporate officer acted with
malice or bad faith. There must be independent proof of malice or bad faith which is
lacking in the present case.
We find no merit in petitioners assertion that Atty. Binamira gravely breached and abused
the rule on privileged communication under the Rules of Court and the Code of
Professional Responsibility of Lawyers when he represented Helen in the present
case. Notably, this issue was never raised before the labor tribunals and was raised for the
first time only on appeal. Moreover, records show that although petitioners previously
employed Atty. Binamira to manage several businesses, there is no showing that they
likewise engaged his professional services as a lawyer.Likewise, at the time the instant
complaint was filed, Atty. Binamira was no longer under the employ of petitioners.
A dismissal may be contrary to law but by itself alone, it does not establish bad faith to
entitle the dismissed employee to moral damages. The award of moral and exemplary
damages cannot be justified solely upon the premise that the employer dismissed his
employee without authorized cause and due process.[31]
Considering that there is no clear and convincing evidence showing that the termination
of Helens services had been carried out in an arbitrary, capricious and malicious manner,
the award of moral and exemplary damages is not warranted.
Consequently, the moral and exemplary damages awarded by the CA are hereby deleted.
However, the award of attorneys fee is warranted pursuant to Article 111 of the
Labor Code. Ten (10%) percent of the total award is usually the reasonable amount of
attorneys fees awarded. It is settled that where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interest, the award of attorneys fees is
legally and morally justifiable.[32]
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision
of the Court of Appeals in CA-G.R. CEB SP No. 00010 dated August 4, 2005 finding the
dismissal of respondent Helen B. Binamira as illegal is AFFIRMED WITH
MODIFICATIONS that respondent is entitled to receive full backwages from the time
she was illegally dismissed on September 14, 1998 as well as to separation pay in lieu of
reinstatement equivalent to one month salary for every year of service. The amounts
awarded as moral damages and exemplary damages are deleted for lack of basis. Finally,
only petitioner Lambert Pawnbrokers and Jewelry Corporation is found liable for the
illegal dismissal of respondent.
SO ORDERED.
DECISION
PERALTA, J.:
Challenged in this Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure are the February 2, 2006 Decision1 and May 29, 2006 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 73127 affirming in toto the August 28, 2002 Decision3 and September 13,
2002 Resolution4 of Voluntary Arbitrator Jesus B. Diamonon (VA Diamonon), which dismissed the
complaint for illegal retrenchment filed by petitioner.
Petitioner Manila Polo Club Employees Union (MPCEU), which is affiliated with the Federation of
Unions of Rizal (FUR)-TUCP, is a legitimate labor organization duly registered with the Department
of Labor and Employment (DOLE), while respondent Manila Polo Club, Inc. is a non-profit and
proprietary membership organization which provides recreation and sports facilities to its proprietary
members, their dependents, and guests.
On December 13, 2001, the Board of Directors of respondent unanimously resolved to completely
terminate the entire operations of its Food and Beverage (F & B) outlets, except the Last Chukker,
and award its operations to a qualified restaurant operator or caterer.5 Cited as reasons were as
follows:
WHEREAS, the Food and Beverage (F & B) operations has resulted in yearly losses to the Club in
six (6) out of the last eight (8) years with FY 2001 suffering the largest loss at P10,647,981 and that
this loss is due mainly to the exceedingly high manpower cost and other management inefficiencies;
WHEREAS, due to the substantial losses incurred by the Club in both F&B operations and in its
recurring operations, the Board and management had instituted cost and loss-cutting measures;
WHEREAS, the Board recognized the non-viability of the operations of the Food and Beverage
Department and that its continued operations by the Club will result in substantial losses that will
seriously impair the Clubs financial health and membership satisfaction;
WHEREAS, the Board recognized the urgent need to act and act decisively and eliminate factors
contributing to substantial losses in the operations of the Club, more particularly the food and
beverage operations. Thus, F & B operations are to cease wholly and totally, subject to observance
and requirements of the law and other rules. x x x6
Subsequently, on March 22, 2002, respondents Board7 approved the implementation of the
retrenchment program of employees who are directly and indirectly involved with the operations of
the F & B outlets and authorized then General Manager Philippe D. Bartholomi to pay the
employees separation pay in accordance with the following scheme:
Length of Service (# Years) Separation Pay (Php)
2 years of service and below 1 month pay
More than 2 years to 9 years of service 1/2 month pay for every year of service
At least 10 years of service 1 month pay for every year of service
At least 15 years of service 1.25 month(s) pay for every year of
At least 20 years of service service
1.5 month(s) pay for every year of
service8
On even date, respondent sent notices to the petitioner and the affected employees (via registered
mail) as well as submitted an Establishment Termination Report to the DOLE. 9 Respondent informed,
among others, of the retrenchment of 123 employees10 in the F & B Division and those whose
functions are related to its operations; the discontinuance of the F & B operations effective March 25,
2002; the termination of the employment relationship on April 30, 2002; and, the continued payment
of the employees salaries despite the directive not to report to work effective immediately.
Unaware yet of the termination notice sent to them by respondent, the affected employees of
petitioner were surprised when they were prevented from entering the Club premises as they
reported for work on March 25, 2002. They later learned that the F & B operations of respondent had
been awarded to Makati Skyline, Inc. effective that day. Treating the incident as respondents way of
terminating union members under the pretense of retrenchment to prevent losses, petitioner filed a
Step II grievance and requested for an immediate meeting with the Management. 11 When the
Management refused, petitioner filed a Notice of Strike before the National Conciliation and
Mediation Board (NCMB) for illegal dismissal, violation/non-implementation of the Collective
Bargaining Agreement (CBA), union busting, and other unfair labor practices (ULP). 12 In view of the
position of respondent not to refer the issues to a voluntary arbitrator or to the Secretary of DOLE,
petitioner withdrew the notice on April 9, 2002 and resolved to exhaust all remedies at the enterprise
level.13
Later, on May 10, 2002, petitioner again filed a Notice of Strike, based on the same grounds, when it
sensed the brewing tension brought about by the CBA negotiation that was in the meantime taking
place.14 A month after, however, the parties agreed, among others, to maintain the existing provisions
of the CBA (except those pertaining to wage increases and signing bonus) and to refer to the
Voluntary Arbitrator the issue of retrenchment of 117 union members, with the qualification that "the
retrenched employees subject of the VA will receive separation package without executing quitclaim
and release, and without prejudice to the decision of the voluntary arbitrator." 15
On June 17, 2002, the parties agreed to submit before VA Diamonon the lone issue of whether the
retrenchment of the 117 union members is legal.16 Finding the pleadings submitted and the evidence
adduced by the parties sufficient to arrive at a judicious determination of the issue raised, VA
Diamonon resolved the case without the need of further hearings.
On August 28, 2002, VA Diamonon dismissed petitioners complaint for lack of merit, but without
prejudice to the payment of separation pay to the affected employees. In supporting his factual
findings, the cases of Catatista v. NLRC,17 Dangan v. NLRC (2nd Div.), et al.,18 Phil. Tobacco Flue-
Curing & Redrying Corp. v. NLRC,19 Special Events & Central Shipping Office Workers Union v. San
Miguel Corp,20 and San Miguel Corporation v. Ubaldo21were relied upon. Petitioners motion for
reconsideration was likewise denied.
Upon an exhaustive examination of the evidence presented by the parties, the CA affirmed in toto
the VAs Decision and denied the substantive aspects of petitioners motion for reconsideration;
hence, this petition.
We deny.
It is apparent from the records that this case involves a closure of business undertaking, not
retrenchment. The legal requirements and consequences of these two authorized causes in the
termination of employment are discernible. We distinguished, in Alabang Country Club Inc. v.
NLRC:22
x x x While retrenchment and closure of a business establishment or undertaking are often used
interchangeably and are interrelated, they are actually two separate and independent authorized
causes for termination of employment.
Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in
terms of salaries and wages resorted to by an employer because of losses in operation of a
business occasioned by lack of work and considerable reduction in the volume of business.
Closure of a business or undertaking due to business losses is the reversal of fortune of the
employer whereby there is a complete cessation of business operations to prevent further financial
drain upon an employer who cannot pay anymore his employees since business has already
stopped.
One of the prerogatives of management is the decision to close the entire establishment or to close
or abolish a department or section thereof for economic reasons, such as to minimize expenses and
reduce capitalization.
While the Labor Code provides for the payment of separation package in case of retrenchment to
prevent losses, it does not obligate the employer for the payment thereof if there is closure of
business due to serious losses.23
Likewise, the case of Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc., Labor-Union,
Super24 stressed the differences:
Retrenchment or lay-off is the termination of employment initiated by the employer, through no fault
of the employees and without prejudice to the latter, during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the introduction of new methods
or more efficient machinery, or of automation. It is an exercise of management prerogative which the
Court upholds if compliant with certain substantive and procedural requirements, namely:
2. That written notice is served on to the employees and the DOLE at least one (1) month
prior to the intended date of retrenchment; and
3. That the retrenched employees receive separation pay equivalent to one (1) month pay or
at least one-half (1/2) month pay for every year of service, whichever is higher.
The employer must prove compliance with all the foregoing requirements. Failure to prove the first
requirement will render the retrenchment illegal and make the employer liable for the reinstatement
of its employees and payment of full backwages. However, were the retrenchment undertaken by the
employer is bona fide, the same will not be invalidated by the latter's failure to serve prior notice on
the employees and the DOLE; the employer will only be liable in nominal damages, the reasonable
rate of which the Court En Banc has set at P50,000.00 for each employee.
Closure or cessation of business is the complete or partial cessation of the operations and/or shut-
down of the establishment of the employer. It is carried out to either stave off the financial ruin or
promote the business interest of the employer.
Article 283.Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year.26
In Industrial Timber Corporation v. Ababon,27 the Court explained the above-quoted provision in this
wise:
A reading of the foregoing law shows that a partial or total closure or cessation of operations of
establishment or undertaking may either be due to serious business losses or financial reverses or
otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of
substantial losses, while under the second kind, the employer can lawfully close shop anytime as
long as cessation of or withdrawal from business operations was bona fide in character and not
impelled by a motive to defeat or circumvent the tenurial rights of employees, and as long as he
pays his employees their termination pay in the amount corresponding to their length of service. Just
as no law forces anyone to go into business, no law can compel anybody to continue the same. It
would be stretching the intent and spirit of the law if a court interferes with management's
prerogative to close or cease its business operations just because the business is not suffering from
any loss or because of the desire to provide the workers continued employment.
In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation
of business operations: (a) service of a written notice to the employees and to the DOLE at least one
month before the intended date thereof; (b) the cessation of business must be bona fide in
character; and (c) payment to the employees of termination pay amounting to one month pay or at
least one-half month pay for every year of service, whichever is higher.28
Our pronouncements in Alabang Country Club Inc. and Eastridge Golf Club, Inc. are significant in
the resolution of the instant case; thus, their discussion is apposite.
Alabang Country Club Inc. (ACCI) is a stock and non-profit corporation that operates and maintains
a country club and various sports and recreational facilities for the exclusive use of its members.
Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the
Management decided to cease the operation of said department and to open the same to a
contractor such as a concessionaire. On December 1, 1994, ACCI entered into an agreement with
La Tasca Restaurant Inc. for the operation of the F & B Department. Also, on even date, ACCI sent
to its employees in the F & B Department individual letters informing them that their services would
be terminated effective January 1, 1995; that they would be paid separation pay equivalent to 125%
percent of their monthly salary for every year of service; that La Tasca agreed to absorb all affected
employees immediately with the status of regular employees without need of undergoing a
probationary period; and, that all affected employees would receive the same salary they were
receiving from ACCI at the time of their termination. On December 11, 1994, the Union filed before
the NLRC a complaint for illegal dismissal, ULP, regularization, and damages with prayer for the
issuance of a writ of preliminary injunction. While the Labor Arbiter (LA) dismissed the complaint and
the National Labor Relations Commission (NLRC) dismissed the appeal, the CA found in favor of the
complainants. It ruled that ACCI failed to prove by sufficient and competent evidence that its alleged
losses were substantial, continuing and without any immediate prospect of abating. This Court,
however, granted ACCIs petition on the view that the case did not involve retrenchment but closure
of a business undertaking. Despite ACCIs failure to prove that the closure of its F & B Department
was due to substantial losses, We still opined that the complainants were legally dismissed on the
ground of closure or cessation of an undertaking not due to serious business losses or financial
reverses, which is allowed under Article 283 of the Labor Code, as amended. It was held:
The closure of operation of an establishment or undertaking not due to serious business losses or
financial reverses includes both the complete cessation of operations and the cessation of only part
of a company's activities.
For any bona fide reason, an employer can lawfully close shop anytime. Just as no law forces
anyone to go into business, no law can compel anybody to continue the same. It would be stretching
the intent and spirit of the law if a court interferes with management's prerogative to close or cease
its business operations just because the business is not suffering from any loss or because of the
desire to provide the workers continued employment.
While petitioner did not sufficiently establish substantial losses to justify closure of its F & B
Department on this ground, there is basis for its claim that the continued maintenance of said
department had become more expensive through the years. An evaluation of the financial figures
appearing in the audited financial statements prepared by the SGV & Co. shows that ninety-one to
ninety-six (91%-96%) percent of the actual revenues earned by the F & B Department comprised the
costs and expenses in maintaining the department. Petitioner's decision to place its F & B operations
under a concessionaire must then be respected, absent a showing of bad faith on its part.
In fine, management's exercise of its prerogative to close a section, branch, department, plant or
shop will be upheld as long as it is done in good faith to advance the employer's interest and not for
the purpose of defeating or circumventing the rights of employees under the law or a valid
agreement.29
On the other hand, in Eastridge Golf Club, Inc., complainants were kitchen staff of the Golf Clubs F
& B Department. They were terminated from employment on the ground that the operations of the F
& B Department had been turned over to a concessionaire as a result of alleged company
reorganization/downsizing. Claiming that their dismissal was not based on any of the causes allowed
by law and that it was made without due process, the employees filed with the NLRC a complaint for
illegal dismissal, ULP, and payment of 13th month pay. To controvert the GolfClub's claim that the
partial cessation of operations was bona fide, complainants presented documentary evidence that
there was no real transfer of operations and that the Golf Club remained to be the real employer of
all the F & B staff. Their documentary evidence consisted of payslips, monthly payroll register,
Philippine Health Insurance Corporation Contribution Payment Return, Employer Quarterly
Remittance Report, and the Social Security System Contribution Payment Return. Both the CA and
the LA found that the cessation of the Golf Club's F & B operations was a mere subterfuge, because
the latter continued to act as the real employer by paying for the salaries and insurance contributions
of the employees of the F & B Department even after the concessionaire took over its operations.
The NLRC saw otherwise, opining that the evidence did not establish that the cessation of
petitioner's F & B operations was in bad faith. When the matter was elevated to this Court, We
agreed with the Golf Club that the CA erred when it declared that, for lack of evidence of financial
losses, the cessation of its F & B operations was not a valid cause to terminate the employment of
complainants. The Court held that the Golf Club need not present evidence of financial losses to
justify such business decision, since the cause invoked in the termination of complainants
employment was the cessation of its F & B operations. Nonetheless, it was ruled that the CA
correctly held that the cessation of petitioner's F & B operations and the transfer to the
concessionaire were merely simulated, and that the employees dismissal by reason thereof was
illegal. We cited similar cases, thus:
In Me-Shurn Corporation v. Me-Shurn Workers Union-FSM, the corporation shut down its operations
allegedly due to financial losses and paid its workers separation benefits. Yet, barely one month after
the shutdown, the corporation resumed operations. In light of such evidence of resumption of
operations, the Court held that the earlier shutdown of the corporation was in bad faith.
With a similar outcome was the closure of the brokerage department of the corporation in Danzas
Intercontinental, Inc. v. Daguman. In view of evidence consisting of a mere letter written by the
corporation to its clientele that its brokerage department was still operating but with a new staff, the
Court declared the earlier closure of the corporation's brokerage department not bona fide and
ordered the reinstatement of its former staff, despite the latter having signed quitclaims and release
forms acknowledging payment of separation benefits.
The closure of a high school department in St. John Colleges, Inc. v. St. John Academy Faculty and
Employees Union was likewise annulled upon evidence that barely one year after the announced
closure, the school reopened its high school department. The Court found the closure of the high
school in bad faith notwithstanding payment to the affected teachers of separation benefits.
In Capitol Medical Center, Inc. v. Meris, the hospital justified the closure of a unit and the dismissal of
its head doctor by claiming that there was a dwindling demand for the unit's services. However, upon
examination of the records, the Court found that service demand had in fact been rising, thus
negating the very reason proffered by the hospital in closing down the unit. On that score, the Court
declared the action of the hospital in bad faith.30
3. The employer can lawfully close shop even if not due to serious business losses or
financial reverses but separation pay, which is equivalent to at least one month pay as
provided for by Article 283 of the Labor Code, as amended, must be given to all the affected
employees.
5. The burden of proving compliance with all the above-stated falls upon the employer.
Guided by the foregoing, the Court shall refuse to dwell on the issue of whether respondent was in
sound financial condition when it resolved to stop the operations of its F & B Department. As stated,
an employer can lawfully close shop anytime even if not due to serious business losses or financial
reverses. Furthermore, the issue would entail an inquiry into the factual veracity of the evidence
presented by the parties, the determination of which is not Our statutory function. Indeed, petitioner
is asking Us to sift through the evidence on record and pass upon whether respondent had, in truth
and in fact, suffered from serious business losses or financial reverses.
That task, however, would be contrary to the well-settled principle that this Court is not a trier of
facts, and cannot re-examine and re-evaluate the probative value of the evidence presented to the
VA and the CA, which formed the basis of the questioned decision.
Respondent correctly asserted in its Memorandum that the instant case is similar to Alabang Country
Club Inc. When it decided to cease operating its F & B Department and open the same to a
1wphi1
concessionaire, respondent did not reduce the number of personnel assigned thereat; instead, it
terminated the employment of all personnel assigned at the department and those who are directly
and indirectly involved in its operations. The closure of the F & B Department was due to legitimate
business considerations, a resolution which the Court has no business interfering with. We have
already resolved that the characterization of the employee's service as no longer necessary or
sustainable, and therefore, properly terminable, is an exercise of business judgment on the part of
the employer; the determination of the continuing necessity of a particular officer or position in a
business corporation is a management prerogative, and the courts will not interfere with the exercise
of such so long as no abuse of discretion or arbitrary or malicious action on the part of the employer
is shown.32 As recognized by both the VA and the CA, evident proofs of respondents good faith to
arrest the losses which the F & B Department had been incurring since 1994 are: engagement of an
independent consulting firm to conduct manpower audit/organizational development; institution of
cost-saving programs, termination of the services of probationary employees, substantial reduction
of a number of agency staff and personnel, and the retrenchment of eight (8) managers. After the
effective date of the termination of employment relation, respondent even went on to aid the
displaced employees in finding gainful employment by soliciting the assistance of respondents
members, Makati Skyline, Human Resource Managers of some companies, and the Association of
Human Resource Managers.33These were not refuted by petitioner. Only that, it perceives them as
inadequate and insists that the operational losses are very well covered by the other income of
respondent and that less drastic measures could have been resorted to, like increasing the
membership dues and the prices of food and beverage. Yet the wisdom or soundness of the
Management decision is not subject to discretionary review of the Court for, even the VA admitted, it
enjoys a pre-eminent role and is presumed to possess all relevant and necessary information to
guide its business decisions and actions.
Further, unlike in the case of Eastridge Golf Club, Inc., there is nothing on record to indicate that the
closure of respondents F & B Department was made in bad faith. It was not motivated by any
specific and clearly determinable union activity of the employees; rather, it was truly dictated by
economic necessity. Despite petitioners allegations, no convincing and credible proofs were
presented to establish the claim that such closure qualifies as an act of union-busting and ULP. No
evidence was shown that the closure is stirred not by a desire to avoid further losses but to
discourage the workers from organizing themselves into a union for more effective negotiations with
the management.34 Allegations are not proofs and it is incumbent upon petitioner to substantiate the
same. On the contrary, respondent continued to negotiate with petitioner even after April 30, 2002. In
fact, a Memorandum of Agreement was executed before the NCMB between petitioner and
respondent on June 10, 2002 whereby the parties agreed, among others, to maintain the existing
provisions of the CBA, except those pertaining to wage increases and signing bonus. 35
Finally, even if the members of petitioner are not considered as illegally dismissed, they are entitled
to separation pay pursuant to Article 283 of the Labor Code, as amended. Per respondent's
information, however, the separation packages of all 117 union members were already paid during
the pendency of the case.36 Petitioner did not oppose this representation;
hence, We shall treat the fact of receipt of separation pay as having been voluntarily entered into,
with a full understanding of its import, and the amount received as credible and reasonable
settlement that should be respected by the Court as the law between the parties are valid and
binding between them.
WHEREFORE, the foregoing considered, the instant Petition is DENIED. The February 2, 2006
Decision and May 29, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 73127 sustaining
in toto the August 28, 2002 Decision and September 13, 2002 Resolution of Voluntary
Arbitrator Jesus B. Diamonon, which dismissed petitioners complaint for illegal retrenchment, are
AFFIRMED.
SO ORDERED.
9. THIRD DIVISION
DECISION
CARPIO-MORALES, J.:
Gorres Velayo & Co. (SGV&Co.) for the years 1989-1993 in reflecting the total
revenue and costs and expenses of the F & B Department. However, while
SGV&Co. deducted the entire undistributed operating costs and expenses
consisting of general and maintenance costs from the total income of ACCI,
Ugalde allocated a percentage of these expenses and charged the same
[6]
against the total revenue of the F & B Department. Consequently, her report
[7]
1. It was only in 1993 when the losses dropped as compared to the 1992 figures.
This was the result of an effective joint management employee undertaking in
1993 towards cost-cutting and efficient resource administration; and
2. The endeavor succeeded only in reducing losses but not totally raising the
figures upward to at least a break-even level;
3. ACCI can generate income from F & B Department if its operation will be
transferred to a concessionaire;
Realizing that it was no longer profitable for ACCI to maintain its own F &
B Department, the management decided to cease from operating the
department and to open the same to a contractor, such as a concessionaire,
which would be willing to operate its own food and beverage business within
the club. [10]
ACCIs Labor Committee Chairman Catalino Santos thus met on
November 11, 1994 with the Union officers and members and discussed the
financial standing of the F & B Department. [11]
gross sales net of sales tax plus the expenses for light and water in the
amount of five (5%) percent of monthly gross sales net of sales tax. [13]
equivalent to one hundred twenty five (125%) percent of their monthly salary
for every year of service. ACCI also informed them that La Tasca agreed to
[15]
The Union then filed a notice of strike. ACCI, finding that the
[18]
requirements under the Labor Code had not been complied with, suspended
on December 28, 1994 those who participated in the strike. [19]
The Union averred, however, that no strike was actually held and that it
was caught by surprise when, upon reporting for work on December 28, 1994,
employees of La Tasca brought their equipment and took over the posts held
by most of [the individual respondents]. [20]
During the pendency of the complaint for illegal dismissal before the Labor
Arbiter, forty-seven (47) of the individual respondents accepted separation
benefits from ACCI at 125% of their monthly salary for every year of service,
on account of which they executed Waivers and Quitclaims in favor of ACCI:
Marilou Abadiano, Ernesto Banal, Benedicto Catalan, Abner Cavestany,
Romulo Dalaygon, Elena dela Cruz, Ernesto Dereza, Gina Dumalaon, Mario
Franche, Annalissa Garcia, Rolando Gannaban, Aniceto Glean, Perlita
Henares, Jaime Hidalgo, Leodegario Humirang, Elpidio Ibuos, Jr., Roberto
Lanon, Arnold Layug, Joel Linaogo, Eduardo Llenas, Joselito Lorino,
Ferdinand Mabitasan, George Marasigan, Perla Marges, Cynthis Mathay,
Werlito Navarro, Cristina Olegario, Cristina Omayao, Nenen Ortigoza, Eleonor
Palima, Maria Pantalita, Eduardo Peralta, Richard Perez, Jovito Pidlaoan,
Pacita Pilongo, Benjamin Pintor, Narciso Quizana, Agrifino Reyes, Dennis
Reyes, Eduardo Rubina, Aristeo Santos, Roberto Solante, Armando Suarez,
Dolores Valiente, Remedios Umali, Ingersol Pomida and Floro Macabit. [26]
By decision of April 30, 1999, the Labor Arbiter dismissed the complaint for
illegal dismissal on the ground that a business entity has the right to reduce its
work force if necessitated by compelling economic factors which endanger its
existence or stability. The Labor Arbiter in fact found that the study made by
[27]
the NLRC committed grave abuse of discretion and utter ignorance of the law
in completely disregarding the audited financial statements prepared by
SGV&Co. showing that ACCIs F & B Department had been consistently
earning profits. [32]
During the pendency of the petition before the appellate court, fifteen (15)
of the individual respondents received their separation package equivalent to
125% of their monthly salary for every year of service, on account of which
they executed Waivers and Quitclaims in favor of ACCI: Ronaldo Ibarra, Ma.
