SECOND DIVISION LEPANTO CERAMICS, INC., Petitioner, G.R. No.

180866

Present: CARPIO, J., Chairperson, BRION, DEL CASTILLO, ABAD, and PEREZ, JJ.

- versus -

LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.

Promulgated: March 2, 2010

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

PEREZ, J.: Before this Court is a Petition for Review on Certiorari under Rule 451 of the 1997 Rules of Civil Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision2 of the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of the
1 2

Appeal by Certiorari to the Supreme Court. Penned by Associate Justice Josefina Guevara-Salonga, with Associate Justices Fernanda Lampas Peralta and Sesinando E. Villon concurring. Rollo, pp. 10-19.

Voluntary Arbitrator3 granting the members of the respondent association a Christmas Bonus in the amount of Three Thousand Pesos (P3,000.00), or the balance of Two Thousand Four Hundred Pesos (P2,400.00) for the year 2002, and the (2) Resolution4 of the same court dated 13 December 2007 denying Petitioners Motion for Reconsideration.

The facts are:

Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating by virtue of Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale basis, among others, tiles, marbles, mosaics and other similar products.5

Respondent

Lepanto

Ceramics

Employees

Association

(respondent

Association) is a legitimate labor organization duly registered with the Department of Labor and Employment. It is the sole and exclusive bargaining agent in the establishment of petitioner.6

In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the respondent Association.7

Subsequently, in September 1999, petitioner and respondent Association entered into a Collective Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the members of the
3 4 5 6 7

Penned by Voluntary Arbitrator Lydia A. Navarro. Id. at 167-169. Id. at 30. CA rollo, p. 36. Id. at 39. Id. at 42.

respondent Association.8 and effect.

The Christmas bonus was one of the enumerated

existing benefit, practice of traditional rights which shall remain in full force

The text reads:

Section 8. All other existing benefits, practice of traditional rights consisting of Christmas Gift package/bonus, reimbursement of transportation expenses in case of breakdown of service vehicle and medical services and safety devices by virtue of company policies by the UNION and employees shall remain in full force and effect. Section 1. EFFECTIVITY This agreement shall become effective on September 1, 1999 and shall remain in full force and effect without change for a period of four (4) years or up to August 31, 2004 except as to the representation aspect which shall be effective for a period of five (5) years. It shall bind each and every employee in the bargaining unit including the present and future officers of the Union.

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave each of the members of respondent Association Tile Redemption Certificates equivalent to P3,000.00.9 The bonus for the year 2002 is the root of the present dispute. Petitioner gave a year-end cash benefit of Six Hundred Pesos (P600.00) and offered a cash advance to interested employees equivalent to one (1) month salary payable in one year.10 The respondent

Association objected to the P600.00 cash benefit and argued that this was in violation of the CBA it executed with the petitioner.

The parties failed to amicably settle the dispute. The respondent Association filed a Notice of Strike with the National Conciliation Mediation Board, Regional
8 9 10

Records, p. 7. Rollo, pp. 43-44. Id. at 45.

Branch No. IV, alleging the violation of the CBA. The case was placed under preventive mediation. The efforts to conciliate failed. The case was then referred to the Voluntary Arbitrator for resolution where the Complaint was docketed as Case No. LAG-PM-12-095-02.

In support of its claim, respondent Association insisted that it has been the traditional practice of the company to grant its members Christmas bonuses during the end of the calendar year, each in the amount of P3,000.00 as an expression of gratitude to the employees for their participation in the companys continued existence in the market. The bonus was either in cash or in the form of company tiles. In 2002, in a speech during the Christmas celebration, one of the companys top executives assured the employees of said bonus. However, the Human

Resources Development Manager informed them that the traditional bonus would not be given as the companys earnings were intended for the payment of its bank loans. Respondent Association argued that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis as the same was not a demandable and enforceable obligation. It argued that the giving of extra compensation was based on the companys available resources for a given year and the workers are not entitled to a bonus if the company does not make profits. Petitioner adverted to the fact that it was debt-ridden having incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the companys accumulated losses amounted to over P2.7 billion. Petitioner further argued that the grant of a one (1) month salary cash advance was not meant to take the place of a bonus but was meant to show the companys sincere desire to help its employees despite its precarious financial condition. Petitioner also averred that the CBA

provision on a Christmas gift/bonus refers to alternative benefits.

Finally,

petitioner emphasized that even if the CBA contained an unconditional obligation to grant the bonus to the respondent Association, the present difficult economic times had already legally released it therefrom pursuant to Article 1267 of the Civil Code.11

The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that the bonus was given prior to the effectivity of the CBA between the parties and that the financial losses of the company is not a sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding contract and constitutes the law between the parties. The Voluntary

Arbitrator further expounded that since the employees had already been given P600.00 cash bonus, the same should be deducted from the claimed amount of P3,000.00, thus leaving a balance of P2,400.00. The dispositive portion of the decision states, viz:

Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of the complainant union LCEA their respective Christmas bonus in the amount of three thousand (P3,000.00) pesos for the year 2002 less the P600.00 already given or a balance of P2,400.00.12

Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an Order dated 27 June 2003, in this wise:

11

Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. Rollo, p. 169.

12

The Motion for Reconsideration filed by the respondent in the aboveentitled case which was received by the Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on Grievance Machinery and Voluntary Arbitration; Amending The Implementing Rules of Book V of the Labor Code of the Philippines; to wit: Section 7. Finality of Award/Decision The decision, order, resolution or award of the voluntary arbitrator or panel of voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties and it shall not be subject of a motion for reconsideration.13

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court docketed as CA-G.R. SP No. 78334.14 As adverted to earlier, the Court of Appeals affirmed in toto the decision of the Voluntary Arbitrator. The appellate court also denied petitioners motion for reconsideration. In affirming respondent Associations right to the Christmas bonus, the Court of Appeals held:

In the case at bar, it is indubitable that petitioner offered private respondent a Christmas bonus/gift in 1998 or before the execution of the 1999 CBA which incorporated the said benefit as a traditional right of the employees. Hence, the grant of said bonus to private respondent can be deemed a practice as the same has not been given only in the 1999 CBA. Apparently, this is the reason why petitioner specifically recognized the grant of a Christmas bonus/gift as a practice or tradition as stated in the CBA. x x x.
13 14

Id. at 170. The Court of Appeals gave due course to the Petition although the proper remedy should have been a Petition for Review under Rule 43 of the 1997 Rules of Civil Procedure. Rule 43. Appeals From the Court of Tax Appeals and Quasi-Judicial Agencies to the Court of Appeals. Section 1. Scope. This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are x x x, and voluntary arbitrators authorized by law.

xxxx Evidently, the argument of petitioner that the giving of a Christmas bonus is a management prerogative holds no water. There were no conditions specified in the CBA for the grant of said benefit contrary to the claim of petitioner that the same is justified only when there are profits earned by the company. As can be gleaned from the CBA, the payment of Christmas bonus was not contingent upon the realization of profits. It does not state that if the company derives no profits, there are no bonuses to be given to the employees. In fine, the payment thereof was not related to the profitability of business operations. Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay, has further been giving its employees an additional Christmas bonus at the end of the year since 1998 or before the effectivity of the CBA in September 1999. Clearly, the grant of Christmas bonus from 1998 up to 2001, which brought about the filing of the complaint for alleged non-payment of the 2002 Christmas bonus does not involve the exercise of management prerogative as the same was given continuously on or about Christmas time pursuant to the CBA. Consequently, the giving of said bonus can no longer be withdrawn by the petitioner as this would amount to a diminution of the employees existing benefits.15

Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or not the Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is obliged to give the members of the respondent Association a Christmas bonus in the amount of P3,000.00 in 2002.16

We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence. This

15 16

Id. at 16-17. Id. at 9.

is the rule particularly where the findings of both the arbitrator and the Court of Appeals coincide.17

As a general proposition, an arbitrator is confined to the interpretation and application of the CBA. He does not sit to dispense his own brand of industrial justice: his award is legitimate only in so far as it draws its essence from the CBA.18 That was done in this case. By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in addition to what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his industry and loyalty which contributed to the success of the employers business and made possible the realization of profits.19

A bonus is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits.20

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties.21 Given that the bonus in this case is integrated in the CBA, the same partakes the nature of a demandable obligation.
17

18

19 20

21

Philippine Airlines, Inc. v. Philippine Airlines Employees Association (PALEA), G.R. No. 142399, 12 March 2008, 548 SCRA 117, 129 citing Stamford Marketing Corporation v. Julian, 468 Phil. 34, 55 (2004). United Kimberly-Clark Employees Union-Philippine Transport General Workers Organization v. Kimberly-Clark Philippines, Inc., G.R. No. 162957, 6 March 2006, 484 SCRA 187, 200. Protacio v. Laya Mananghaya and Co., G.R. No. 168654, 25 March 2009. Philippine Airlines, Inc. v. Philippine Airlines Employees Association (PALEA) , supra note 16 at 133 citing Philippine Education Co., Inc. (PECO) v. Court of Industrial Relations, 92 Phil. 381, 385 (1952). American Wire and Cable Daily Rated Employees Union v. American Wire and Cable, 497 Phil. 213, 224 (2005).

Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act of generosity on the part of the petitioner but a contractual obligation it has undertaken.22

A CBA refers to a negotiated contract between a legitimate labor organization and the employer, concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all other contracts, the parties to a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public policy.23

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions.24 This principle stands strong and true in the case at bar.

A reading of the provision of the CBA reveals that the same provides for the giving of a Christmas gift package/bonus without qualification. Terse a nd clear, the said provision did not state that the Christmas package shall be made to depend on the petitioners financial standing. The records are also bereft of any showing that the petitioner made it clear during CBA negotiations that the bonus was dependent on any condition. Indeed, if the petitioner and respondent Association intended that the P3,000.00 bonus would be dependent on the company earnings, such intention should have been expressed in the CBA.

22 23

24

Philippine Airlines, Inc. v Philippine Airlines Employees Association (PALEA), supra note 16 at 133. Honda Philippines, Inc. v. Samahan ng Malayang Manggagawa sa Honda, G.R. No. 145561, 15 June 2005, 460 SCRA 186,190. University of San Agustin v. University of San Agustin Employees Union, G.R. No. 177594, 23 July 2009; HFJ Philippines, Inc. v. Pilar, G.R. No. 168716, 16 April 2009.

It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that the 1997 financial crisis in the Asian region adversely affected the Philippine economy.25

From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its undertaking. It is manifestly clear that petitioner was very much aware of the imminence and possibility of business losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss of P14,347,548.00.26 Yet it gave a P3,000.00 bonus to the members of the respondent Association. In 1999, when petitioners very own financial statement reflected that the positive developments in the economy have yet to favorably affect the operations of the company,27 and reported a loss of P346,025,733.00,28 it entered into the CBA with the respondent Association whereby it contracted to grant a Christmas gift package/bonus to the latter. Petitioner supposedly continued to incur losses in the years 200029 and 2001. Still and all, this did not deter it from honoring the CBA provision on Christmas bonus as it continued to give P3,000.00 each to the members of the respondent Association in the years 1999, 2000 and 2001.

All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is
25

26 27 28 29

Said Financial Statements further noted that The Asian Crisis led to a volatile foreign exchange and interest rates. During the first half of 1999, the situation has improved with the peso moving in a relatively narrow range of $38 to $40 against the US dollar between 31 December 1998 and 30 September 1999 x x x. Records, p. 215. Id. at 218. Id. at 215. Id. at 218. Petitioners financial statement states that in year 2000 it incurred a net loss of P865,137,705.00 and P958,602,659.00 in the year 2001.

founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full protection.30 Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or duress, it is presumed that it entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of its commitments under the contract.

The Court is fully aware that implementation to the letter of the subject CBA provision may further deplete petitioners resources. Petitioners remedy though lies not in the Courts invalidation of the provision but in the parties clarification of the same in subsequent CBA negotiations. Article 253 of the Labor Code is relekvant:
Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement. - When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the sixty (60)-day period and/or until a new agreement is reached by the parties.

WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of the Court of Appeals dated 5 April 2006 and the Resolution of the same court dated 13 December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.

SO ORDERED.
30

Arco Metal Products, Co., Inc. v. Samahan ng Mga Mangagagawa sa Arco Metal-NAFLU (SAMARMNAFLU), G.R. No. 170734, 14 May 2008, 554 SCRA 110, 118-119.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

RENATO REAL, Petitioner,

G.R. No. 168757

Present:

CORONA, C. J., Chairperson, - versusVELASCO, JR., LEONARDO-DE CASTRO, DEL CASTILLO, and PEREZ, JJ. SANGU PHILIPPINES, INC. and/ or KIICHI ABE, Respondents.

Promulgated: January 19, 2011

x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

The perennial question of whether a complaint for illegal dismissal is intracorporate and thus beyond the jurisdiction of the Labor Arbiter is the core issue up for consideration in this case.

This Petition for Review on Certiorari assails the Decision31 dated June 28, 2005 of the Court of Appeals (CA) in CA-G.R. SP. No. 86017 which dismissed the petition for certiorari filed before it.

Factual Antecedents

Petitioner Renato Real was the Manager of respondent corporation Sangu Philippines, Inc., a corporation engaged in the business of providing manpower for general services, like janitors, janitresses and other maintenance personnel, to various

31

CA rollo, pp. 370-394; penned by Associate Justice Perlita J. Tria Tirona and concurred in by Associate Justices Delilah Vidallon-Magtolis and Jose C. Reyes, Jr.

clients.

In 2001, petitioner, together with 29 others who were either janitors,

janitresses, leadmen and maintenance men, all employed by respondent corporation, filed their respective Complaints32 for illegal dismissal against the latter and respondent Kiichi Abe, the corporations Vice-President and General Manager. These complaints were later on consolidated.

With regard to petitioner, he was removed from his position as Manager through Board Resolution 2001-0333 adopted by respondent corporations Board of Directors. Petitioner complained that he was neither notified of the Board Meeting during which said board resolution was passed nor formally charged with any infraction. He just received from respondents a letter34 dated March 26, 2001 stating that he has been terminated from service effective March 25, 2001 for the following reasons: (1) continuous absences at his post at Ogino Philippines Inc. for several months which was detrimental to the corporations operation; (2) loss of trust and confidence; and, (3) to cut down operational expenses to reduce further losses being experienced by respondent corporation.

Respondents, on the other hand, refuted petitioners claim of illegal dismissal by alleging that after petitioner was appointed Manager, he committed gross acts of misconduct detrimental to the company since 2000. According to them, petitioner would almost always absent himself from work without informing the corporation of his whereabouts and that he would come to the office only to collect his salaries. As he
32 33 34

Id. at 51-71. Id. at 115-116. Id. at 117.

was almost always absent, petitioner neglected to supervise the employees resulting in complaints from various clients about employees performance. In one instance, petitioner together with a few others, while apparently drunk, went to the premises of one of respondents clients, Epson Precision (Phils.) Inc., and engaged in a heated argument with the employees therein. Because of this, respondent Abe allegedly received a complaint from Epsons Personnel Manager concerning petitioners conduct. Respondents likewise averred that petitioner established a company engaged in the same business as respondent corporations and even submitted proposals for janitorial services to two of the latters clients. Because of all these, the Board of Directors of respondent corporation met on March 24, 2001 and adopted Board Resolution No. 2001-03 removing petition ner as Manager. Petitioner was thereafter informed of his removal through a letter dated March 26, 2001 which he, however, refused to receive.

Further, in what respondents believed to be an act of retaliation, petitioner allegedly encouraged the employees who had been placed in the manpower pool to file a complaint for illegal dismissal against respondents. Worse, he later incited those assigned in Epson Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines Inc. and Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner together with other employees also barricaded the premises of respondent corporation. Such acts respondents posited constitute just cause for petitioners dismissal and that same was validly effected.

Rulings of the Labor Arbiter and the National Labor Relations Commission

The Labor Arbiter in a Decision35 dated June 5, 2003 declared petitioner and his co-complainants as having been illegally dismissed and ordered respondents to reinstate complainants to their former positions without loss of seniority rights and other privileges and to pay their full backwages from the time of their dismissal until actually reinstated and furthermore, to pay them attorneys fees. The Labor Arbiter found no convincing proof of the causes for which petitioner was terminated and noted that there was complete absence of due process in the manner of his termination.

Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised therein as one of the issues the lack of jurisdiction of the Labor Arbiter over petitioners complaint. Respondents claimed that petitioner is both a stockholder and a corporate officer of respondent corporation, hence, his action against respondents is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction.

The NLRC found such contention of respondents to be meritorious. Aside from petitioners own admission in the pleadings that he is a stockholder and at the same time occupying a managerial position, the NLRC also gave weight to the corporations General Information Sheet36 (GIS) dated October 27, 1999 listing petitioner as one of its stockholders, consequently his termination had to be effected through a board resolution. These, the NLRC opined, clearly established petitioners status as a

stockholder and as a corporate officer and hence, his action against respondent
35 36

Id. at 162-181. Id. at 237-240.

corporation is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. As to the other complainants, the NLRC ruled that there was no dismissal. The NLRC however, modified the appealed decision of the Labor Arbiter in a Decision37 dated February 13, 2004, the dispositive portion of which reads:

WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003 is hereby MODIFIED. Accordingly, judgment is hereby rendered DISMISSING the complaint of Renato Real for lack of jurisdiction. As to the rest of the complainants, they are hereby ordered to immediately report back to work but without the payment of backwages.

All other claims against respondents including attorneys fees are DISMISSED for lack of merit.

SO ORDERED.

Still joined by his co-complainants, petitioner brought the case to the CA by way of petition for certiorari. Ruling of the Court of Appeals

Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to lack or excess of jurisdiction in declaring him a corporate officer and in holding that his action against respondents is an intra-corporate controversy and thus beyond the jurisdiction of the Labor Arbiter.
37

Id. at 32-46.

While admitting that he is indeed a stockholder of respondent corporation, petitioner nevertheless disputed the declaration of the NLRC that he is a corporate officer thereof. He posited that his being a stockholder and his being a managerial employee do not ipso facto confer upon him the status of a corporate officer. To support this contention, petitioner called the CAs attention to the same GIS relied upon by the NLRC when it declared him to be a corporate officer. He pointed out that although said information sheet clearly indicates that he is a stockholder of respondent corporation, he is not an officer thereof as shown by the entry N/A or not applicable opposite his name in the officer column. Said column requires that the particular position be indicated if the person is an officer and if not, the entry N/A. Petitioner further argued that the fact that his dismissal was effected through a board resolution does not likewise mean that he is a corporate officer. Otherwise, all that an employer has to do in order to avoid compliance with the requisites of a valid dismissal under the Labor Code is to dismiss a managerial employee through a board resolution. Moreover, he insisted that his action for illegal dismissal is not an intra-corporate controversy as same stemmed from employee-employer relationship which is well within the jurisdiction of the Labor Arbiter. This can be deduced and is bolstered by the last paragraph of the termination letter sent to him by respondents stating that he is entitled to benefits under the Labor Code, to wit:

In this connection (his dismissal) you are entitled to separation pay and other benefits provided for under the Labor Code of the Philippines.38 (Emphasis supplied)

38

Id. at 117.

In contrast, respondents stood firm that the action against them is an intracorporate controversy. It cited Tabang v. National Labor Relations Commission39 wherein this Court declared that an intra-corporate controversy is one which arises between a stockholder and the corporation; that *t+here is no distinction, qualification, nor any exemption whatsoever; and that it is broad and covers all kinds of controversies between stockholders and corporations. In view of this ruling and since petitioner is undisputedly a stockholder of the corporation, respondents contended that the action instituted by petitioner against them is an intra-corporate controversy cognizable only by the appropriate regional trial court. Hence, the NLRC correctly dismissed petitioners complaint for lack of jurisdiction.

In the assailed Decision40 dated June 28, 2005, the CA sided with respondents and affirmed the NLRCs finding that aside from being a stockholder of respondent corporation, petitioner is also a corporate officer thereof and consequently, his complaint is an intra-corporate controversy over which the labor arbiter has no jurisdiction. Said court opined that if it was true that petitioner is a mere employee, the respondent corporation would not have called a board meeting to pass a resolution for petitioners dismissal considering that it was very tedious for the Board of Directors to convene and to adopt a resolution every time they decide to dismiss their managerial employees. To support its finding, the CA likewise cited Tabang. As to petitioners cocomplainants, the CA likewise affirmed the NLRCS finding that they were never dismissed from the service. The dispositive portion of the CA Decision reads:

39 40

334 Phil.424, 430 (1997). CA rollo, pp. 370-394.

WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed decision and resolution of the public respondent National Labor Relations Commission in NLRC NCR CA No. 036128-03 NLRC SRAB-IV-05-6618-01-B/05-6619-02-B/05-6620-02-B/10-6637-01B/10-6833-01-B, STANDS.

SO ORDERED.

Now alone but still undeterred, petitioner elevated the case to us through this Petition for Review on Certiorari.

The Parties Arguments

Petitioner continues to insist that he is not a corporate officer. He argues that a corporate officer is one who holds an elective position as provided in the Articles of Incorporation or one who is appointed to such other positions by the Board of Directors as specifically authorized by its By-Laws. And, since he was neither elected nor is there any showing that he was appointed by the Board of Directors to his position as Manager, petitioner maintains that he is not a corporate officer contrary to the findings of the NLRC and the CA.

Petitioner likewise contends that his complaint for illegal dismissal against respondents is not an intra-corporate controversy. He avers that for an action or suit between a stockholder and a corporation to be considered an intra-corporate controversy, same must arise from intra-corporate relations, i.e., an action involving the status of a stockholder as such. He believes that his action against the respondents

does not arise from intra-corporate relations but rather from employer-employee relations. This, according to him, was even impliedly recognized by respondents as shown by the earlier quoted portion of the termination letter they sent to him.

For their part, respondents posit that what petitioner is essentially assailing before this Court is the finding of the NLRC and the CA that he is a corporate officer of respondent corporation. To the respondents, the question of whether petitioner is a corporate officer is a question of fact which, as held in a long line of jurisprudence, cannot be the subject of review under this Petition for Review on Certiorari. At any rate, respondents insist that petitioner who is undisputedly a stockholder of respondent corporation is likewise a corporate officer and that his action against them is an intracorporate dispute beyond the jurisdiction of the labor tribunals. To support this, they cited several jurisprudence such as Pearson & George (S.E. Asia), Inc. v. National Labor Relations Commission,41 Philippine School of Business Administration v. Leano,42 Fortune Cement Corporation v. National Labor Relations Commission43 and again, Tabang v. National Labor Relations Commission.44

Moreover, in an attempt to demolish petitioners claim that the present controversy concerns employer-employee relations, respondents enumerated the following facts and circumstances: (1) Petitioner was an incorporator, stockholder and manager of respondent company; (2) As an incorporator, he was one of only seven
41 42 43 44

323 Phil. 166 (1996). 212 Phil. 716 (1984). G.R. No. 79762, January 24, 1991, 193 SCRA 258. Supra note 9.

incorporators of respondent corporation and one of only four Filipino members of the Board of Directors; (3) As stockholder, he has One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800) common shares held by Filipino stockholders, with a par-value of One Hundred Thousand Pesos (P100,000.00); (4) His appointment as manager was by virtue of Section 1, Article IV of respondent corporations By-Laws; (5) As manager, he had direct management and authority over all of respondent corporations skilled employees; (6) Petitioner has shown himself to be an incompetent manager, unable to properly supervise the employees and even causing friction with the corporations clients by engaging in unruly behavior while in clients premises; (7) As if his incompetence was not enough, in a blatant and palpable act of disloyalty, he established another company engaged in the same line of business as respondent corporation; (8) Because of these acts of incompetence and disloyalty, respondent corporation through a Resolution adopted by its Board of Directors was finally constrained to remove petitioner as Manager and declare his office vacant; (9) After his removal, petitioner urged the employees under him to stage an unlawful strike by leading them to believe that they have been illegally dismissed from employment.45 Apparently, respondents intended to show from this enumeration that petitioners removal pertains to his relationship with respondent corporation, that is, his utter failure to advance its interest and the prejudice caused by his acts of disloyalty. For this reason, respondents see the action against them not as a case between an employer and an employee as what petitioner alleges, but one by an officer and at same time a major stockholder seeking to be reinstated to his former office against the corporation that declared his position vacant.

45

Respondents Comment/Opposition (To the Petition for Review), rollo, pp. 89-100.

Finally, respondents state that the fact that petitioner is being given benefits under the Labor Code as stated in his termination letter does not mean that they are recognizing the employer-employee relations between them. They explain that the benefits provided under the Labor Code were merely made by respondent corporation as the basis in determining petitioners compensation package and that same are merely part of the perquisites of petitioners office as a director and manager. It does not and it cannot change the intra-corporate nature of the controversy. Hence, respondents pray that this petition be dismissed for lack of merit.

Issues

From the foregoing and as earlier mentioned, the core issue to be resolved in this case is whether petitioners complaint for illegal dismissal constitutes an intra-corporate controversy and thus, beyond the jurisdiction of the Labor Arbiter.

Our Ruling

Two-tier test in determining the existence of intra-corporate controversy

Respondents strongly rely on this Courts pronouncement in the 1997 case of Tabang v. National Labor Relations Commission, to wit:

[A]n intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification nor any

exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations.46

In view of this, respondents contend that even if petitioner challenges his being a corporate officer, the present case still constitutes an intra-corporate controversy as petitioner is undisputedly a stockholder and a director of respondent corporation.

It is worthy to note, however, that before the promulgation of the Tabang case, the Court provided in Mainland Construction Co., Inc. v. Movilla47 a better policy in determining which between the Securities and Exchange Commission (SEC) and the Labor Arbiter has jurisdiction over termination disputes,48 or similarly, whether they are intra-corporate or not, viz:

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of the SEC (now the Regional Trial Court49). The better policy to be followed in
46 47 48 49

Supra note 9 at 430. 320 Phil. 353, 359-360 (1995). See C.A. Azucena Jr.s The Labor Code With Comments and Cases, Volume II, 6th Edition (2007) pp. 46-49. Pursuant to Section 5.2 of Republic Act No. 8799 otherwise known as The Securities Regulation Code.

determining jurisdiction over a case should be to consider concurrent factors such as the status or relationship of the parties or the nature of the question that is subject of their controversy. In the absence of any one of these factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that every conflict between the corporation and its stockholders would involve such corporate matters as only SEC (now the Regional Trial Court50) can resolve in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis ours)

And, while Tabang was promulgated later than Mainland Construction Co., Inc., the better policy enunciated in the latter appears to have developed into a standard approach in classifying what constitutes an intra-corporate controversy. This is explained lengthily in Reyes v. Regional Trial Court of Makati, Br. 142,51 to wit:

Intra-Corporate Controversy

A review of relevant jurisprudence shows a development in the Courts approach in classifying what constitutes an intra-corporate controversy. Initially, the main consideration in determining whether a

50 51

Id. G.R. No. 165744, August 11, 2008, 561 SCRA 593, 609-612.

dispute constitutes an intra-corporate controversy was limited to a consideration of the intra-corporate relationship existing between or among the parties. The types of relationships embraced under Section 5(b) x x x were as follows:

a) b) c) d)

between the corporation, partnership or association and the public; between the corporation, partnership or association and its stockholders, partners, members or officers; between the corporation, partnership or association and the State as far as its franchise, permit or license to operate is concerned; and among the stockholders, partners or associates themselves.

The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC (now the RTC), regardless of the subject matter of the dispute. This came to be known as the relationship test.

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced the nature of the controversy test. We declared in this case that it is not the mere existence of an intracorporate relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in

disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute.

Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra-corporate controversy exists.

The Court then combined the two tests and declared that jurisdiction should be determined by considering not only the status or relationship of the parties, but also the nature of the question under controversy. This twotier test was adopted in the recent case of Speed Distribution Inc. v. Court of Appeals:

To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intracorporate or partnership relations between any or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or associates, between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership, or association and the State insofar as it concerns the individual franchises. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy. [Citations omitted.]

Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as to consider them as intra-corporate controversies.

What then is the nature of petitioners Complaint for Illegal Dismissal? Is it intracorporate and thus beyond the jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case.

No intra-corporate relationship between the parties

As earlier stated, petitioners status as a stockholder and director of respondent corporation is not disputed. What the parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of the complaint for illegal dismissal, however, reveals that the root of the controversy is petitioners dismissal as Manager of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying the relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent corporation so as to establish the intra-corporate relationship between the parties. And albeit

respondents claim that the determination of whether petitioner is a corporate officer is a question of fact which this Court cannot pass upon in this petition for review on certiorari, we shall nonetheless proceed to consider the same because such question is not the main issue to be resolved in this case but is merely collateral to the core issue earlier mentioned.

Petitioner negates his status as a corporate officer by pointing out that although he was removed as Manager through a board resolution, he was never elected to said position nor was he appointed thereto by the Board of Directors. While the By-Laws of respondent corporation provides that the Board may from time to time appoint such officers as it may deem necessary or proper, he avers that respondents failed to present any board resolution that he was appointed pursuant to said By-Laws. He instead alleges that he was hired as Manager of respondent corporation solely by respondent Abe. For these reasons, petitioner claims to be a mere employee of respondent corporation rather than as a corporate officer. We find merit in petitioners contention.

Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that character by the Corporation Code or by the corporations by-laws. There are three specific officers whom a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The number of corporate officers is thus limited by law and by the corporations by-laws.52

Respondents claim that petitioner was appointed Manager by virtue of Section 1, Article IV of respondent corporations By-Laws which provides:

52

Garcia v. Eastern Telecommunications Philippines, Inc., G.R. Nos. 173115 and 173163-164, April 16, 2009, 585 SCRA 450, 468.

ARTICLE IV OFFICER

Section 1. Election/Appointment Immediately after their election, the Board of Directors shall formally organize by electing the President, Vice-President, the Secretary at said meeting.

The Board, may from time to time, appoint such other officers as it may determine to be necessary or proper. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as President and Treasurer or Secretary at the same time.

x x x x53 (Emphasis ours)

We have however examined the records of this case and we find nothing to prove that petitioners appointment was made pursuant to the above-quoted provision of respondent corporations By-Laws. No copy of board resolution appointing petitioner as Manager or any other document showing that he was appointed to said position by action of the board was submitted by respondents. What we found instead were mere allegations of respondents in their various pleadings54 that petitioner was appointed as Manager of respondent corporation and nothing more. The Court has stressed time and again that

53 54

CA rollo, pp. 266-273. Respondents Position Paper filed with the Labor Arbiter, id. at 94-113; Memorandum on Appeal and Rejoinder filed with the NLRC, id. at 182-220 and 285-294; Comment filed with the CA, id. at 302-319; Comment/Opposition (To The Petition for Review) and Memorandum filed before this Court, rollo, pp. 89-100 and 169-187.

allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.55

It also does not escape our attention that respondents made the following conflicting allegations in their Memorandum on Appeal56 filed before the NLRC which cast doubt on petitioners status as a corporate officer, to wit:

xxxx

24. Complainant-appellee Renato Real was appointed as the manager of respondent-appellant Sangu on November 6, 1998. Priorly [sic], he was working at Atlas Ltd. Co. at Mito-shi, Ibaraki-ken Japan. He was staying in Japan as an illegal alien for the past eleven (11) years. He had a problem with his family here in the Philippines which prompted him to surrender himself to Japans Bureau of Immigration and was deported back to the Philippines. His former employer, Mr. Tsutomo Nogami requested Mr. Masahiko Shibata, one of respondent-appellant Sangus Board of Directors, if complainant-appellee Renato Real could work as one of its employees here in the Philippines because he had been blacklisted at Japans Immigration Office and could no longer go back to Japan. And so it was arranged that he would serve as respondentappellant Sangus manager, receiving a salary of P25,000.00. As such, he was tasked to oversee the operations of the company. x x x (Emphasis ours)

xxxx As earlier stated, complainant-appellee Renato Real was hired as the manager of respondent-appellant Sangu. As such, his position was reposed with full trust and confidence. x x x

55

56

General Milling Corporation v. Casio, G.R. No. 149552, March 10, 2010 citing Rimbunan Hijau Group of Companies v. Oriental Wood Processing Corporation, 507 Phil. 631, 648-649 (2005). CA rollo, pp. 122-220 at 191 and 212.

While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the corporations By-Laws, the above-quoted inconsistencies in their allegations as to how petitioner was placed in said position, coupled by the fact that they failed to produce any documentary evidence to prove that petitioner was appointed thereto by action or with approval of the board, only leads this Court to believe otherwise. It has been consistently held that [a]n office is created by the charter of the corporation and the officer is elected (or appointed) by the directors or stockholders.57 Clearly here, respondents failed to prove that petitioner was appointed by the board of directors. Thus, we cannot subscribe to their claim that petitioner is a corporate officer. Having said this, we find that there is no intra-corporate relationship between the parties insofar as petitioners complaint for illegal dismissal is concerned and that same does not satisfy the relationship test.

Present controversy does not relate to intracorporate dispute

We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents loss of trust and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages, moral damages and attorneys fees. From these, it is not difficult to see that the reasons given by respondents for
57

Easycall Communications Phils., Inc. v. King , G.R. No. 145901, December 15, 2005, 478 SCRA 102, 110.

dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his being a director or stockholder. For one, petitioners continuous absences in his post in Ogino relates to his performance as Manager. Second, respondents loss of trust and confidence in petitioner stemmed from his alleged acts of establishing a company engaged in the same line of business as respondent corporations and submitting proposals to the latters clients while he was still serving as its Manager. While we note that respondents also claim these acts as constituting acts of disloyalty of petitioner as director and stockholder, we, however, think that same is a mere afterthought on their part to make it appear that the present case involves an element of intra-corporate controversy. This is because before the Labor Arbiter, respondents did not see such acts to be disloyal acts of a director and stockholder but rather, as constituting willful breach of the trust reposed upon petitioner as Manager.58 It was only after respondents invoked the Labor Arbiters lack of jurisdiction over petitioners complaint in the Supplemental Memorandum of Appeal59 filed before the NLRC that respondents started considering said acts as such. Third, in saying that they were dismissing petitioner to cut operational expenses, respondents actually want to save on the salaries and other remunerations being given to petitioner as its Manager. Thus, when petitioner sought for reinstatement, he wanted to recover his position as Manager, a position which we have, however, earlier declared to be not a corporate position. He is not trying to recover a seat in the board of directors or to any appointive or elective corporate position which has been declared vacant by the board. Certainly, what we have here is a case of termination of employment which is a labor controversy and not an intracorporate dispute. In sum, we hold that petitioners complaint likewise does not satisfy the nature of controversy test.

58 59

Respondents Position Paper, CA rollo, pp. 94-113 at 109-110. Id. at 221-236.

With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioners complaint for illegal dismissal against respondents is not intracorporate. Rather, it is a termination dispute and, consequently, falls under the jurisdiction of the Labor Arbiter pursuant to Section 21760 of the Labor Code.

We take note of the cases cited by respondents and find them inapplicable to the case at bar. Fortune Cement Corporation v. National Labor Relations Commission61 involves a member of the board of directors and at the same time a corporate officer who claims he was illegally dismissed after he was stripped of his corporate position of Executive Vice-President because of loss of trust and confidence. On the other hand, Philippine School of Business Administration v. Leano62 and Pearson & George v. National Labor Relations Commission63 both concern a complaint for illegal dismissal by corporate officers who were not re-elected to their respective corporate positions. The Court declared all these cases as involving intra-corporate controversies and thus affirmed the jurisdiction of the SEC (now the RTC)64 over them precisely because they all relate to corporate officers and their removal or non-reelection to their respective
60

61 62 63 64

ART. 217. Jurisdiction of the Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lock-outs; and 6. Except claims for Employees Compensation, Social Security, Medicare and Maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement xxxx Supra note 13. Supra note 12. Supra note 11 at 173-174. Pursuant to Section 5.2 of Republic Act No. 8799 otherwise known as The Securities Regulation Code.

corporate positions. Said cases are by no means similar to the present case because as discussed earlier, petitioner here is not a corporate officer.