Isabelita Pizarro, Felix Arisme, Edilberto Bantilles, Bernardo de Chavez,
Medardo Enriquez, Domingo Iballar, Jose Masagca, Sharon Dantes-Platero,
Juliet Tenorio, Emerson Argoso, Felipe Cadena, Joseph Tayong, Rosanna
Rosarial, and Efren Abadia. [33]
By decision of August 14, 2002, the Court of Appeals reversed those of the
NLRC and the Labor Arbiter. It held that due to ACCIs failure to prove by
sufficient and competent evidence that its alleged losses were substantial,
continuing and without any immediate prospect of abating them, the bona fide
nature of the retrenchment appeared doubtful. Passing on ACCIs financial
[34]
court by Resolution of March 6, 2003, it comes before this Court via petition
[39]
A.
B.
C.
D.
As you probably have known, our Food and Beverage Division has been losing for the
past several years. Your management tried to remedy the situation through changes
and innovations but to no avail. This being so and to prevent further losses,
management has deemed it necessary to concessionize (sic) our Food and Beverage
operations. Since La Tasca won in the bidding and pursuant to our agreement with the
same, La Tasca shall, effective January 1, 1995, be operating all our Food and
Beverage outlets. As a consequence thereof, please be informed that effective January
1, 1995, your services shall be terminated as effective said date ACCI shall cease to
operate all Food and Beverage outlets. x x x (Underscoring supplied).
[41]
While the Labor Code provides for the payment of separation package in
case of retrenchment to prevent losses, it does not obligate the employer for
the payment thereof if there is closure of business due to serious losses.
[49]
In the present case, when petitioner decided to cease operating its F & B
Department and open the same to a concessionaire, it did not reduce the
number of personnel assigned thereat. It terminated the employment of all
personnel assigned at the department.
As did the appellate court, this Court finds that the study report submitted
by the internal auditor of petitioner, the only evidence submitted to prove its
alleged losses, is self-serving and falls short of the stringent requirement of
[51]
the law that the employer prove sufficiently and convincingly its allegation of
substantial losses.
Petitioners failure to prove that the closure of its F & B Department was
due to substantial losses notwithstanding, this Court finds that individual
respondents were dismissed on the ground of closure or cessation of an
undertaking not due to serious business losses or financial reverses, which is
allowed under Article 283 of the Labor Code:
Art. 283. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of the
establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the worker and the Ministry
of Labor and Employment at least one (1) month before its intended date thereof. In
case of termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least one
(1) month pay for every year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closures or cessation of operations of the
establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-
half () month pay for every year of service, whichever is higher. A fraction of at least
six (6) months shall be considered as one (1) whole year. (Emphasis in the original)
For any bona fide reason, an employer can lawfully close shop anytime.
Just as no law forces anyone to go into business, no law can compel anybody
to continue the same. It would be stretching the intent and spirit of the law if
[55]
a court interferes with managements prerogative to close or cease its
business operations just because the business is not suffering from any loss
or because of the desire to provide the workers continued employment. [56]
faith to advance the employers interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement. [59]
Respondents not having been illegally dismissed, they are not entitled to
backwages.
respondents who had been given their separation pay were duly notarized,
the certificate of acknowledgement in each of them serves as prima facie
evidence of their due execution. Not one of individual respondents who
[63]
SO ORDERED.
FIRST DIVISION
DECISION
This is a Petition for Review on Certiorari 1 of the Decision2 and Resolution3 dated April 21, 2006 and
August 7, 2006, respectively, of the Court of Appeals in CA-G.R. SP No. 51656, which dismissed the
petition for certiorari of petitioners Mindanao Terminal and Brokerage Service, Inc. (Minterbro) and
Fortunato V. De Castro.1
The docking of vessels at the piers in Davao City, including that of Minterbro, is being carried out by
the Davao Pilots' Association, Inc. (DPAI).7 In a letter8 dated January 6, 1996, DPAI requested
Minterbro to waive any claim of liability against it for any damage to the pier or vessel. DPAI alleged
that Minterbros pier vibrates everytime a ship docks due to weak posts at the underwater portion.
In a letter9 dated January 15, 1997, Minterbro denied the request explaining that DPAIs observation
had no basis as any damage to the pier was actually caused by a vessel under the control of DPAI
which bumped the pier on December 28, 1996. DPAI replied in a letter10 dated January 23, 1997
informing Minterbro of its intention to refrain from docking vessels at Minterbros pier for security and
safety reasons, until such time as Minterbro shall have caused the restoration of the original
independent fenders of the said pier.
This prompted Minterbro to bring up the matter to the Philippine Ports Authority (PPA). The PPA
promptly dispatched a team to conduct ocular inspection on Minterbros pier.11 In a
communication12 dated February 3, 1997, on the basis of its ocular inspection, the PPA advised
Minterbro "to conduct a thorough investigation of the underdeck and underwater structures of the
pier and initiate corrective measures if necessary." Thereafter, Minterbro, DPAI, and the PPA had a
meeting and agreed that Minterbro would seek the assistance of experts for an ocular inspection and
survey of the pier. Minterbro engaged the Davao Engineering Works and Marine Services (Davao
Engineering) to carry out the work.13
In its Survey Report No. 390/9714 dated May 6, 1997, Davao Engineering stated:
OBSERVATIONS:
The Pier facilities of Minterbro at Ilang, Davao City can still be used for loading and unloading of
cargoes provided, however, that docking procedures were properly carried out.
The cracks and spalled concrete on the joints of the RC Piles and Pile caps [do] not affect the
strength and capabilities of the Pier. However, immediate attention should be given to the Pier
damages in order to prevent further deterioration of its structural members which will lead to a costly
[repair] later on.15
Meanwhile, from January 1 until April 13, 1997, a total of sixteen (16) vessels were serviced at the
Minterbro pier:
Subsequently, Minterbro decided to rehabilitate the pier on August 1, 1997 and, on the same day,
sent a letter to the Department of Labor and Employment (DOLE) to inform DOLE of Minterbros
intention to temporarily suspend arrastre and stevedoring operations. Minterbro alleged that, despite
the condition of the pier, it was able to service 16 vessels from January 1997 to April 13, 1997 and it
was ready and awaiting vessels to dock at the pier from April 14, 1997 to July 31, 1997 during which
Minterbros office, motor pool, and field personnel continued operations. 17
This is to advise you that we have completed the repair of our pier which we did inspite of the earlier
certification issued by the Davao Engineering Works & Services, that after the latter carried out the
underwater/above water ocular inspection and survey of the pier facilities, said pier can still be used
for loading and unloading of cargoes provided that the docking procedures should be properly
carried out.
In view of the foregoing, may we request your office to render your own ocular inspection and survey
for the issuance of the corresponding certification on its readiness to accept vessels for loading and
unloading operations.
At the initial hearing before the Labor Arbiter on December 10, 1997, Minterbro and De Castro
informed the union and its members that the rehabilitation of the pier had been completed and that
they were just awaiting clearance to operate from the PPA. In a manifestation dated December 12,
1997, the union and its members stated, among others, that "they x x x are not anymore amenable
to going back to work with [the] company, for the reason that the latter has not been operating for
more than six (6) months, even if it resumes operation at a later date and would just demand that
they be given Retirement or Separation Pay, as the case may be." 20
On December 17, 1997, the PPA issued the following Certification21 declaring Minterbros pier as
safe and ready for operation:
C E R TI F I C ATI O N
This is to certify that the repair and rehabilitation of Minterbro Wharf owned by Mindanao Terminal &
Brokerage Services, Inc. located at Tibungco, Ilang, Davao City was inspected by our Engineering
Services Division office on Dec. 10, 1997 and was found to be totally completed. The structural
design and the supervision of work was undertaken by Bow C. Moreno, Civil Structural Design
Engineering Office of San Andres St., Manila.
Further, as certified by the Structural Consultants of the Contractor, copy attached, the Port
[M]anagement Office of Davao, Philippine Ports Authority has now declared Minterbro Wharf as safe
and ready for operationalization.
This certification is issued for whatever purpose the Mindanao Terminal & Brokerage Services, Inc.
will deem necessary.
Done in the City of Davao, Philippines, this 17th day of December 1997.
(Sgd.)
MANUEL C. ALBARRACIN
Port Manager
Thereafter, MV Uranus was serviced at the Minterbro pier on December 22 to 28, 1997. 22
On June 15, 1998, the Labor Arbiter rendered a Decision23 with the following decretal portion:
WHEREFORE, judgment is hereby rendered dismissing the complaint for separation pay for lack of
merit and declaring the ninety-five (95) complainants named in the final list filed on February 3, 1998
to have lost their employment status for abandonment of work; and
Declaring complainants Roberto D. Estrera, Sr., Gorgonio Hurao, Jeremias Molato and Constancio
Albiso, who have formally withdrawn their complaint, not to have lost their employment status and
ordering respondents to accept them back to their former positions without loss of seniority rights
and other privileges.24
Aggrieved, the union members appealed the Labor Arbiters Decision to the NLRC. In a
Decision25 dated September 30, 1998, the NLRC modified the Decision of the Labor Arbiter in this
wise:
In denying complainants their separation benefits, the Executive Labor Arbiter considered the period
embraced within August 1, 1997, when respondent formally informed [the] DOLE of the temporary
cessation of operation up to December 16, 1997, when respondent was issued a certificate declaring
the wharf safe and ready for operations and December 22-28, 1997, when the respondent company
serviced a vessel MV Uranus which obviously did not exceed six (6) months, thus denying
complainants their monetary benefits. Incidentally, the period reckoned is incorrect.
It is admitted by respondent that the last vessel that was serviced was on April 11-13, 1997 (MV
Bosco Polar), and after the rehabilitation of the wharf, on December 22-28, 1997 (MV Uranus) was
served, thereby covering a period of more or less eight months.
Respondent cannot conceal or make the August 1, 1997 formal notice to DOLE or the alleged
continued operations of its office personnel until July 31, 1997, an excuse to evade the mandated six
(6) months period (Article 286 of the Labor Code, as amended), since the issue at bar concerns the
complainants who became jobless and penniless because of the December 28, 1996 accident.
With the unrefuted peculiar circumstances, complainants are therefore entitled to their claims for
separation benefits.
Moreover, complainants cannot be considered to have abandoned their jobs for the reason that it
took respondent a long period [of] time to rehabilitate the wharf causing uncertainties in their minds
which culminated in the filing of the case.
WHEREFORE, the assailed Decision is Modified. Respondents are ordered to pay complainants
their separation benefits to be assessed and computed during the post arbitral stage of the
proceedings below upon finality of the herein Decision.26
In a Resolution27 dated January 25, 1999, the NLRC maintained its Decision and denied the motion
for reconsideration of Minterbro and De Castro.
Thereafter, Minterbro and De Castro took the NLRC and the members of the union to task by filing a
Petition for Certiorari28 in the Court of Appeals asserting that the NLRC acted with grave abuse of
discretion in ordering Minterbro and De Castro to pay the union members separation pay under
Article 286 of the Labor Code. This was docketed as CA-G.R. SP No. 51656.
In a Decision dated April 21, 2006, the Court of Appeals dismissed the petition. It ruled that the
seasonal nature of the services rendered by the members of the union did not negate their status as
regular employees and that the temporary suspension of Minterbros operations should be reckoned
from April 14, 1997, the day no more vessel was serviced at Minterbros pier after MV Bosco Polar
was serviced at the said pier on April 11 to 13, 1997. Thus, pursuant to Article 286 of the Labor Code
and its application in Sebuguero v. National Labor Relations Commission,29 the NLRC correctly
ordered Minterbro and De Castro to pay the union members their separation benefits as their
temporary lay-off exceeded six months.
In a Resolution dated August 7, 2006, reconsideration was denied as the Court of Appeals found no
reason to reverse its decision. Hence, this petition.
Petitioners Minterbro and De Castro insist that the Court of Appeals erred when it ruled that the
union members are entitled to separation pay under Article 286 of the Labor Code. Petitioners
concede that, as enunciated in Sebuguero, where a temporary lay-off lasts longer than six months,
the employees should either be recalled to work or permanently retrenched following the
requirements of the law.30 However, according to petitioners, the lack of arrastre and stevedoring
services in the pier after the servicing of MV Bosco Polar on April 11 to 13, 1997 was a result of Del
Montes decision, for reasons unknown to Minterbro, to suddenly stop docking its vessels at
Minterbros pier. And while there were no arrastre and stevedoring services for lack of any vessel to
service, Minterbros office, motorpool and field personnel continued their work until July 31, 1997, or
a day before Minterbro filed the required notices with the DOLE on August 1, 1997. The decision to
rehabilitate the pier is a business decision and had nothing to do with the unfounded complaint of
DPAI in January 1997 about the condition of the pier.31
For their part, the union members contend that the petition is flawed as it presents a question of fact,
not of law. In particular, the determination of the correct reckoning date of the temporary suspension
of Minterbros business, whether April 14, 1997 or August 1, 1997, involves a review of facts and the
respective evidence of the parties, which is prohibited under the Rules of Court. Moreover, the NLRC
and the Court of Appeals have already fully discussed the matter and both came to the same
conclusion, that Minterbro and De Castro are liable to the union members for separation pay. The
factual findings of the NLRC and the Court of Appeals should therefore be accorded respect and
conclusiveness.32
The issue thus presented in this petition is whether the union members/employees were deprived of
gainful employment on April 14, 1997 after the last vessel was serviced prior to the repair of the pier
or on August 1, 1997 when repair works on the pier were commenced. Resolution of this issue will
determine whether petitioners are liable for separation pay for effectively dismissing the union
members through their prolonged lay-off of more than six months.
Petitioners insist on August 1, 1997 as the reckoning date and rely on Article 286 of the Labor Code.
On the other hand, the union members assert that the reckoning date is April 14, 1997 and
invoke Sebuguero.
At the outset, the Court notes that the petition is fatally defective. The issue it presents is factual, not
legal.
There is a question of fact when the doubt or difference arises as to the truth or the falsehood of
alleged facts. There is a question of fact if the issue invites a review of the evidence presented. 33
In this case, this Court is effectively being called upon to determine who among the parties is
asserting the truth regarding the date the union members were laid-off. Such venture requires the
evaluation of the respective pieces of evidence presented by the parties as well as the consideration
of "the existence and relevancy of specific surrounding circumstances as well as their relation to
each other and to the whole, and the probability of the situation." 34 However, the nature of petitioners
action, a petition for review under Rule 45 of the Rules of Court, renders that very action
inappropriate for this Court to take. Only questions of law should be raised in a petition for review
under Rule 45.35 While there are recognized exceptions to that rule, this case is not among them.
Moreover, this Court finds neither compelling reason nor substantial argument that will warrant the
reversal of the NLRC Decision which has been affirmed by the Court of Appeals.
The NLRC and the Court of Appeals found that the union members/employees were not given work
starting April 14, 1997 and that more than six months have elapsed after the union members were
laid off when the next vessel was serviced at the Minterbro pier on December 22 to 28, 1997.
Minterbro claims that it had no hand whatsoever in the lack of work for the union members at the
pier from April 14, 1997. It stated that it did not even have any idea as to why Del Monte suddenly
stopped docking its vessels at Minterbros pier. Nonetheless, as between petitioners and the union
members, it is petitioners who had the right to demand from Del Monte to perform its obligations
under the Contract for Use of Pier. Petitioners right to compel Del Monte to comply with its
contractual obligations becomes stronger in view of the following undertaking of Del Monte:
October 7, 1988
With reference to our "Contract for Use of Pier", dated 3 October, 1988, (Doc. No. 348, No. 71, Book
XXVI of Notary Public D. A. Soriano of Makati, Metro Manila), we confirm our commitment to
maximize the use of the [Minterbro] Pier at Ilang, Davao City and not to dock any of the
vessels of our principal elsewhere for as long as they can be accommodated therein as per your
commitment in the contract and in the customary and usual manner and for the purpose which they
are intended to serve.
If this reflects our understanding, please sign below and return to us our copy of this letter. This will
serve as our supplemental agreement on the matter.
(Sgd.)
JUAN F. SIERRA
President
CONFORME:
By:
(Sgd.)
ELIODORO C. CRUZ
Vice-President36 (Emphasis supplied.)
Unfortunately, petitioners failed to show any effort on their part to hold Del Monte to its end of the
bargain even though the union members were being forced to be laid off. Effectively, when
petitioners allowed Del Monte to abandon its agreement with Minterbro for eight months covering the
middle of April 1997 until the latter part of December 1997 without holding Del Monte accountable for
such breach, petitioners consented to Del Montes unexplained action and the prejudice it caused to
the union members.
Moreover, the communications between Minterbro and the PPA during the relevant period are telling.
Among these is a letter dated February 3, 1997 from the PPA:
03 February 1997
We had been furnished copy of the communications of the Davao Pilots, Association dated January
6 and 23, 1997 with the same subject on weakened pier structure of your port facility.
On 22 January 1997, a PMO team was dispatched to conduct an ocular inspection. The related
report is herewith furnished for your perusal.
Any report or observation of this nature from port users is considered critical and this should
be investigated and verified for the safety of all parties concerned. We therefore advise your
company to conduct a thorough investigation of the underdeck and underwater structures of the pier
and initiate corrective measures if necessary.
(Sgd.)
MANUEL C. ALBARRACIN37 (Emphasis supplied.)
Another material document is the letter dated December 8, 1997 from Minterbro to the PPA wherein
petitioners requested the PPA to confirm the repair and rehabilitation of the Minterbro pier and issue
a certification on the piers "readiness to accept vessels for loading and unloading operations." 38
Petitioners exert much effort to dissociate themselves from Del Montes act of stopping its vessels
from docking at Minterbros pier beginning April 14, 1997. They also went to great lengths not only to
refute the complaint of DPAI that Minterbros pier is damaged and defective but also to establish that
such allegedly baseless claims have no connection with the decision of the vessels not to dock at
the Minterbro pier. The above communications, however, negate petitioners contention. As early as
February 1997, the PPA had already advised petitioners that the observation of DPAI that the pier
had abnormal vibrations "is considered critical."39 And in the Petition for Certiorari40 and
Memorandum41 which they filed in the Court of Appeals, petitioners alleged as follows:
12. MINTERBRO sent copies of the Survey Report No. 390/97 to the PPA, the [Davao Pilots]
Association and Del Monte Philippines, Inc. to inform them that the observation/complaint of the
[Davao Pilots] Association was clearly unfounded and without any factual basis. Despite receipt of
the Survey Report, Del Monte did not dock any of its vessels at MINTERBROs
pier.42 (Emphasis supplied.)
The above statement shows that petitioners were fully aware that Del Montes decision to stop
docking any of its vessels at the Minterbro pier was basically related to the issue of the condition of
the pier. Moreover, petitioners may not rightfully shift the blame to Del Monte in view of the following
provision of their Contract for Use of Pier:
3. MINTERBRO shall maintain the pier in good condition suitable for the loading and unloading
of [Del Monte] or [Del Monte]-related cargoes[.]43 (Emphasis supplied.)
If petitioners really believed their claim that the piers condition was still suitable for normal
operations even without having undertaken the repairs which it took starting August 1997, petitioners
could have simply submitted Survey Report No. 390/97 to the PPA and requested for a certification
similar to the PPA certification dated December 17, 1997. Yet, they did not. They had to rehabilitate
the pier first before they requested for the certification. Furthermore, the very Survey Report No.
390/97 that petitioners use to support their claim that the claim of DPAI as to the condition of the pier
is totally baseless is not completely true. As quoted by petitioners, the Survey Report states that the
Minterbro pier "can still be used for loading and unloading of cargoes provided, however, that
docking procedures were properly carried out."44 This can be reasonably taken to mean as saying
that the operations at the pier should now be carried out in a mistake free manner because one
wrong move may prove to be disastrous. That means that every time arrastre and stevedoring
services are conducted at the pier, a sword would be hanging over the heads of those working at the
pier. Moreover, the said Survey Report expressly directs that "immediate attention should be
given to the Pier damages in order to prevent further deterioration of its structural
members."45 This directive contradicts petitioners stance that the Minterbro pier was in good
condition even prior to its repair and rehabilitation in August 1997. Thus, the Court of Appeals did not
err when it made the following observations:
In view of the inspections and surveys conducted on the pier, it could not have failed to dawn upon
petitioners that no vessel would take the risk of docking in their pier because of its damaged
condition.46
To Our mind, both petitioners and the Labor Arbiter failed to realize that what had been indisputably
established thereby was that petitioners pier was in critical condition, i.e., no longer viable for
docking as early as May 1996 in spite of which petitioners decided to make the necessary repairs
only in August [1996] or four months thereafter.
x x x Petitioners had already been amply notified of the unstable condition of their pier which
required prompt corrective action for the safety of both the facilities and the lives of the laborers
therein, so that petitioners should not have insisted that their pier was still in good shape.
x x x.47
In sum, petitioners inaction on what they allege to be the unexplained abandonment by Del Monte of
its obligations under the Contract for the Use of Pier coupled with petitioners belated action on the
damaged condition of the pier caused the absence of available work for the union members. As
petitioners were responsible for the lack of work at the pier and, consequently, the layoff of the union
members, they are liable for the separation from employment of the union members on a ground
similar to retrenchment. In this connection, this Court has ruled:
When petitioners failed to make work available to the union members for a period of more than six
months starting April 14, 1997 by failing to call the attention of Del Monte on the latters obligations
under the Contract of Use of Pier and to undertake a timely rehabilitation of the pier, they are
deemed to have constructively dismissed the union members. As this Court held in Valdez v.
National Labor Relations Commission49:
Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or
undertaking for a period not exceeding six months shall not terminate employment. Consequently,
when the bona fide suspension of the operation of a business or undertaking exceeds six months,
then the employment of the employee shall be deemed terminated. By the same token and applying
said rule by analogy, if the employee was forced to remain without work or assignment for a
period exceeding six months, then he is in effect constructively dismissed. (Citation omitted.)
In Sebuguero,50 the Court ruled on a case regarding layoff or temporary retrenchment, which
subsequently resulted to the separation from employment of the concerned employee as it lasted for
more than six months, as follows:
Article 283 of the Labor Code which covers retrenchment, reads as follows:
Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
servicing a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses,
the separation pay shall be equivalent to one (I) month pay or at least one-half ( 1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6) months shall he considered
1wphi1
As the Court of Appeals did not err in ruling that Sebuguero applies to this case, the consequences
arrived at in Sebuguero also apply. Lay-off is essentially retrenchment and under Article 283 of the
Labor Code a retrenched employee is entitled to separation pay equivalent to one (1) month salary
or one-half (12) month salary per year of service, whichever is higher.
WHEREFORE, the petition 1s hereby DENIED. The Executive Labor Arbiter of the Regional
Arbitration Branch No. XI at Davao City of the National Labor Relations Commission
is DIRECTED to ensure the prompt implementation of this Decision.
SO ORDERED.
Supreme Court
Manila
THIRD DIVISION
Petitioners, Present:
PERALTA, J., Acting
Chairperson,
- versus -
ABAD,
VILLARAMA, JR.,
Respondents.
Promulgated:
x
------------------------------------------------------------------------------------------------
-----x
DECISION
MENDOZA, J.:
Issues:
In this case, EEMI failed to establish that the main reason for
its closure was business reverses. As aptly observed by the CA,
the cessation of EEMIs business was not directly brought about by
serious business losses or financial reverses, but by reason of the
enforcement of a judgment against it. Thus, EEMI should be
required to pay separation pay to its affected employees.
For one, in the said cases, the persons made liable after the
companys cessation of operations were the officers and agents of
the corporation. The rationale is that, since the corporation is an
artificial person, it must have an officer who can be presumed to
be the employer, being the person acting in the interest of the
employer. The corporation, only in the technical sense, is the
employer. In the instant case, what is being made liable is another
corporation (PNB) which acquired the debtor corporation (PNEI).