With the foregoing, it is clear that the CA erred in affirming the decision of the NLRC which dismissed petitioners complaint for lack of jurisdiction. In cases such as this, the Court normally remands the case to the NLRC and directs it to properly dispose of the case on the merits. However, when there is enough basis on which a proper evaluation of the merits of petitioners case may be had, the Court may dispense with the time-consuming procedure of remand in order to prevent further delays in the disposition of the case.65 It is already an accepted rule of procedure for us to strive to settle the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of litigation. If, based on the records, the pleadings, and other evidence, the dispute can be resolved by us, we will do so to serve the ends of justice instead of remanding the case to the lower court for further proceedings.66 We have gone over the records before us and we are convinced that we can now altogether resolve the issue of the validity of petitioners dismissal and hence, we shall proceed to do so. Petitioners dismissal not in accordance with law In an illegal dismissal case, the onus probandi rests on the employer to prove that [the] dismissal of an employee is for a valid cause.67 Here, as correctly observed by the Labor Arbiter, respondents failed to produce any convincing proof to support the grounds for which they terminated petitioner. Respondents contend that petitioner has been
65

66

67

Leandro M. Alcantara v. The Philippine Commercial and International Bank, G.R. No. 151349, October 20, 2010 citing Somoso v. Court of Appeals, G.R. No. 78050, October 23, 1989, 178 SCRA 654, 663; Bach v. Ongkiko Kalaw Manhit & Acorda Law Offices, G.R. No. 160334, September 11, 2006, 501 SCRA 419, 426. Id. citing Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, February 6, 2007, 514 SCRA 537, 555. Pepsi Cola Products Philippines, Inc. v. Santos, G.R. No. 165968, April 14, 2008, 551 SCRA 245, 252.

absent for several months, yet they failed to present any proof that petitioner was indeed absent for such a long time. Also, the fact that petitioner was still able to collect his salaries after his alleged absences casts doubts on the truthfulness of such charge. Respondents likewise allege that petitioner engaged in a heated argument with the employees of Epson, one of respondents clients. But just like in the charge of absenteeism, there is no showing that an investigation on the matter was done and that disciplinary action was imposed upon petitioner. At any rate, we have reviewed the records of this case and we agree with the Labor Arbiter that under the circumstances, said charges are not sufficient bases for petitioners termination. As to the charge of breach of trust allegedly committed by petitioner when he established a new company engaged in the same line of business as respondent corporations and submitted proposals to two of the latters clients while he was still a Manager, we again observe that these are mere allegations without sufficient proof. To reiterate, allegations must be proven by sufficient evidence because mere allegation is definitely not evidence.68 Moreover, petitioners dismissal was effected without due process of law. The twin requirements of notice and hearing constitute the essential elements of due process. The law requires the employer to furnish the employee sought to be dismissed with two written notices before termination of employment can be legally effected: (1) a written notice apprising the employee of the particular acts or omissions for which his dismissal is sought in order to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he desires, and (2) a subsequent notice informing the employee of the employers decision to dismiss him. This procedure is mandatory and its absence taints the dismissal with illegality.69 Since in this case, petitioners dismissal was effected through a board
68 69

Supra note 25. Supra note 27 at 113-114.

resolution and all that petitioner received was a letter informing him of the boards decision to terminate him, the abovementioned procedure was clearly not complied with. All told, we agree with the findings of the Labor Arbiter that petitioner has been illegally dismissed. And, as an illegally dismissed employee is entitled to the two reliefs of backwages and reinstatement,70 we affirm the Labor Arbiters judgment ordering petitioners reinstatement to his former position without loss of seniority rights and other privileges and awarding backwages from the time of his dismissal until actually reinstated. Considering that petitioner has to secure the services of counsel to protect his interest and necessarily has to incur expenses, we likewise affirm the award of attorneys fees which is equivalent to 10% of the total backwages that respondents must pay petitioner in accordance with this Decision.

WHEREFORE, the petition is hereby GRANTED. The assailed June 28, 2005 Decision of the Court of Appeals insofar as it affirmed the National Labor Relations Commissions dismissal of petitioners complaint for lack of jurisdiction, is hereby REVERSED and SET ASIDE. The June 5, 2003 Decision of the Labor Arbiter with respect to petitioner Renato Real is AFFIRMED and this case is ordered REMANDED to the National Labor Relations Commission for the computation of petitioners backwages and attorneys fees in accordance with this Decision. SO ORDERED.

SECOND DIVISION

70

Golden Ace Builders v. Jose Talde, G.R. No. 187200, May 5, 2010.

THE UNIVERSITY OF THE IMMACULATE CONCEPTION and MO. MARIA ASSUMPTA DAVID, RVM, Petitioners,

G.R. No. 181146

Present:

CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and

- versus -

MENDOZA, JJ.

NATIONAL LABOR RELATIONS COMMISSION and TEODORA AXALAN, Respondents.

Promulgated:

January 26, 2011

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari of the 13 December 2007 Decision of the
1 2

Court of Appeals in CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24 October 2005 Resolutions of the National Labor Relations Commission in NLRC CA
3

No. M-008333-2005, which sustained the 11 October 2004 Decision of the Labor
4

Arbiter in RAB-11-12-01187-03 ordering petitioner to reinstate private respondent to her former position without loss of seniority rights and to pay her backwages, salary differentials, damages, and attorneys fees.

The Facts

Petitioner University of the Immaculate Conception is a private educational institution located in Davao City. Private respondent Teodora C. Axalan is a regular faculty member in the university holding the position of Associate Professor II. Aside from being a regular faculty member, Axalan is the elected president of the employees union.
5

From 18 November to 22 November 2002, Axalan attended a seminar in Quezon City on website development. Axalan then received a memorandum from Dean Maria
6

Rosa Celestial asking her to explain in writing why she should not be dismissed for having been absent without official leave.

In her letter, Axalan claimed that she held online classes while attending the seminar.
7

She explained that she was under the impression that faculty members would not be marked absent even if they were not physically present in the classroom as long as they conducted online classes.

In reply, Dean Celestial relayed to Axalan the message of the university president that
8

no administrative charge would be filed if Axalan would admit having been absent without official leave and write a letter of apology seeking forgiveness. `Convinced that she could not be deemed absent since she held online classes, Axalan opted not to write the letter of admission and contrition the university president requested. The Dean wrote Axalan that the university president had created an ad hoc
9

grievance committee to investigate the AWOL charge.

10

From 28 January to 3 February 2003, Axalan attended a seminar in Baguio City on advanced paralegal training. Dean Celestial wrote Axalan informing her that her participation in the paralegal seminar in Baguio City was the subject of a second AWOL charge. The dean asked Axalan to explain in writing why no disciplinary
11

action should be taken against her.

12

In her letter, Axalan explained that before going to Baguio City for the seminar, she
13

sought the approval of Vice-President for Academics Alicia Sayson. In a letter, VP

14

Sayson denied having approved Axalans application for official leave. The VP stated in her letter that it was the university president, Maria Assumpta David, who must approve the application.

After conducting hearings and receiving evidence, the ad hoc grievance committee found Axalan to have incurred AWOL on both instances and recommended that Axalan be suspended without pay for six months on each AWOL charge. The
15

university president approved the committees recommendation.

The university president then wrote Axalan informing her that she incurred absences without official leave when she attended the seminars on website development in Quezon City and on advanced paralegal training in Baguio City on 18-22 November 2002 and on 28 January-3 February 2003, respectively. In the same letter, the university president informed Axalan that the total penalty of one-year suspension without pay for both AWOL charges would be effective immediately.
16

On 1 December 2003, Axalan filed a complaint against the university for illegal
17

suspension, constructive dismissal, reinstatement with backwages, and unfair labor practice with prayer for damages and attorneys fees.

The university moved to dismiss the complaint on the ground that the Labor Arbiter had no jurisdiction over the subject matter of the complaint. The university maintained that jurisdiction lay in the voluntary arbitrator.
18

In denying the universitys motion to dismiss, the Labor Arbiter held that there being no existing collective bargaining agreement between the parties, no grievance machinery was constituted, which barred resort to voluntary arbitration.
19

Meanwhile, upon the expiration of the one-year suspension, Axalan promptly resumed teaching at the university on 1 October 2004.

The Ruling of the Labor Arbiter

On 11 October 2004, the Labor Arbiter rendered a Decision holding that the suspension of Axalan amounted to constructive dismissal entitling her to reinstatement and payment of backwages, salary differentials, damages, and attorneys fees, thus:

WHEREFORE, premises laid, judgment is hereby rendered declaring that the suspension of complainant amounted to constructive dismissal, and as such, she is entitled to reinstatement and payment of her full backwages reckoned from the time it was withheld from her up to the time of reinstatement. Accordingly, Respondent University of the Immaculate Conception acting through its President, Respondent Mo. Maria Assumpta David, RVM, is directed to reinstate the complainant to her former position without loss of seniority rights and to pay her the sum of Five Hundred Forty Three Thousand Four Hundred Fifty Two Pesos (P543,452.00) representing her backwages, salary differentials (diminution) and damages plus ten percent (10%) thereof as attorneys fees or the sum of P54,345.20. The Respondent UIC and its President are hereby directed to inform this Office of the mode of compliance it will avail itself by reason of the Order of reinstatement.

SO ORDERED.

20

The university appealed the Labor Arbiters Decision to the National Labor Relations Commission (NLRC). It challenged the jurisdiction of the Labor Arbiter insisting that the voluntary arbitrator had jurisdiction over the labor dispute. The university pointed out that when the Labor Arbiter rendered his Decision on 11 October 2004, Axalan had returned to work on 1 October 2004 upon the expiration of the one-year suspension.

The Ruling of the NLRC

The NLRC held that the Labor Arbiter, not the voluntary arbitrator, had jurisdiction as the controversy did not pertain to a dispute involving the union and the university. In its 15 August 2005 Resolution, the NLRC ruled:

WHEREFORE, for want of merit, the instant appeal is hereby DISMISSED. SO ORDERED.
21

NLRC Commissioner Jovito C. Cagaanan, in his dissenting opinion, stressed that the
22

parties previously agreed to submit the dispute to voluntary arbitration, which cast doubt on the jurisdiction of the Labor Arbiter.

The university moved for reconsideration of the NLRC Resolution. But the NLRC, in its 24 October 2005 Resolution, denied the motion for reconsideration for lack of
23

merit. The university challenged both Resolutions of the NLRC before the Court of Appeals via a petition for certiorari.

The Ruling of the Court of Appeals

The Court of Appeals affirmed the findings of the Labor Arbiter and the NLRC. In its 13 December 2007 Decision, the Court of Appeals dismissed the universitys petition for certiorari, thus:

We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent in affirming the Labor Arbiter. Respondent Commissions ruling finds more than ample support in statutory and case law. It cannot, therefore, be characterized as whimsical, arbitrary, or oppressive. WHEREFORE, the instant petition is hereby DISMISSED. SO ORDERED.
24

Dissatisfied, the university filed in this Court the instant petition for review on certiorari.

The Issues

The issues for resolution are (1) whether the voluntary arbitrator had jurisdiction over the labor dispute; (2) whether Axalan was constructively dismissed; and (3) whether the Labor Arbiters computation of backwages, damages, and attorneys fees was correct.

The Courts Ruling

The petition is impressed with merit.

The university contends that based on the transcript of stenographic notes from the ad hoc grievance committee hearing held on 20 February 2003, the parties agreed that the voluntary arbitrator would have jurisdiction over the labor dispute. The university maintains that Axalans suspension does not constitute constructive dismissal and that the Labor Arbiters decision treating it as such is an attempt to make it appear that the voluntary arbitrator has no jurisdiction. The university points out that for constructive dismissal to exist, there must be severance of employment by the employee because of unbearable act of discrimination, insensibility, or disdain on the part of the employer

leaving the employee with no choice but to forego continued employment. The university claims that on the contrary, Axalan eagerly reported for work as soon as the one-year suspension was over. The university further argues that assuming Axalan is entitled to backwages, it should have been based on Axalans average gross monthly income at the time she was suspended in SY2003-2004, which was P14,145.00, not on her average gross monthly income in SY2002-2003, which was P18,502.00.

Private respondent Axalan counters that the university raises the same factual issues already decided unanimously by the Labor Arbiter, the NLRC, and the Court of Appeals. On the issue of jurisdiction, Axalan stresses that the present labor case, being a complaint for constructive dismissal and unfair labor practice, is within the jurisdiction of the Labor Arbiter. On the finding of constructive dismissal, Axalan points out that the Labor Arbiters factual finding of constructive dismissal, when affirmed by the NLRC and the Court of Appeals, binds this Court. Axalan claims that both AWOL charges against her were without basis and were only a form of harassment amounting to unfair labor practice. As to the computation of the award of backwages, Axalan points out that her average gross monthly income in SY2002-2003 was reduced in SY2003-2004 precisely because she was not given an overload of two extra assignments resulting in the diminution of her income. Axalan maintains that the award of damages was just proper considering that her suspension was without basis and amounted to unfair labor practice.

Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported by the evidence on record or the

impugned judgment is based on a misapprehension of facts. Patently erroneous findings of the Labor Arbiter, even when affirmed by the NLRC and the Court of Appeals, are not binding on this Court.
25

As to the first issue, Article 217 of the Labor Code states that unfair labor practices and termination disputes fall within the original and exclusive jurisdiction of the Labor Arbiter:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide x x x the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; x x x x (Emphasis supplied)

Article 262 of the same Code provides the exception:

ART. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. (Emphasis supplied)

In San Miguel Corp. v. NLRC, the Court ruled that for the exception to apply, there
26

must be agreement between the parties clearly conferring jurisdiction to the voluntary arbitrator. Such agreement may be stipulated in a collective bargaining agreement. However, in the absence of a collective bargaining agreement, it is enough that there

is evidence on record showing the parties have agreed to resort to voluntary arbitration.
27

As can be gleaned from the transcript of stenographic notes of the administrative hearing held on 20 February 2003, the parties in this case clearly agreed to resort to voluntary arbitration. To quote the exact words of the parties counsels:

Atty. Dante Sandiego: x x x So, are we to understand that the decision of the President shall be without prejudice to the right of the employees to contest the validity or legality of his dismissal or of the disciplinary action imposed upon him by asking for voluntary arbitration under the Labor Code or when applicable availing himself of the grievance machinery under the Labor Code which ends in voluntary arbitration. That will be the steps that we will have to follow. Atty. Sabino Padilla, Jr.: Yes, agreed.
28

Thus, the Labor Arbiter should have immediately disposed of the complaint and referred the same to the voluntary arbitrator when the university moved to dismiss the complaint for lack of jurisdiction.

No less than Section 3, Article XIII of the Constitution declares as state policy the preferential use of voluntary modes in settling disputes, to wit:

Sec. 3. x x x x The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes

in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. (Emphasis supplied)

As to the second issue, constructive dismissal occurs when there is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee leaving the latter with no other option but to quit.
29

In this case however, there was no cessation of employment relations between the parties. It is unrefuted that Axalan promptly resumed teaching at the university right after the expiration of the suspension period. In other words, Axalan never quit. Hence, Axalan cannot claim that she was left with no choice but to quit, a crucial element in a finding of constructive dismissal. Thus, Axalan cannot be deemed to have been constructively dismissed.

Significantly, at the time the Labor Arbiter rendered his Decision on 11 October 2004, Axalan had already returned to her teaching job at the university on 1 October 2004. The Labor Arbiters Decision ordering the reinstatement of Axalan, who at the time had already returned to work, is thus absurd.

There being no constructive dismissal, there is no legal basis for the Labor Arbiters order of reinstatement as well as payment of backwages, salary differentials, damages, and attorneys fees. Thus, the third issue raised in the petition is now moot.
30

Note that on the first AWOL incident, the university even offered to drop the AWOL charge against Axalan if she would only write a letter of contrition. But Axalan adamantly refused knowing fully well that the administrative case would take its course leading to possible sanctions. She cannot now be heard that the imposition of the penalty of six-month suspension without pay for each AWOL charge is unreasonable. We are convinced that Axalan was validly suspended for cause and in accord with procedural due process.

The Court recognizes the right of employers to discipline its employees for serious violations of company rules after affording the latter due process and if the evidence warrants. The university, after affording Axalan due process and finding her guilty of incurring AWOL on two separate occasions, acted well within the bounds of labor laws in imposing the penalty of six-month suspension without pay for each incidence of AWOL.

As a learning institution, the university cannot be expected to take lightly absences without official leave among its employees, more so among its faculty members even if they happen to be union officers. To do so would send the wrong signal to the studentry and the rest of its teaching staff that irresponsibility is widely tolerated in the academe.

The law protects both the welfare of employees and the prerogatives of management. Courts will not interfere with prerogatives of management on the
31

discipline of employees, as long as they do not violate labor laws, collective bargaining agreements if any, and general principles of fairness and justice.
32

WHEREFORE, we GRANT the petition. The 13 December 2007 Decision of the Court of Appeals in CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24 October 2005 Resolutions of the National Labor Relations Commission in NLRC CA No. M-008333-2005, which sustained the 11 October 2004 Decision of the Labor Arbiter in RAB-11-12-01187-03, is SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION

THE HERITAGE HOTEL MANILA, acting through its owner, GRAND PLAZA

G.R. No. 178296

HOTEL CORPORATION, Petitioner, Present:

- versus -

CARPIO, J., Chairperson,

NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT AND ALLIED INDUSTRIES-HERITAGE HOTEL MANILA SUPERVISORS CHAPTER (NUWHRAINHHMSC), Respondent.

NACHURA, LEONARDO-DE CASTRO,* ABAD, and MENDOZA, JJ.

Promulgated:

January 12, 2011 x----------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Additional member in lieu of Associate Justice Diosdado M. Peralta per Raffle dated January 12, 2011.

Before the Court is a petition for review on certiorari of the Decision71 of the Court of Appeals (CA) dated May 30, 2005 and Resolution dated June 4, 2007. The assailed Decision affirmed the dismissal of a petition for cancellation of union registration filed by petitioner, Grand Plaza Hotel Corporation, owner of Heritage Hotel Manila, against respondent, National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC), a labor organization of the supervisory employees of Heritage Hotel Manila.

The case stemmed from the following antecedents:

On October 11, 1995, respondent filed with the Department of Labor and Employment-National Capital Region (DOLE-NCR) a petition for certification election.72 The Med-Arbiter granted the petition on February 14, 1996 and ordered the holding of a certification election.73 On appeal, the DOLE Secretary, in a Resolution dated August 15, 1996, affirmed the Med-Arbiters order and remanded the case to the Med-Arbiter for the holding of a preelection conference on February 26, 1997. Petitioner filed a motion for reconsideration, but it was denied on September 23, 1996.

71

Penned by Associate Justice Ruben T. Reyes (now a retired member of this Court), with Associate Justices Josefina Guevara-Salonga and Fernanda Lampas Peralta, concurring; rollo, pp. 38-54. 72 Id. at 62-64. 73 Id. at 133.

The preelection conference was not held as initially scheduled; it was held a year later, or on February 20, 1998. Petitioner moved to archive or to dismiss the petition due to alleged repeated non-appearance of respondent. The latter agreed to suspend proceedings until further notice. The preelection conference resumed on January 29, 2000.

Subsequently, petitioner discovered that respondent had failed to submit to the Bureau of Labor Relations (BLR) its annual financial report for several years and the list of its members since it filed its registration papers in 1995. Consequently, on May 19, 2000, petitioner filed a Petition for Cancellation of Registration of respondent, on the ground of the non-submission of the said documents. Petitioner prayed that respondents Certificate of Creation of Local/Chapter be cancelled and its name be deleted from the list of legitimate labor organizations. It further requested the suspension of the certification election proceedings.74

On June 1, 2000, petitioner reiterated its request by filing a Motion to Dismiss or Suspend the [Certification Election] Proceedings,75 arguing that the dismissal or suspension of the proceedings is warranted, considering that the legitimacy of respondent is seriously being challenged in the petition for cancellation of registration. Petitioner maintained that the resolution of the issue of whether respondent is a legitimate labor organization is crucial to the issue of
74 75

Id. at 67-74. Id. at 83-85.

whether it may exercise rights of a legitimate labor organization, which include the right to be certified as the bargaining agent of the covered employees.

Nevertheless, the certification election pushed through on June 23, 2000. Respondent emerged as the winner.76

On June 28, 2000, petitioner filed a Protest with Motion to Defer Certification of Election Results and Winner,77 stating that the certification election held on June 23, 2000 was an exercise in futility because, once respondents registration is cancelled, it would no longer be entitled to be certified as the exclusive bargaining agent of the supervisory employees. Petitioner also claimed that some of respondents members were not qualified to join the union because they were either confidential employees or managerial employees. It then prayed that the certification of the election results and winner be deferred until the petition for cancellation shall have been resolved, and that respondents members who held confidential or managerial positions be excluded from the supervisors bargaining unit. Meanwhile, respondent filed its Answer78 to the petition for the cancellation of its registration. It averred that the petition was filed primarily to delay the conduct of the certification election, the respondents certification as the exclusive bargaining representative of the supervisory employees, and the
76 77 78

Id. at 100. Id. at 87-95. Id. at 76-81.

commencement of bargaining negotiations. Respondent prayed for the dismissal of the petition for the following reasons: (a) petitioner is estopped from questioning respondents status as a legitimate labor organization as it had already recognized respondent as such during the preelection conferences; (b) petitioner is not the party-in-interest, as the union members are the ones who would be disadvantaged by the non-submission of financial reports; (c) it has already complied with the reportorial requirements, having submitted its financial statements for 1996, 1997, 1998, and 1999, its updated list of officers, and its list of members for the years 1995, 1996, 1997, 1998, and 1999; (d) the petition is already moot and academic, considering that the certification election had already been held, and the members had manifested their will to be represented by respondent.

Citing National Union of Bank Employees v. Minister of Labor, et al.79 and Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma,80 the Med-Arbiter held that the pendency of a petition for cancellation of registration is not a bar to the holding of a certification election. Thus, in an Order81 dated January 26, 2001, the Med-Arbiter dismissed petitioners protest, and certified respondent as the sole and exclusive bargaining agent of all supervisory employees.

79 80 81

196 Phil. 441 (1981). 334 Phil. 955 (1997). Rollo, pp. 100-103.

Petitioner subsequently appealed the said Order to the DOLE Secretary.82 The appeal was later dismissed by DOLE Secretary Patricia A. Sto. Tomas (DOLE Secretary Sto. Tomas) in the Resolution of August 21, 2002.83 Petitioner moved for reconsideration, but the motion was also denied.84

In the meantime, Regional Director Alex E. Maraan (Regional Director Maraan) of DOLE-NCR finally resolved the petition for cancellation of registration. While finding that respondent had indeed failed to file financial reports and the list of its members for several years, he, nonetheless, denied the petition, ratiocinating that freedom of association and the employees right to selforganization are more substantive considerations. He took into account the fact that respondent won the certification election and that it had already been certified as the exclusive bargaining agent of the supervisory employees. In view of the foregoing, Regional Director Maraanwhile emphasizing that the noncompliance with the law is not viewed with favorconsidered the belated submission of the annual financial reports and the list of members as sufficient compliance thereof and considered them as having been submitted on time. The dispositive portion of the decision85 dated December 29, 2001 reads:

82 83 84 85

Id. at 104-110. Id. at 133-136. Id. at 158. Id. at 113-118.

WHEREFORE, premises considered, the instant petition to delist the National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter from the roll of legitimate labor organizations is hereby DENIED.

SO ORDERED.86

Aggrieved, petitioner appealed the decision to the BLR.87 BLR Director Hans Leo Cacdac inhibited himself from the case because he had been a former counsel of respondent.

In view of Director Cacdacs inhibition, DOLE Secretary Sto. Tomas took cognizance of the appeal. In a resolution88 dated February 21, 2003, she dismissed the appeal, holding that the constitutionally guaranteed freedom of association and right of workers to self-organization outweighed respondents

noncompliance with the statutory requirements to maintain its status as a legitimate labor organization.

Petitioner filed a motion for reconsideration,89 but the motion was likewise denied in a resolution90 dated May 30, 2003. DOLE Secretary Sto. Tomas admitted that it was the BLR which had jurisdiction over the appeal, but she pointed out that the BLR Director had voluntarily inhibited himself from the case because he
86 87 88 89 90

Id. at 118. Id. at 119-130. Id. at 187-190. Id. at 192-202. Id. at 204-205.

used to appear as counsel for respondent. In order to maintain the integrity of the decision and of the BLR, she therefore accepted the motion to inhibit and took cognizance of the appeal.

Petitioner filed a petition for certiorari with the CA, raising the issue of whether the DOLE Secretary acted with grave abuse of discretion in taking cognizance of the appeal and affirming the dismissal of its petition for cancellation of respondents registration.

In a Decision dated May 30, 2005, the CA denied the petition. The CA opined that the DOLE Secretary may legally assume jurisdiction over an appeal from the decision of the Regional Director in the event that the Director of the BLR inhibits himself from the case. According to the CA, in the absence of the BLR Director, there is no person more competent to resolve the appeal than the DOLE Secretary. The CA brushed aside the allegation of bias and partiality on the part of the DOLE Secretary, considering that such allegation was not supported by any evidence.

The CA also found that the DOLE Secretary did not commit grave abuse of discretion when she affirmed the dismissal of the petition for cancellation of respondents registration as a labor organization. Echoing the DOLE Secretary, the CA held that the requirements of registration of labor organizations are an exercise of the overriding police power of the State, designed for the protection

of workers against potential abuse by the union that recruits them. These requirements, the CA opined, should not be exploited to work against the workers constitutionally protected right to self-organization.

Petitioner filed a motion for reconsideration, invoking this Courts ruling in Abbott Labs. Phils., Inc. v. Abbott Labs. Employees Union,91 which categorically declared that the DOLE Secretary has no authority to review the decision of the Regional Director in a petition for cancellation of union registration, and Section 4,92 Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code.

In its Resolution93 dated June 4, 2007, the CA denied petitioners motion, stating that the BLR Directors inhibition from the case was a peculiarity not present in the Abbott case, and that such inhibition justified the assumption of jurisdiction by the DOLE Secretary.

In this petition, petitioner argues that:

91

380 Phil. 364 (2000). Sec. 4. Action on the petition; appeals. The Regional or Bureau Director, as the case may be, shall have thirty (30) days from submission of the case for resolution within which to resolve the petition. The decision of the Regional or Bureau Director may be appealed to the Bureau or the Secretary, as the case may be, within ten (10) days from receipt thereof by the aggrieved party on the ground of grave abuse of discretion or any violation of these Rules.
92

The Bureau or the Secretary shall have fifteen (15) days from receipt of the records of the case within which to decide the appeal. The decision of the Bureau or the Secretary shall be final and executory.
93

Rollo, pp. 56-59.

I.

The Court of Appeals seriously erred in ruling that the Labor Secretary properly assumed jurisdiction over Petitioners appeal of the Regional Directors Decision in the Cancellation Petition x x x.

A. Jurisdiction is conferred only by law. The Labor Secretary had no jurisdiction to review the decision of the Regional Director in a petition for cancellation. Such jurisdiction is conferred by law to the BLR.

B. The unilateral inhibition by the BLR Director cannot justify the Labor Secretarys exercise of jurisdiction over the Appeal.

C. The Labor Secretarys assumption of jurisdiction over the Appeal without notice violated Petitioners right to due process.

II.

The Court of Appeals gravely erred in affirming the dismissal of the Cancellation Petition despite the mandatory and unequivocal provisions of the Labor Code and its Implementing Rules.94

The petition has no merit.

Jurisdiction to review the decision of the Regional Director lies with the BLR. This is clearly provided in the Implementing Rules of the Labor Code and enunciated by the Court in Abbott. But as pointed out by the CA, the present case involves a peculiar circumstance that was not present or covered by the ruling in
94

Id. at 535-536.

Abbott. In this case, the BLR Director inhibited himself from the case because he was a former counsel of respondent. Who, then, shall resolve the case in his place?

In Abbott, the appeal from the Regional Directors decision was directly filed with the Office of the DOLE Secretary, and we ruled that the latter has no appellate jurisdiction. In the instant case, the appeal was filed by petitioner with the BLR, which, undisputedly, acquired jurisdiction over the case. Once jurisdiction is acquired by the court, it remains with it until the full termination of the case.95

Thus, jurisdiction remained with the BLR despite the BLR Directors inhibition. When the DOLE Secretary resolved the appeal, she merely stepped into the shoes of the BLR Director and performed a function that the latter could not himself perform. She did so pursuant to her power of supervision and control over the BLR.96

Expounding on the extent of the power of control, the Court, in Araneta, et al. v. Hon. M. Gatmaitan, et al.,97 pronounced that, if a certain power or authority is vested by law upon the Department Secretary, then such power or authority may be exercised directly by the President, who exercises supervision and control
95 96 97

Republic v. Asiapro Cooperative, G.R. No. 172101, November 23, 2007, 538 SCRA 659, 670. Administrative Code of 1987, Book IV, Chapter 8, Sec. 39(1). 101 Phil. 328 (1957).

over the departments. This principle was incorporated in the Administrative Code of 1987, which defines supervision and control as including the authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate.98 Applying the foregoing to the present case, it is clear that the DOLE Secretary, as the person exercising the power of supervision and control over the BLR, has the authority to directly exercise the quasi-judicial function entrusted by law to the BLR Director.

It is true that the power of control and supervision does not give the Department Secretary unbridled authority to take over the functions of his or her subordinate. Such authority is subject to certain guidelines which are stated in Book IV, Chapter 8, Section 39(1)(a) of the Administrative Code of 1987.99 However, in the present case, the DOLE Secretarys act of taking over the function of the BLR Director was warranted and necessitated by the latters inhibition from the case and the objective to maintain the integrity of the decision, as well as the Bureau itself.100

Petitioner insists that the BLR Directors subordinates should have resolved the appeal, citing the provision under the Administrative Code of 1987 which
98 99

Administrative Code of 1987, Book IV, Chapter 7, Sec. 38(1). Administrative Code of 1987, Book IV, Chapter 8, Sec. 39(1), paragraph (a) provides: Sec. 39. Secretarys Authority. (1) The Secretary shall have supervision and control over the bureaus, offices, and agencies under him, subject to the following guidelines: (a) Initiative and freedom of action on the part of subordinate units shall be encouraged and promoted, rather than curtailed, and reasonable opportunity to act shall be afforded those units before control is exercised. Rollo, p. 205.

100

states, in case of the absence or disability of the head of a bureau or office, his duties shall be performed by the assistant head.101 The provision clearly does not apply considering that the BLR Director was neither absent nor suffering from any disability; he remained as head of the BLR. Thus, to dispel any suspicion of bias, the DOLE Secretary opted to resolve the appeal herself.

Petitioner was not denied the right to due process when it was not notified in advance of the BLR Directors inhibition and the DOLE Secretarys assumption of the case. Well-settled is the rule that the essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling complained of.102 Petitioner had the opportunity to question the BLR Directors inhibition and the DOLE Secretarys taking cognizance of the case when it filed a motion for reconsideration of the latters decision. It would be well to state that a critical component of due process is a hearing before an impartial and disinterested tribunal, for all the elements of due process, like notice and hearing, would be meaningless if the ultimate decision would come from a partial and biased judge.103 It was precisely to ensure a fair trial that moved the BLR Director to inhibit himself from the case and the DOLE Secretary to take over his function.

101 102 103

Administrative Code of 1987, Book IV, Chapter 6, Sec. 32. Sarapat v. Salanga, G.R. No. 154110, November 23, 2007, 538 SCRA 324, 332. Busilac Builders, Inc. v. Aguilar, A.M. No. RTJ-03-1809, October 17, 2006, 504 SCRA 585, 597.

Petitioner also insists that respondents registration as a legitimate labor union should be cancelled. Petitioner posits that once it is determined that a ground enumerated in Article 239 of the Labor Code is present, cancellation of registration should follow; it becomes the ministerial duty of the Regional Director to cancel the registration of the labor organization, hence, the use of the word shall. Petitioner points out that the Regional Director has admitted in its decision that respondent failed to submit the required documents for a number of years; therefore, cancellation of its registration should have followed as a matter of course.

We are not persuaded.

Articles 238 and 239 of the Labor Code read:

ART. 238. CANCELLATION OF REGISTRATION; APPEAL

The certificate of registration of any legitimate labor organization, whether national or local, shall be canceled by the Bureau if it has reason to believe, after due hearing, that the said labor organization no longer meets one or more of the requirements herein prescribed.104

ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION.

The following shall constitute grounds for cancellation of union registration:

xxxx

(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the closing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the financial report itself;

xxxx

(i) Failure to submit list of individual members to the Bureau once a year or whenever required by the Bureau.105

104 105

Emphasis supplied. Emphasis supplied.

These provisions give the Regional Director ample discretion in dealing with a petition for cancellation of a unions registration, particularly, determining whether the union still meets the requirements prescribed by law. It is sufficient to give the Regional Director license to treat the late filing of required documents as sufficient compliance with the requirements of the law. After all, the law requires the labor organization to submit the annual financial report and list of members in order to verify if it is still viable and financially sustainable as an organization so as to protect the employer and employees from fraudulent or flyby-night unions. With the submission of the required documents by respondent, the purpose of the law has been achieved, though belatedly.

We cannot ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying the petition for cancellation of respondents registration. The union members and, in fact, all the employees belonging to the appropriate bargaining unit should not be deprived of a bargaining agent, merely because of the negligence of the union officers who were responsible for the submission of the documents to the BLR.

Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of union registration, lest they be accused of interfering with union activities. In resolving the petition, consideration must be taken of the fundamental rights guaranteed by Article XIII, Section 3 of the Constitution, i.e., the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities. Labor authorities should bear in

mind that registration confers upon a union the status of legitimacy and the concomitant right and privileges granted by law to a legitimate labor organization, particularly the right to participate in or ask for certification election in a bargaining unit.106 Thus, the cancellation of a certificate of registration is the equivalent of snuffing out the life of a labor organization. For without such registration, it loses - as a rule - its rights under the Labor Code.107

It is worth mentioning that the Labor Codes provisions on cancellation of union registration and on reportorial requirements have been recently amended by Republic Act (R.A.) No. 9481, An Act Strengthening the Workers Constitutional Right to Self-Organization, Amending for the Purpose Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, which lapsed into law on May 25, 2007 and became effective on June 14, 2007. The amendment sought to strengthen the workers right to self-organization and enhance the Philippines compliance with its international obligations as embodied in the International Labour Organization (ILO) Convention No. 87,108 pertaining to the non-dissolution of workers organizations by administrative authority.109 Thus, R.A. No. 9481 amended Article 239 to read:

ART. 239. Grounds for Cancellation of Union Registration.The following may constitute grounds for cancellation of union registration:
106

S.S. Ventures International, Inc. v. S.S. Ventures Labor Union, G.R. No. 161690, July 23, 2008, 559 SCRA 435, 442. 107 Alliance of Democratic Free Labor Org. v. Laguesma, 325 Phil. 13, 28 (1996).
108 109

Convention Concerning Freedom of Association and Protection of the Right to Organise. Sponsorship Speech of Senator Jinggoy Ejercito Estrada of Senate Bill No. 2466, Journal of the Senate, Session No. 25, September 19, 2006, pp. 384-385.

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification;

(b) Misrepresentation, false statements or fraud in connection with the election of officers, minutes of the election of officers, and the list of voters;

(c) Voluntary dissolution by the members.

R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides:

ART. 242-A. Reportorial Requirements.The following are documents required to be submitted to the Bureau by the legitimate labor organization concerned:

(a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification of the constitution and by-laws within thirty (30) days from adoption or ratification of the constitution and by-laws or amendments thereto;

(b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days from election;

(c) Its annual financial report within thirty (30) days after the close of every fiscal year; and

(d) Its list of members at least once a year or whenever required by the Bureau.

Failure to comply with the above requirements shall not be a ground for cancellation of union registration but shall subject the erring officers or members to suspension, expulsion from membership, or any appropriate penalty.

ILO Convention No. 87, which we have ratified in 1953, provides that workers and employers organizations shall not be liable to be dissolved or suspended by administrative authority. The ILO has expressed the opinion that the cancellation of union registration by the registrar of labor unions, which in our case is the BLR, is tantamount to dissolution of the organization by administrative authority when such measure would give rise to the loss of legal personality of the union or loss of advantages necessary for it to carry out its activities, which is true in our jurisdiction. Although the ILO has allowed such measure to be taken, provided that judicial safeguards are in place, i.e., the right to appeal to a judicial body, it has nonetheless reminded its members that dissolution of a union, and cancellation of registration for that matter, involve serious consequences for occupational representation. It has, therefore, deemed it preferable if such actions were to be taken only as a last resort and after exhausting other possibilities with less serious effects on the organization.110

The aforesaid amendments and the ILOs opinion on this matter serve to fortify our ruling in this case. We therefore quote with approval the DOLE Secretarys rationale for denying the petition, thus:
110

Freedom of association and collective bargaining: Dissolution and suspension of organizations by administrative authority, Report III(4B), International Labour Conference, 81 st Session, Geneva, 1994.