In the present case, Go may have acted in behalf of EEMI but the companys
failure to operate cannot be equated to bad faith. Cessation of business operation is
brought about by various causes like mismanagement, lack of demand, negligence,
or lack of business foresight. Unless it can be shown that the closure was
deliberate, malicious and in bad faith, the Court must apply the general rule that a
corporation has, by law, a personality separate and distinct from that of its
owners. As there is no evidence that Go, as EEMIs President, acted maliciously or
in bad faith in handling their business affairs and in eventually implementing the
closure of its business, he cannot be held jointly and solidarily liable with EEMI.
SECOND DIVISION
PARAS, J.:p
This is a petition for certiorari to review and set aside the resolutions of the National Labor Relations
Commission (NLRC), Second Division, * dated February 12, 1987 and April 7, 1987, both affirming
the decision of Labor Arbiter Reynaldo M. Maroan in NLRC Case No. AB-9-676-81, entitled
"Gorgonia Maramag, et al. vs. San Felipe Neri School of Mandaluyong, Inc. and/or Faustino F.
Bonifacio, et al"., adjudging herein petitioners solidarily liable for the payment of separation pay in
favor of herein private respondents.
The antecedent facts of the case as gathered from the records are as follows:
Petitioners were the incorporators, stockholders and/or trustees of a corporation known as the San
Felipe Neri School of Mandaluyong, Inc., which owned and operated petitioner school. Private
respondents were formerly teacher employees of the aforesaid institution.
Sometime on April 18, 1981, petitioner-school and the Roman Catholic Archbishop of Manila (RCAM
for brevity) executed a Deed of Absolute Sale of Real and Personal Properties, the pertinent portions
of which provide that:
(1) The SELLER is the owner of a two (2) storey reinforced concrete building and
other buildings, structures or improvements erected on land belonging to the
BUYER, situated in the grounds of San Felipe Neri Parish Church and presently
used by the SELLER in the operation of the San Felipe School.
(2) The SELLER is also the owner of library books, school equipment, tables, desks,
chairs, blackboards and other personal properties found therein and itemized in the
inventory hereto attached as ANNEX 'A' and made an integral part of this Deed of
Absolute Sale of Real and Personal Properties.
(3) For and in consideration of the sum of FOUR HUNDRED THOUSAND PESOS
(P400,000.00), Philippine Currency, payable at the office of the BUYER on April 30,
1981, the SELLER has sold, transferred and conveyed, as it, by these presents,
does SELL, TRANSFER, AND CONVEY, absolutely and in perpetuity unto the
BUYER, its successors or assigns, the real and personal properties described in
paragraphs 1 and 2 above. (Rollo, p. 5 and p. 60).
Private respondents (former teachers of petitioner school) upon reporting for work sometime in May
of the same year for the opening of the school year 1981-82, were surprised to learn from school
authorities that the school was already under new ownership and management. They (private
respondents) had never been previously notified nor informed of the sale or transfer of the school to
the RCAM (Rollo, p. 34 and pp. 145-146).
The new owner and administrator (RCAM), in turn, required said respondent teachers to apply as
new employees subject to the usual probation (Rollo, p. 34). Demoted to probationary status and
their past services not recognized by the new employer, said teachers inquired about their rights
from the former school owners (herein petitioners), but to no avail. Instead, they were referred to the
new owners of the school, supposedly as the proper party who should answer for and adjust private
respondents' demand and grievances (Rollo, p. 146).
Respondent teachers then filed a complaint before the Labor Arbiter against all the petitioners,
including the RCAM the vendee or transferee, as alternative defendant for separation pay,
differential pay and other claims (Rollo, pp. 22-25). After submitting their respective position papers
and there being no amicable settlement reached between the parties despite sufficient time allowed
for such purpose, hearing ensued at which both complainants (herein private respondents) and
respondents (herein petitioners, including RCAM presented testimonial and documentary evidence
(Rollo, p. 35).
On March 26, 1984, the Labor Arbiter rendered judgment in favor of private respondents, ordering
petitioners to pay the latter their separation pay. The decretal portion of the contested order of the
Labor Arbiter reads:
WHEREFORE, judgment is hereby rendered ordering the respondent San Felipe
Neri School of Mandaluyong, Inc., Faustino F. Bonifacio, Jr., Domingo P. Angeles,
Rosa A. Salazar, Father Anastacio B. Gapac, Mariano de Leon, and Magdalena I.
Angeles, jointly and severally to pay the complainants separation pay equivalent to
one (1) months pay or at least one-half () month pay for every year of service
whichever is higher, plus 12% interest thereon from the filing of the amended
complaint until full satisfaction thereof. The complaint against the Roman Catholic
Archbishop of Manila is hereby dismissed. Likewise, the claims for separation pay of
complainants N. Parada and R. Aviles who are admittedly part time employees of the
school are hereby dismissed. Further, the claim for underpayment of salaries and
allowances and non- payment of summer vacation pay is hereby dismissed for lack
of merit. (Rollo, p. 39)
Petitioners, on April 23, 1984, appealed to the National Labor Relations Commission (NLRC)
contesting the aforequoted order as having been issued contrary to law and jurisprudence, and that
the Commission has no jurisdiction over them, alleging that no employer-employee relationship
exists between said individual petitioners and private respondents, the latter being considered the
employees of the school corporation and not by said petitioners themselves in conformance with the
principle or doctrine that a corporation has a personality separate and distinct from those persons
composing it (Rollo, pp. 41-46).
On February 12, 1987, the Second Division of the NLRC in its Resolution, affirmed the findings and
decision of the Labor Arbiter and dismissed the appeal for lack of merit ruling that there was in fact a
closure of the establishment when the same was sold to the transferee, the RCAM and that the
award of separation pay to herein private respondents was in accordance with the law (Rollo, pp. 62-
63).
Petitioners filed their Motion for Reconsideration on March 13, 1987 (Rollo, pp. 64-69), but the same
was denied by the Commission in its Resolution dated April 7, 1987 (Rollo, p. 70).
The main issue in this case is whether or not respondent teachers' employment was terminated by
the sale and transfer of San Felipe Neri School of Mandaluyong, Inc. to the Archbishop of Manila
that would entitle them to separation pay.
Petitioner argue that they cannot be held accountable to private respondents's claim for separation
pay since there was no cessation of employment insofar as individual respondents are concerned.
The Roman Catholic Archbishop of Manila (RCAM) which assumed the ownership and control of the
school continued with its business operations and hired the said private respond respondents. Only
the ownership of the school has changed. There was no interpretation in the employment of private
respondents who were school teachers, hence there is no basis for payment to them of separation
pay (Rollo, p. 18). Relying on two (2) NLRC cases (the GENBANK and TARELCO cases), petitioners
assume that the security of tenure of employees of the transferor is not affected by the change of
ownership of the establishment and since there was no termination to speak of, it was error for the
NLRC to award separation pay to private respondents (Rollo, pp. 14-19).
Moreover, petitioners maintain that the Commission had no jurisdiction over them since they are not
the employers of the private respondents but the petitioner school as a corporation (Rollo, p. 19).
It is not disputed that San Felipe Neri School of Mandaluyong, Inc. sold its properties and assets to
RCAM on April 18, 1981; but RCAM did not buy the school nor assumed its liabilities. Immediately
thereafter, RCAM as the transferee-purchaser, continued the operation of the school, but applied for
a new permit to operate the same (Rollo, pp. 91-93). In short, there was a change of ownership or
management of the school properties and assets.
A close scrutiny of the pertinent Deed of Sale dated April 18, 1981 reveals no express stipulation
whatsoever relative to the continued employment by the transferee, RCAM of the employees (herein
private respondents) of the erstwhile employer (petitioner). On the contrary, records show that
RCAM expressly manifested its unwillingness to absorb the petitioner school's employees or to
recognize their prior service. As correctly found by the Labor Arbiter and the NLRC, respondent
teachers' employment has been effectively terminated and there was in effect a closure (Rollo, pp.
37 and 62). Obviously, therefore, the fate of private respondents under the new owner (RCAM)
appeared unprovided for. And there is no law which requires the purchaser to absorb the employees
of the selling corporation (MDII Supervisors and Confidential Employees Association (FFW) vs.
Presidential Assistant on Legal Affairs, 79 SCRA 40 [1977]).
As there is no such law, the most that the purchasing company may do, for purposes of public policy
and social justice, is to give preference to the qualified separated employees of the selling company,
who in their judgment are necessary in the continued operation of the business establishment (Ibid.).
This, RCAM did. It required private respondents to re-apply as new employees as a condition for
rehiring, subject to the usual probationary status, the latter's past services with the petitioners-
transferors not recognized (Rollo, pp. 60 and 99).
Records further reveal that the negotiations for the sale of the assets and properties of petitioner
school were held behind the back of the private respondents who were taken by surprise when they
reported for work finding a new owner of the school. As mentioned at the outset they were not
formally notified of the sale or transfer to RCAM and its attendant consequences with respect to their
continued employment status under the new owners. As such, the recognition of their past services
as teachers remains uncertain. Worse, they were not at all given the required notice of their
termination.
On all fours with the instant case is the ruling in Central Azucarera del Danao vs. Court of
Appeals, 137 SCRA 295, 306 [1985], pertinent portions of which read:
The records further reveal that the negotiations for the sale of the assets and
properties of Central Danao to Dadeco were held behind the back of the employees
who were taken by surprise upon the consummation of the sale. They were not
formally notified of the impending sell-out to Dadeco and its attendant consequences
with respect to their continued employment status under the purchasing company. As
such, they were uncertain of being retained, hired, or absorbed by the new owner
and its management. Technically then, the employees were actually terminated
and/or separated from the service on the date of the sale, or on July 7, 1961. Worse,
they were not at all given the required notice of their termination. Inasmuch as there
was no notice of termination whatsoever given to the employees of Central Danao
coupled with the fact that no efforts were exerted by Central Danao to apprise its
employees of the consequences of the sale or disposition of its assets to Dadeco,
justice and equity dictate that private respondents be entitled to their termination or
separation pay corresponding to the number of years of service with Central Danao
until June 7, 1961.
In the earlier case of Philippine Refining Company vs. Garcia, 18 SCRA 107 [1966], this Court,
speaking thru Justice J.B.L. Reyes, stated:
Except where other applicable statutes provide differently, it is not the cause for the
dismissal but the employer's failure to serve notice upon the employee that renders
the employer answerable to the employee for termination pay.
Hence, petitioners' contention that private respondents are not entitled to separation pay on the
ground that there was no termination of the latter's employment but a mere change of ownership in
the assets and properties of the school is untenable. Neither can the flimsy excuse that at the time of
their alleged termination, there was no employer-employee relationship between them (private
respondents) and petitioners, be sustained.
Finally, this Honorable Court took the occasion to remind employers to exercise caution and care in
dealing with their employees to prevent suspicion that the adoption of certain corporate
combinations such as merger or consolidation, or outright sale or disposition of assets is but a
scheme to evade payment of termination pay to their employees (Central Azucarera del
Danao, supra).
With the resolution of the main issue, there appears to be no necessity to go into the other issues,
except to say that only petitioner San Felipe Neri School of Mandaluyong is liable to the private
respondents, the other petitioners not being the employers of the teachers.
WHEREFORE, as hereinabove MODIFIED, the appealed decision and resolution are hereby
AFFIRMED, the school having a separate and distinct personality from the other petitioners.
SO ORDERED.
13. EN BANC
AMANTE G. DORIA,
Petitioners,
Present:
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
- v e r s u s - CORONA,
CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION and
PERALTA, JJ.
Respondents. Promulgated:
April 7, 2009
x------------------------------------------
--------x
DECISION
CORONA, J.:
We disagree.
xxxxxxxxx
SO ORDERED.
THIRD DIVISION
- versus -
NATIONAL LABOR
RELATIONS COMMISSION,
PHILIPPINE LONG
DISTANCE TELEPHONE
COMPANY (PLDT)/
AUGUSTO G. COTELO,
Respondents.
x-------------------x
- versus -
NATIONAL LABOR
RELATIONS COMMISSION,
PHILIPPINE LONG
DISTANCE TELEPHONE
COMPANY (PLDT),
Respondents.
x-------------------x
Promulgated:
January 30, 2007
x------------------------------------------------
x
DECISION
AUSTRIA-MARTINEZ, J.:
xxxx
SO ORDERED.[18]
SO ORDERED. [21]
ART. 264.
xxxx
(e) No person engaged in picketing shall commit any act
of violence, coercion or intimidation or obstruct the free
ingress to or egress from the employers premises for
lawful purposes or obstruct public thoroughfares.
SO ORDERED.[36]
SO ORDERED. [45]
SO ORDERED.[49]
The petitions in G.R. No. 146762 and G.R. No. 153584 are partly
meritorious in that the CA did not err in upholding the validity of
the dismissal of Suico, Ceniza, Dacut, and Mariano but the PLDT
should be ordered to pay said employees nominal
damages pursuant to Agabon v. National Labor Relations
Commission.[52]
xxxx
(b) Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause and
without prejudice to the requirement of notice under Article 283 of this Code, the
employer shall furnish the worker whose employment is sought to be terminated a
written notice containing a statement of the cause for termination and shall afford
the latter ample opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires, in accordance with company
rules and regulations promulgated pursuant to guidelines set by the
Department of Labor and Employment. (Emphasis supplied).
Effective Date
xxxx
1. PURPOSE
2. GENERAL
2.1 Investigation of offenses or infractions of
Company regulations committed by employees
shall be handled by various investigating units xxx;
xxxx
SO ORDERED.
15. Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
DECISION
Jose A. Talde (respondent) was hired in 1990 as a carpenter by petitioner Golden Ace Builders of
which its co-petitioner Arnold Azul (Azul) is the owner-manager. In February 1999, Azul, alleging the
unavailability of construction projects, stopped giving work assignments to respondent, prompting
the latter to file a complaint1 for illegal dismissal.
By Decision2 of January 10, 2001, the Labor Arbiter ruled in favor of respondent and ordered his
immediate reinstatement without loss of seniority rights and other privileges, and with payment of full
backwages, which at that time was computed at P144,382.23, and the amount of P3,236.37
representing premium pay for rest days, service incentive leave pay and 13th month pay.
Pending their appeal to the National Labor Relations Commission (NLRC) and in compliance with
the Labor Arbiters Decision, petitioners, through counsel, advised respondent to report for work in
the construction site within 10 days from receipt thereof. Respondent submitted, however, on May
16, 2001 a manifestation3 to the Labor Arbiter that actual animosities existed between him and
petitioners and there had been threats to his life and his familys safety, hence, he opted for the
payment of separation pay. Petitioners denied the existence of any such animosity.
Meanwhile, the NLRC dismissed petitioners appeal by Resolution4 of April 22, 2002, holding that
respondent was a regular employee and not a project employee, and that there was no valid ground
for the termination of his services. Petitioners motion for reconsideration was denied by
Resolution5 of August 6, 2002.
Petitioners appeal to the Court of Appeals was dismissed by Decision6 of August 12, 2004 which
attained finality on September 15, 2004.
As an agreement could not be forged by the parties on the satisfaction of the judgment, the matter
was referred to the Fiscal Examiner of the NLRC who recomputed at P562,804.69 the amount due
respondent, which was approved by the Labor Arbiter by Order 7 of July 5, 2005. A writ of
execution8 dated July 8, 2005 was thereupon issued.
Finding the amount exorbitant, petitioners filed a motion for reconsideration with the NLRC,
contending that since respondent refused to report back to work, he should be considered to have
abandoned the same, hence, the recomputation of the wages and benefits due him should not be
beyond May 15, 2001, the date when he manifested his refusal to be reinstated.
By Resolution9 of March 9, 2006, the NLRC granted petitioners motion and accordingly vacated the
computation. It held that since respondent did not appeal the Decision of the Labor Arbiter granting
him only reinstatement and backwages, not separation pay in lieu thereof, he may not be afforded
affirmative relief; and since he refused to go back to work, he may recover backwages only up to
May 20, 2001, the day he was supposed to return to the job site. Respondents motion for
reconsideration was denied by the NLRC by Resolution 10 of June 30, 2006, hence, he filed a petition
for certiorari with the Court of Appeals.
By Decision11 of September 10, 2008, the appellate court set aside the NLRC Resolutions, holding
that respondent is entitled to both backwages and separation pay, even if separation pay was not
granted by the Labor Arbiter, the latter in view of the strained relations between the parties. The
appellate court disposed:
Thus, the full backwages and separation pay to be awarded to the petitioner shall be computed as
follows:
P608,564.69
We also award an additional 10% of the total monetary award by way of attorneys fees for the
expenses incurred by the petitioner to protect his rights and interests. Furthermore, when the
decision of this Court as to the monetary award becomes final and executory, the rate of legal
interest shall be imposed at 12% per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of credit.
Petitioners motion for reconsideration was denied by Resolution12 of March 12, 2009, hence, the
present petition for review on certiorari.
Petitioners assail the appellate courts award of separation pay. They assailed too as contrary to
prevailing jurisprudence the computation of backwages from the time of dismissal up to actual
reinstatement. They contend that, in effect, the appellate court modified an already final and
executory decision.
The basis for the payment of backwages is different from that for the award of separation pay.
Separation pay is granted where reinstatement is no longer advisable because of strained relations
between the employee and the employer. Backwages represent compensation that should have
been earned but were not collected because of the unjust dismissal. The basis for computing
backwages is usually the length of the employees service while that for separation pay is the actual
period when the employee was unlawfully prevented from working. 13
[T]he award of separation pay is inconsistent with a finding that there was no illegal dismissal, for
under Article 279 of the Labor Code and as held in a catena of cases, an employee who is dismissed
without just cause and without due process is entitled to backwages and reinstatement or payment
of separation pay in lieu thereof:
The normal consequences of respondents illegal dismissal, then, are reinstatement without
loss of seniority rights, and payment of backwages computed from the time compensation
was withheld up to the date of actual reinstatement. Where reinstatement is no longer viable
as an option, separation pay equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of separation pay is in addition to payment
of backwages. (emphasis, italics and underscoring supplied)
The accepted doctrine is that separation pay may avail in lieu of reinstatement if
reinstatement is no longer practical or in the best interest of the parties. Separation pay in lieu
of reinstatement may likewise be awarded if the employee decides not to be reinstated. (emphasis in
the original; italics supplied)
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly oppressive work environment. On
the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.15
In the present case, the Labor Arbiter found that actual animosity existed between petitioner Azul
and respondent as a result of the filing of the illegal dismissal case. Such finding, especially when
affirmed by the appellate court as in the case at bar, is binding upon the Court, consistent with the
prevailing rules that this Court will not try facts anew and that findings of facts of quasi-judicial bodies
are accorded great respect, even finality.
Clearly then, respondent is entitled to backwages and separation pay as his reinstatement has been
rendered impossible due to strained relations. As correctly held by the appellate court, the
backwages due respondent must be computed from the time he was unjustly dismissed until his
actual reinstatement, or from February 1999 until June 30, 2005 when his reinstatement was
rendered impossible without fault on his part.
The Court, however, does not find the appellate courts computation of separation pay in order. The
appellate court considered respondent to have served petitioner company for only eight years.
Petitioner was hired in 1990, however, and he must be considered to have been in the service
not only until 1999, when he was unjustly dismissed, but until June 30, 2005, the day he is
deemed to have been actually separated (his reinstatement having been rendered
impossible) from petitioner company or for a total of 15 years.
WHEREFORE, the Court of Appeals Decision dated September 10, 2008 and its Resolution dated
March 12, 2009 in C.A. G.R. SP No. 961082 are AFFIRMED with the MODIFICATION that the
amount of separation pay due respondent is, in light of the discussion in the immediately
foregoing paragraph, computed at P85,800.00.
SO ORDERED.
DECISION
PERALTA, J.:
Before this Court is a Petition for Review on certiorari1 under Rule 45 of the Rules of Court assailing
the August 31, 2004 Decision2 and April 5, 2005 Resolution3 of the Court of Appeals (CA) in CA-G.R.
SP No. 82810. The CA declared the dismissal of petitioner as illegal and ordered the payment of his
full backwages, but did not decree his reinstatement.
Petitioner Reynaldo G. Cabigting was hired as a receiver/ issuer at the San Miguel Corporation,
Feeds and Livestock Division (B-Meg) on February 16, 1984 and after years of service, he was
promoted as inventory controller.4
On June 26, 2000, respondent San Miguel Foods, Inc., through its President, Mr. Arnaldo Africa,
sent petitioner a letter informing him that his position as sales office coordinator under its logistic
department has been declared redundant. Simultaneously, respondent terminated the services of
petitioner effective July 31, 2000, and offered him an early retirement package. Thereafter, petitioner
was included in the list of retrenched employees (for reason of redundancy) submitted by
respondent to the Department of Labor and Employment.5
Petitioner was surprised upon receipt of the letter because he was not a sales office coordinator, and
yet he was being terminated as such. Accordingly, petitioner refused to avail of the early retirement
package.6
Prior to petitioners termination on July 31, 2000, he was an inventory controller, performing at the
same time the function of a warehouseman. Furthermore, petitioner was an active union officer of
respondents union but upon his termination, was only a member thereof. 7
With the support of his union,8 petitioner filed a Complaint questioning his termination primarily
because he was not a sales office coordinator, but an inventory controller, performing the functions
of both an inventory controller and a warehouseman. 9
In reply, respondent reiterated its declaration that petitioners position as sales office coordinator was
redundant as a result of respondents effort to streamline its operations.10
According to respondent, petitioner was supposed to be separated from employment (effective July
1, 1997) due to the cessation of business of the B-Meg Plant. However, upon petitioners request for
redeployment to another position, he was accommodated and was designated as sales coordinator
from December 1997 to November 1998, even without rendering actual work as sales coordinator.
Respondent claimed that the same was done on the assumption that petitioner would replace Mr.
Luis del Rosario, Sales Coordinator of respondents Luzon Operations Center, upon the latters
impending retirement and for the sole purpose of justifying his inclusion in the payroll. Respondent
averred, however, that the position of Mr. Luis del Rosario as sales coordinator was abolished due to
redundancy as a result of its streamlining efforts.11
On October 14, 2002, the Labor Arbiter (LA) rendered a Decision, 12 where it ruled that petitioner was
illegally dismissed. Accordingly, the LA ordered respondent to pay petitioner backwages, separation
pay in lieu of reinstatement and attorneys fees. The dispositive portion of said Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent SAN
MIGUEL FOODS, INC. to pay complainant REYNALDO CABIGTING the amount of P1,521,588.99,
representing his separation pay under the CBA, backwages and attorneys fees.
SO ORDERED.13
Respondent appealed the LAs Decision to the National Labor Relations Commission (NLRC).
Likewise, petitioner partly appealed the LAs Decision as to his non-reinstatement to his previous
post and for not awarding him moral and exemplary damages. 14
On June 30, 2003, the NLRC rendered a Decision15 affirming the LAs finding that petitioner was
illegally dismissed by respondent. More importantly, the NLRC modified the LAs Decision by
ordering the reinstatement of petitioner to his previous post, without loss of seniority rights. The
dispositive portion of said Decision reads:
WHEREFORE, premises considered, the decision under review is hereby MODIFIED by decreeing
the REINSTATEMENT of the complainant to his former position without loss of seniority rights, in lieu
of an earlier award of separation pay.
Accordingly, backwages shall be computed from the time of the dismissal up to actual reinstatement.
SO ORDERED.16
Respondent appealed the NLRC Decision to the CA via a Petition for Certiorari 17 under Rule 65 of
the Rules of Court.
On August 31, 2004, the CA rendered a Decision partially granting respondents petition. In said
Decision, the CA affirmed the judgment of the LA and the NLRC finding that petitioner was illegally
dismissed by respondent. However, the CA, on the ground that there were strained relations
between employee and employer, reversed the portion of the NLRC Decision which decreed
petitioners reinstatement. The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the judgment of public respondent NLRC, affirming the
judgment of the Labor Arbiter that private respondent Cabigting was illegally dismissed by petitioner,
is hereby AFFIRMED. However, public respondent NLRCs judgment ordering the reinstatement of
private respondent Cabigting is hereby REVERSED and SET ASIDE.
The awards of backwages, separation pay and attorneys fees by the Labor Arbiter in his Decision
dated October 14, 2002 REMAIN.
SO ORDERED.18
Respondent filed a Motion for Reconsideration19 of the said Decision. Likewise, petitioner filed a
Partial Motion for Reconsideration20 assailing the CA Decision insofar as it ruled against his
reinstatement.