It is undisputed that appellee failed to submit its annual financial reports and list of individual members in accordance with Article 239 of the Labor Code. However, the existence of this ground should not necessarily lead to the cancellation of union registration. Article 239 recognizes the regulatory authority of the State to exact compliance with reporting requirements. Yet there is more at stake in this case than merely monitoring union activities and requiring periodic documentation thereof.

The more substantive considerations involve the constitutionally guaranteed freedom of association and right of workers to self-organization. Also involved is the public policy to promote free trade unionism and collective bargaining as instruments of industrial peace and democracy. An overly stringent interpretation of the statute governing cancellation of union registration without regard to surrounding circumstances cannot be allowed. Otherwise, it would lead to an unconstitutional application of the statute and emasculation of public policy objectives. Worse, it can render nugatory the protection to labor and social justice clauses that pervades the Constitution and the Labor Code.

Moreover, submission of the required documents is the duty of the officers of the union. It would be unreasonable for this Office to order the cancellation of the union and penalize the entire union membership on the basis of the negligence of its officers. In National Union of Bank Employees vs. Minister of Labor, L-53406, 14 December 1981, 110 SCRA 296, the Supreme Court ruled:

As aptly ruled by respondent Bureau of Labor Relations Director Noriel: The rights of workers to self-organization finds general and specific constitutional guarantees. x x x Such constitutional guarantees should not be lightly taken much less nullified. A healthy respect for the freedom of association demands that acts imputable to officers or members be not easily visited with capital punishments against the association itself.

At any rate, we note that on 19 May 2000, appellee had submitted its financial statement for the years 1996-1999. With this submission, appellee has substantially complied with its duty to submit its financial report for the said period. To rule differently would be to preclude the union, after having failed to meet its periodic obligations promptly, from taking appropriate measures to correct its omissions. For the

record, we do not view with favor appellees late submission. Punctuality on the part of the union and its officers could have prevented this petition.111

WHEREFORE, premises considered, the Court of Appeals Decision dated May 30, 2005 and Resolution dated June 4, 2007 are AFFIRMED. SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

LEGEND INTERNATIONAL RESORTS LIMITED, Petitioner,

G.R. No. 169754

Present:

111

Rollo,p. 189.

- versus -

CORONA, C.J., Chairperson, VELASCO, JR., NACHURA, DEL CASTILLO, and

KILUSANG MANGGAGAWA NG LEGENDA (KMLINDEPENDENT), Respondent.

PEREZ, JJ.

Promulgated: February 23, 2011

x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari assails the September 18, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 72848 which found no grave abuse of discretion on the part of the Office of the Secretary of the Department of Labor and Employment (DOLE) which ruled in favor of Kilusang Manggagawa ng Legenda (KML). Also assailed is the September 14, 2005 Resolution denying petitioners motion for reconsideration.

In lieu of Justice Teresita J. Leonardo-De Castro per Special Order No. 947 dated February 11, 2011.

Factual Antecedents

On June 6, 2001, KML filed with the Med-Arbitration Unit of the DOLE, San Fernando, Pampanga, a Petition for Certification Election112 docketed as Case No. RO300-0106-RU-001. KML alleged that it is a legitimate labor organization of the rank and file employees of Legend International Resorts Limited (LEGEND). KML claimed that it was issued its Certificate of Registration No. RO300-0105-UR-002 by the DOLE on May 18, 2001.

LEGEND moved to dismiss113 the petition alleging that KML is not a legitimate labor organization because its membership is a mixture of rank and file and supervisory employees in violation of Article 245 of the Labor Code. LEGEND also claimed that KML committed acts of fraud and misrepresentation when it made it appear that certain employees attended its general membership meeting on April 5, 2001 when in reality some of them were either at work; have already resigned as of March 2001; or were abroad.

In its Comment,114 KML argued that even if 41 of its members are indeed supervisory employees and therefore excluded from its membership, the certification election could still proceed because the required number of the total rank and file employees necessary for certification purposes is still sustained. KML also claimed that
112 113 114

CA rollo, pp. 51-54. Id. at 56-74. Id. at 144-152.

its legitimacy as a labor union could not be collaterally attacked in the certification election proceedings but only through a separate and independent action for cancellation of union registration. Finally, as to the alleged acts of misrepresentation, KML asserted that LEGEND failed to substantiate its claim.

Ruling of the Med-Arbiter

On September 20, 2001, the Med-Arbiter115 rendered judgment116 dismissing for lack of merit the petition for certification election. The Med-Arbiter found that indeed there were several supervisory employees in KMLs membership. Since Article 245 of the Labor Code expressly prohibits supervisory employees from joining the union of rank and file employees, the Med-Arbiter concluded that KML is not a legitimate labor organization. KML was also found to have fraudulently procured its registration certificate by misrepresenting that 70 employees were among those who attended its organizational meeting on April 5, 2001 when in fact they were either at work or elsewhere.

KML thus appealed to the Office of the Secretary of the DOLE.

Ruling of the Office of the Secretary of DOLE

115 116

Atty. Brigida C. Fadrigon. CA rollo, pp. 290-301.

On May 22, 2002, the Office of the Secretary of DOLE rendered its Decision117 granting KMLs appeal thereby reversing and setting aside the Med-Arbiters Decision. The Office of the Secretary of DOLE held that KMLs legitimacy as a union could not be collaterally attacked, citing Section 5,118 Rule V of Department Order No. 9, series of 1997.

The Office of the Secretary of DOLE also opined that Article 245 of the Labor Code merely provides for the prohibition on managerial employees to form or join a union and the ineligibility of supervisors to join the union of the rank and file employees and vice versa. It declared that any violation of the provision of Article 245 does not ipso facto render the existence of the labor organization illegal. Moreover, it held that Section 11, paragraph II of Rule XI which provides for the grounds for dismissal of a petition for certification election does not include mixed membership in one union.

The dispositive portion of the Office of the Secretary of DOLEs Decision reads:
WHEREFORE, the appeal is hereby GRANTED and the order of the Med-Arbiter dated 20 September 2001 is REVERSED and SET ASIDE.

Accordingly, let the entire record of the case be remanded to the regional office of origin for the immediate conduct of the certification election, subject to the usual pre-election
117 118

Id. at 43-47; per Acting Secretary Manuel G. Imson. Section 5. Effect of registration. The labor organization or workers association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack, but may be questioned only in an independent petition for cancellation in accordance with these Rules. (Id. at 44.)

conference, among the rank and file employees of LEGEND INTERNATIONAL RESORTS LIMITED with the following choices:

1. KILUSANG MANGGAGAWA NG LEGENDA (KML-INDEPENDENT); and

2. NO UNION.

Pursuant to Rule XI, Section II.1 of D.O. No. 9, the employer is hereby directed to submit to the office of origin, within ten days from receipt of the decision, the certified list of employees in the bargaining unit for the last three (3) months prior to the issuance of this decision.

SO DECIDED.119

LEGEND filed its Motion for Reconsideration120 reiterating its earlier arguments. It also alleged that on August 24, 2001, it filed a Petition121 for Cancellation of Union Registration of KML docketed as Case No. RO300-0108-CP-001 which was granted122 by the DOLE Regional Office No. III of San Fernando, Pampanga in its Decision123 dated November 7, 2001.

119 120 121 122

Id. at 46-47. Id. at 347-358. Id. at 176-197. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered cancelling the registration of Kilusang Manggagawa sa Legenda. Let copy of this Decision be furnished the Bureau of Labor Relations, the central registry of unions and collective bargaining agreements under Article 231 of the Labor Code. (Id. at 346.)

123

Id. at 333-346; penned by Atty. Ana C. Dione.

In a Resolution124 dated August 20, 2002, the Office of the Secretary of DOLE denied LEGENDs motion for reconsideration. It opined that Section 11, paragraph II(a), Rule XI of Department Order No. 9 requires a final order of cancellation before a petition for certification election may be dismissed on the ground of lack of legal personality. Besides, it noted that the November 7, 2001 Decision of DOLE Regional Office No. III of San Fernando, Pampanga in Case No. RO300-0108-CP-001 was reversed by the Bureau of Labor Relations in a Decision dated March 26, 2002.

Ruling of the Court of Appeals

Undeterred, LEGEND filed a Petition for Certiorari125 with the Court of Appeals docketed as CA-G.R. SP No. 72848. LEGEND alleged that the Office of the Secretary of DOLE gravely abused its discretion in reversing and setting aside the Decision of the Med-Arbiter despite substantial and overwhelming evidence against KML.

For its part, KML alleged that the Decision dated March 26, 2002 of the Bureau of Labor Relations in Case No. RO300-0108-CP-001 denying LEGENDs petition for cancellation and upholding KMLs legitimacy as a labor organization has already become final and executory, entry of judgment having been made on August 21, 2002.126

124 125 126

Id. at 49-50; per Secretary Patricia A. Sto. Tomas. Id. at 2-41. See KMLs Comment, id. at 385-402.

The Office of the Secretary of DOLE also filed its Comment127 asserting that KMLs legitimacy cannot be attacked collaterally. Finally, the Office of the Secretary of DOLE stressed that LEGEND has no legal personality to participate in the certification election proceedings.

On September 18, 2003, the Court of Appeals rendered its Decision128 finding no grave abuse of discretion on the part of the Office of the Secretary of DOLE. The appellate court held that the issue on the legitimacy of KML as a labor organization has already been settled with finality in Case No. RO300-0108-CP-001. The March 26, 2002 Decision of the Bureau of Labor Relations upholding the legitimacy of KML as a labor organization had long become final and executory for failure of LEGEND to appeal the same. Thus, having already been settled that KML is a legitimate labor organization, the latter could properly file a petition for certification election. There was nothing left for the Office of the Secretary of DOLE to do but to order the holding of such certification election.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, and finding that no grave abuse of discretion amounting to lack or excess of jurisdiction has been committed by the Department of Labor and Employment, the assailed May 22, 2002 Decision and August 20, 2002 Resolution in Case No.

127 128

Id. at 459-465. Id. at 497-503; penned by Associate Justice Sergio L. Pestao and concurred in by Associate Justices Perlita J. Tria Tirona and now Supreme Court Associate Justice Jose C. Mendoza.

RO300-106-RU-001 are UPHELD and AFFIRMED. The instant petition is DENIED due course and, accordingly, DISMISSED for lack of merit.129

LEGEND filed a Motion for Reconsideration130 alleging, among others, that it has appealed to the Court of Appeals the March 26, 2002 Decision in Case No. RO300-0108CP-001 denying its petition for cancellation and that it is still pending resolution.

On September 14, 2005, the appellate court denied LEGENDs motion for reconsideration.

Hence, this Petition for Review on Certiorari raising the lone assignment of error, viz:

WHETHER X X X THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN THE APPLICATION OF LAW IN DENYING THE PETITIONERS PETITION FOR CERTIORARI.131

Petitioners Arguments

129 130 131

Id. at 502. Id. at 505-525. Rollo of G.R. No. 169754, p. 826.

LEGEND submits that the Court of Appeals grievously erred in ruling that the March 26, 2002 Decision denying its Petition for Cancellation of KMLs registration has already become final and executory. It asserts that it has seasonably filed a Petition for Certiorari132 before the CA docketed as CA-G.R. SP No. 72659 assailing said Decision. In fact, on June 30, 2005, the Court of Appeals granted the petition, reversed the March 26, 2002 Decision of the Bureau of Labor Relations and reinstated the November 7, 2001 Decision of the DOLE Regional Office III ordering the cancellation of KMLs registration.

Finally, LEGEND posits that the cancellation of KMLs certificate of registration should retroact to the time of its issuance.133 It thus claims that the petition for certification election and all of KMLs activities should be nullified because it has no legal personality to file the same, much less demand collective bargaining with LEGEND.134

LEGEND thus prays that the September 20, 2001 Decision of the Med-Arbiter dismissing KMLs petition for certification election be reinstated.135

Respondents Arguments

132 133 134 135

Id. at 461-494. Id. at 838. Id. Id. at 851.

In its Comment filed before this Court dated March 21, 2006, KML insists that the Decision of the Bureau of Labor Relations upholding its legitimacy as a labor organization has already attained finality136 hence there was no more hindrance to the holding of a certification election. Moreover, it claims that the instant petition has become moot because the certification election sought to be prevented had already been conducted.

Our Ruling

The petition is partly meritorious.

LEGEND has timely appealed the March 26, 2002 Decision of the Bureau of Labor Relations to the Court of Appeals.

We cannot understand why the Court of Appeals totally disregarded LEGENDs allegation in its Motion for Reconsideration that the March 26, 2002 Decision of the Bureau of Labor Relations has not yet attained finality considering that it has timely appealed the same to the Court of Appeals and which at that time is still pending resolution. The Court of Appeals never bothered to look into this allegation and instead dismissed outright LEGENDs motion for reconsideration. By doing so, the Court of Appeals in effect maintained its earlier ruling that the March 26, 2002 Decision of the
136

Id. at 720.

Bureau of Labor Relations upholding the legitimacy of KML as a labor organization has long become final and executory for failure of LEGEND to appeal the same.

This is inaccurate. Records show that (in the cancellation of registration case) LEGEND has timely filed on September 6, 2002 a petition for certiorari137 before the Court of Appeals which was docketed as CA-G.R. SP No. 72659 assailing the March 26, 2002 Decision of the Bureau of Labor Relations. In fact, KML received a copy of said petition on September 10, 2002138 and has filed its Comment thereto on December 2, 2002.139 Thus, we find it quite interesting for KML to claim in its Comment (in the certification petition case) before this Court dated March 21, 2006140 that the Bureau of Labor Relations Decision in the petition for cancellation case has already attained finality. Even in its Memorandum141 dated March 13, 2007 filed before us, KML is still insisting that the Bureau of Labor Relations Decision has become final and executory.

Our perusal of the records shows that on June 30, 2005, the Court of Appeals rendered its Decision142 in CA-G.R. SP No. 72659 reversing the March 26, 2002 Decision of the Bureau of Labor Relations and reinstating the November 7, 2001 Decision of the Med-Arbiter which canceled the certificate of registration of KML.143 On September 30,

137 138

139 140 141 142

143

Id. at 461-494. Rollo of G.R. No. 169972 (Kilusang Manggagawa ng Legenda-KML Independent v. Legend International Resorts, Ltd.), p. 59. Rollo of G.R. No. 169754, p. 559. Id. at 721. Id. at 796. Rollo of G.R. No. 169972, pp. 35-45; penned by Associate Justice Rebecca De Guia-Salvador and concurred in by Associate Justices Conrado M. Vasquez, Jr. and Aurora Santiago-Lagman. The dispositive portion of the Decision reads:

2005, KMLs motion for reconsideration was denied for lack of merit.144 On November 25, 2005, KML filed its Petition for Review on Certiorari145 before this Court which was docketed as G.R. No. 169972. However, the same was denied in a Resolution146 dated February 13, 2006 for having been filed out of time. KML moved for reconsideration but it was denied with finality in a Resolution147 dated June 7, 2006. Thereafter, the said Decision canceling the certificate of registration of KML as a labor organization became final and executory and entry of judgment was made on July 18, 2006.148

The cancellation of KMLs certificate of registration should not retroact to the time of its issuance.

Notwithstanding the finality of the Decision canceling the certificate of registration of KML, we cannot subscribe to LEGENDs proposition that the cancellation of KMLs certificate of registration should retroact to the time of its issuance. LEGEND claims that KMLs petition for certification election filed during the pendency of the petition for cancellation and its demand to enter into collective bargaining agreement with LEGEND should be dismissed due to KMLs lack of legal personality.

WHEREFORE, public respondents impugned March 26, 2002 decision is REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the REINSTATEMENT of the November 7, 2001 Decision in Case No. RO300-0108-P-001. SO ORDERED. (Id. at 45.)
144 145 146 147 148

Id. at 47. Id. at 10-33. Id. at 316. Id. (unpaged). Id. (unpaged).

This issue is not new or novel. In Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor,149 we already ruled that:

Anent the issue of whether or not the Petition to cancel/revoke registration is a prejudicial question to the petition for certification election, the following ruling in the case of Association of the Court of Appeals Employees (ACAE) v. Hon. Pura Ferrer-Calleja, x x x is in point, to wit:

x x x It is well-settled rule that a certification proceedings is not a litigation in the sense that the term is ordinarily understood, but an investigation of a non-adversarial and fact finding character. (Associated Labor Unions (ALU) v. Ferrer-Calleja, 179 SCRA 127 [1989]; Philippine Telegraph and Telephone Corporation v. NLRC, 183 SCRA 451 [1990]. Thus, the technical rules of evidence do not apply if the decision to grant it proceeds from an examination of the sufficiency of the petition as well as a careful look into the arguments contained in the position papers and other documents.

At any rate, the Court applies the established rule correctly followed by the public respondent that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing the cancellation.150 (Emphasis supplied.)

149 150

371 Phil. 30 (1999). Id. at 44-45.

In Capitol Medical Center, Inc. v. Hon. Trajano,151 we also held that the pendency of a petition for cancellation of union registration does not preclude collective bargaining.152 Citing the Secretary of Labor, we held viz:

That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition to cancel the unions registration certificate x x x more so should the collective bargaining process continue despite its pendency. 153 (Emphasis supplied.)

In Association of Court of Appeals Employees v. Ferrer-Calleja,154 this Court was tasked to resolve the issue of whether the certification proceedings should be suspended pending *the petitioners+ petition for the cancellation of union registration of the UCECA155.156 The Court resolved the issue in the negative holding that an order to hold a certification election is proper despite the pendency of the petition for cancellation of the registration certificate of the respondent union. The rationale for this is that at the time the respondent union filed its petition, it still had the legal personality to perform such act absent an order directing a cancellation.157 We reiterated this view in Samahan ng Manggagawa sa Pacific Plastic v. Hon. Laguesma158 where we declared that a certification election can be conducted despite pendency of a petition to cancel the union registration certificate. For the fact is that at the time
151 152 153 154 155 156 157 158

501 Phil. 144 (2005). Id. at 150. Id. G.R. No. 94716, November 15, 1991, 203 SCRA 596. Union of Concerned Employees of the Court of Appeals. Association of Court of Appeals Employees v. Ferrer-Calleja, supra note 43 at 606. Id. at 607. Emphasis supplied. 334 Phil. 955 (1997).

the respondent union filed its petition for certification, it still had the legal personality to perform such act absent an order directing its cancellation.159

Based on the foregoing jurisprudence, it is clear that a certification election may be conducted during the pendency of the cancellation proceedings. This is because at the time the petition for certification was filed, the petitioning union is presumed to possess the legal personality to file the same. There is therefore no basis for LEGENDs assertion that the cancellation of KMLs certificate of registration should retroact to the time of its issuance or that it effectively nullified all of KMLs activities, including its filing of the petition for certification election and its demand to collectively bargain.

The legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election.

We agree with the ruling of the Office of the Secretary of DOLE that the legitimacy of the legal personality of KML cannot be collaterally attacked in a petition for certification election proceeding. This is in consonance with our ruling in Laguna Autoparts Manufacturing Corporation v. Office of the Secretary, Department of Labor and Employment160 that such legal personality may not be subject to a collateral attack

159 160

Id. at 965. Emphasis supplied. 497 Phil. 255 (2005).

but only through a separate action instituted particularly for the purpose of assailing it.161 We further held therein that:

This is categorically prescribed by Section 5, Rule V of the Implementing Rules of Book V, which states as follows:

SEC. 5.162 Effect of registration. The labor organization or workers association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack but may be questioned only in an independent petition for cancellation in accordance with these Rules.

Hence, to raise the issue of the respondent unions legal personality is not proper in this case. The pronouncement of the Labor Relations Division Chief, that the respondent union acquired a legal personality x x x cannot be challenged in a petition for certification election.

The discussion of the Secretary of Labor and Employment on this point is also enlightening, thus:

. . . Section 5, Rule V of D.O. 9 is instructive on the matter. It provides that the legal personality of a union cannot be the subject of collateral attack in a petition for certification election, but may be questioned only in an independent petition for cancellation of union registration. This has been the rule since NUBE v. Minister of Labor, 110 SCRA 274 (1981). What applies in this case is the principle that once a union acquires a legitimate status as a labor organization, it continues as such until its certificate of registration is cancelled or revoked in an independent action for cancellation.

161 162

Id. at 266. Now Section 8, Rule IV, Book V of the Omnibus Rules Implementing the Labor Code.

Equally important is Section 11, Paragraph II, Rule IX of D.O. 9, which provides for the dismissal of a petition for certification election based on the lack of legal personality of a labor organization only in the following instances: (1) appellant is not listed by the Regional Office or the BLR in its registry of legitimate labor organizations; or (2) appellants legal personality has been revoked or cancelled with finality. Since appellant is listed in the registry of legitimate labor organizations, and its legitimacy has not been revoked or cancelled with finality, the granting of its petition for certification election is proper.163

*T+he legal personality of a legitimate labor organization x x x cannot be subject to a collateral attack. The law is very clear on this matter. x x x The Implementing Rules stipulate that a labor organization shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Once a certificate of registration is issued to a union, its legal personality cannot be subject to a collateral attack. In may be questioned only in an independent petition for cancellation in accordance with Section 5 of Rule V, Book V of the Implementing Rules.164

WHEREFORE, in view of the foregoing, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 18, 2003 in CA-G.R. SP No. 72848 insofar as it affirms the May 22, 2002 Decision and August 20, 2002 Resolution of the Office of the Secretary of Department of Labor and Employment is AFFIRMED. The Decision of the Court of Appeals insofar as it declares that the March 26, 2002 Decision

163

164

Laguna Autoparts Manufacturing Corporation v. Office of the Secretary, Department of Labor and Employment, supra note 49 at 266-267. Italics in the original. San Miguel Corporation Employees Union-Phil. Transport and General Workers Org. v. San Miguel Packaging Products Employees Union-Pambansang Diwa ng Manggagawang Pilipino , G.R. No. 171153, September 12, 2007, 533 SCRA 125, 145-146.

of the Bureau of Labor Relations in Case No. RO300-0108-CP-001 upholding that the legitimacy of KML as a labor organization has long become final and executory for failure of LEGEND to appeal the same, is REVERSED and SET ASIDE.

SO ORDERED.

Republic of the Philippines Supreme Court Manila SECOND DIVISION FILIPINAS PALMOIL PROCESSING, INC. and DENNIS T. VILLAREAL, Petitioners, G.R. No. 167332 Present:

- versus -

CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ.

JOEL P. DEJAPA, represented by his Attorney-in-Fact MYRNA Promulgated: MANZANO, Respondent. February 7, 2011 x--------------------------------------------------x

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari are the Resolutions dated December 10, 2004165 and February 17, 2005166 issued by the Court of Appeals (CA) in CA-G.R. SP No. 60562.

The antecedent facts are as follows:

On May 27, 1997, respondent Joey Dejapa filed a Complaint for illegal dismissal and money claims against petitioner Asian Plantation Phils., Inc. (formerly Veg. Oil Phils. Inc.), now Filipinas Palmoil Processing, Inc., Dennis T. Villareal and Tom Madula.

On July 14, 1999, the Labor Arbiter (LA) dismissed respondent's complaint for lack of merit.

Respondent filed his appeal with the National Labor Relations Commission (NLRC) which, in a Decision dated December 29, 1999, affirmed the LA decision. Respondent's motion for reconsideration was denied in a Resolution dated April 28, 2000.

Aggrieved, respondent filed with the CA a petition for certiorari. Petitioners filed their Comment thereto.

On August 29, 2002, the CA reversed and set aside the NLRC decision and resolution. The decretal portion of the decision states:
165

Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Salvador J. Valdez, Jr. and Danilo B. Pine, concurring; rollo, pp. 205- 216. 166 Id. at 227-228.

WHEREFORE, premises considered, the assailed Decision dated December 29, 1999, as well as the Resolution dated April 28, 2000 in NLRC NCR CASE No. 0005-03748-97 (NLRC NCR CA No. 016505-98) are hereby REVERSED and SET ASIDE. Petitioner (herein respondent) is ordered REINSTATED without loss of seniority rights with payment of backwages, including his salary differentials, overtime pay, 13th month pay, service incentive leave pay and other benefits from the time his salary was withheld, or from December 1, 1997 until actual reinstatement. However, if reinstatement is no longer feasible, private respondent company is ordered to pay separation pay equivalent to one (1) month for every year of service where a fraction of six (6) months shall be considered as one whole year. Private respondent company is likewise ordered to pay P10,000.00 as moral damages and P10,000.00 as exemplary damages. In addition, private respondent company is ordered to pay attorneys fees in the amount equivalent to 10% of the total monetary award. SO ORDERED.167

The CA found that petitioner company was respondent's employer and that Tom Madula was not really an independent contractor, but petitioner company's Operations Manager. It ruled that respondent was illegally dismissed by petitioner company. We quote the pertinent portions of the Decision, thus:
It must be borne in mind that private respondent company's claim is principally anchored on the assertion that petitioner was not its employee but that of private respondent Madula who is allegedly an independent contractor.168 xxxx In this petition, there is no showing that private respondent Madula is an independent contractor. We reiterate that private respondent company failed to show any evidence to support such claim. Hence, it is fair to conclude that private respondent Madula is an employee of private respondent company. He is the operations manager of private respondent company. This fact was not refuted by either private respondent Madula or private respondent company.169
167 168 169

Id. at 118-119. Id. at 112. Id. at 114.

xxxx In fine, it is evident that private respondent Madula is indeed an employee of private respondent company. As its operations manager, he is deemed an agent of private respondent company.170

Petitioners' motion for reconsideration was denied in a Resolution171 dated July 14, 2003.

Petitioners filed with Us a petition for review on certiorari, docketed as G.R. No. 159142, which We denied in a Resolution172 dated October 1, 2003 for petitioners' failure to take the appeal within the reglementary period. Petitioners' motion for reconsideration was denied in a Resolution173 dated January 21, 2004; thus, the decision became final and executory on February 27, 2004, and an entry of judgment was subsequently made.

Respondent, through his representative, filed with the LA a Motion for Execution and Computation of the Award. The LA issued a Writ of Execution 174 dated July 12, 2004 for the implementation of the CA Decision dated August 29, 2002. Pursuant to the said writ of execution, petitioners' deposit in the United Coconut Planters Bank (UCPB) in the amount of P736,910.10 was garnished.

On July 21, 2004, petitioners filed a Motion to Quash Writ of Execution 175 on the ground that it can be held liable only insofar as the reinstatement aspect and/or the monetary award were concerned, pursuant to the CA Decision dated
170 171 172 173 174 175

Id. at 118. Id. at 135. Id. at 186. Id. at 185. Per Labor Arbiter Lilia S. Savari; id. at 187-190. Id. at 191-194.

August 29, 2002, but not to backwages. Respondent filed his Comment/Opposition thereto.

On August 6, 2004, respondent filed an Ex-Parte Motion for Order of Release praying for the immediate release of the garnished amount in the UCPB.

On September 14, 2004, the LA issued its Order176 partially granting petitioners' Motion to Quash Writ of Execution, the decretal portion of which reads:
WHEREFORE, the Motion to Quash Writ of Execution filed by Asian Plantation is partially granted in so far as the liability for backwages and reinstatement is concerned such that the same is adjudged against respondent Tom Madula. The respondents are solidarily liable to the rest of the award, except damages, which are for the sole account of respondent company. The garnished account of Filipinas Palm Oil Processing, Inc. with United Coconut Planters Bank is hereby ordered released to the extent of TWO HUNDRED SIXTY-SIX THOUSAND SEVEN HUNDRED FIFTY-SEVEN & 85/100 PESOS (P266,757.85). SO ORDERED.177

Dissatisfied, both parties filed their respective appeals with the NLRC.

On October 19, 2004, respondent then filed before the CA a Very Urgent Motion for Clarification of Judgment, praying that the CA Decision dated August 29, 2002 be clarified to the effect that petitioner be made solely liable to the judgment award and, as a consequence thereof, to order the NLRC and the LA to implement the same and to direct the UCPB to release the garnished amount of

176 177

Id. at 195-197. Id. at 196-197.

P736,910.10 to the NLRC Sheriff and for the latter to deposit the same to the NLRC cashier for further disposition.

On December 10, 2004, the CA rendered the assailed Resolution granting respondent's motion for clarificatory judgment, the pertinent portion of which provides:

Obviously, the confusion was brought about by the September 14, 2004 Order of Labor Arbiter Savari. It is immediately apparent that the order is devoid of any legal basis since the ground relied upon by private respondent Filipinas Palmoil (Asian Plantation) is not among those grounds upon which a writ of execution may be quashed. As jurisprudentially settled, quashal of the writ of execution was held to be proper in the following instances: (a) when it was improvidently issued, (b) when it is defective in substance, (c) when it is issued against the wrong party, (d) where the judgment was already satisfied, (e) when it was issued without authority, (f) when a change in the situation of the parties renders execution inequitable, and (g) when the controversy was never validly submitted to the court, The ground invoked by private respondent Filipinas Palmoil (Asian Plantation) to quash the writ of execution is patently improper as it actually sought to vary the final judgment of this Court. Despite this, Labor Arbiter Savari partially granted the motion to quash. Worst, Labor Arbiter Savari even went to the extent of making her own findings of fact and ruling on the merits, and came out with an entirely new disposition different from that decreed by this Court in the August 29, 2002 decision. Such action on the part of Labor Arbiter Savari betrays sheer ignorance of settled precepts, and amounts to a clear encroachment and interference on the final judgment of this Court. Ordinarily, the recourse against such an order of the Labor Arbiter is to challenge the same on appeal or via the extraordinary remedies of certiorari, prohibition or mandamus. However, requiring petitioner to undergo such litigious process once again would not be in keeping with the protection to labor mandate of the Constitution. Thus, in order to write finis to this controversy, which has tarried for some time now, and in order to forestall the offshoot of another prolonged litigation, this Court, in the exercise of equity jurisdiction, hereby grants petitioner's motion for clarification. It is, of course, stressed that the Court is not amending its August 29, 2002 decision or rectifying a perceived error therein. With this clarification, this Court only states the obvious by explicitly articulating what should have been necessarily implied by the application of basic principles under our labor law. 178
178

Id. at 212-214.

Thus, the dispositive portion of the assailed CA Resolution reads:

WHEREFORE, in view of the foregoing, in accordance with petitioner's supplications, this Court renders, nunc pro tunc, the following clarification to the decretal portion of this Court's August 29, 2002 decision. WHEREFORE, premises considered, the assailed Decision dated December 29, 1999 as well as the Resolution dated April 28, 2000 in NLRC NCR CASE NO. 0005-03748-97 (NLRC NCR CA NO. 016505-98) are hereby REVERSED and SET ASIDE. Private respondent Filipinas Palmoil Processing Inc. (Asian Plantation Phils., Inc.) is hereby ordered to REINSTATE petitioner Joey Dejapa without loss of seniority rights and to pay him his backwages including his salary differentials, overtime pay, 13th month pay, service incentive leave pay and other benefits from the time his salary was withheld or from December 1, 1997 until actual reinstatement. If reinstatement is no longer feasible, private respondent Filipinas Palmoil Processing, Inc. (Asian Plantation Phils., Inc.) is likewise ordered to pay separation pay in addition to the payment of backwages and other benefits equivalent to one (1) month pay for every year of service, where a fraction of six (6) months shall be considered as one whole year. Private respondent Filipinas Palmoil Processing Inc. (Asian Plantation Phils., Inc.) is likewise ordered to pay petitioner P10,000.00 as moral damages, P10,000.00 as exemplary damages, and attorney's fees in the amount equivalent to 10% of the total monetary award. Private respondent Tom Madula is hereby relieved from any liability under the judgment. Labor Arbiter Lilia S. Savari is hereby directed to implement the final judgment of this Court strictly in accordance with the foregoing, and to order the UCPB to release the garnished amount of P736,910.10 to the NLRC Sheriff for further disposition.179

179

Id. at 214-215.

Petitioners' motion for reconsideration was denied in a Resolution dated February 17, 2005. Hence this Petition for review on certiorari raising the following grounds:
THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE CONTRARY TO LAW AND SETTLED RULINGS OF THE SUPREME COURT WHEN IT ORDERED THE COMPANY TO REINSTATE THE RESPONDENT AND PAY HIM BACKWAGES, SALARY DIFFERENTIALS, OVERTIME PAY, 13TH MONTH PAY, SERVICE INCENTIVE LEAVE PAY AND OTHER BENEFITS, AND IF REINSTATEMENT IS NOT POSSIBLE, TO PAY RESPONDENT SEPARATION PAY IN ADDITION TO BACKWAGES AND OTHER BENEFITS, PLUS DAMAGES AND ATTORNEY'S FEES CONSIDERING THAT: A. RESPONDENT WAS NEVER DISMISSED AND WAS NEVER UNDER THE EMPLOY OF THE COMPANY, [AND] B. QUASHAL OF THE WRIT OF EXECUTION IS PROPER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE.180

Petitioners insist that: (1) it engaged the services of Tom Madula to provide it with manning services and delivery of liquid cargo; (2) Madula assigned respondent to work as barge patron in the company's Butuan depot; (3) the terms of the contract between Madula and petitioner were clear and categorical, which negate the existence of an employment relationship between respondent and petitioner; and (4) Madula's obligation to provide the services contracted and which were performed by respondent were among the functions expressly allowed by law to be contractible. Petitioners claim that the CA Decision dated August 29, 2002 did not even provide for the circumstances surrounding the alleged dismissal and how the same was effected; that even respondent's narration of facts in his

180

Id. at 15.

position paper filed before the LA negated the existence of the fact of dismissal. Considering that petitioner company was not, at any time, the employer of respondent and that since there was no dismissal to speak of, it is but proper to order the quashal of the writ of execution.

In his Comment, respondent claims that (1) petitioner seeks to reverse or set aside the CA Decision dated August 29, 2002, which had already attained finality and an entry of judgment had already been made; (2) the issues which petitioners raised have already been passed upon by the CA in its 2002 decision; and (3) the CA Resolution which is being assailed in this petition was merely a clarification of the final and executory CA Decision dated August 29, 2002, where the CA did not modify its earlier decision but only interpreted the same, which was well within its authority to do so. Respondent informs Us that the amount of P736,910.10 in the UCPB had already been released to the NLRC Sheriff and was deposited to the Cashier, who in turn had released the said amount to respondent through his attorney-in-fact.

In their Reply, petitioners contend that it is not precluded from assailing the Resolutions issued by the CA via a petition for review under Rule 45 of the Rules of Court and reiterated the arguments raised in the petition.

We find the petition unmeritorious.

In the Decision dated August 29, 2002, the CA found petitioner as the employer of respondent; that Tom Madula was not really an independent contractor, but was only an employee of petitioner company being its operations manager; and that respondent was illegally dismissed by petitioner company. The

CA Decision became final and executory on February 27, 2004 after we denied petitioners' petition for review on certiorari, and an entry of judgment was subsequently made.

The instant petition for review filed with Us by petitioners assails the CA Resolutions dated December 10, 2004 and February 17, 2005, which the CA issued upon respondent's filing of a Very Urgent Motion for Clarificatory Judgment praying that the CA clarify its Decision dated August 29, 2002 declaring petitioner company solely liable to the judgment award and, as a consequence thereof, to order the NLRC and the LA to implement the same and for the UCPB to release the garnished amount of P736,910.10 to the Sheriff for further disposition.

Notably, the CA Resolutions sought to be annulled in this petition were only issued to clarify the CA Decision dated August 29, 2002, which had already become final and executory in 2004.

As a general rule, final and executory judgments are immutable and unalterable, except under these recognized exceptions, to wit: (a) clerical errors; (b) nunc pro tunc entries which cause no prejudice to any party; and (c) void judgments.181 What the CA rendered on December 10, 2004 was a nunc pro tunc order clarifying the decretal portion of the August 29, 2002 Decision.