Hence, herein petition, with petitioner raising the lone assignment of error, to wit:
The crux of the controversy is whether or not "strained relations" bar petitioners reinstatement.
At the outset, this Court shall address respondents plea to re-open the issue of illegal dismissal.
Respondent argues that it is axiomatic that an appeal, once accepted by the Supreme Court, throws
the entire case open to review.23 Accordingly, respondent posits that petitioner was not illegally
dismissed, but was separated due to a valid redundancy/retrenchment program. 24
The well-entrenched rule in our jurisdiction is that only questions of law may be entertained by this
Court in a petition for review on certiorari. This rule, however, is not ironclad and admits certain
exceptions, such as when (1) the conclusion is grounded on speculations, surmises or conjectures;
(2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion;
(4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6)
there is no citation of specific evidence on which the factual findings are based; (7) the findings of
absence of facts are contradicted by the presence of evidence on record; (8) the findings of the
Court of Appeals are contrary to those of the trial court; (9) the Court of Appeals manifestly
overlooked certain relevant and undisputed facts that, if properly considered, would justify a different
conclusion; (10) the findings of the Court of Appeals are beyond the issues of the case; and (11)
such findings are contrary to the admissions of both parties.25
After a painstaking review of the records, this Court finds no justification to warrant the application of
any exception to the general rule.
It bears to stress that the LA, the NLRC and the CA all ruled that petitioner was illegally dismissed.
Such being the case, factual findings of quasi-judicial bodies like the NLRC, particularly when they
coincide with those of the Labor Arbiter and, if supported by substantial evidence, are accorded
respect and even finality by this Court.26Moreover, it is not the function of this Court to assess and
evaluate the evidence all over again, particularly where the findings of the LA, the NLRC and the CA
coincide. Thus, absent a showing of an error of law committed by the court below, or of whimsical or
capricious exercise of judgment, or a demonstrable lack of basis for its conclusions, this Court may
not disturb its factual findings.27
Having settled the foregoing, this Court shall now address the lone issue of strained relations.
Article 279 of the Labor Code of the Philippines provides the law on reinstatement, viz.:
Article 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 benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.28
Corollarily, Sections 2 and 3, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code
state, viz.:
Sec. 2. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee, except for a just cause as provided in the Labor Code or when authorized
by existing laws.
Sec. 3. Reinstatement. - An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and to backwages. 29
Under the law and prevailing jurisprudence, an illegally dismissed employee is entitled to
reinstatement as a matter of right. However, if reinstatement would only exacerbate the tension and
strained relations between the parties, or where the relationship between the employer and the
employee has been unduly strained by reason of their irreconcilable differences, particularly where
the illegally dismissed employee held a managerial or key position in the company, it would be more
prudent to order payment of separation pay instead of reinstatement. 30
In Globe-Mackay Cable and Radio Corporation v. National Labor Relations Commission, 31 this Court
discussed the limitations and qualifications for the application of the "strained relations" principle, in
this wise:
x x x If, in the wisdom of the Court, there may be a ground or grounds for non-application of the
above-cited provision, this should be by way of exception, such as when the reinstatement may be
inadmissible due to ensuing strained relations between the employer and the employee.
In such cases, it should be proved that the employee concerned occupies a position where he
enjoys the trust and confidence of his employer; and that it is likely that if reinstated, an atmosphere
of antipathy and antagonism may be generated as to adversely affect the efficiency and productivity
of the employee concerned.
A few examples will suffice to illustrate the Court's application of the above principle: where the
employee is a Vice-President for Marketing and, as such, enjoys the full trust and confidence of top
management; or is the Officer-In-Charge of the extension office of the bank where he works; or is an
organizer of a union who was in a position to sabotage the union's efforts to organize the workers in
commercial and industrial establishments; or is a warehouseman of a non-profit organization whose
primary purpose is to facilitate and maximize voluntary gifts by foreign individuals and organizations
to the Philippines; or is a manager of its Energy Equipment Sales.
Besides, no strained relations should arise from a valid and legal act of asserting one's right;
otherwise, an employee who shall assert his right could be easily separated from the service, by
merely paying his separation pay on the pretext that his relationship with his employer had already
become strained.32
Moreover, Chief Justice Reynato S. Puno, in his dissenting opinion in MGG Marine Services, Inc. v.
National Labor Relations Commission,33 gives the following suggestion in the application of the
doctrine of strained relations:
x x x At the very least, I suggest that, henceforth, we should require that the alleged "strained
relationship" must be pleaded and proved if either the employer or the employee does not want the
employment tie to remain. By making "strained relationship" a triable issue of fact before the Arbiter
or the NLRC we will eliminate rulings on "strained relationship" based on mere impression alone. 34
Based on the foregoing, in order for the doctrine of strained relations to apply, it should be proved
that the employee concerned occupies a position where he enjoys the trust and confidence of his
employer and that it is likely that if reinstated, an atmosphere of antipathy and antagonism may be
generated as to adversely affect the efficiency and productivity of the employee concerned.
Although the determination of the applicability of the doctrine of strained relations is essentially a
question of fact, which should not be the proper subject of herein petition, this Court shall address
said issue in light of the conflicting findings of the LA and the NLRC.
After a perusal of the LA Decision, this Court finds that the LA had no hard facts upon which to base
the application of the doctrine of strained relations, as the same was not squarely discussed nor
elaborated on. Also, it is of notice that said issue was addressed by the LA in just one sentence
without indicating factual circumstances why strained relations exist.
The same is also true for the CA Decision which disposed of the issue in just one sentence without
any elaboration, to wit:
On the matter of reinstatement, We believe that under the circumstances in this case, there has
been, and there will be, animosity and strained relationships between the parties, hence, private
respondent Cabigting shall be entitled to separation pay.36
Accordingly, this Court is of the opinion that both the LA and the CA based their conclusions on
impression alone. It bears to stress that reinstatement is the rule and, for the exception of strained
relations to apply, it should be proved that it is likely that if reinstated, an atmosphere of antipathy
and antagonism would be generated as to adversely affect the efficiency and productivity of the
employee concerned. However, both the LA and the CA failed to state the basis for their finding that
a strained relationship exists.
Based on the foregoing, this Court upholds the ruling of the NLRC finding the doctrine of strained
relations inapplicable to the factual circumstances of the case at bar, to wit:
Finally, it is noted that the position of warehouseman and inventory controller is still existing up to
date. The nature of the controversy where the parties to this case were engaged is not of such
nature that would spawn a situation where the relations are severely strained between them as
would bar the complainant to his continued employment. Neither may it be said that his position
entails a constant communion with the respondent such that hostilities may bar smooth interactions
between them. Accordingly, We find no basis for an award of separation pay in lieu of
reinstatement.37
In its pleadings, however, respondent repeatedly argued against the reinstatement of petitioner, in
the wise:
5.5 Strained relations may result, among others, from the imputations made by the employer and the
employee as against each other or, by the filing of a complaint by the employee against the
employer. 1avvphi1
5.6 As will be discussed below, the strained relationship between the petitioner and the respondent,
aside from the fact that the former was not illegally dismissed, further militates against the
reinstatement of the petitioner.
5.7 The petitioner, in his pleadings submitted before the Honorable Labor Arbiter below, resorted to
imputations and accusations which are totally uncalled for, hitting the respondent "below the belt," so
to speak.
5.8 For instance, in his reply position paper, petitioner declared as a "blatant display of arrogance"
the alleged refusal of respondent to observe certain provisions of the collective bargaining
agreement; that it was "highly ridiculous" on the part of the respondent to assert that his continued
employment was due merely to an act of accommodation on the part of the respondent.
5.9 In fact, in his comment with the Court of Appeals, petitioner intimated that respondent fabricated
evidence when it presented a document which showed that petitioner was a Sales Office
Coordinator, claiming that he was assigned by the respondent to a "new and unknown position and
thereafter declared [the position] redundant." Throughout his allegations, petitioner imputes "malice"
and "bad faith" on the part of respondent.
5.10 These imputations effectively placed a strain on the relationship between the respondent and
the petitioner, notwithstanding the fact that the former did everything within its resources to
accommodate the petitioner so as to provide him employment even when there was no more work
for him to do.
xxxx
5.18 The antagonism and antipathy shown by petitioner towards the respondent is more real than
imaginary. It bears to note that after the respondent extended him accommodation by instituting him
in the payroll, the petitioner "turned the tables" on the respondent by declaring that his continued
employment was not due to an accommodation, even alleging that it was "highly ridiculous" for the
respondent to consider him as an accommodated employee. 38
The claim of respondent is not meritorious. This Court shares petitioners view that the words
allegedly imputing malice and bad faith towards the respondent cannot be made a basis for denying
his reinstatement. Respondents perceived antipathy and antagonism is not of such degree as would
preclude reinstatement of petitioner to his former position.39 In addition, by themselves alone, the
words used by petitioner in his pleadings are insufficient to prove the presence of strained relations.
Thus, this Court finds that one should not fault petitioner for his choice of words, especially in light of
overwhelming evidence showing he was illegally dismissed.
Moreover, the filing of the complaint by petitioner cannot be used as a basis for strained relations. As
a rule, no strained relations should arise from a valid and legal act asserting ones right. 40 Likewise,
respondents claim that it was betrayed by petitioner, after several accommodations it had extended
to him,41 deserves scant consideration. On this note, the NLRC was categorical that no such
accommodation existed, to wit:
On the argument that Cabigting was merely accommodated by the respondent after the closure of
the Tacoma Warehouse, it, however, appears that no such accommodation existed. x x x 42
The doctrine of strained relations has been made applicable to cases 43 where the employee decides
not to be reinstated and demands for separation pay. The same, however, does not apply to herein
petition, as petitioner is asking for his reinstatement despite his illegal dismissal.
Lastly, this Court takes note of the findings of fact of the NLRC that the position of inventory
controller and warehouseman is still existing up to date. 44 Petitioner has been an inventory controller
for so many years, and there should be no problem in ordering the reinstatement with facility of a
laborer, clerk, or other rank-and-file employee.45
In conclusion, it bears to stress that it is human nature that some hostility will inevitably arise
between parties as a result of litigation, but the same does not always constitute strained relations in
the absence of proof or explanation that such indeed exists.
WHEREFORE, premises considered, the petition is GRANTED. The August 31, 2004 Decision and
April 5, 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 82810 are hereby AFFIRMED
with the MODIFICATION that petitioner Reynaldo G. Cabigting is entitled to REINSTATEMENT.
Respondent is ORDERED to IMMEDIATELY REINSTATE petitioner to his previous position without
loss of seniority rights. In case the former position of petitioner is no longer available, respondent is
directed to create an equivalent position and immediately reinstate petitioner without loss of seniority
rights. Accordingly, backwages shall be computed from the time of dismissal up to the time of actual
reinstatement.
SO ORDERED.
SECOND DIVISION
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court from the May 29, 2008 Decision 1 of
the Twentieth Division of the Court of Appeals (CA) in CA-G.R. SP No. 02127 entitled "Timoteo H.
Sarona v. National Labor Relations Commission, Royale Security Agency (formerly Sceptre Security
Agency) and Cesar S. Tan" (Assailed Decision), which affirmed the National Labor Relations
Commissions (NLRC) November 30, 2005 Decision and January 31, 2006 Resolution, finding the
petitioner illegally dismissed but limiting the amount of his backwages to three (3) monthly salaries.
The CA likewise affirmed the NLRCs finding that the petitioners separation pay should be computed
only on the basis of his length of service with respondent Royale Security Agency (Royale). The CA
held that absent any showing that Royale is a mere alter ego of Sceptre Security Agency (Sceptre),
Royale cannot be compelled to recognize the petitioners tenure with Sceptre. The dispositive
portion of the CAs Assailed Decision states:
WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED, though piercing
of the corporate veil is hereby denied for lack of merit. Accordingly, the assailed Decision and
Resolution of the NLRC respectively dated November 30, 2005 and January 31, 2006 are
hereby AFFIRMED as to the monetary awards.
SO ORDERED. 2
Factual Antecedents
On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April
1976, was asked by Karen Therese Tan (Karen), Sceptres Operation Manager, to submit a
resignation letter as the same was supposedly required for applying for a position at Royale. The
petitioner was also asked to fill up Royales employment application form, which was handed to him
by Royales General Manager, respondent Cesar Antonio Tan II (Cesar).3
After several weeks of being in floating status, Royales Security Officer, Martin Gono (Martin),
assigned the petitioner at Highlight Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8,
2003. Thereafter, the petitioner was transferred and assigned to Wide Wide World Express, Inc.
(WWWE, Inc.). During his assignment at Highlight Metal, the petitioner used the patches and agency
cloths of Sceptre and it was only
when he was posted at WWWE, Inc. that he started using those of Royale. 4
On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been
withdrawn because Royale had allegedly been replaced by another security agency. The petitioner,
however, shortly discovered thereafter that Royale was never replaced as WWWE, Inc.s security
agency. When he placed a call at WWWE, Inc., he learned that his fellow security guard was not
relieved from his post.5
On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit for a short
period from September 22, 2003 to September 30, 2003. Subsequently, when the petitioner reported
at Royales office on October 1, 2003, Martin informed him that he would no longer be given any
assignment per the instructions of Aida Sabalones-Tan (Aida), general manager of Sceptre. This
prompted him to file a complaint for illegal dismissal on October 4, 2003. 6
In his May 11, 2005 Decision, Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the petitioners
favor and found him illegally dismissed. For being unsubstantiated, LA Gutierrez denied credence to
the respondents claim that the termination of the petitioners employment relationship with Royale
was on his accord following his alleged employment in another company. That the petitioner was no
longer interested in being an employee of Royale cannot be presumed from his request for a
certificate of employment, a claim which, to begin with, he vehemently denies. Allegation of the
petitioners abandonment is negated by his filing of a complaint for illegal dismissal three (3) days
after he was informed that he would no longer be given any assignments. LA Gutierrez ruled:
In short, respondent wanted to impress before us that complainant abandoned his employment. We
are not however, convinced.
There is abandonment when there is a clear proof showing that one has no more interest to return to
work. In this instant case, the record has no proof to such effect. In a long line of decisions, the
Supreme Court ruled:
"In abandonment, there must be a concurrence of the intention to abandon and some overt
acts from which an employee may be declared as having no more interest to work." (C.
Alcontin & Sons, Inc. vs. NLRC, 229 SCRA 109).
"It is clear, deliberate and unjustified refusal to severe employment and not mere absence
that is required to constitute abandonment." x x x" (De Ysasi III vs. NLRC, 231 SCRA 173).
Aside from lack of proof showing that complainant has abandoned his employment, the record would
show that immediate action was taken in order to protest his dismissal from employment. He filed a
complaint [for] illegal dismissal on October 4, 2004 or three (3) days after he was dismissed. This
act, as declared by the Supreme Court is inconsistent with abandonment, as held in the case of
Pampanga Sugar Development Co., Inc. vs. NLRC, 272 SCRA 737 where the Supreme Court ruled:
The respondents were ordered to pay the petitioner backwages, which LA Gutierrez computed from
the day he was dismissed, or on October 1, 2003, up to the promulgation of his Decision on May 11,
2005. In lieu of reinstatement, the respondents were ordered to pay the petitioner separation pay
equivalent to his one (1) month salary in consideration of his tenure with Royale, which lasted for
only one (1) month and three (3) days. In this regard, LA Gutierrez refused to pierce Royales
corporate veil for purposes of factoring the petitioners length of service with Sceptre in the
computation of his separation pay. LA Gutierrez ruled that Royales corporate personality, which is
separate and distinct from that of Sceptre, a sole proprietorship owned by the late Roso Sabalones
(Roso) and later, Aida, cannot be pierced absent clear and convincing evidence that Sceptre and
Royale share the same stockholders and incorporators and that Sceptre has complete control and
dominion over the finances and business affairs of Royale. Specifically:
To support its prayer of piercing the veil of corporate entity of respondent Royale, complainant avers
that respondent Royal (sic) was using the very same office of SCEPTRE in C. Padilla St., Cebu City.
In addition, all officers and staff of SCEPTRE are now the same officers and staff of ROYALE, that all
[the] properties of SCEPTRE are now being owned by ROYALE and that ROYALE is now occupying
the property of SCEPTRE. We are not however, persuaded.
It should be pointed out at this juncture that SCEPTRE, is a single proprietorship. Being so, it has no
distinct and separate personality. It is owned by the late Roso T. Sabalones. After the death of the
owner, the property is supposed to be divided by the heirs and any claim against the sole
proprietorship is a claim against Roso T. Sabalones. After his death, the claims should be instituted
against the estate of Roso T. Sabalones. In short, the estate of the late Roso T. Sabalones should
have been impleaded as respondent of this case.
Complainant wanted to impress upon us that Sceptre was organized into another entity now called
Royale Security Agency. There is however, no proof to this assertion. Likewise, there is no proof that
Roso T. Sabalones, organized his single proprietorship business into a corporation, Royale Security
Agency. On the contrary, the name of Roso T. Sabalones does not appear in the Articles of
Incorporation. The names therein as incorporators are:
Complainant claims that two (2) of the incorporators are the granddaughters of Roso T. Sabalones.
This fact even give (sic) us further reason to conclude that respondent Royal (sic) Security Agency is
not an alter ego or conduit of SCEPTRE. It is obvious that respondent Royal (sic) Security Agency is
not owned by the owner of "SCEPTRE".
It may be true that the place where respondent Royale hold (sic) office is the same office formerly
used by "SCEPTRE." Likewise, it may be true that the same officers and staff now employed by
respondent Royale Security Agency were the same officers and staff employed by "SCEPTRE." We
find, however, that these facts are not sufficient to justify to require respondent Royale to answer for
the liability of Sceptre, which was owned solely by the late Roso T. Sabalones. As we have stated
above, the remedy is to address the claim on the estate of Roso T. Sabalones. 8
The respondents appealed LA Gutierrezs May 11, 2005 Decision to the NLRC, claiming that the
finding of illegal dismissal was attended with grave abuse of discretion. This appeal was, however,
dismissed by the NLRC in its November 30, 2005 Decision, 9 the dispositive portion of which states:
WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the illegal dismissal
of complainant is hereby AFFIRMED.
However[,] We modify the monetary award by limiting the grant of backwages to only three (3)
months in view of complainants very limited service which lasted only for one month and three days.
1. Backwages - [P]15,600.00
2. Separation Pay - 5,200.00
3. 13th Month Pay - 583.34
[P]21,383.34 Attorney's Fees - 2,138.33
Total [P]23,521.67
The appeal of respondent Royal (sic) Security Agency is hereby DISMISSED for lack of merit.
SO ORDERED.10
The NLRC partially affirmed LA Gutierrezs May 11, 2005 Decision. It concurred with the latters
finding that the petitioner was illegally dismissed and the manner by which his separation pay was
computed, but modified the monetary award in the petitioners favor by reducing the amount of his
backwages from P95,600.00 to P15,600.00. The NLRC determined the petitioners backwages as
limited to three (3) months of his last monthly salary, considering that his employment with Royale
was only for a period for one (1) month and three (3) days, thus:11
On the other hand, while complainant is entitled to backwages, We are aware that his stint with
respondent Royal (sic) lasted only for one (1) month and three (3) days such that it is Our
considered view that his backwages should be limited to only three (3) months.
Backwages:
The petitioner, on the other hand, did not appeal LA Gutierrezs May 11, 2005 Decision but opted to
raise the validity of LA Gutierrezs adverse findings with respect to piercing Royales corporate
personality and computation of his separation pay in his Reply to the respondents Memorandum of
Appeal. As the filing of an appeal is the prescribed remedy and no aspect of the decision can be
overturned by a mere reply, the NLRC dismissed the petitioners efforts to reverse LA Gutierrezs
disposition of these issues. Effectively, the petitioner had already waived his right to question LA
Gutierrezs Decision when he failed to file an appeal within the reglementary period. The NLRC held:
On the other hand, in complainants Reply to Respondents Appeal Memorandum he prayed that the
doctrine of piercing the veil of corporate fiction of respondent be applied so that his services with
Sceptre since 1976 [will not] be deleted. If complainant assails this particular finding in the Labor
Arbiters Decision, complainant should have filed an appeal and not seek a relief by merely filing a
Reply to Respondents Appeal Memorandum.13
Consequently, the petitioner elevated the NLRCs November 30, 2005 Decision to the CA by way of
a Petition for Certiorari under Rule 65 of the Rules of Court. On the other hand, the respondents filed
no appeal from the NLRCs finding that the petitioner was illegally dismissed.
The CA, in consideration of substantial justice and the jurisprudential dictum that an appealed case
is thrown open for the appellate courts review, disagreed with the NLRC and proceeded to review
the evidence on record to determine if Royale is Sceptres alter ego that would warrant the piercing
of its corporate veil.14 According to the CA, errors not assigned on appeal may be reviewed as
technicalities should not serve as bar to the full adjudication of cases. Thus:
In Cuyco v. Cuyco, which We find application in the instant case, the Supreme Court held:
"In their Reply, petitioners alleged that their petition only raised the sole issue of interest on the
interest due, thus, by not filing their own petition for review, respondents waived their privilege to
bring matters for the Courts review that [does] not deal with the sole issue raised.
Procedurally, the appellate court in deciding the case shall consider only the assigned errors,
however, it is equally settled that the Court is clothed with ample authority to review matters not
assigned as errors in an appeal, if it finds that their consideration is necessary to arrive at a just
disposition of the case."
Therefore, for full adjudication of the case, We have to primarily resolve the issue of whether the
doctrine of piercing the corporate veil be justly applied in order to determine petitioners length of
service with private respondents.15 (citations omitted)
Nonetheless, the CA ruled against the petitioner and found the evidence he submitted to support his
allegation that Royale and Sceptre are one and the same juridical entity to be wanting. The CA
refused to pierce Royales corporate mask as one of the "probative factors that would justify the
application of the doctrine of piercing the corporate veil is stock ownership by one or common
ownership of both corporations" and the petitioner failed to present clear and convincing proof that
Royale and Sceptre are commonly owned or controlled. The relevant portions of the CAs Decision
state:
In the instant case, We find no evidence to show that Royale Security Agency, Inc. (hereinafter
"Royale"), a corporation duly registered with the Securities and Exchange Commission (SEC) and
Sceptre Security Agency (hereinafter "Sceptre"), a single proprietorship, are one and the same
entity.
Petitioner, who has been with Sceptre since 1976 and, as ruled by both the Labor Arbiter and the
NLRC, was illegally dismissed by Royale on October 1, 2003, alleged that in order to circumvent
labor laws, especially to avoid payment of money claims and the consideration on the length of
service of its employees, Royale was established as an alter ego or business conduit of Sceptre. To
prove his claim, petitioner declared that Royale is conducting business in the same office of Sceptre,
the latter being owned by the late retired Gen. Roso Sabalones, and was managed by the latters
daughter, Dr. Aida Sabalones-Tan; that two of Royales incorporators are grandchildren [of] the late
Gen. Roso Sabalones; that all the properties of Sceptre are now owned by Royale, and that the
officers and staff of both business establishments are the same; that the heirs of Gen. Sabalones
should have applied for dissolution of Sceptre before the SEC before forming a new corporation.
On the other hand, private respondents declared that Royale was incorporated only on March 10,
2003 as evidenced by the Certificate of Incorporation issued by the SEC on the same date; that
Royales incorporators are Bruino M. Kuizon, Wilfredo Gracia K. Tan, Karen Therese S. Tan, Cesar
Antonio S. Tan II and [Gabeth] Maria K. Tan.
Settled is the tenet that allegations in the complaint must be duly proven by competent evidence and
the burden of proof is on the party making the allegation. Further, Section 1 of Rule 131 of the
Revised Rules of Court provides:
"SECTION 1. Burden of proof. Burden of proof is the duty of a party to present evidence on the
facts in issue necessary to establish his claim or defense by the amount of evidence required by
law."
We believe that petitioner did not discharge the required burden of proof to establish his allegations.
As We see it, petitioners claim that Royale is an alter ego or business conduit of Sceptre is without
basis because aside from the fact that there is no common ownership of both Royale and Sceptre,
no evidence on record would prove that Sceptre, much less the late retired Gen. Roso Sabalones or
his heirs, has control or complete domination of Royales finances and business transactions.
Absence of this first element, coupled by petitioners failure to present clear and convincing evidence
to substantiate his allegations, would prevent piercing of the corporate veil. Allegations must be
proven by sufficient evidence. Simply stated, he who alleges a fact has the burden of proving it;
mere allegation is not evidence.16 (citations omitted)
By way of this Petition, the petitioner would like this Court to revisit the computation of his
backwages, claiming that the same should be computed from the time he was illegally dismissed
until the finality of this decision.17 The petitioner would likewise have this Court review and examine
anew the factual allegations and the supporting evidence to determine if the CA erred in its refusal to
pierce Royales corporate mask and rule that it is but a mere continuation or successor of Sceptre.
According to the petitioner, the erroneous computation of his separation pay was due to the CAs
failure, as well as the NLRC and LA Gutierrez, to consider evidence conclusively demonstrating that
Royale and Sceptre are one and the same juridical entity. The petitioner claims that since Royale is
no more than Sceptres alter ego, it should recognize and credit his length of service with Sceptre. 18
The petitioner claimed that Royale and Sceptre are not separate legal persons for purposes of
computing the amount of his separation pay and other benefits under the Labor Code. The piercing
of Royales corporate personality is justified by several indicators that Royale was incorporated for
the sole purpose of defeating his right to security of tenure and circumvent payment of his benefits to
which he is entitled under the law: (i) Royale was holding office in the same property used by
Sceptre as its principal place of business;19 (ii) Sceptre and Royal have the same officers and
employees;20 (iii) on October 14, 1994, Roso, the sole proprietor of Sceptre, sold to Aida, and her
husband, Wilfredo Gracia K. Tan (Wilfredo),21 the property used by Sceptre as its principal place of
business;22 (iv) Wilfredo is one of the incorporators of Royale; 23 (v) on May 3, 1999, Roso ceded the
license to operate Sceptre issued by the Philippine National Police to Aida; 24 (vi) on July 28, 1999,
the business name "Sceptre Security & Detective Agency" was registered with the Department of
Trade and Industry (DTI) under the name of Aida;25 (vii) Aida exercised control over the affairs of
Sceptre and Royale, as she was, in fact, the one who dismissed the petitioner from
employment;26 (viii) Karen, the daughter of Aida, was Sceptres Operation Manager and is one of the
incorporators of Royale;27 and (ix) Cesar Tan II, the son of Aida was one of Sceptres officers and is
one of the incorporators of Royale.28
In their Comment, the respondents claim that the petitioner is barred from questioning the manner by
which his backwages and separation pay were computed. Earlier, the petitioner moved for the
execution of the NLRCs November 30, 2005 Decision29 and the respondents paid him the full
amount of the monetary award thereunder shortly after the writ of execution was issued. 30 The
respondents likewise maintain that Royales separate and distinct corporate personality should be
respected considering that the evidence presented by the petitioner fell short of establishing that
Royale is a mere alter ego of Sceptre.
The petitioner does not deny that he has received the full amount of backwages and separation pay
as provided under the NLRCs November 30, 2005 Decision.31 However, he claims that this does not
preclude this Court from modifying a decision that is tainted with grave abuse of discretion or issued
without jurisdiction.32
ISSUES
Considering the conflicting submissions of the parties, a judicious determination of their respective
rights and obligations requires this Court to resolve the following substantive issues:
a. Whether Royales corporate fiction should be pierced for the purpose of compelling it to
recognize the petitioners length of service with Sceptre and for holding it liable for the
benefits that have accrued to him arising from his employment with Sceptre; and
b. Whether the petitioners backwages should be limited to his salary for three (3) months.
OUR RULING
Because his receipt of the proceeds of the award under the NLRCs November 30, 2005
Decision is qualified and without prejudice to the CAs resolution of his petition for certiorari,
the petitioner is not barred from exercising his right to elevate the decision of the CA to this
Court.
Before this Court proceeds to decide this Petition on its merits, it is imperative to resolve the
respondents contention that the full satisfaction of the award under the NLRCs November 30, 2005
Decision bars the petitioner from questioning the validity thereof. The respondents submit that they
had paid the petitioner the amount of P21,521.67 as directed by the NLRC and this constitutes a
waiver of his right to file an appeal to this Court.
The petitioners receipt of the monetary award adjudicated by the NLRC is not absolute,
unconditional and unqualified. The petitioners May 3, 2007 Motion for Release contains a
reservation, stating in his prayer that: "it is respectfully prayed that the respondents and/or Great
Domestic Insurance Co. be ordered to RELEASE/GIVE the amount of P23,521.67 in favor of the
complainant TIMOTEO H. SARONA without prejudice to the outcome of the petition with the CA." 33
In Leonis Navigation Co., Inc., et al. v. Villamater, et al.,34 this Court ruled that the prevailing partys
receipt of the full amount of the judgment award pursuant to a writ of execution issued by the labor
arbiter does not close or terminate the case if such receipt is qualified as without prejudice to the
outcome of the petition for certiorari pending with the CA. 1avvphi1
Simply put, the execution of the final and executory decision or resolution of the NLRC shall proceed
despite the pendency of a petition for certiorari, unless it is restrained by the proper court. In the
present case, petitioners already paid Villamaters widow, Sonia, the amount of P3,649,800.00,
representing the total and permanent disability award plus attorneys fees, pursuant to the Writ of
Execution issued by the Labor Arbiter. Thereafter, an Order was issued declaring the case as
"closed and terminated". However, although there was no motion for reconsideration of this last
Order, Sonia was, nonetheless, estopped from claiming that the controversy had already reached its
end with the issuance of the Order closing and terminating the case. This is because the
Acknowledgment Receipt she signed when she received petitioners payment was without prejudice
to the final outcome of the petition for certiorari pending before the CA.35
The finality of the NLRCs decision does not preclude the filing of a petition for certiorari under Rule
65 of the Rules of Court. That the NLRC issues an entry of judgment after the lapse of ten (10) days
from the parties receipt of its decision36 will only give rise to the prevailing partys right to move for
the execution thereof but will not prevent the CA from taking cognizance of a petition for certiorari on
jurisdictional and due process considerations.37 In turn, the decision rendered by the CA on a petition
for certiorari may be appealed to this Court by way of a petition for review on certiorari under Rule 45
of the Rules of Court. Under Section 5, Article VIII of the Constitution, this Court has the power to
"review, revise, reverse, modify, or affirm on appeal or certiorari as the law or the Rules of Court may
provide, final judgments and orders of lower courts in x x x all cases in which only an error or
question of law is involved." Consistent with this constitutional mandate, Rule 45 of the Rules of
Court provides the remedy of an appeal by certiorari from decisions, final orders or resolutions of the
CA in any case, i.e., regardless of the nature of the action or proceedings involved, which would be
but a continuation of the appellate process over the original case. 38 Since an appeal to this Court is
not an original and independent action but a continuation of the proceedings before the CA, the filing
of a petition for review under Rule 45 cannot be barred by the finality of the NLRCs decision in the
same way that a petition for certiorari under Rule 65 with the CA cannot.
Furthermore, if the NLRCs decision or resolution was reversed and set aside for being issued with
grave abuse of discretion by way of a petition for certiorari to the CA or to this Court by way of an
appeal from the decision of the CA, it is considered void ab initio and, thus, had never become final
and executory.39
A Rule 45 Petition should be confined to questions of law. Nevertheless, this Court has the
power to resolve a question of fact, such as whether a corporation is a mere alter ego of
another entity or whether the corporate fiction was invoked for fraudulent or malevolent
ends, if the findings in assailed decision is not supported by the evidence on record or based
on a misapprehension of facts.
The question of whether one corporation is merely an alter ego of another is purely one of fact. So is
the question of whether a corporation is a paper company, a sham or subterfuge or whether the
petitioner adduced the requisite quantum of evidence warranting the piercing of the veil of the
respondents corporate personality.40
As a general rule, this Court is not a trier of facts and a petition for review on certiorari under Rule 45
of the Rules of Court must exclusively raise questions of law. Moreover, if factual findings of the
NLRC and the LA have been affirmed by the CA, this Court accords them the respect and finality
they deserve. It is well-settled and oft-repeated that findings of fact of administrative agencies and
quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific
matters, are generally accorded not only respect, but finality when affirmed by the CA. 41
Nevertheless, this Court will not hesitate to deviate from what are clearly procedural guidelines and
disturb and strike down the findings of the CA and those of the labor tribunals if there is a showing
that they are unsupported by the evidence on record or there was a patent misappreciation of facts.
Indeed, that the impugned decision of the CA is consistent with the findings of the labor tribunals
does not per se conclusively demonstrate the correctness thereof. By way of exception to the
general rule, this Court will scrutinize the facts if only to rectify the prejudice and injustice resulting
from an incorrect assessment of the evidence presented.
A resolution of an issue that has supposedly become final and executory as the petitioner
only raised it in his reply to the respondents appeal may be revisited by the appellate court if
such is necessary for a just disposition of the case.
As above-stated, the NLRC refused to disturb LA Gutierrezs denial of the petitioners plea to pierce
Royales corporate veil as the petitioner did not appeal any portion of LA Gutierrezs May 11, 2005
Decision.
In this respect, the NLRC cannot be accused of grave abuse of discretion. Under Section 4(c), Rule
VI of the NLRC Rules,42 the NLRC shall limit itself to reviewing and deciding only the issues that
were elevated on appeal. The NLRC, while not totally bound by technical rules of procedure, is not
licensed to disregard and violate the implementing rules it implemented. 43
Nonetheless, technicalities should not be allowed to stand in the way of equitably and completely
resolving the rights and obligations of the parties. Technical rules are not binding in labor cases and
are not to be applied strictly if the result would be detrimental to the working man. 44 This Court may
choose not to encumber itself with technicalities and limitations consequent to procedural rules if
such will only serve as a hindrance to its duty to decide cases judiciously and in a manner that would
put an end with finality to all existing conflicts between the parties.
A corporation is an artificial being created by operation of law. It possesses the right of succession
and such powers, attributes, and properties expressly authorized by law or incident to its existence.
It has a personality separate and distinct from the persons composing it, as well as from any other
legal entity to which it may be related. This is basic.45
Equally well-settled is the principle that the corporate mask may be removed or the corporate veil
pierced when the corporation is just an alter ego of a person or of another corporation. For reasons
of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it
becomes a shield for fraud, illegality or inequity committed against third persons. 46
Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A
court should be mindful of the milieu where it is to be applied. It must be certain that the corporate
fiction was misused to such an extent that injustice, fraud, or crime was committed against another,
in disregard of rights. The wrongdoing must be clearly and convincingly established; it cannot be
presumed. Otherwise, an injustice that was never unintended may result from an erroneous
application.47
Whether the separate personality of the corporation should be pierced hinges on obtaining facts
appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with
caution, albeit the Court will not hesitate to disregard the corporate veil when it is misused or when
necessary in the interest of justice. After all, the concept of corporate entity was not meant to
promote unfair objectives.48
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of
public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing
obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or
defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter
ego or business conduit of a person, or where the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation.49
In this regard, this Court finds cogent reason to reverse the CAs findings. Evidence abound showing
that Royale is a mere continuation or successor of Sceptre and fraudulent objectives are behind
Royales incorporation and the petitioners subsequent employment therein. These are plainly
suggested by events that the respondents do not dispute and which the CA, the NLRC and LA
Gutierrez accept as fully substantiated but misappreciated as insufficient to warrant the use of the
equitable weapon of piercing.
As correctly pointed out by the petitioner, it was Aida who exercised control and supervision over the
affairs of both Sceptre and Royale. Contrary to the submissions of the respondents that Roso had
been the only one in sole control of Sceptres finances and business affairs, Aida took over as early
as 1999 when Roso assigned his license to operate Sceptre on May 3, 1999. 50 As further proof of
Aidas acquisition of the rights as Sceptres sole proprietor, she caused the registration of the
business name "Sceptre Security & Detective Agency" under her name with the DTI a few months
after Roso abdicated his rights to Sceptre in her favor.51 As far as Royale is concerned, the
respondents do not deny that she has a hand in its management and operation and possesses
control and supervision of its employees, including the petitioner. As the petitioner correctly pointed
out, that Aida was the one who decided to stop giving any assignments to the petitioner and
summarily dismiss him is an eloquent testament of the power she wields insofar as Royales affairs
are concerned. The presence of actual common control coupled with the misuse of the corporate
form to perpetrate oppressive or manipulative conduct or evade performance of legal obligations is
patent; Royale cannot hide behind its corporate fiction.
Aidas control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction.
There must be a showing that a fraudulent intent or illegal purpose is behind the exercise of such
control to warrant the piercing of the corporate veil. 52 However, the manner by which the petitioner
was made to resign from Sceptre and how he became an employee of Royale suggest the perverted
use of the legal fiction of the separate corporate personality. It is undisputed that the petitioner
lavvphil
tendered his resignation and that he applied at Royale at the instance of Karen and Cesar and on
the impression they created that these were necessary for his continued employment. They
orchestrated the petitioners resignation from Sceptre and subsequent employment at Royale, taking
advantage of their ascendancy over the petitioner and the latters lack of knowledge of his rights and
the consequences of his actions. Furthermore, that the petitioner was made to resign from Sceptre
and apply with Royale only to be unceremoniously terminated shortly thereafter leads to the
ineluctable conclusion that there was intent to violate the petitioners rights as an employee,
particularly his right to security of tenure. The respondents scheme reeks of bad faith and fraud and
compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling
Royale to credit and recognize the petitioners length of service with Sceptre. The respondents
cannot use the legal fiction of a separate corporate personality for ends subversive of the policy and
purpose behind its creation53 or which could not have been intended by law to which it owed its
being.54
For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole proprietorship. As ruled
in Prince Transport, Inc., et al. v. Garcia, et al.,55 it is the act of hiding behind the separate and
distinct personalities of juridical entities to perpetuate fraud, commit illegal acts, evade ones
obligations that the equitable piercing doctrine was formulated to address and prevent:
A settled formulation of the doctrine of piercing the corporate veil is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will, when
necessary to protect the rights of third parties, disregard the legal fiction that these two entities are
distinct and treat them as identical or as one and the same. In the present case, it may be true that
Lubas is a single proprietorship and not a corporation. However, petitioners attempt to isolate
themselves from and hide behind the supposed separate and distinct personality of Lubas so as to
evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity
seeks to prevent and remedy.56
Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994,
Aida and Wilfredo became the owners of the property used by Sceptre as its principal place of
business by virtue of a Deed of Absolute Sale they executed with Roso. 57 Royale, shortly after its
incorporation, started to hold office in the same property. These, the respondents failed to dispute.
The respondents do not likewise deny that Royale and Sceptre share the same officers and
employees. Karen assumed the dual role of Sceptres Operation Manager and incorporator of
Royale. With respect to the petitioner, even if he has already resigned from Sceptre and has been
employed by Royale, he was still using the patches and agency cloths of Sceptre during his
assignment at Highlight Metal.
Royale also claimed a right to the cash bond which the petitioner posted when he was still with
Sceptre. If Sceptre and Royale are indeed separate entities, Sceptre should have released the
petitioners cash bond when he resigned and Royale would have required the petitioner to post a
new cash bond in its favor.
Taking the foregoing in conjunction with Aidas control over Sceptres and Royales business affairs,
it is patent that Royale was a mere subterfuge for Aida. Since a sole proprietorship does not have a
separate and distinct personality from that of the owner of the enterprise, the latter is personally
liable. This is what she sought to avoid but cannot prosper.
Effectively, the petitioner cannot be deemed to have changed employers as Royale and Sceptre are
one and the same. His separation pay should, thus, be computed from the date he was hired by
Sceptre in April 1976 until the finality of this decision. Based on this Courts ruling in Masagana
Concrete Products, et al. v. NLRC, et al.,58 the intervening period between the day an employee was
illegally dismissed and the day the decision finding him illegally dismissed becomes final and
executory shall be considered in the computation of his separation pay as a period of "imputed" or
"putative" service:
Separation pay, equivalent to one month's salary for every year of service, is awarded as an
alternative to reinstatement when the latter is no longer an option. Separation pay is computed from
the commencement of employment up to the time of termination, including the imputed service for
which the employee is entitled to backwages, with the salary rate prevailing at the end of the period
of putative service being the basis for computation. 59
It is well-settled, even axiomatic, that if reinstatement is not possible, the period covered in
the computation of backwages is from the time the employee was unlawfully terminated until
the finality of the decision finding illegal dismissal.
With respect to the petitioners backwages, this Court cannot subscribe to the view that it should be
limited to an amount equivalent to three (3) months of his salary. Backwages is a remedy affording
the employee a way to recover what he has lost by reason of the unlawful dismissal. 60 In awarding
backwages, the primordial consideration is the income that should have accrued to the employee
from the time that he was dismissed up to his reinstatement61 and the length of service prior to his
dismissal is definitely inconsequential.
As early as 1996, this Court, in Bustamante, et al. v. NLRC, et al.,62 clarified in no uncertain terms
that if reinstatement is no longer possible, backwages should be computed from the time the
employee was terminated until the finality of the decision, finding the dismissal unlawful.
Therefore, in accordance with R.A. No. 6715, petitioners are entitled on their full backwages,
inclusive of allowances and other benefits or their monetary equivalent, from the time their actual
compensation was withheld on them up to the time of their actual reinstatement.
As to reinstatement of petitioners, this Court has already ruled that reinstatement is no longer
feasible, because the company would be adjustly prejudiced by the continued employment of
petitioners who at present are overage, a separation pay equal to one-month salary granted to them
in the Labor Arbiter's decision was in order and, therefore, affirmed on the Court's decision of 15
March 1996. Furthermore, since reinstatement on this case is no longer feasible, the amount
of backwages shall be computed from the time of their illegal termination on 25 June 1990 up
to the time of finality of this decision.63 (emphasis supplied)
Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:
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 benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
Clearly, the law intends the award of backwages and similar benefits to accumulate past the date of
the Labor Arbiter's decision until the dismissed employee is actually reinstated. But if, as in this case,
reinstatement is no longer possible, this Court has consistently ruled that backwages shall be
computed from the time of illegal dismissal until the date the decision becomes final. 65 (citation
omitted)
In case separation pay is awarded and reinstatement is no longer feasible, backwages shall be
computed from the time of illegal dismissal up to the finality of the decision should separation pay
not be paid in the meantime. It is the employees actual receipt of the full amount of his separation
pay that will effectively terminate the employment of an illegally dismissed employee. 66 Otherwise,
the employer-employee relationship subsists and the illegally dismissed employee is entitled to
backwages, taking into account the increases and other benefits, including the 13th month pay, that
were received by his co-employees who are not dismissed.67 It is the obligation of the employer to
pay an illegally dismissed employee or worker the whole amount of the salaries or wages, plus all
other benefits and
bonuses and general increases, to which he would have been normally entitled had he not been
dismissed and had not stopped working.68
In fine, this Court holds Royale liable to pay the petitioner backwages to be computed from his
dismissal on October 1, 2003 until the finality of this decision. Nonetheless, the amount received by
the petitioner from the respondents in satisfaction of the November 30, 2005 Decision shall be
deducted accordingly.
Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for the
petitioners dismissal, which was tainted by bad faith and fraud, are in order. Moral damages may be
recovered where the dismissal of the employee was tainted by bad faith or fraud, or where it
constituted an act oppressive to labor, and done in a manner contrary to morals, good customs or
public policy while exemplary damages are recoverable only if the dismissal was done in a wanton,
oppressive, or malevolent manner.69
WHEREFORE, premises considered, the Petition is hereby GRANTED. We REVERSE and SET
ASIDE the CAs May 29, 2008 Decision in C.A.-G.R. SP No. 02127 and order the respondents to
pay the petitioner the following minus the amount of (P23,521.67) paid to the petitioner in
satisfaction of the NLRCs November 30, 2005 Decision in NLRC Case No. V-000355-05:
a) full backwages and other benefits computed from October 1, 2003 (the date Royale
illegally dismissed the petitioner) until the finality of this decision;
b) separation pay computed from April 1976 until the finality of this decision at the rate of one
month pay per year of service;
c) ten percent (10%) attorneys fees based on the total amount of the awards under (a) and
(b) above;
This case is REMANDED to the labor arbiter for computation of the separation pay, backwages, and
other monetary awards due the petitioner.
SO ORDERED.
SECOND DIVISION
DECISION
BRION, J.:
We rule on the petition for review on certiorari assailing the decision 1 and resolution2 of the Court of
Appeals3(CA) in CA-G.R. SP No. 89326. These CA rulings dismissed the petition for certiorari the
petitioner Session Delights Ice Cream and Fast Foods (petitioner) filed to challenge the
resolutions4 of the Second Division of the National Labor Relations Commission 5 (NLRC) that in turn
affirmed the order6 of the Labor Arbiter7 granting a re-computation of the monetary awards in favor of
the private respondent Adonis Armenio M. Flora (private respondent).
The Facts
The private respondent filed against the petitioner a complaint for illegal dismissal, entitled "Adonis
Armenio M. Flora, Complainant versus Session Delights Ice Cream & Fast Foods, et. al, Private
respondents," docketed as NLRC Case No. RAB-CAR 09-0507-00.
The labor arbiter decided the complaint on February 8, 2001, finding that the petitioner illegally
dismissed the private respondent. The decision awarded the private respondent backwages,
separation pay in lieu of reinstatement, indemnity, and attorneys fees, under a computation that the
decision itself outlined in its dispositive portion. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered declaring private respondent guilty of illegal dismissal.
Accordingly, private respondent SESSION DELIGHTS is ordered to pay complainant the following:
Backwages:
a)
P170.00 x 154 days P 26,180.00
Proportional 13th month pay
P 26,180/12 2,181.65 28,361.65
b) Separation Pay:
P 170.00 x 314/12 x 1 4,448.35
c) Indemnity of P5,000.00 for failure to observe due process
d) Attorneys fees which is 10% of the total award in the amount of P3,781.00.
SO ORDERED.8
On the petitioners appeal, the NLRC affirmed the labor arbiters decision in its resolutions dated
May 31, 2002 and September 30, 2002.9 The dispositive portion of the NLRCs resolution of May 31,
2002 states:
WHEREFORE, premises considered, the decision under review is hereby AFFIRMED, and the
appeal, DISMISSED, for lack of merit.10
The petitioner continued to seek relief, this time by filing a petition for certiorari before the CA, which
petition was docketed as CA-G.R. SP No. 74653.
On July 4, 2003, the CA dismissed the petition and affirmed with modification the NLRC decision by
deleting the awards for a proportionate 13th month pay and for indemnity.11 The CA decision became
final per Entry of Judgment dated July 29, 2003.12 The dispositive portion of this CA decision states:
WHEREFORE, premises considered, the instant petition is hereby DISMISSED. The decision of the
National Labor Relations Commission is AFFIRMED with modification that the award of proportional
13th month pay as well as the award of indemnity of P 5,000.00 for failure to observe due process
are DELETED.
In January 2004, and in the course of the execution of the above final judgment pursuant to Section
3, Rule VIII13of the then NLRC Rules of Procedure, the Finance Analyst of the Labor Arbiters Office
held a pre-execution conference with the contending parties in attendance. The Finance Analyst
submitted an updated computation of the monetary awards due the private respondent in the total
amount of P235,986.00.14 This updated computation included additional backwages and separation
pay due the private respondent computed from March 1, 2001 to September 17, 2003. The
computation also included the proportionate amount of the private respondents 13th month pay. On
March 25, 2004, the labor arbiter approved the updated computation which ran, as follows:
C O M P U TATI O N
161,807.75
2. Additional separation pay:
P190.00 x 314/12 x 3 years = 14,915.00
3. Additional attorneys fee:
P176,722.75 x 10% = 17,672.25 194,395.00
TOTAL 253,986.00
The petitioner objected to the re-computation and appealed the labor arbiters order to the NLRC.
The petitioner claimed that the updated computation was inconsistent with the dispositive portion of
the labor arbiters February 8, 2001 decision, as modified by the CA in CA-G.R. SP No. 74653. The
NLRC disagreed with the petitioner and affirmed the labor arbiters decision in a resolution dated
October 25, 2004. The NLRC also denied the petitioners motion for reconsideration in its resolution
dated January 31, 2005.
The petitioner sought recourse with the CA through a petition for certiorari on the ground that the
NLRC acted with grave abuse of discretion amounting to lack or excess of jurisdiction.