In Briones-Vazquez v. Court of Appeals,182 nunc pro tunc judgments have been defined and characterized as follows:
The object of a judgment nunc pro tunc is not the rendering of a new judgment and the ascertainment and determination of new rights, but is one
181 182

Briones-Vazquez v. Court of Appeals, 491 Phil. 81, 92 (2005). Id.

placing in proper form on the record, the judgment that had been previously rendered, to make it speak the truth, so as to make it show what the judicial action really was, not to correct judicial errors, such as to render a judgment which the court ought to have rendered, in place of the one it did erroneously render, nor to supply nonaction by the court, however erroneous the judgment may have been.183

By filing the instant petition for review with Us, petitioners would like to appeal anew the merits of the illegal dismissal case filed by respondent against petitioners raising the same arguments which had long been passed upon and decided in the August 29, 2002 CA Decision which had already attained finality. As the CA said in denying petitioners' motion for reconsideration of the assailed December 10, 2004 Resolution, to wit:

It is basic that once a decision becomes final and executory, it is immutable and unalterable. Private respondents' (herein petitioners) motion for reconsideration seeks a modification or reversal of this Court's August 29, 2002 decision, which has long become final and executory, as in fact, it is already in its execution stage. It may no longer be modified by this Court or even by the Highest Court of the land. It should be sufficiently clear to private respondents (herein petitioners) that the December 10, 2004 Resolution was issued merely to clarify a seeming ambiguity in the decision but as stressed therein, it is neither an amendment nor a rectification of a perceived error therein. The instant motion for reconsideration has, therefore, no merit at all.184

We find that petitioners' action is merely a subterfuge to alter or modify the final and executory Decision of the CA which we cannot countenance without violating procedural rules and jurisprudence.

183 184

Id. (Citation omitted). Resolution dated February 17, 2005, p. 2; id. at 228.

In Navarro v. Metropolitan Bank and Trust Company,185 We discussed the rule on immutability of judgment and said:

No other procedural law principle is indeed more settled than that once a judgment becomes final, it is no longer subject to change, revision, amendment or reversal, except only for correction of clerical errors, or the making of nunc pro tunc entries which cause no prejudice to any party, or where the judgment itself is void. The underlying reason for the rule is two-fold: (1) to avoid delay in the administration of justice and thus make orderly the discharge of judicial business, and (2) to put judicial controversies to an end, at the risk of occasional errors, inasmuch as controversies cannot be allowed to drag on indefinitely and the rights and obligations of every litigant must not hang in suspense for an indefinite period of time. As the Court declared in Yau v. Silverio, Litigation must end and terminate sometime and somewhere, and it is essential to an effective and efficient administration of justice that, once a judgment has become final, the winning party be, not through a mere subterfuge, deprived of the fruits of the verdict. Courts must therefore guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to prolong them. Indeed, just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment. Any attempt to thwart this rigid rule and deny the prevailing litigant his right to savor the fruit of his victory must immediately be struck down. Thus, in Heirs of Wenceslao Samper v. Reciproco-Noble, we had occasion to emphasize the significance of this rule, to wit: It is an important fundamental principle in our Judicial system that every litigation must come to an end x x x Access to the courts is guaranteed. But there must be a limit thereto. Once a litigant's rights have been adjudicated in a valid final judgment of a competent court, he should not be granted an unbridled license to come back for another try. The prevailing party should not be harassed by subsequent suits. For, if endless litigations were to be encouraged, then unscrupulous litigants will multiply in number to the detriment of the administration of justice.186

185 186

G.R. Nos. 165697 and 166481, August 4, 2009, 595 SCRA 149. Id. at 159-160.

WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals, dated December 10, 2004 and February 17, 2005, in CA-G.R. SP No. 60562, are AFFIRMED. SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
SECOND DIVISION

PAQUITO V. ANDO, Petitioner, G.R. No. 184007 Present:

CARPIO, J., Chairperson, NACHURA, - versus PERALTA, ABAD, and MENDOZA, JJ.

ANDRESITO Y. CAMPO, ET AL., Respondents.

Promulgated:

February 16, 2011

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari187 under Rule 45 of the Rules of Court. Petitioner Paquito V. Ando (petitioner) is assailing the Decision188 dated February 21, 2008 and the Resolution189 dated July 25, 2008 of the Court of Appeals (CA) in CA-G.R. CEB-SP. No. 02370.

Petitioner was the president of Premier Allied and Contracting Services, Inc. (PACSI), an independent labor contractor. Respondents were hired by PACSI as pilers or haulers tasked to manually carry bags of sugar from the warehouse of

187 188

Rollo, pp. 26-48. Penned by Associate Justice Priscilla Baltazar-Padilla, with Associate Justices Isaias P. Dicdican and Franchito N. Diamante, concurring; rollo, pp. 50-59. 189 Id. at 75-77.

Victorias Milling Company and load them on trucks.190 In June 1998, respondents were dismissed from employment. They filed a case for illegal dismissal and some money claims with the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. VI, Bacolod City.191

On June 14, 2001, Labor Arbiter Phibun D. Pura (Labor Arbiter) promulgated a decision, ruling in respondents favor.192 PACSI and petitioner were directed to pay a total of P422,702.28, representing respondents separation pay and the award of attorneys fees.193

Petitioner and PACSI appealed to the NLRC. In a decision194 dated October 20, 2004, the NLRC ruled that petitioner failed to perfect his appeal because he did not pay the supersedeas bond. It also affirmed the Labor Arbiters decision with modification of the award for separation pay to four other employees who were similarly situated. Upon finality of the decision, respondents moved for its execution.195

To answer for the monetary award, NLRC Acting Sheriff Romeo Pasustento issued a Notice of Sale on Execution of Personal Property196 over the property
190 191 192 193 194 195 196

CA rollo, p. 191. Rollo, pp. 50-51. CA rollo, pp. 191-199. Id. at 198. Id. at 200-204. Rollo, p. 51. CA rollo, pp. 72-73.

covered by Transfer Certificate of Title (TCT) No. T-140167 in the name of Paquito V. Ando x x x married to Erlinda S. Ando.

This prompted petitioner to file an action for prohibition and damages with prayer for the issuance of a temporary restraining order (TRO) before the Regional Trial Court (RTC), Branch 50, Bacolod City. Petitioner claimed that the property belonged to him and his wife, not to the corporation, and, hence, could not be subject of the execution sale. Since it is the corporation that was the judgment debtor, execution should be made on the latters properties.197

On December 27, 2006, the RTC issued an Order198 denying the prayer for a TRO, holding that the trial court had no jurisdiction to try and decide the case. The RTC ruled that, pursuant to the NLRC Manual on the Execution of Judgment, petitioners remedy was to file a third-party claim with the NLRC Sheriff. Despite lack of jurisdiction, however, the RTC went on to decide the merits of the case.

Petitioner did not file a motion for reconsideration of the RTC Order. Instead, he filed a petition for certiorari under Rule 65199 before the CA. He contended that the RTC acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the Order. Petitioner argued that the writ of execution was issued improvidently or
197 198 199

Rollo, p. 51. CA rollo, pp. 41-44. Id. at 2-40.

without authority since the property to be levied belonged to him in his personal capacity and his wife. The RTC, respondent contended, could stay the execution of a judgment if the same was unjust.200 He also contended that, pursuant to a ruling of this Court, a third party who is not a judgment creditor may choose between filing a third-party claim with the NLRC sheriff or filing a separate action with the courts.201

In the Decision now assailed before this Court, the CA affirmed the RTC Order in so far as it dismissed the complaint on the ground that it had no jurisdiction over the case, and nullified all other pronouncements in the same Order. Petitioner moved for reconsideration, but the motion was denied.

Petitioner then filed the present petition seeking the nullification of the CA Decision. He argues that he was never sued in his personal capacity, but in his representative capacity as president of PACSI. Neither was there any indication in the body of the Decision that he was solidarily liable with the corporation.202 He also concedes that the Labor Arbiters decision has become final. Hence, he is not seeking to stop the execution of the judgment against the properties of PACSI. He also avers, however, that there is no evidence that the sheriff ever implemented the writ of execution against the properties of PACSI.203

200 201 202 203

Id. at 16. Id. at 26-27. Rollo, p. 33. Id. at 34.

Petitioner also raises anew his argument that he can choose between filing a third-party claim with the sheriff of the NLRC or filing a separate action.204 He maintains that this special civil action is purely civil in nature since it involves the manner in which the writ of execution in a labor case will be implemented against the property of petitioner which is not a corporate property of PACSI.205 What he is seeking to be restrained, petitioner maintains, is not the Decision itself but the manner of its execution.206 Further, he claims that the property levied has been constituted as a family home within the contemplation of the Family Code.207

The petition is meritorious.

Initially, we must state that the CA did not, in fact, err in upholding the RTCs lack of jurisdiction to restrain the implementation of the writ of execution issued by the Labor Arbiter.

The Court has long recognized that regular courts have no jurisdiction to hear and decide questions which arise from and are incidental to the enforcement of decisions, orders, or awards rendered in labor cases by appropriate officers and tribunals of the Department of Labor and Employment.

204 205 206 207

Id. at 35. Id. at 36. Id. at 37. Id. at 39.

To hold otherwise is to sanction splitting of jurisdiction which is obnoxious to the orderly administration of justice.208

Thus, it is, first and foremost, the NLRC Manual on the Execution of Judgment that governs any question on the execution of a judgment of that body. Petitioner need not look further than that. The Rules of Court apply only by analogy or in a suppletory character.209

Consider the provision in Section 16, Rule 39 of the Rules of Court on thirdparty claims:

SEC. 16. Proceedings where property claimed by third person.If the property levied on is claimed by any person other than the judgment obligor or his agent, and such person makes an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title, and serves the same upon the officer making the levy and a copy thereof upon the judgment obligee, the officer shall not be bound to keep the property, unless such judgment obligee, on demand of the officer, files a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution. No claim for damages for the taking or keeping of the property may be enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the bond.
208

Air Services Cooperative v. CA, 354 Phil. 905, 916 (1998), citing Balais v. Hon. Velasco, 322 Phil. 790, 807 (1996). 209 2005 REVISED RULES OF PROCEDURE OF THE NATIONAL LABOR RELATIONS COMMISSION, Section 3. Suppletory Application of the Rules of Court. - In the absence of any applicable provision in these Rules, and in order to effectuate the objectives of the Labor Code, the pertinent provisions of the Rules of Court of the Philippines may, in the interest of expeditious dispensation of labor justice and whenever practicable and convenient, be applied by analogy or in a suppletory character and effect.

The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such bond is filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate action against a third-party claimant who filed a frivolous or plainly spurious claim.
When the writ of execution is issued in favor of the Republic of the Philippines, or any officer duly representing it, the filing of such bond shall not be required, and in case the sheriff or levying officer is sued for damages as a result of the levy, he shall be represented by the Solicitor General and if held liable therefor, the actual damages adjudged by the court shall be paid by the National Treasurer out of such funds as may be appropriated for the purpose.

On the other hand, the NLRC Manual on the Execution of Judgment deals specifically with third-party claims in cases brought before that body. It defines a third-party claim as one where a person, not a party to the case, asserts title to or right to the possession of the property levied upon.210 It also sets out the procedure for the filing of a third-party claim, to wit:

SECTION 2. Proceedings. If property levied upon be claimed by any person other than the losing party or his agent, such person shall make an affidavit of his title thereto or right to the possession thereof, stating the grounds of such right or title and shall file the same with the sheriff and copies thereof served upon the Labor Arbiter or proper officer issuing the writ and upon the prevailing party. Upon receipt of the third party claim, all proceedings with respect to the execution of the property subject of the third party claim shall automatically be suspended and the Labor Arbiter or proper officer issuing the writ shall conduct a hearing with due notice to all parties concerned and resolve the validity of the claim within ten (10) working days from receipt thereof and his decision is appealable to the Commission within ten (10) working days from notice, and the Commission shall resolve the appeal within same period.

210

NLRC MANUAL ON THE EXECUTION OF JUDGMENT, Rule VI, Sec. 1.

There is no doubt in our mind that petitioners complaint is a third- party claim within the cognizance of the NLRC. Petitioner may indeed be considered a third party in relation to the property subject of the execution vis--vis the Labor Arbiters decision. There is no question that the property belongs to petitioner and his wife, and not to the corporation. It can be said that the property belongs to the conjugal partnership, not to petitioner alone. Thus, the property belongs to a third party, i.e., the conjugal partnership. At the very least, the Court can consider that petitioners wife is a third party within contemplation of the law.

The Courts pronouncements in Deltaventures Resources, Inc. v. Hon. Cabato211 are instructive:

Ostensibly the complaint before the trial court was for the recovery of possession and injunction, but in essence it was an action challenging the legality or propriety of the levy vis-a-vis the alias writ of execution, including the acts performed by the Labor Arbiter and the Deputy Sheriff implementing the writ. The complaint was in effect a motion to quash the writ of execution of a decision rendered on a case properly within the jurisdiction of the Labor Arbiter, to wit: Illegal Dismissal and Unfair Labor Practice. Considering the factual setting, it is then logical to conclude that the subject matter of the third party claim is but an incident of the labor case, a matter beyond the jurisdiction of regional trial courts.

xxxx

211

384 Phil. 252, 260 (2000).

x x x. Whatever irregularities attended the issuance an execution of the alias writ of execution should be referred to the same administrative tribunal which rendered the decision. This is because any court which issued a writ of execution has the inherent power, for the advancement of justice, to correct errors of its ministerial officers and to control its own processes.

The broad powers granted to the Labor Arbiter and to the National Labor Relations Commission by Articles 217, 218 and 224 of the Labor Code can only be interpreted as vesting in them jurisdiction over incidents arising from, in connection with or relating to labor disputes, as the controversy under consideration, to the exclusion of the regular courts.212

There is no denying that the present controversy arose from the complaint for illegal dismissal. The subject matter of petitioners complaint is the execution of the NLRC decision. Execution is an essential part of the proceedings before the NLRC. Jurisdiction, once acquired, continues until the case is finally terminated,213 and there can be no end to the controversy without the full and proper implementation of the commissions directives.

Further underscoring the RTCs lack of jurisdiction over petitioners complaint is Article 254 of the Labor Code, to wit:

212 213

Id. at 260-261. (Citations omitted.) Mario, Jr. v. Gamilla, 490 Phil. 607, 620 (2005), citing A Prime Security Services, Inc. v. Hon. Drilon, 316 Phil. 532, 537 (1995).

ART. 254. INJUNCTION PROHIBITED. No temporary or permanent injunction or restraining order in any case involving or growing out of labor disputes shall be issued by any court or other entity, except as otherwise provided in Articles 218 and 264 of this Code.

That said, however, we resolve to put an end to the controversy right now, considering the length of time that has passed since the levy on the property was made.

Petitioner claims that the property sought to be levied does not belong to PACSI, the judgment debtor, but to him and his wife. Since he was sued in a representative capacity, and not in his personal capacity, the property could not be made to answer for the judgment obligation of the corporation.

The TCT214 of the property bears out that, indeed, it belongs to petitioner and his wife. Thus, even if we consider petitioner as an agent of the corporation and, therefore, not a stranger to the case such that the provision on third-party claims will not apply to him, the property was registered not only in the name of petitioner but also of his wife. She stands to lose the property subject of execution without ever being a party to the case. This will be tantamount to deprivation of property without due process.

214

CA rollo, p. 109.

Moreover, the power of the NLRC, or the courts, to execute its judgment extends only to properties unquestionably belonging to the judgment debtor alone.215 A sheriff, therefore, has no authority to attach the property of any person except that of the judgment debtor.216 Likewise, there is no showing that the sheriff ever tried to execute on the properties of the corporation.

In sum, while petitioner availed himself of the wrong remedy to vindicate his rights, nonetheless, justice demands that this Court look beyond his procedural missteps and grant the petition.

WHEREFORE, the foregoing premises considered, the petition is GRANTED. The Decision dated February 21, 2008 and the Resolution dated July 25, 2008 of the Court of Appeals in CA-G.R. CEB-SP. No. 02370 are hereby REVERSED and SET ASIDE, and a new one is entered declaring NULL and VOID (1) the Order of the Regional Trial Court of Negros Occidental dated December 27, 2006 in Civil Case No. 06-12927; and (2) the Notice of Sale on Execution of Personal Property dated December 4, 2006 over the property covered by Transfer Certificate of Title No. T140167, issued by the Acting Sheriff of the National Labor Relations Commission.

SO ORDERED.

215

Go v. Yamane, G.R. No. 160762, May 3, 2006, 489 SCRA 107, 124; Yao v. Hon. Perello, 460 Phil. 658, 662 (2003); Co Tuan v. NLRC, 352 Phil. 240, 250 (1998). 216 Johnson and Johnson (Phils.), Inc. v. CA, 330 Phil. 856, 873 (1996).

Republic of the Philippines Supreme Court

Manila
FIRST DIVISION

NELSON A. CULILI,

Petitioner,

G.R. No. 165381

Present: - versus CORONA, C.J., Chairperson,

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., SALVADOR HIZON (PRESIDENT AND CHIEF EXECUTIVE OFFICER), EMILIANO JURADO (CHAIRMAN OF THE BOARD), VIRGILIO GARCIA (VICE PRESIDENT) AND STELLA GARCIA (ASSISTANT VICE PRESIDENT),

VELASCO, JR., LEONARDO-DE CASTRO, DEL CASTILLO, and PEREZ, JJ.

Respondents.

Promulgated:

February 9, 2011 x---------------------------------------------------- x

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a petition for review on certiorari217 of the February 5, 2004 Decision218 and September 13, 2004 Resolution219 of the Court of Appeals in CAG.R. SP No. 75001, wherein the Court of Appeals set aside the March 1, 2002 Decision220 and September 24, 2002 Resolution221 of the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters Decision222 dated April 30, 2001.

Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a telecommunications company engaged mainly in the business of establishing commercial telecommunications systems and leasing of international datalines or circuits that pass through the international gateway facility (IGF).223 The other respondents are ETPIs officers: Salvador Hizon, President and Chief Executive Officer; Emiliano Jurado, Chairman of the Board; Virgilio Garcia, Vice President; and Stella Garcia, Assistant Vice President.

217 218

219 220

221 222 223

Under Rule 45 of the 1997 Rules of Civil Procedure. Rollo, pp. 59-76; penned by Associate Justice Portia Alio-Hormachuelos with Associate Justices Perlita J. Tria Tirona and Rosalinda Asuncion-Vicente, concurring. Id. at 78-81. Id. at 611-624; penned by Commissioner Alberto R. Quimpo with Presiding Commissioner Roy V. Seneres and Commissioner Vicente S.E. Veloso, concurring. Id. at 656. Id. at 472-487; penned by Labor Arbiter Luis D. Flores. Id. at 976.