The CA Rulings
The CA partially granted the petition in its decision of December 19, 2005 (now challenged before
us) by deleting the awarded proportionate 13th month pay. The CA ruled:
WHEREFORE, the petition is PARTIALLY GRANTED. The Labor Arbiter is DIRECTED to compute
only the following (a) private respondents backwages from the time his salary was withheld up to
July 29, 2003, the finality of the Decision in CA-G.R. SP No. 74653; (b) private respondents
separation pay from July 31, 2000 up to July 29, 2003; and (c) attorneys fees equivalent to 10% of
the total monetary claims from (a) and (b). The total monetary award shall earn legal interest from
July 29, 2003 until fully paid. No pronouncement as to cost.
SO ORDERED.15
The CA explained in this ruling that employees illegally dismissed are entitled to reinstatement, full
backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from
the time actual compensation was withheld from them, up to the time of actual reinstatement. If
reinstatement is no longer feasible, the backwages shall be computed from the time of their illegal
dismissal up to the finality of the decision. The CA reasoned that a re-computation of the monetary
awards was necessary to determine the correct amount due the private respondent from the time his
salary was withheld from him until July 29, 2003 (the date of finality of the July 4, 2003 decision in
CA-G.R. SP No. 74653) since the separation pay, which was awarded in lieu of reinstatement, had
not been paid by the petitioner. The attorneys fees likewise have to be re-computed in light of the
deletion of the proportionate 13th month pay and indemnity awards.
The petitioner timely filed a motion for reconsideration which the CA denied in its resolution of March
30, 2006, now similarly assailed before us.
The Issue
The lone issue the petitioner raised is whether a final and executory decision (the labor arbiters
decision of February 8, 2001, as affirmed with modification by the CA decision in CA-G.R. SP No.
74653) may be enforced beyond the terms decreed in its dispositive portion.
In the pleadings submitted to the Court, the petitioner insists on a literal reading and application of
the labor arbiters February 8, 2001 decision, as modified by the CA in CA-G.R. SP No. 74653. The
petitioner argues that since the modified labor arbiters February 8, 2001 decision did not provide in
its dispositive portion for a computation of the monetary award up to the finality of the judgment in
the case, the CA should have enforced the decision according to its express and literal terms. In
other words, the CA cannot now allow the execution of the labor arbiters original decision (which the
CA affirmed with finality but with modification) beyond the express terms of its dispositive portion;
thus, the amounts that accrued during the pendency of the petitioners recourses with the NLRC and
the CA cannot be read into and implemented as part of the final and executory judgment.
The petitioner, as an alternative argument, argues that even assuming that the body of the CA
decision in CA-G.R. SP No. 74653 intended a computation of the monetary award up to the finality
of the decision, the dispositive portion remains to be the directive that should be enforced, as it is the
part of the decision that governs, settles, and declares the rights and obligations of the parties.
The private respondent, for his part, counters that the computation of the monetary award until the
finality of the CA decision in CA-G.R. SP No. 74653 is in accord with Article 279 of the Labor Code,
as amended.
We state at the outset that, as a rule, we frown upon any delay in the execution of final and
executory decisions, as the immediate enforcement of the parties rights, confirmed by a final
decision, is a major component of the ideal administration of justice. We admit, however, that
circumstances may transpire rendering delay unavoidable. One such occasion is when the execution
of the final judgment is not in accord with what the final judgment decrees in its dispositive portion.
Just as the execution of a final judgment is a matter of right for the winning litigant who should not be
denied the fruits of his or her victory, the right of the losing party to give, perform, pay, and deliver
only what has been decreed in the final judgment should also be respected.
That a judgment should be implemented according to the terms of its dispositive portion is a long
and well-established rule.16 Otherwise stated, it is the dispositive portion that categorically states the
rights and obligations of the parties to the dispute as against each other.17 Thus, it is the dispositive
portion which the entities charged with the execution of a final judgment that must be enforced to
ensure the validity of the execution.18
A companion to the above rule on the execution of a final judgment is the principle of its immutability.
Save for recognized exceptions,19 a final judgment may no longer be altered, amended or modified,
even if the alteration, amendment or modification is meant to correct what is perceived to be an
erroneous conclusion of fact or law and regardless of what court, be it the highest Court of the land,
renders it.20 Any attempt on the part of the responsible entities charged with the execution of a final
judgment to insert, change or add matters not clearly contemplated in the dispositive portion violates
the rule on immutability of judgments.
In the present case, with the CAs deletion of the proportionate 13th month pay and indemnity
awards in the labor arbiters February 8, 2001 decision, only the awards of backwages, separation
pay, and attorneys fees remain. These are the awards subject to execution.
A distinct feature of the judgment under execution is that the February 8, 2001 labor arbiter decision
already provided for the computation of the payable separation pay and backwages due, and did not
literally order the computation of the monetary awards up to the time of the finality of the judgment.
The private respondent, too, did not contest the decision through an appeal. The petitioners
argument to confine the awards to what the labor arbiter stated in the dispositive part of his decision
is largely based on these established features of the judgment.
We reject the petitioners view as a narrow and misplaced interpretation of an illegal dismissal
decision, particularly of the terms of the labor arbiters decision.
While the private respondent failed to appeal the February 8, 2001 decision of the labor arbiter, the
failure, at the most, had the effect of making the awards granted to him final so that he could no
longer seek any other affirmative relief, or pray for any award additional to what the labor arbiter had
given. Other than these, the illegal dismissal case remained open for adjudication based on the
appeal made for the higher tribunals consideration. In other words, the higher tribunals, on
appropriate recourses made, may reverse the judgment and declare that no illegal dismissal took
place, or affirm the illegal dismissal already decreed with or without modifying the monetary
consequences flowing from the dismissal.
As the case developed and is presented to us, the issue before us is not the correctness of the
awards, nor the finality of the CAs judgment, nor the petitioners failure to appeal. The issue before
us is the propriety of the computation of the awards made, and, whether this violated the principle of
immutability of final judgments.
In concrete terms, the question is whether a re-computation in the course of execution of the labor
arbiters original computation of the awards made, pegged as of the time the decision was rendered
and confirmed with modification by a final CA decision, is legally proper. The question is posed,
given that the petitioner did not immediately pay the awards stated in the original labor arbiters
decision; it delayed payment because it continued with the litigation until final judgment at the CA
level.
A source of misunderstanding in implementing the final decision in this case proceeds from the way
the original labor arbiter framed his decision. The decision consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it has been confirmed with
finality. This is the finding of the illegality of the dismissal and the awards of separation pay in lieu of
reinstatement, backwages, attorneys 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 figures used in the computation.
This part, being merely a computation of what the first 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 arbiters decision that the CA
had affirmed. 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 finality of the decision, if separation pay is to be given in
lieu reinstatement.
That the labor arbiters decision, at the same time that it found that an illegal dismissal had taken
place, also made a computation of the award, is understandable in light of Section 3, Rule VIII of the
then NLRC Rules of Procedure which requires that a computation be made. This Section in part
states:
[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as
practicable, shall embody in any such decision or order the detailed and full amount awarded.
Clearly implied from this original computation is its currency up to the finality of the labor arbiters
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 arbiters findings on all counts i.e., on the finding
of illegality as well as on all the consequent awards made. Hence, the petitioner appealed the case
to the NLRC which, in turn, affirmed the labor arbiters decision. By law,21 the NLRC decision is final,
reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a
timely filed Rule 65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority
in affirming the payment of 13th month pay and indemnity, lapsed to finality and was subsequently
returned to the labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the
original labor arbiters decision, the implementing labor arbiter ordered the award re-computed; he
apparently read the figures originally ordered to be paid to be the computation due had the case
been terminated and implemented at the labor arbiters level. Thus, the labor arbiter re-computed the
award to include the separation pay and the backwages due up to the finality of the CA decision that
fully terminated the case on the merits. Unfortunately, the labor arbiters approved computation went
beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards
the final CA decision had deleted specifically, the proportionate 13th month pay and the indemnity
awards. Hence, the CA issued the decision now questioned in the present petition.
To illustrate these points, had the case involved a pure money claim for a specific sum (e.g. salary
for a specific period) or a specific benefit (e.g. 13th month pay for a specific year) made by a former
employee, the labor arbiters computation would admittedly have continuing currency because the
sum is specific and any variation may only be on the interests that may run from the finality of the
decision ordering the payment of the specific sum.
In contrast with a ruling on a specific 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 flow from the declared status (in this case, the payment of separation
pay and backwages and attorneys fees when illegal dismissal is found). When this type of decision
is executed, what is primarily implemented is the declaratory finding 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.
In the present case, the CA confirmed 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 final 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.22
As the CA correctly pointed out, the basis for the computation of separation pay and backwages is
Article 279 of the Labor Code, as amended, which reads:
x x x 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 benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.
By jurisprudence derived from this provision, separation pay may be awarded to an illegally
dismissed employee in lieu of reinstatement.23 Recourse to the payment of separation pay is made
when continued employment is no longer possible, in cases where the dismissed employees
position is no longer available, or the continued relationship between the employer and the
employee is no longer viable due to the strained relations between them, or when the dismissed
employee opted not to be reinstated, or payment of separation benefits will be for the best interest of
the parties involved.24
This reading of Article 279, of course, does not appear to be disputed in the present case as the
petitioner admits that separation pay in lieu of reinstatement shall be paid, computed up to the
finality of the judgment finding that illegal dismissal had taken place. What the petitioner simply
disputes is the re-computation of the award when the final CA decision did not order any re-
computation while the NLRC decision that the CA affirmed and the labor arbiter decision the NLRC
in turn affirmed, already made a computation that on the basis of immutability of judgment and the
rule on execution of the dispositive portion of the decision should not now be disturbed.
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 flows 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 specifically, Article 279 of the Labor Code 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 Labor Code. The re-computation of the
consequences of illegal dismissal upon execution of the decision does not constitute an alteration or
amendment of the final 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.
1avvphi1
We fully appreciate the petitioners efforts in trying to clarify how the standing jurisprudence on the
payment of separation pay in lieu of reinstatement and the accompanying payment of backwages
ought to be read and reconciled. Its attempt, however, is out of place and, rather than clarify, may
only confuse the implementation of Article 279; the core issue in this case is not the payment of
separation pay and backwages but their re-computation in light of an original labor arbiter ruling that
already contained a dated computation of the monetary consequences of illegal dismissal.
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 arbiters
decision. Article 279 provides for the consequences of illegal dismissal in no uncertain terms,
qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is
allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning
point instead of the reinstatement that the law decrees. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so that separation pay and backwages
are to be computed up to that point. The decision also becomes a judgment for money from which
another consequence flows the payment of interest in case of delay. This was what the CA
correctly decreed when it provided for the payment of the legal interest of 12% from the finality of the
judgment, in accordance with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals. 25
WHEREFORE, premises considered, we hereby AFFIRM the decision of the Court of Appeals dated
December 19, 2005 and its resolution dated March 30, 2006 in CA-G.R. SP No. 89326.
For greater certainty, the petitioner is ORDERED to PAY the private respondent:
(a) backwages computed from August 28, 2000 (the date the employer illegally dismissed
the private respondent) up to July 29, 2003, the date of finality of the decision of the Court of
Appeals in CA-G.R. SP No. 74653;
(b) separation pay computed from July 31, 2000 (the private respondents first day of
employment) up to July 29, 2003 at the rate of one month pay per year of service;
(c) ten percent (10%) attorneys fees based on the total amount of the awards under (a) and
(b) above; and
(d) legal interest of twelve percent (12%) per annum of the total monetary awards computed
from July 29, 2003, until their full satisfaction.
The labor arbiter is hereby ORDERED to make another re-computation according to the above
directives.
SO ORDERED.
THIRD DIVISION
G.R. No. 175283 March 28, 2008
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court is the
Decision2 of the Court of Appeals dated 7 November 2006 in CA-G.R. SP No. 90083. The appellate
courts Decision granted the Special Civil Action for Certiorari filed by respondent San Sebastian
College-Recoletos, Manila (SSC-R), and annulled the Decision 3 dated 23 November 2004 and the
Resolution4 dated 31 March 2005 of the National Labor Relations Commission (NLRC) in NLRC-
NCR-CA No. 037175-03.
Respondent SSC-R is a domestic corporation and an educational institution duly registered under
the laws of the Philippines, located in C. M. Recto Avenue, Quiapo, Manila.
On 16 January 1999, SSC-R employed petitioner Jackqui R. Moreno (Moreno) as a teaching fellow.
On 23 October 2000, Moreno was appointed as a full-time college faculty member.5 Then, on 22
October 2001, Moreno became a member of the permanent college faculty.6 She was also offered
the chairmanship7 of the Business Finance and Accountancy Department of her college on 13
September 2002.
On 27 October 2002, Moreno received a memorandum9 from the Dean of her college, requiring her
to explain the reports regarding her unauthorized teaching engagements. The said activities
allegedly violated Section 2.2 of Article II of SSC-Rs Faculty Manual,10 which reads:
Administrative permission is required for all full-time faculty members to teach part-time elsewhere. If
ever teaching permission is granted, the total teaching load should not exceed the maximum allowed
by CHED rules and regulations. Faculty members are required to report all other teaching
assignments elsewhere within two (2) weeks from start of the classes every semester.
On 28 October 2002, Moreno sent a written explanation11 in which she admitted her failure to secure
any written permission before she taught in other schools. Moreno explained that the said teaching
engagements were merely transitory in nature as the aforesaid schools urgently needed lecturers
and that she was no longer connected with them. Moreno further stated that it was never her
intention to jeopardize her work in SSC-R and that she merely wanted to improve her familys poor
financial conditions.
A Special Grievance Committee was then formed in order to investigate and make recommendations
regarding Morenos case. The said committee was composed of Dean Abraham Espejo of the
College of Law, as chairman, and Messrs. Dindo Bunag and Ramon Montierro, as members.
In a letter12 dated 11 November 2002, the grievance committee required Moreno to answer the
following series of questions concerning her case, to wit:
1. Did you teach in other schools without first obtaining the consent of your superiors in SSC-
R?
2. Did you ever go beyond the maximum limit for an outside load?
3. Did you ever truthfully disclose completely to your superiors at SSC-R any outside Load?
Moreno answered the above queries in a letter13 dated 12 November 2002. Moreno admitted she did
not formally disclose her teaching loads at the College of the Holy Spirit and at the Centro Escolar
University for fear that the priest administrators may no longer grant her permission, as prior similar
requests had already been declined; that the Dean of her college was aware of her external teaching
loads; that she went beyond the maximum limit for an outside load in the School Years 2000 until
2002, because she needed to support her mother and sister, her masteral studies, and her sisters
canteen business, all of which coincided with the payment of the emergency loan from the SSC-R
administrators that paid for her mothers illness; that she did not deny teaching part-time in the
aforementioned schools; and that she did not wish to resign because she felt she deserved a second
chance.
On the same day that Moreno sent her letter, the grievance committee issued its resolution, 14 which
unanimously found that she violated the prohibition against a full-time faculty having an unauthorized
external teaching load. The majority of the grievance committee members recommended Morenos
dismissal from employment in accordance with the school manual, but Dean Espejo dissented and
called only for a suspension for one semester.
Thereafter, SSC-R sent a letter15 to Moreno that was signed by the College President, informing her
that they had approved and adopted the findings and recommendations of the grievance committee
and, in accordance therewith, her employment was to be terminated effective 16 November 2002.
Moreno thus instituted with the NLRC a complaint for illegal termination against SSC-R, docketed as
NLRC-NCR Case No. 11-10077-02, seeking reinstatement, money claims, backwages, separation
pay if reinstatement is not viable, and attorneys fees.
In the Decision16 dated 30 April 2003, Labor Arbiter Veneranda C. Guerrero dismissed Morenos
complaint for lack of merit, thus:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for
illegal dismissal for lack of merit. Respondent San Sebastian College-Recoletos is hereby ordered to
pay complainant Jackqui R. Moreno the amount of NINE THOUSAND ONE HUNDRED FORTY
THREE AND 75/100 PESOS (P9,143.75) representing her unpaid salaries.
The Labor Arbiter ruled that Morenos due acceptance of the appointment as a member of the
Permanent Faculty meant that she was bound to the condition therein not to accept any outside
teaching assignments without permission. Morenos admission of her violation was likewise said to
have rendered her liable for the penalty of dismissal as provided for in the SSC-R Faculty Manual.
The Labor Arbiter held that SSC-R had adequately discharged the burden of proof imposed by law in
dismissing Moreno. Except for her unpaid salary for fifteen (15) days, which was not controverted,
the rest of Morenos money claims were denied for being unsubstantiated.
On appeal by Moreno, the NLRC reversed the rulings of the Labor Arbiter in a Decision dated 23
November 2004, the relevant portion of which reads:
The four (4) applications for leave of absence adduced in evidence by the respondent [SSC-R] are
all undated. If the absences indicated in the said documents were the only absences incurred by the
complainant [Moreno] in her four-year tenure, it cannot be said that she had a poor attendance. In
fact, the contrary would be true. On the other hand, it is conceded that in the yearly evaluation of the
performance of teachers, she consistently landed among the five best teachers. Thus, neither can it
be said that her moonlighting activities adversely affected her work performance. Likewise, the
undisputed fact that she was asked to be the chairman of Business Finance and Accountancy for SY
2002-2003 should be considered. This last circumstance could only mean that she was very good at
her job.
There are other extenuating circumstances that should have been taken into consideration in
determining the propriety of the penalty of dismissal meted upon the complainant. These
circumstances are the fact that it was her first offense in four years of unblemished employment, and
the fact that she candidly admitted her fault. x x x
Moreover, it is settled that the existence of some rules agreed upon between the employer and
employee on the subject of dismissal cannot preclude the State from inquiring whether its rigid
application would work too harshly on the employee. (Gelmart Industries Phils. Inc. vs. NLRC, 176
SCRA 295 cited in Caltex Refinery Employees Association vs. NLRC, 246 SCRA 271).
Thus, in the instant case, it must be concluded that the penalty of dismissal meted upon the
complainant [Moreno] was too harsh and unreasonable under the circumstances. At most, a one-
year suspension with a warning against the repetition of the same offense would have been more in
keeping with the generally accepted principles of law.
WHEREFORE, the decision appealed from is hereby REVERSED. The respondent [SSC-R] is
hereby ordered to REINSTATE the complainant [Moreno] to her former position, and to pay her full
backwages counted from November 16, 2003 up to the date of her actual reinstatement. 17
SSC-R filed a Motion for Reconsideration18 of the NLRC Decision, which was denied for lack of merit
in a Resolution19 dated 31 March 2005. 1avvphi1
Thus, SSC-R instituted with the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules
of Court, with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary
injunction,20 docketed as CA-G.R. SP No. 90083, alleging grave abuse of discretion on the part of the
NLRC.
In a Decision21 dated 7 November 2006, the appellate court granted the petition and annulled the
Decision dated 23 November 2004, and Resolution dated 31 March 2005 of the NLRC. In reinstating
the Decision of the Labor Arbiter dated 30 April 2003, the Court of Appeals ruled in this wise:
In the case at bar, there is clearly grave abuse of discretion on the part of the NLRC when it
reversed the Decision of the Labor Arbiter. Its conclusions are highly prejudicial to the interests of
herein petitioner [SSC-R], considering the glaring infractions committed by private respondent
[Moreno], which she even expressly admitted.
xxxx
"Willful disobedience of the employers lawful orders, as a just cause for dismissal of an employee,
envisages the concurrence of at least two (2) requisites: the employees assailed conduct must have
been willful or intentional, the willfulness being characterized by a wrongful or perverse attitude; and
the order violated must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he had been engaged to discharge.
The foregoing requisites are all present in this case. The prohibition against unauthorized outside
teaching engagements found in the Faculty Manual and in private respondents [Moreno]
appointment letter are deemed reasonable under the circumstances. In fact, the petitioners [SSC-R]
policy is actually permissive since it allows other teaching engagements so long as its president
approves of the same.
Concededly, this policy was made known to private respondent [Moreno] for as mentioned earlier, it
is found not only in the Faculty Manual, but more importantly, it is explicitly stated in her appointment
letter. By her own admission, it cannot be clearer that, in spite of her knowledge thereof, private
respondent [Moreno] willfully disobeyed the said prohibition. When she accepted the teaching
opportunities offered to her by other schools and altogether concealed the same from the petitioner
[SSC-R], she risked being administratively held liable therefor. Thus, the excuses she raised upon
the petitioners [SSC-R] discovery of such concealment deserve scant consideration.
The policy is obviously in connection with the private respondents [Moreno] duties as a faculty
member. It is designed to ensure that the petitioners [SSC-R] teaching staff is well fit to function
accordingly, not only for its benefit, but chiefly, for the students who are under their care and
instruction. Private respondent [Moreno] argues that notwithstanding her violations, her
commitments with petitioner [SSC-R] were never compromised. Be that as it may, this fact cannot
absolve her. She may be fit at the time when her infractions were revealed, but there is no
assurance that her health would not deteriorate in time if she persists in carrying on a heavy
workload.
xxxx
WHEREFORE, the instant petition is GRANTED. The 23 November 2004 Decision and the 31
March 2005 Resolution of the National Labor Relations Commission (Second Division) are
hereby ANNULLED and SET ASIDE. The National Labor Relations Commission is permanently
enjoined from executing its 31 March 2005 Resolution. The Decision of the Labor Arbiter dated 30
April 2003 is hereby REINSTATED and AFFIRMED.
Accordingly, Moreno now impugns before this Court the Court of Appeals Decision dated 07
November 2006 raising the following issues:
I.
II.
Moreno insists that her right to security of tenure is a more significant consideration in this case than
the strict application of a school policy. She laments that her dismissal from employment for failing to
secure the necessary permission is too harsh and undeserved a penalty.
The most basic of tenets in employee termination cases is that no worker shall be dismissed from
employment without the observance of substantive and procedural due process. Substantive due
process means that the ground upon which the dismissal is based is one of the just or authorized
causes enumerated in the Labor Code. Procedural due process, on the other hand, requires that an
employee be apprised of the charge against him, given reasonable time to answer the same,
allowed ample opportunity to be heard and defend himself, and assisted by a representative if the
employee so desires.22 The employee must be furnished two written notices: the first notice apprises
the employee of the particular acts or omissions for which his dismissal is sought, and the second is
a subsequent notice which informs the employee of the employer's decision to dismiss him. 23
Article 282 of the Labor Code provides for the just causes for the termination of employment, to wit:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representatives; and
In termination cases, the burden of proof rests on the employer to show that the dismissal is for just
cause. When there is no showing of a clear, valid and legal cause for the termination of employment,
the law considers the matter a case of illegal dismissal and the burden is on the employer to prove
that the termination was for a valid or authorized cause. 24
Respondent SSC-R contends that Morenos dismissal from employment was valid because she
knowingly violated the prohibition embodied in the aforementioned Section 2.2 of Art. II of the SSC-R
Faculty Manual, in accordance with Section 4525 of the Manual of Regulations for Private Schools,
and which prohibition was likewise contained in Morenos employment contract. 26 In so doing,
Moreno allegedly committed serious misconduct and willful disobedience against the school, and
thereby submitted herself to the corresponding penalty provided for in both the Faculty Manual and
the employment contract, which is termination for cause.
On the basis of the evidence on record, the Court finds that Moreno has indeed committed
misconduct against respondent SSC-R. Her admitted failure to obtain the required permission from
the school before she engaged in external teaching engagements is a clear transgression of SSC-
Rs policy. However, said misconduct falls below the required level of gravity that would warrant
dismissal as a penalty.
Under Art. 282(a) of the Labor Code, willful disobedience of the employers lawful orders as a just
cause for termination of employment envisages the concurrence of at least two requisites: (1) the
employees assailed conduct must have been willful or intentional, the willfulness being
characterized by a "wrongful and perverse attitude"; and (2) the order violated must have been
reasonable, lawful, made known to the employee and must pertain to the duties which he has been
engaged to discharge.27
Similarly, with respect to serious misconduct, the Court has already ruled in National Labor Relations
Commission v. Salgarino28 that:
Misconduct is defined as improper or wrong conduct. It is the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character and implies
wrongful intent and not mere error of judgment. The misconduct to be serious within the meaning
of the act must be of such a grave and aggravated character and not merely trivial or unimportant.
Such misconduct, however serious, must nevertheless be in connection with the work of the
employee to constitute just cause from his separation.
In order to constitute serious misconduct which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained
of has violated some established rules or policies. It is equally important and required that the
act or conduct must have been performed with wrongful intent. (Emphasis ours.)
After examining the records of the case, the Court finds that SSC-R miserably failed to prove that
Morenos misconduct was induced by a perverse and wrongful intent as required in Art. 282(a) of the
Labor Code. SSC-R merely anchored Morenos alleged bad faith on the fact that she had full
knowledge of the policy that was violated and that it was relatively easy for her to secure the
required permission before she taught in other schools. This posture is utterly lacking.
It bears repeating that it is the employer that has the burden of proving the lawful cause sustaining
the dismissal of the employee. Even equipoise is not enough; the employer must affirmatively show
rationally adequate evidence that the dismissal was for a justifiable cause. 29
In the present case, SSC-R failed to adduce any concrete evidence to prove that Moreno indeed
harbored perverse or corrupt motivations in violating the aforesaid school policy. In her letter of
explanation to the grievance committee dated 12 November 2002, Moreno explained in detail her
role as the breadwinner and the grave financial conditions of her family. As previous requests for
permission had already been denied, Moreno was thus prompted to engage in illicit teaching
activities in other schools, as she desperately needed them to augment her income. Instead of
submitting controverting evidence, SSC-R simply dismissed the above statements as nothing more
than a "lame excuse"30 and are "clearly an afterthought,"31 considering that no evidence was offered
to support them and that Morenos salary was allegedly one of the highest among the universities in
the country.
In addition, even if dismissal for cause is the prescribed penalty for the misconduct herein
committed, in accordance with the SSC-R Faculty Manual and Morenos employment contract, the
Court finds the same to be disproportionate to the offense.
Time and again, we have ruled that while an employer enjoys a wide latitude of discretion in the
promulgation of policies, rules and regulations on work-related activities of the employees, those
directives, however, must always be fair and reasonable, and the corresponding penalties, when
prescribed, must be commensurate to the offense involved and to the degree of the infraction. 32
Special circumstances were present in the case at bar which should have been properly taken into
account in the imposition of the appropriate penalty. Moreno, in this case, had readily admitted her
misconduct, which was undisputedly the first she has ever committed against the school. Her
teaching abilities and administrative skills remained apparently unaffected by her external teaching
engagements, as she was found by the grievance committee to be one of the better professors in
the Accounting Department33 and she was even offered the Chairmanship of her college.34 Also, the
fact that Moreno merely wanted to alleviate her familys poor financial conditions is a justification that
SSC-R failed to refute. SSC-R likewise failed to prove any resulting material damage or prejudice on
its part as a consequence of Morenos misconduct. The claim by SSC-R that the imposition of a
lesser penalty would set a bad precedent35 for the other faculty members who comply with the school
policies is too speculative for this Court to even consider.
Finally, the Court notes that in Morenos contract of employment, 36 one of the provisions therein
categorically stated that should a violation of any of the terms and conditions thereof be committed,
the penalty that will be imposed would either be suspension or dismissal from employment. Thus,
contrary to its position from the beginning, SSC-R clearly had the discretion to impose a lighter
penalty of suspension and was not at all compelled to dismiss Moreno under the circumstances, just
because the Faculty Manual said so.
With regard to the observance of procedural due process, neither of the parties has put the same
into issue. Indeed, based on the evidence on record, Moreno was served with the required twin
notices and was afforded the opportunity to be heard. The first notice was embodied in the
memorandum37 dated 27 October 2002 sent by her College Dean, which required her to explain her
unauthorized teaching assignments. The letter38 by SSC-R that informed Moreno that her services
were being terminated effective 16 November 2002 constituted the second required notice. Moreno
was also given the opportunity to explain her side when the special grievance committee asked her
a series of questions pertaining to their investigation in a letter 39 dated 11 November 2002 and to
which she replied likewise through a letter40 dated 12 November 2002.
In light of the foregoing, the Court holds that the dismissal of petitioner Moreno failed to comply with
the substantive aspect of due process. Despite SSC-Rs observance of procedural due process, it
nonetheless failed to discharge its burden of proving the legality of Morenos termination from
employment. Thus, the imposed penalty of dismissal is hereby declared as invalid.
In so ruling, this Court does not depreciate the misconduct committed by Moreno. Indeed, SSC-R
has adequate reasons to impose sanctions on her. However, this should not be dismissal from
employment. Because of the serious implications of this penalty, "our Labor Code decrees that an
employee cannot be dismissed, except for the most serious causes."41
Considering the presence of extenuating circumstances in the instant case, the Court deems it
appropriate to impose the penalty of suspension of one (1) year on Moreno, to be counted from 16
November 2002, the effective date of her illegal dismissal. However, given the period of time in
which Moreno was actually prevented from working in the respondent school, the said suspension
should already be deemed served.
Furthermore, the Court holds that Moreno should be reinstated to her former position, without loss of
seniority rights and other privileges, but without payment of backwages.
As a general rule, the normal consequences of a finding that an employee has been illegally
dismissed are, firstly, that the employee becomes entitled to reinstatement without loss of seniority
rights; and secondly, the payment of backwages corresponding to the period from his illegal
dismissal up to his actual reinstatement. The two forms of relief are, however, distinct and separate
from each other. Though the grant of reinstatement commonly carries with it an award of
backwages, the appropriateness or non-availability of one does not carry with it the
inappropriateness or non-availability of the other.42
In accordance with Durabuilt Recapping Plant & Co. v. National Labor Relations Commission, 43 the
Court may not only mitigate, but also absolve entirely, the liability of the employer to pay backwages
where good faith is evident. Likewise, backwages may be withheld from a dismissed employee
where exceptional circumstances are availing.44
In the present case, the good faith of SSC-R is apparent. The termination of Moreno from her
employment cannot be said to have been carried out in a malevolent, arbitrary or oppressive
manner. Indeed, the only mistake that the respondent school has committed was to strictly apply the
provisions of its Faculty Manual and its contract with Moreno without regard for the aforementioned
special circumstances that were attendant in this case. Even then, Morenos right to procedural due
process was fully respected, as she was given the required twin notices and an ample opportunity to
be heard. This fact was not even disputed by Moreno herself.
With respect to Morenos claim for moral and exemplary damages, the same were never
satisfactorily pleaded and substantiated.45 Thus, they are hereby denied. Neither is Moreno entitled
to the award of the monetary claims46 in her petition, as no basis and proof for the grant thereof were
ever adduced.
The Court cannot likewise award attorneys fees to Moreno in view of the above-mentioned finding of
good faith on the part of SSC-R47. It is a well-settled principle that even if a claimant is compelled to
litigate with third persons or to incur expenses to protect the claimants rights, attorneys fees may
still not be awarded where no sufficient showing of bad faith could be reflected in a partys
persistence in a case other than an erroneous conviction of the righteousness of his cause. 48
WHEREFORE, the Petition for Review is GRANTED. The Decision of the Court of Appeals in CA-
G.R. SP No 90083 dated 7 November 2006 is hereby REVERSED. Respondent San Sebastian
College-Recoletos, Manila, is hereby ordered to reinstate Petitioner Jackqui R. Moreno without loss
of seniority rights and other privileges. No pronouncement as to cost.
SO ORDERED.
THIRD DIVISION
DECISION
In this Petition for Review on Certiorari under Rule 45, Alexander B. Baares assails and seeks the
reversal of the Decision2 dated October 14, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
112542 and its Resolution3 of June 15, 2011 denying petitioner's motion for reconsideration. The CA
Decision set aside the July 7, 2009 Decision4 and November 18, 2009 Resolution5 of the National
Labor Relations Commission (NLRC) as well as the April 14, 2008 Order 6 of the Labor Arbiter.
Petitioner was for some time the general manager of Tabaco Women's Transport Service
Cooperative (T A WTRASCO) until its management, on March 6, 2006, terminated his services. On
March 7, 2006, before the Labor Arbiter (LA) in RAB V of the NLRC in Legaspi City, petitioner filed a
complaint for illegal dismissal and payment of monetary claims which was docketed as NLRC RAB V
Case No. 03-00092-06.
On August 22, 2006, the LA rendered a Decision7 finding for petitioner, as complainant, with the fallo
reading:
All other claims and/or charges are hereby dismissed for lack of factual and legal basis.
SO ORDERED.
Since TAWTRASCO opted not to appeal, the LA Decision soon became final and executory. In fact,
TAWTRASCO in no time paid petitioner the amount of PhP 119, 600 by way of damages and
backwages corresponding to the period March 6, 2006 to August 22, 2006. But petitioner was not
immediately reinstated. Owing to the strained employer-employee relationship perceived to exist
between them, TAWTRASCO offered to pay petitioner separation pay of PhP 172, 296, but petitioner
rejected the offer. Eventually, the two entered into a Compromise Agreement, in which petitioner
waived a portion of his monetary claim, specifically his backwages for the period from August 23,
2006 to February 5, 2007, and agreed that the amount due shall be payable in three (3) installments.
In turn, TAWTRASCO undertook to reinstate the petitioner effective February 6, 2007. Accordingly,
the LA issued, on February 5, 2007, an Order8 based on the compromise agreement thus executed,
and declared the instant case closed and terminated.
On February 24, 2007, petitioner received a copy of Memorandum Order No. 04, 9 Series of 2007,
with a copy of a resolution passed by the Board of Directors (BOD) of TAWTRASCO, requiring him
to report at the companys Virac, Catanduanes terminal. The memorandum order contained an
enumeration of petitioners duties and responsibilities.
A day after, petitioner went to see Oliva Barcebal (Oliva), the BOD Chairman, to decry that the
adverted return-to-work memorandum and board resolution contravene the NLRC-approved
compromise agreement which called for his reinstatement as general manager without loss of
seniority rights. Petitioner would later reiterate his concerns in a letter 10 dated March 12, 2007.
On March 20, 2007, TAWTRASCO served petitioner a copy of Memorandum No. 10, 11 Series of
2007 which set forth his location assignment, as follows: temporarily assigned at the Virac,
Catanduanes terminal/office for two months, after which he is to divide his time between the Virac
Terminal and the Araneta Center Bus Terminal (ACBT), three days (Monday to Wednesday) in Virac
and two days (Friday and Saturday) in Cubao, utilizing Thursday as his travel day in between offices.
As ordered, petitioner reported to the Virac terminal which purportedly needed his attention due to its
flagging operations and management problems.
Barely a week into his new assignment, petitioner, thru a memorandum report, proposed the
construction/rehabilitation of the passenger lounge in the Virac terminal, among other improvements.
The proposal came with a request for a monthly lodging accommodation allowance of PhP 1,700 for
the duration of his stay in Virac.
While the management eventually approved the desired construction projects, it denied petitioners
plea for cash lodging allowance. Instead of a straight cash allowance, the company urged petitioner
to use the Virac office for lodging purposes.
Subsequent events saw petitioner requesting and receiving an allocation of PhP 3,000 for his travel,
accommodation, representation and communication allowance subject to liquidation. No
replenishment, however, came after.
On April 12, 2007, Oliva, while conducting, in the company of another director, an ocular inspection
of the Virac terminal, discovered that petitioner had not reported for work since March 31, 2007.
Thus, the issuance of a company memorandum12 asking petitioner to explain his absence.
In response, petitioner addressed a letter-reply13 to management stating the underlying reason for
not reporting and continue reporting for work in his new place of assignment and expressing in detail
his grievances against management. Some excerpts of petitioners letter:
x x x The very reason why I dont go back to Virac Catanduanes x x x is because I realized that in
truth my reinstatement effected by your office which is supposed to be in pursuance to the NLRC
decision is nothing but an artificial, fake, fictitious and a sham kind of return to work order.
2. Despite x x x my request for the allocation of the indispensable travel, representation and
accommodation allowances I need to have while staying in Virac because the garage/terminal
facilities remains in a messy condition but still you fail until now to provide it to me x x x;
3. The manner and nature of work you would want me to do while in Virac is utterly a deviation from
my original work and in effect a demotion in rank;
4. The place of work x x x was completely devoid of any office materials and equipments needed in
the nature of my work. To put in details there was no office table and chairs, no filing cabinets for
safekeeping of important documents, no ball-pens, no bond papers etc. x x x There is nothing at all
in said place of work for me to say that there was really an office of the General Manager. As a
matter of fact, you know that all my reports being submitted x x x are made possible by using my
own personal computer, my computer printer, my computer inks and even my own bond papers.
5. Just recently, I found out that there are employees in our company who are under my jurisdiction
and x x x that are being instructed not to follow my lawful orders. This matter needs no further
explanation because I have already reported it and yet you did nothing to correct it.
6. The free place of accommodation I used to have before when staying in Cubao, Quezon City
remains non-existent x x x despite the fact that x x x I need to be [back] also in Cubao to facilitate
the restoration of our transport operation x x x.
In essence, there is an ongoing mockery of the mandate of the NLRC decision that I should be
reinstated to my former position as General Manager without loss of seniority rights. What is truly
happening now is the obvious evidence that you dont want me to work the way I was doing it before
and the way as mandated by the by-laws of our transport cooperative.
In sum, you cannot charge me for abandonment of work because you are in fact causing me an
inhumane and degrading treatment as General Manager and giving an embarrassing kind of work.
Therefore, in view of the foregoing circumstances, may I hereby demand that my salary should be
paid immediately as soon as you receive this letter of mine that explains in full details the logical
reasons why I really cannot go back to my new place of assigned but temporary work x x x.
xxxx
Finally, let me just frankly tell you that I can only go back to Virac Catanduanes when everything I
need in my work as General Manager is sufficiently given to me and when all employees of
TAWTRASCO are duly advised that in effect Im truly back to work and all the employees need to
follow my orders. Meantime, as General Manager I will utilize my time to do some other works x x x.
On April 27, 2007, petitioner filed a complaint against TAWTRASCO for nonpayment of salaries and
withholding of privileges before the LA. Via a Manifestation with application for the issuance of an
alias writ of execution, petitioner prayed that his complaint be deemed withdrawn "for the purpose of
not confusing the essence of consolidation and in order to give way to the smooth proceedings and
fast adjudication on the merits."14
By Order of April 14, 2008, the LA effectively issued the desired alias writ of execution, as follows:
Consequently, there being no compliance of the reinstatement aspect of the Decision, petitioner is
therefore, entitled to his reinstatement salaries less the amount he already received, reckoned from
date of receipt by respondent [TAWTRASCO] of the decision on October 11, 2006 to date of this
order, subject to further computation until reinstatement is actually carried out religiously plus
monthly allowance of P1,000.00 without prejudice on the part of the respondent to avail of the
remedy available to it under the rules. Hence, the same is computed as follows:
LESS:
CY 2/13/08 7,500.00
P255,000.00
xxxx
SO ORDERED.15
TAWTRASCO appealed to the NLRC which dismissed the appeal per its Decision dated July 7,
2009, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered DISMISSING respondents appeal for lack of merit.
The assailed Order of the Labor Arbiter dated 14 April 2008, is hereby AFFIRMED.
SO ORDERED.
In so ruling, the NLRC held that TAWTRASCO only partially complied with the final and executory
August 22, 2006 Decision of the LA, i.e., by paying the PhP 119,000 backwages of petitioner as
ordered. The reinstatement aspect of the LA Decision, however, has yet to be wholly complied with.
To the NLRC, the LA acted within his sound discretion in ordering the authentic and full
reinstatement of petitioner and the payment of PhP 255,000 as reinstatement salaries as computed
from October 11, 2006 to April 18, 2008.
The NLRC denied, through its November 18, 2009 Resolution, TAWTRASCOs motion for
reconsideration.
TAWTRASCO went to the CA on certiorari. On October 14, 2010, the appellate court rendered the
assailed Decision, the fallo of which reads:
WHEREFORE, the instant petition for certiorari is GRANTED. The assailed Decision and Resolution
of the public respondent National Labor Relations Commission, in NLRC LAC No. 08-002800-08
[NLRC RAB V Case No. 03-000092-06], as well as the Order dated 14 April 2008 of the Labor
Arbiter are SET ASIDE.
SO ORDERED.
Contrary to the LAs holding, as affirmed by the NLRC, the CA found TAWTRASCO to have fully
reinstated petitioner to his former post. And without expressly declaring so, the unmistakable thrust
of the CA disposition was that petitioner veritably abandoned his work when he stopped reporting to
his Virac terminal assignment.
His motion for reconsideration having been denied per the CAs assailed Resolution of June 15,
2011, petitioner went to this Court. His petition is predicated on the following assignment of errors:
(A)
THE [CA] SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN FAILING TO
OBSERVE AND UPHOLD THE FORMAL AND PROCEDURAL REQUIREMENTS IN THE FILING
OF THE PETITION FOR CERTIORARI UNDER RULE 65.
(B)
THE [CA] SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN IGNORING THE
STRICT RULE ON NON-FORUM SHOPPING AND WHEN DESPITE KNOWLEDGE OF A PRIOR
FINAL JUDGMENT INVOLVING THE SAME AND IDENTICAL ISSUES AND THE SAME AND
IDENTICAL PARTIES, THE COURT A QUO FAILED TO DISMISS OUTRIGHT THE PETITION FOR
CERTIORARI IN VIOLATION OF THE DOCTRINE ON "RES JUDICATA" AND THE PRINCIPLE OF
"LITIS PENDENCIA".
(C)
THE [CA] SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN THE COURT A
QUO HAS DECIDED IT IN A WAY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISIONS OF THIS SUPREME COURT WITH RESPECT TO THE FORMAL APPEARANCES OF
COUNSEL.
(D)
THE [CA] SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN THE COURT A
QUO HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS IN DELVING INTO THE FACTS OF THE CASE. 16
Essentially, the issues raised boil down to: was there a proper and genuine reinstatement of
petitioner to his former position of General Manager of TAWTRASCO without loss of seniority rights
and privileges? Subsumed in this core issue is the question of whether petitioners refusal to report
in the Virac terminal in early April 2007 constitutes abandonment, not constructive dismissal.
The parallel finding and conclusion of the LA and the NLRC contradict that of the CA which, as
earlier indicated, categorically resolved the first factual poser in the negative. In light of the
divergence between the findings of facts of the LA and the NLRC, on one hand, and the appellate
court, on the other, a review of the records and the clashing arguments of the parties is in order.17
Reinstatement, as a labor law concept, means the admission of an employee back to work prevailing
prior to his dismissal;18 restoration to a state or position from which one had been removed or
separated, which presupposes that there shall be no demotion in rank and/or diminution of salary,
benefits and other privileges; if the position previously occupied no longer exists, the restoration
shall be to a substantially equivalent position in terms of salary, benefits and other
privileges.19 Managements prerogative to transfer an employee from one office or station to another
within the business establishment, however, generally remains unaffected by a reinstatement order,
as long as there is no resulting demotion or diminution of salary and other benefits and/or the action
is not motivated by consideration less than fair or effected as a punishment or to get back at the
reinstated employee.20
Guided by the foregoing reasonable albeit exaction norm, the "reinstatement" of petitioner as
general manager of TAWTRASCO, effected by TAWTRASCO pursuant to the February 5, 2007
compromise agreement, was not a real, bona fide reinstatement in the context of the Labor Code
and pertinent decisional law. Consider:
First, TAWTRASCO at the outset, i.e., after the compromise agreement signing, directed petitioner to
report to the Virac terminal with duties and responsibilities not befitting a general manager of a
transport company. In fine, the assignment partook of the nature of a demotion. The aforementioned
Memorandum Order No. 04, Series of 2007, in its pertinently part, states and directs:
1) To supervise all TAWTRASCO bus employees, personnels and including authorized callers for the
success of the terminal operation;
2) To have a record of the in and out of freight loaded on all TAWTRASCO buses, regulate freight
charge/s and minimize problems and complaints regarding the freight/cargoes loaded at these
buses;
3) As General Manager to sign on the manifesto or trip records of the buses going out daily at Virac
Terminal attesting his approval except on day-off schedule;
5) To explore all possibilities and restore the said terminal to its former successful operation;
6) To find solution to all other problems relative to its management operation and to report
complaints affecting transport operations; and
2) To give Notice three (3) days before regarding vacation leave except on emergency cases.
A cursory reading of items (2) and (3) above would readily reveal that petitioner was tasked to
discharge menial duties, such as maintaining a record of the "in" and "out" of freight loaded on all
TAWTRASCO buses and signing the trip records of the buses going out daily. To be sure, these
tasks cannot be classified as pertaining to the office of a general manager, but that of a checker. As
may reasonably be expected, petitioner promptly reacted to this assignment. A day after he received
the memorandum in question, or on February 25, 2007, he repaired to the office of Oliva to
personally voice out his misgivings about the set up and why he believed that the above
memorandum contravened their compromise agreement and the February 5, 2007 Order of the LA
specifically providing for his reinstatement as general manager without loss of seniority rights and
privileges.
Nevertheless, 15 days after the uneventful personal meeting with Oliva, petitioner addressed a letter
to top management inquiring about his reinstatement and assignment. The BOD Secretary of
TAWTRASCO received this letter on March 13, 2007.
TAWTRASCOs action on petitioners aforementioned letter came, as narrated earlier, in the form of
Memorandum No. 10, Series of 2007, which temporarily assigned him to the Virac terminal for two
months. And after the two-month period, he shall divide his time between the Virac and the ACBT
terminals, with Thursday as his travel day in between offices. Notably, this time, TAWTRASCO
explained that its Virac terminal needs petitioners attention due to its flagging operations and
management problems. Thus, petitioner acquiesced and reported to the Virac terminal of
TAWTRASCO.
In a rather unusual turn of events, however, the assailed CA decision made no mention of the
foregoing critical facts despite their being pleaded by petitioner and duly supported by the records,
although that court made a perfunctory reference to the adverted Memorandum Order No. 04.
And second, while Memorandum No. 10 was couched as if TAWTRASCO had in mind the
reinstatement of petitioner to his former position, there cannot be any quibble that TAWTRASCO
withheld petitioners customary boarding house privilege. What is more, TAWTRASCO did not
provide him with a formal office space.
As evidence on record abundantly shows, TAWTRASCO was made aware of its shortcomings as
employer, but it opted not to lift a finger to address petitioners reasonable requests for office space
and free lodging while assigned at the Virac terminal. Thus, the stand-off between employer and
employee led to petitioner writing on April 24, 2007 to TAWTRASCO, an explanatory letter explaining
his failure to report back to work at the Virac terminal. We reproduce anew highlights of that letter:
1. Our garage/terminal in Virac Catanduanes wherein you would want me to stay is in total disarray
and dirty as it looks until the time that I stayed there and despite having reported that matter to you
and despite having requested by me that the necessary funding for the reconstruction or rebuilding
of the necessary facilities we at least used to have before should be immediately allocated and
released and yet you were too slow in granting it;
2. Despite x x x my request for the allocation of the indispensable travel, representation and
accommodation allowances I need to have while staying in Virac because the garage/terminal
facilities remains in a messy condition but still you fail until now to provide it to me because probably
you want me to sleep at night along the sidewalks x x x;
3. The manner and nature of work you would want me to do while in Virac is utterly a deviation from
my original work and in effect a demotion in rank;
4. The place of work x x x was completely devoid of any office materials and equipments needed in
the nature of my work. To put in details there was no office table and chairs, no filing cabinets for
safekeeping of important documents, no ball-pens, no bond papers etc. x x x There is nothing at all
in said place of work for me to say that there was really an office of the General Manager.
As a matter of fact, you know that all my reports being submitted x x x are made possible by using
my own personal computer, my computer printer, my computer inks and even my own bond papers.
xxxx
6. The free place of accommodation I used to have before when staying in Cubao, Quezon City
remains non-existent x x x despite the fact that x x x I need to be [back] also in Cubao to facilitate
the restoration of our transport operation x x x.
Apropos to what petitioner viewed as a demeaning treatment dealt him by TAWTRASCO, the LA had
stated the ensuing observations in his April 14, 2008 Order:
In this case, however, this Branch finds that respondent TAWTRASCO indeed, complied with the
reinstatement of the complainant petitioner Baares, however, the office where he was assigned in
Virac, Catanduanes is not in good and tenantable condition. As shown in complainants Annex "F"
which is the photograph of the place, it is unsafe, dilapidated and in a messy situation. Confronted
with this problem, complainant requested fund from respondent for the rehabilitation of the office.
However, this was not favorably acted upon. To further rub salt in an open wound, respondent
appointed a new General Manager effective November 12, 2007 (Annexes "H" and "I", complainants
Memorandum). This conduct on the part of respondent gave complainant the correct impression that
the respondent did not intend to be bound by the compromise agreement, and its non-materialization
negated the very purpose for which it was executed.22
Annex "F," the photograph23 adverted to by the LA, tells it all. Indeed, petitioner could not reasonably
be expected to work in such a messy condition without any office space, office furniture, equipment
and supplies. And much less can petitioner lodge there. TAWTRASCO pointedly told petitioner
through the March 26, 2007 letter of Oliva denying his request for a PhP 1,700 lodging allowance
that petitioner could instead use the Virac office for his accommodation. It must be borne in mind
and TAWTRASCO has not controverted the factthat, prior to his illegal dismissal, petitioner was
enjoying PhP 5,000-a-month free lodging privilege while stationed in the Cubao terminal.
Accordingly, this lodging privilege was supposed to continue under the reinstatement package. But
as it turned out, TAWTRASCO discontinued the accommodation when it posted petitioner in Virac.
Under Article 223 of the Labor Code, an employee entitled to reinstatement "shall either be admitted
back to work under the same terms and conditions prevailing prior to his dismissal or separation x x
x."24 Verily, an illegally dismissed employee is entitled to reinstatement without loss of seniority rights
and to other established employment privileges, and to his full backwages. 25 The boarding house
privilege being an established perk accorded to petitioner ought to have been granted him if a real
and authentic reinstatement to his former position as general manager is to be posited.
It cannot be stressed enough that TAWTRASCO withheld petitioners salaries for and after his
purported refusal to report for work at the Virac terminal. The reality, however, is that TAWTRASCO
veritably directed petitioner to work under terms and conditions prejudicial to him, the most hurtful
cut being that he was required to work without a decent office partly performing a checkers job. And
this embarrassing work arrangement is what doubtless triggered the refusal to work, which under the
premises appears very much justified.
Generally, employees have a demandable right over existing benefits voluntarily granted to them by
their employers. And if the grant or benefit is founded on an express policy or has, for a considerable
period of time, been given regularly and deliberately, then the grant ripens into a vested right 26 which
the employer cannot unilaterally diminish, discontinue or eliminate 27 without offending the declared
constitutional policy on full protection to labor.28 So it must be here with respect, at the minimum, to
the lodging accommodation which TAWTRASCO, as found by the NLRC, appears to have regularly
extended for free for some time to petitioner.
Contrary to TAWTRASCOs posture and what the CA Decision implied, petitioners refusal, during
the period material, to report for work at the Virac terminal does not, without more, translate to
abandonment. For abandonment to exist, it is essential (1) that the employee must have failed to
report for work or must have been absent without valid or justifiable reason; and (2) that there must
have been a clear intention to sever the employer-employee relationship manifested by some overt
acts.29 These concurring elements of abandonment are not present in the instant case.
As reflected above, the reinstatement order has not been faithfully complied with. And varied but
justifiable reasons obtain which made petitioners work at the Virac terminal untenable. To reiterate,
there was a lack of a viable office: no proper office space, no office furniture and equipment, no
office supplies. Petitioners request for immediate remediation of the above unfortunate employment
conditions fell on deaf ears. This is not to mention petitioners board and lodging privilege which he
was deprived of without so much as an explanation. Thus, it could not be said that petitioners
absence is without valid or justifiable cause.
But more to the point, petitioner has not manifested, by overt acts, a clear intention to sever his
employment with TAWTRASCO. In fact, after submitting his April 24, 2007 letter-explanation to, but
not receiving a reaction one way or another from, TAWTRASCO, petitioner lost no time in filing a
complaint against the former for, inter alia, nonpayment of salaries and forfeiture of boarding house
privilege. Thereafter, via a Manifestation, he sought the early issuance of an alias writ of execution
purposely for the full implementation of the final and executory LA August 22, 2006 Decision, i.e., for
the payment of his salaries and full reinstatement. These twin actions clearly argue against a finding
of abandonment on petitioners part. It is a settled doctrine that the filing of an illegal dismissal suit is
inconsistent with the charge of abandonment, for an employee who takes steps to protest his
dismissal cannot by logic be said to have abandoned his work.30
Given the convergence of events and circumstances above described, the Court can readily declare
that TAWTRASCO admitted petitioner back to work under terms and conditions adversely dissimilar
to those prevailing before his illegal dismissal. Put a bit differently, petitioner was admitted back, but
required to work under conditions crafted to cause unnecessary hardship to or meant to be rejected
by him. And to reiterate, these conditions entailed a demotion in rank and diminution of perks and
standard privileges. The shabby and unfair treatment accorded him or her by the management of
TAWTRASCO is definitely not genuine reinstatement to his former position.
The Court finds, as did the NLRC and the LA, that petitioner was not truly reinstated by
TAWTRASCO consistent with the final and executory August 22, 2006 Decision of the LA and the
February 5, 2007 Compromise Agreement inked by the parties in the presence of the hearing LA.
Perforce, the assailed decision and resolution of the CA must be set aside, and the April 14, 2008
Order of the LA, as effectively affirmed in the July 7, 2009 Decision and November 18, 2009
Resolution of the NLRC, accordingly reinstated.
Supervening events, however, had transpired which inexorably makes the reinstatement infeasible.
For one, on November 12, 2007, TAWTRASCO already appointed a new general manager.
Petitioner no less has raised this fact of appointment. As a matter of settled law, reinstatement and
payment of backwages, as the normal consequences of illegal dismissal, presuppose that the
previous position from which the employee has been removed is still in existence or there is an
unfilled position of a nature, more or less, similar to the one previously occupied by said employee. 31
For another, a considerable period of time has elapsed since petitioner last reported to work in early
2007 or practically a six-year period. And this protracted labor suit have likely engendered animosity
and exacerbated already strained relations between petitioner and his employer.
Reinstatement is no longer viable where, among other things, the relations between the employer
and employee have been so severely strained, that it is not in the best interest of the parties, nor is it
advisable or practical to order reinstatement.32 Under the doctrine of strained relations, payment of
separation pay is considered an acceptable alternative to reinstatement when the latter option is no
longer desirable or viable.33 Indeed, separation pay is made an alternative relief in lieu of
reinstatement in certain circumstances, such as: (1) when reinstatement can no longer be effected in
view of the passage of a long period of time or because of the realities of the situation; (2)
reinstatement is inimical to the employers interest; (3) reinstatement is no longer feasible; (4)
reinstatement does not serve the best interests of the parties involved; (5) the employer is prejudiced
by the workers continued employment; (6) facts that make execution unjust or inequitable have
supervened; or (7) strained relations between the employer and the employee. 34
Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. 35 In lieu of reinstatement,
petitioner is entitled to separation pay equivalent to one (1) month salary for every year of service
reckoned from the time he commenced his employment with TAWTRASCO until finality of this
Decision.
In addition, petitioner is entitled to backwages and other emoluments due him from the time he did
not report for work on March 31, 2007 until the finality of this Decision. Said backwages and
emoluments shall earn 12% interest from finality of this Decision until fully paid. The payment of
legal interest becomes a necessary consequence of the finality of the Courts Decision, because,
reckoned from that time, the said decision becomes a judgment for money which shall earn interest
at the rate of 12% per annum.36
In accordance with Art. 11137 of the Labor Code and in line with current jurisprudence,38 petitioner
shall be paid attorneys fees in the amount equivalent to 10% of the monetary award.
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution
dated October 14, 2010 and June 15, 2011, respectively, of the CA in CA-G.R. SP No. 112542 are
SET ASIDE. The NLRC July 7, 2009 Decision and November 18, 2009 Resolution as well as the
April 14, 2008 Order of the Labor Arbiter are hereby REINSTATED with MODIFICATION in that the
Tabaco Womens Transport Service Cooperative Is ORDERED to pay petitioner Alexander B.
Baares the following:
(1) Backwages and other emoluments due to petitioner from March 31, 2007 when petitioner did not
report for work until finality of this Decision with interest thereon at 12% per annum from finality of
this Decision until paid;
(2) Separation pay equivalent to one (1) month salary for every year of service reckoned from the
time he started his employment with TAWTRASCO until the finality of this Decision; and
(3) 10% attorney's fees computed from the total monetary benefits.
The case is REMANDED to the RAB V of the NLRC in Legaspi City for the computation, as
expeditiously as possible, of the monetary awards.
No pronouncement as to costs.
SO ORDERED.
THIRD DIVISION
DECISION
PERALTA, J.:
This is a Petition for Review under Rule 45 of the Rules of Court assailing the April 11, 2002
Decision1 of the Court of Appeals in CA-G.R. SP No. 60135, as well as the June 14, 2002
Resolution2 therein which denied reconsideration. The assailed decision affirmed the November 29,
1999 decision3 of the National Labor Relations Commission (NLRC) in NLRC NCR-CA No. 019439-
99, but modified the award of damages in the case. In turn, the decision of the NLRC had reversed
and set aside the finding of illegal dismissal in the March 26, 1999 ruling 4of the Labor Arbiter in
NLRC NCR Case No. 00-06-05215-98.
The facts follow.
Respondent Gwendellyn Rose Gucaban (Gucaban) was well into the tenth year of her career as a
licensed civil engineer when she joined the workforce of petitioner San Miguel Properties
Philippines, Inc. (SMPI) in 1991. Initially engaged as a construction management specialist, she, by
her satisfactory performance on the job, was promoted in 1994 and 1995, respectively, to the
position of technical services manager, and then of project development manager. As project
development manager, she also sat as a member of the companys management committee. She
had been in continuous service in the latter capacity until her severance from the company in
February 1998. 5
In her complaint6 for illegal dismissal filed on June 26, 1998, Gucaban alleged that her separation
from service was practically forced upon her by management. She claimed that on January 27,
1998, she was informed by SMPIs President and Chief Executive Officer, Federico Gonzalez
(Gonzalez), that the company was planning to reorganize its manpower in order to cut on costs, and
that she must file for resignation or otherwise face termination. Three days later, the Human
Resource Department allegedly furnished her a blank resignation form which she refused to sign.
From then on, she had been hounded by Gonzalez to sign and submit her resignation letter.7
Gucaban complained of the ugly treatment which she had since received from Gonzalez and the
management supposedly on account of her refusal to sign the resignation letter. She claimed she
had been kept off from all the meetings of the management committee,8 and that on February 12,
1998, she received an evaluation report signed by Gonzalez showing that for the covered period she
had been negligent and unsatisfactory in the performance of her duties. 9 She found said report to be
unfounded and unfair, because no less than the companys Vice-President for Property
Management, Manuel Torres (Torres), in a subsequent memorandum, had actually vouched for her
competence and efficiency on the job.10 She herself professed having been consistently satisfactory
in her job performance as shown by her successive promotions in the company.11 It was supposedly
the extreme humiliation and alienation that impelled her to submit a signed resignation letter on
February 18, 1998.12
Gucaban surmised that she had merely been tricked by SMPI into filing her resignation letter
because it never actualized its reorganization and streamlining plan; on the contrary, SMPI allegedly
expanded its employee population and also made new appointments and promotions to various
other positions. She felt that she had been dismissed without cause and, hence, prayed for
reinstatement and payment of backwages and damages. 13
SMPI argued that it truly encountered a steep market decline in 1997 that necessitated cost-cutting
measures and streamlining of its employee structure which, in turn, would require the abolition of
certain job positions; Gucabans post as project development manager was one of such positions.
As a measure of generosity, it allegedly proposed to Gucaban that she voluntarily resign from office
in consideration of a financial package14 an offer for which Gucaban was supposedly given the first
week of February 1998 to evaluate. Gucaban, however, did not communicate her acceptance of the
offer and, instead, she allegedly conferred with the Human Resource Department and negotiated to
augment her benefits package.15
SMPI claimed that Gucaban was able to grasp the favorable end of the bargain and, expectant of an
even more generous benefits package, she voluntarily tendered her resignation effective February
27, 1998. On the day before her effective date of resignation, she signed a document denominated
as Receipt and Release whereby she acknowledged receipt of P1,131,865.67 cash representing her
monetary benefits and waived her right to demand satisfaction of any employment-related claims
which she might have against management.16 SMPI admitted having made several other
appointments in June 1998, but the same, however, were supposedly part of the full implementation
of its reorganization scheme. 17
In its March 26, 1999 Decision,18 the Labor Arbiter dismissed the complaint for lack of merit, thus:
WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit.
SO ORDERED.19
Addressing in the affirmative the issue of whether the subject resignation was voluntary, the Labor
Arbiter found no proven force, coercion, intimidation or any other circumstance which could
otherwise invalidate Gucabans resignation. He found incredible Gucabans claim of humiliation and
alienation, because the mere fact that she was excluded from the meetings of the management
committee would not be so humiliating and alienating as to compel her to decide to leave the
company.20 He likewise dismissed her claim that SMPI merely feigned the necessity of reorganization
in that while the company indeed made new other appointments following Gucabans resignation,
still, this measure was an implementation of its reorganization plan. 21
Gucaban appealed to the NLRC22 which, in its November 29, 1999 Decision,23 reversed the ruling of
the Labor Arbiter. Finding that Gucaban has been illegally dismissed, it ordered her reinstatement
without loss of seniority rights and with full backwages, as well as ordered the award of damages
and attorneys fees. It disposed of the appeal as follows:
WHEREFORE, the appealed decision is SET ASIDE. On the basis of our finding that the
complainant was illegally dismissed, judgment is hereby rendered directing the respondent to
reinstate complainant to her position last held, and to pay her full backwages computed from the
time of her dismissal until she is actually reinstated. As alleged and prayed for in the complaint, the
respondent is likewise directed to pay complainant moral damages limited however to P200,000.00,
exemplary damages of P100,000.00, and ten percent (10%) of the total award as attorneys fees.
SO ORDERED.24
SMPI sought reconsideration,25 but it was denied.26 It elevated the matter to the Court of
Appeals via a petition for certiorari.27
On April 11, 2002, the Court of Appeals issued the assailed Decision28 finding partial merit in the
petition. It affirmed the NLRCs finding of illegal/constructive dismissal, but modified the monetary
award as follows:
WHEREFORE, we grant the petition for certiorari insofar only in the granting of the exorbitant
amount of P200,000.00 moral damages and P100,000.00 exemplary damages.
The damages awarded are reduced to P50,000.00 moral damages and P25,000.00 exemplary
damages as discussed in the text of the decision. The ten percent (10%) awarded for attorneys fees
shall be based on the total amount awarded.
SO ORDERED.29
SMPIs motion for reconsideration was denied;30 hence, this recourse to the Court.
SMPI posits that the Court of Appeals finding of illegal dismissal was at best conjectural, based as it
is on a misapprehension of facts and on Gucabans self-serving allegations of alienation and
humiliation which, nevertheless, could not have given sufficient motivation for her to resign. It insists
that Gucaban, in exchange for a benefits package, has voluntarily tendered her resignation following
the presentation to her of the possibility of company reorganization and of the resulting abolition of
her office as necessitated by the companys business losses at the time. It adds that Gucaban has,
in fact, been able to negotiate with the company for a better separation package which she
voluntarily accepted as shown by her unconditional resignation letter and the accompanying Receipt
and Release form.31 It cites Samaniego v. NLRC,32 Sicangco v. NLRC,33 Domondon v. NLRC34 and
Guerzon v. Pasig Industries, Inc.35 to support its cause.36
Gucaban stands by the uniform findings of the NLRC and the Court of Appeals. In her Comment on
the Petition, she points out that indeed SMPI was unable to conclusively refute the allegations in her
complaint, particularly those which negate the voluntariness of her resignation. 37 She insists that
SMPI had no intention to reorganize at the time the option to resign was presented to her. She
discloses that while actual reorganization took place more than a year after she was fraudulently
eased out of the company, the said measure was supposedly brought about by the change in
management and not by a need to cut on expenditures. In connection with this, she surmises why
would SMPI actually implement its reorganization plan belatedly if there were, at the time of her
resignation, an existing need to cut on costs, and why would those affected employees be given
financial benefits far better than hers.38 She concludes that given the foregoing, the cases relied on
by petitioner do not apply to the case at bar.39
Replying, SMPI counters that the fact that the company had undertaken an albeit belated
reorganization would mean that there was such a plan in existence at the time of Gucabans
resignation. It professes that in June 1998, the company designated several of its personnel to
different positions which, therefore, indicates a reorganization following respondents resignation.
Moreover, it points out that Gucabans claim of trickery does not sit well with the fact that she is a
well-educated person who naturally cannot be inveigled into resigning from employment against her
will.40
Prefatorily, we note in this case the inconsistency in the factual findings and conclusions of the Labor
Arbiter and the NLRC, yet the incongruence has already been addressed and settled by the Court of
Appeals which affirmed the NLRC. Not being a trier of facts, this Court then ought to accord respect
if not finality to the findings of the Court of Appeals, especially since, as will be shown, they are
substantiated by the availing records.41 Hence, we deny the petition.
In all stages of the proceedings, SMPI has been persistent that there was an existing reorganization
plan in 1998 and that it was implemented shortly after the effective date of Gucabans resignation. As
proof, it submitted a copy of its June 9, 1998 Memorandum which shows that new appointments had
been made to various positions in the company. A fleeting glance at the said document, however,
tells that there were four high-ranking personnel who received their respective promotions, yet
interestingly it tells nothing of a reorganization scheme being implemented within the larger
corporate structure.46
Equally interesting is that SMPI, in its Supplemental Argument to the Motion for Reconsideration filed
with the NLRC, attached copies of the notices it sent to the Department of Labor and Employment
on July 13, 1999 and December 29, 1998 to the effect that effective February 15, August 15 and
September 15, 1999 it would have to terminate the services of its 76 employees due to business
losses and financial reverses.47 True, while a reorganization of SMPIs corporate structure might
have indeed taken place as shown by these notices, nevertheless, it happened only in the latter part
of 1999 or more than a year after Gucabans separation from the company and incidentally, after
she filed the instant complaint.48 SMPIs claim in this respect all the more loses its bearing,
considering that said corporate restructuring was brought about rather by the sudden change in
management than the need to cope with business losses. And this fact has been explained by
Gucaban in her Comment and in her Memorandum filed with the Court of Appeals. 49
It is not difficult to see that, shortly prior to and at the time of Gucabans alleged resignation, there
was actually no genuine corporate restructuring plan in place as yet. In other words, although the
company might have been suffering from losses due to market decline as alleged, there was still no
concrete plan for a corporate reorganization at the time Gonzalez presented to Gucaban the
seemingly last available alternative options of voluntary resignation and termination by abolition of
her office. Certainly, inasmuch as the necessity of corporate reorganization generally lies within the
exclusive prerogative of management, Gucaban at that point had no facility to ascertain the truth
behind it, and neither was she in a position to question it right then and there. Indeed, she could not
have chosen to file for resignation had SMPI not broached to her the possibility of her being
terminated from service on account of the supposed reorganization.
It is then understandable for Gucaban, considering the attractive financial package which SMPI
admittedly offered to her, to opt for resignation instead of suffer termination a consequence the
certainty of which she was made to believe. As rightly noted by the Court of Appeals, that there was
no actual reorganization plan in place when Gucaban was induced to resign, and that she had been
excluded from the meetings of the management committee since she refused to sign her resignation
letter followed by the soured treatment that caused her humiliation and alienation, are matters which
SMPI has not directly addressed and successfully refuted.50
Another argument advanced by SMPI to support its claim that the resignation of Gucaban was
voluntary is that the latter has actually been given ample time to weigh her options and was, in fact,
able to negotiate with management for improved benefits. Again, this contention is specious as the
same is not supported by the availing records.51 Indeed, as clarified by Gucaban, the increased
benefits was the result of practice sanctioned and even encouraged by the mother company in favor
of those availing of early retirement and that the increased basic monthly rate in the computation of
the benefits is applied to April and retroacts to January.52
Besides, whether there have been negotiations or not, the irreducible fact remains that Gucabans
separation from the company was the confluence of the fraudulent representation to her that her
office would be declared redundant, coupled with the subsequent alienation which she suffered from
the company by reason of her refusal to tender resignation. The element of voluntariness in her
resignation is, therefore, missing. She had been constructively and, hence, illegally dismissed as
indeed her continued employment is rendered impossible, unreasonable or unlikely under the
circumstances.53 The observation made by the Court of Appeals is instructive:
x x x As correctly noted by public respondent NLRC, respondent Gucaban did not voluntarily resign
but was forced to do so because of petitioners representation regarding its planned reorganization.
Mr. Gonzale[z] informed respondent that if she does not resign from her employment, she shall be
terminated which would mean less financial benefits than that offered to her. When respondent
initially refused, petitioners subsequent actions as alleged by respondent which were not rebutted
by petitioner, show that she is being eased out from the company. Said actions rendered
respondents continuous employment with petitioner impossible, unreasonable and unlikely. x x x
x x x [R]esignation must be voluntary and made with the intention of relinquishing the office,
accompanied with an act of relinquishment. Indeed, it would have been illogical for private
respondent herein to resign and then file a complaint for illegal dismissal. Resignation is inconsistent
with the filing of the said complaint. x x x
x x x Since respondent could not have resigned absent petitioners broaching to her the idea of
voluntary resignation instead of retrenchment, coupled with petitioners acts of discrimination,
petitioner in effect forced respondent to resign. The same is constructive dismissal and is a dismissal
without cause. x x x
As respondent was dismissed without cause, the NLRC ruling is correct that she is entitled to
reinstatement and backwages, the latter to be computed from her dismissal up to the time of her
actual reinstatement pursuant to Art. 279 of the Labor Code.54
At this juncture, we find that the cases invoked by SMPI are hardly supportive of its case. In
1avvphi1
Samaniego, one of the issues addressed by the Court is whether the resignation of petitioners
therein was voluntary; but while the matter of reorganization was indeed raised as a peripheral
issue, nevertheless, the same has dealt merely with the validity thereof. As in the cases of
Domondon and Guerzon, the Court, in Samaniego, did not tackle the matter of the existence or non-
existence of a genuine and bona fide reorganization at the time the option to resign was presented
to the employee as would affect his decision to voluntarily resign or not. And in Sicangco, the Court
dismissed the allegation of involuntary resignation by a well-educated employee because there was
no proven fraud, intimidation or undue influence that could support it. In the instant case, the
pressing matter is whether there was in place a genuine reorganization plan awaiting immediate
implementation in good faith at or about the time Gucaban resolved to hand in her resignation letter.
This issue is primordial, because to reiterate, Gucaban indeed would not have opted to resign
without the company having laid out to her its prospect of a corporate restructuring which SMPI
failed to establish as existing at the time as well as the certainty of a consequent termination
should she not resign.
A final word. Moral damages are awarded in termination cases where the employees dismissal was
attended by bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it
was done in a manner contrary to morals, good customs or public policy 55 In Gucabans case, the
said bases indeed obtain when she was fraudulently induced to resign and accede to a quitclaim
upon the false representation of an impending and genuine reorganization as well as on the pretext
that such option would be the most beneficial. This, coupled with the subsequent oppression that
immediately preceded her involuntary resignation, deserves an award of moral damages consistent
with the Court of Appeals ruling. Accordingly, Gucaban is likewise entitled to exemplary damages as
decreed by the Court of Appeals.
Lastly, reinstatement and payment of backwages, as the normal consequences of illegal dismissal,
presuppose that the previous position from which the employee has been removed is still in
existence or there is an unfilled position of a nature, more or less, similar to the one previously
occupied by said employee.56 Yet, it has been more than a decade since the incident which led to
Gucabans involuntary resignation took place and, hence, with the changes in SMPIs corporate
structure through the years, the former position occupied by Gucaban, or an equivalent thereof, may
no longer be existing or is currently occupied. Furthermore, there is the possibility that Gucabans
rejoining SMPIs workforce would only exacerbate the tension and strained relations which in the first
place had given rise to this incident. This, considering that as project development manager she was
holding a key position in the company founded on trust and confidence and, hence, there is also the
possibility of compromising her efficiency and productivity on the job.57 For these two reasons, the
ruling of the Court of Appeals is modified in this respect. In lieu of reinstatement, an award of
separation pay is in order, equivalent to one (1) month salary for every year of service.
WHEREFORE, the Petition is DENIED. The April 11, 2002 Decision of the Court of Appeals in CA-
G.R. SP No. 60135, as well as its June 14, 2002 Resolution, are hereby AFFIRMED with
the MODIFICATION that petitioner San Miguel Properties Philippines, Inc. is DIRECTED to pay
respondent Gwendellyn Rose S. Gucaban separation pay in lieu of reinstatement and backwages.
The case is REMANDED to the Labor Arbiter for execution and for the proper determination of
respondents separation pay, less any amount which she may have received as financial assistance.
SO ORDERED.