Petitioner Nelson A. Culili (Culili) was employed by ETPI as a Technician in its Field Operations Department on January 27, 1981. On December 12, 1996, Culili was promoted to Senior Technician in the Customer Premises Equipment Management Unit of the Service Quality Department and his basic salary was increased.224

As a telecommunications company and an authorized IGF operator, ETPI was required, under Republic Act. No. 7925 and Executive Order No. 109, to establish landlines in Metro Manila and certain provinces.225 However, due to interconnection problems with the Philippine Long Distance Telephone Company (PLDT), poor subscription and cancellation of subscriptions, and other business difficulties, ETPI was forced to halt its roll out of one hundred twenty-nine thousand (129,000) landlines already allocated to a number of its employees.226

In 1998, due to business troubles and losses, ETPI was compelled to implement a Right-Sizing Program which consisted of two phases: the first phase involved the reduction of ETPIs workforce to only those employees that were necessary and which ETPI could sustain; the second phase entailed a companywide reorganization which would result in the transfer, merger, absorption or abolition of certain departments of ETPI.227

224 225 226 227

Id. at 255. Id. at 976. Id. at 165-166. Id. at 979.

As part of the first phase, ETPI, on December 10, 1998, offered to its employees who had rendered at least fifteen years of service, the Special Retirement Program, which consisted of the option to voluntarily retire at an earlier age and a retirement package equivalent to two and a half (2) months salary for every year of service.228 This offer was initially rejected by the Eastern Telecommunications Employees Union (ETEU), ETPIs duly recognized bargaining agent, which threatened to stage a strike. ETPI explained to ETEU the exact details of the Right-Sizing Program and the Special Retirement Program and after consultations with ETEUs members, ETEU agreed to the implementation of both programs.229 Thus, on February 8, 1999, ETPI re-offered the Special

Retirement Program and the corresponding retirement package to the one hundred two (102) employees who qualified for the program. 230 Of all the employees who qualified to avail of the program, only Culili rejected the offer.231

After the successful implementation of the first phase of the Right-Sizing Program, ETPI, on March 1, 1999 proceeded with the second phase which necessitated the abolition, transfer and merger of a number of ETPIs departments.232

Among the departments abolished was the Service Quality Department. The functions of the Customer Premises Equipment Management Unit, Culilis unit, were absorbed by the Business and Consumer Accounts Department.
228 229 230 231 232

The

Id. at 102. Id. at 104. Id. at 169. Id. at 980. Id. at 980-981.

abolition of the Service Quality Department rendered the specialized functions of a Senior Technician unnecessary. As a result, Culilis position was abolished due to redundancy and his functions were absorbed by Andre Andrada, another employee already with the Business and Consumer Accounts Department.233

On March 5, 1999, Culili discovered that his name was omitted in ETPIs New Table of Organization. Culili, along with three of his co-employees who were similarly situated, wrote their union president to protest such omission.234

In a letter dated March 8, 1999, ETPI, through its Assistant Vice President Stella Garcia, informed Culili of his termination from employment effective April 8, 1999. The letter reads:

March 8, 1999

To: Thru:

N. Culili S. Dobbin/G. Ebue

From: AVP-HRD ------------------------------------------------------------------------------------------

As you are aware, the current economic crisis has adversely affected our operations and undermined our earlier plans to put in place major work programs and activities. Because of this, we have to implement a Rightsizing Program in order to cut administrative/operating costs and to avoid losses. In line with this program, your
233 234

Id. at 981-982. Id. at 16.

employment with the company shall terminate effective at the close of business hours on April 08, 1999. However, to give you ample time to look for other employment, provided you have amply turned over your pending work and settled your accountabilities, you are no longer required to report to work starting tomorrow. You will be considered on paid leave until April 08, 1999.

You will likewise be paid separation pay in compliance with legal requirements (see attached), as well as other benefits accruing to you under the law, and the CBA. We take this opportunity to thank you for your services and wish you well in your future endeavors.

(Signed) Stella J. Garcia235

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.236

Culili alleged that neither he nor the Department of Labor and Employment (DOLE) were formally notified of his termination. Culili claimed that he only found out about it sometime in March 1999 when Vice President Virgilio Garcia handed him a copy of the March 8, 1999 letter, after he was barred from entering ETPIs premises by its armed security personnel when he tried to report for work.237 Culili believed that ETPI had already decided to dismiss him even prior to the March 8, 1999 letter as evidenced by the December 7, 1998 version of that
235 236 237

Id. at 260. Id. at 259. Id. at 16-17.

letter. Moreover, Culili asserted that ETPI had contracted out the services he used to perform to a labor-only contractor which not only proved that his functions had not become unnecessary, but which also violated their Collective Bargaining Agreement (CBA) and the Labor Code. Aside from these, Culili also alleged that he was discriminated against when ETPI offered some of his co-employees an additional benefit in the form of motorcycles to induce them to avail of the Special Retirement Program, while he was not.238

ETPI denied singling Culili out for termination. ETPI claimed that while it is true that they offered the Special Retirement Package to reduce their workforce to a sustainable level, this was only the first phase of the Right-Sizing Program to which ETEU agreed. The second phase intended to simplify and streamline the functions of the departments and employees of ETPI. The abolition of Culilis department - the Service Quality Department - and the absorption of its functions by the Business and Consumer Accounts Department were in line with the programs goals as the Business and Consumer Accounts Department was more economical and versatile and it was flexible enough to handle the limited functions of the Service Quality Department. ETPI averred that since Culili did not avail of the Special Retirement Program and his position was subsequently declared redundant, it had no choice but to terminate Culili.239 Culili, however, continued to report for work. ETPI said that because there was no more work for Culili, it was constrained to serve a final notice of termination240 to Culili, which Culili ignored. ETPI alleged that Culili informed his superiors that he would agree to his termination if ETPI would give him certain special work tools in addition to the
238 239 240

Id. at 21-40. Id. at 105-115. Id. at 175.

benefits he was already offered. ETPI claimed that Culilis counter -offer was unacceptable as the work tools Culili wanted were worth almost a million pesos. Thus, on March 26, 1999, ETPI tendered to Culili his final pay check of Eight Hundred Fifty-Nine Thousand Thirty-Three and 99/100 Pesos (P859,033.99) consisting of his basic salary, leaves, 13th month pay and separation pay.241 ETPI claimed that Culili refused to accept his termination and continued to report for work.242 ETPI denied hiring outside contractors to perform Culilis work and denied offering added incentives to its employees to induce them to retire early. ETPI also explained that the December 7, 1998 letter was never given to Culili in an official capacity. ETPI claimed that it really needed to reduce its workforce at that time and that it had to prepare several letters in advance in the event that none of the employees avail of the Special Retirement Program. Retirement Program instead of terminating them.243 However, ETPI

decided to wait for a favorable response from its employees regarding the Special

On February 8, 2000, Culili filed a complaint against ETPI and its officers for illegal dismissal, unfair labor practice, and money claims before the Labor Arbiter.

On April 30, 2001, the Labor Arbiter rendered a decision finding ETPI guilty of illegal dismissal and unfair labor practice, to wit:

241 242 243

CA rollo, Vol. I, pp. 185-186. Rollo, pp. 114-115. Id. at 101-105.

WHEREFORE, decision is hereby rendered declaring the dismissal of complainant Nelson A. Culili illegal for having been made through an arbitrary and malicious declaration of redundancy of his position and for having been done without due process for failure of the respondent to give complainant and the DOLE written notice of such termination prior to the effectivity thereof.

In view of the foregoing, respondents Eastern Telecommunications Philippines and the individual respondents are hereby found guilty of unfair labor practice/discrimination and illegal dismissal and ordered to pay complainant backwages and such other benefits due him if he were not illegally dismissed, including moral and exemplary damages and 10% attorneys fees. Complainant likewise is to be reinstated to his former position or to a substantially equivalent position in accordance with the pertinent provisions of the Labor Code as interpreted in the case of Pioneer texturing [Pioneer Texturizing Corp. v. National Labor Relations Commission], G.R. No. 11865[1], 16 October 1997. Hence, Complainant must be paid the total amount of TWO MILLION SEVEN HUNDRED FORTY[-]FOUR THOUSAND THREE [HUNDRED] SEVENTY[-] NINE and 41/100 (P2,744,379.41), computed as follows:

I. Backwages (from 16 March 1999 to 16 March 2001) a. Basic Salary (P29,030 x 24 mos.) P696,720.96 b. 13th Month Pay (P692,720.96/12) c. Leave Benefits 1. Vacation Leave (30 days/annum) P1,116.54 x 60 days 66,992.40 58,060.88

2. Sick Leave (30 days/annum) P1,116.54 x 60 days 66,992.40

3. Birthday Leave (1 day/annum) P1,116.54 x 2 days 2,233.08

d. Rice and Meal Subsidy

16 March 31 July 1999 (P1,750 x 4.5 mos. = P7,875.00)

01 August 1991 31 July 2000 (P1,850 x 12 mos. = P22,200.00)

01 August 2000 16 March 2001 (P1,950 x 7.5 mos. = P14,625.00) 44,700.00

e. Uniform Allowance P7,000/annum x 2 years

__14,000.00 P949,699.72

II. Damages a. MoralP500,000.00 b. ExemplaryP250,000.00 III. Attorneys Fees (10% of award) GRAND TOTAL: __94,969.97 P2,744,379.41244

The Labor Arbiter believed Culilis claim that ETPI intended to dismiss him even before his position was declared redundant. He found the December 7, 1998 letter to be a telling sign of this intention. The Labor Arbiter held that a reading of the termination letter shows that the ground ETPI was actually invoking was retrenchment and not redundancy, but ETPI stuck to redundancy because it was
244

Id. at 485-488.

easier to prove than retrenchment. He also did not believe that Culilis functions were as limited as ETPI made it appear to be, and held that ETPI failed to present any reasonable criteria to justify the declaration of Culilis position as redundant. On the issue of unfair labor practice, the Labor Arbiter agreed that the contracting out of Culilis functions to non-union members violated Culilis rights as a union member. Moreover, the Labor Arbiter said that ETPI was not able to dispute Culilis claims of discrimination and subcontracting, hence, ETPI was guilty of unfair labor practice.

On appeal, the NLRC affirmed the Labor Arbiters decision but modified the amount of moral and exemplary damages awarded, viz:

WHEREFORE, the Decision appealed from is AFFIRMED granting complainant the money claims prayed for including full backwages, allowances and other benefits or their monetary equivalent computed from the time of his illegal dismissal on 16 March 1999 up to his actual reinstatement except the award of moral and exemplary damages which is modified to P200,000.00 for moral and P100,000.00 for exemplary damages. For this purpose, this case is REMANDED to the Labor Arbiter for computation of backwages and other monetary awards to complainant.245

ETPI filed a Petition for Certiorari under Rule 65 of the Rules of Civil Procedure before the Court of Appeals on the ground of grave abuse of discretion. ETPI prayed that a Temporary Restraining Order be issued against the NLRC from implementing its decision and that the NLRC decision and resolution be set aside.

245

Id. at 623-624.

The Court of Appeals, on February 5, 2004, partially granted ETPIs petition. The dispositive portion of the decision reads as follows:

WHEREFORE, all the foregoing considered, the petition is PARTIALLY GRANTED. The assailed Decision of public respondent National Labor Relations Commission is MODIFIED in that petitioner Eastern Telecommunications Philippines Inc. (ETPI) is hereby ORDERED to pay respondent Nelson Culili full backwages from the time his salaries were not paid until the finality of this Decision plus separation pay in an amount equivalent to one (1) month salary for every year of service. The awards for moral and exemplary damages are DELETED. The Writ of Execution issued by the Labor Arbiter dated September 8, 2003 is DISSOLVED.246

The Court of Appeals found that Culilis position was validly abolished due to redundancy. The Court of Appeals said that ETPI had been very candid with its employees in implementing its Right-Sizing Program, and that it was highly unlikely that ETPI would effect a company-wide reorganization simply for the purpose of getting rid of Culili. The Court of Appeals also held that ETPI cannot be held guilty of unfair labor practice as mere contracting out of services being performed by union members does not per se amount to unfair labor practice unless it interferes with the employees right to self -organization. The Court of Appeals further held that ETPIs officers cannot be held liable absent a showing of bad faith or malice. However, the Court of Appeals found that ETPI failed to observe the standards of due process as required by our laws when it failed to properly notify both Culili and the DOLE of Culilis termination. The Court of Appeals maintained its position in its September 13, 2004 Resolution when it denied Culilis Motion for Reconsideration and Urgent Motion to Reinstate the

246

Id. at 75.

Writ of Execution issued by the Labor Arbiter, and ETPIs Motion for Partial Reconsideration.

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:

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE APPLICABLE LAW AND JURISPRUDENCE WHEN IT REVERSED THE DECISIONS OF THE NLRC AND THE LABOR ARBITER HOLDING THE DISMISSAL OF PETITIONER ILLEGAL IN THAT:

A.

CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, RESPONDENTS CHARACTERIZATION OF PETITIONERS POSITION AS REDUNDANT WAS TAINTED BY BAD FAITH. THERE WAS NO ADEQUATE JUSTIFICATION TO DECLARE PETITIONERS POSITION AS REDUNDANT.

B.

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

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN DELETING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES IN FAVOR OF PETITIONER AND IN DISSOLVING THE WRIT OF EXECUTION DATED 8 SEPTEMBER 2003 ISSUED BY THE LABOR ARBITER.

IV

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE IN ABSOLVING THE INDIVIDUAL RESPONDENTS OF PERSONAL LIABILITY.

CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE, THE COURT OF APPEALS, IN A CERTIORARI PROCEEDING, REVIEWED THE FACTUAL FINDINGS OF THE NLRC WHICH AFFIRMED THAT OF THE LABOR ARBITER AND, THEREAFTER, ISSUED A WRIT OF CERTIORARI REVERSING THE DECISIONS OF THE NLRC AND THE LABOR ARBITER EVEN IN THE ABSENCE OF GRAVE ABUSE OF DISCRETION.247

Procedural Issue: Court of Appeals Power to Review Facts in a Petition For Certiorari under Rule 65
247

Id. at 19-20.

Culili argued that the Court of Appeals acted in contravention of applicable law and jurisprudence when it reexamined the facts in this case and reversed the factual findings of the Labor Arbiter and the NLRC in a special civil action for certiorari.

This Court has already confirmed the power of the Court of Appeals, even on a Petition for Certiorari under Rule 65,248 to review the evidence on record, when necessary, to resolve factual issues:

The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has been settled as early as in our decision in St. Martin Funeral Home v. National Labor Relations Commission. This Court held that the proper vehicle for such review was a Special Civil Action for Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in the Court of Appeals in strict observance of the doctrine of the hierarchy of courts. Moreover, it is already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court of Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129 as amended, known as the Judiciary Reorganization Act of 1980), the Court of Appeals pursuant to the exercise of its original jurisdiction over Petitions for Certiorari is specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues.249

While it is true that factual findings made by quasi-judicial and administrative tribunals, if supported by substantial evidence, are accorded great respect and even finality by the courts, this general rule admits of exceptions.
248 249

1997 Rules of Civil Procedure. PICOP Resources, Inc. v. Taeca, G.R. No. 160828, August 9, 2010.

When there is a showing that a palpable and demonstrable mistake that needs rectification has been committed250 or when the factual findings were arrived at arbitrarily or in disregard of the evidence on record, these findings may be examined by the courts.251

In the case at bench, the Court of Appeals found itself unable to completely sustain the findings of the NLRC thus, it was compelled to review the facts and evidence and not limit itself to the issue of grave abuse of discretion.

With the conflicting findings of facts by the tribunals below now before us, it behooves this Court to make an independent evaluation of the facts in this case.

Main Issue: Legality of Dismissal

Culili asserted that he was illegally dismissed because there was no valid cause to terminate his employment. He claimed that ETPI failed to prove that his position had become redundant and that ETPI was indeed incurring losses. Culili further alleged that his functions as a Senior Technician could not be considered a superfluity because his tasks were crucial and critical to ETPIs business.

Under our laws, an employee may be terminated for reasons involving measures taken by the employer due to business necessities. Article 283 of the Labor Code provides:
250

251

Alcazaren v. Univet Agricultural Products, Inc., G.R. No. 149628, November 22, 2005, 475 SCRA 626, 650. R& E Transport, Inc. v. Latag, 467 Phil. 355, 364-365 (2004).

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 Department 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.

There is redundancy when the service capability of the workforce is greater than what is reasonably required to meet the demands of the business enterprise. A position becomes redundant when it is rendered superfluous by any number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product line or service activity previously manufactured or undertaken by the enterprise.252

This Court has been consistent in holding that the determination of whether or not an employees services are still needed or sustainable properly belongs to the employer. Provided there is no violation of law or a showing that the employer was prompted by an arbitrary or malicious act, the soundness or wisdom of this

252

Soriano, Jr. v. National Labor Relations Commission , G.R. No. 165594, April 23, 2007, 521 SCRA 526, 543.

exercise of business judgment is not subject to the discretionary review of the Labor Arbiter and the NLRC.253

However, an employer cannot simply declare that it has become overmanned and dismiss its employees without producing adequate proof to sustain its claim of redundancy.254 Among the requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing the redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be declared redundant,255 such as but not limited to: preferred status, efficiency, and seniority. 256

This Court also held that the following evidence may be proffered to substantiate redundancy: the new staffing pattern, feasibility studies/ proposal on the viability of the newly created positions, job description and the approval by the management of the restructuring.257

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.
253 254 255 256 257

Asufrin, Jr. v. San Miguel Corporation, 469 Phil. 237, 244 (2004). Id. at 244-245. AMA Computer College, Inc. v. Garcia, G.R. No. 166703, April 14, 2008, 551 SCRA 254, 264. Panlilio v. National Labor Relations Commission , 346 Phil. 30, 35 (1997). AMA Computer College, Inc. v. Garcia, supra note 39 at 264-265.

In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency, economy, versatility and flexibility. It needed to reduce its workforce to a sustainable level while maintaining functions necessary to keep it operating. The records show that ETPI had sufficiently established not only its need to reduce its workforce and streamline its organization, but also the existence of redundancy in the position of a Senior Technician. ETPI explained how it failed to meet its business targets and the factors that caused this, and how this necessitated it to reduce its workforce and streamline its organization. ETPI also submitted its old and new tables of organization and sufficiently described how limited the functions of the abolished position of a Senior Technician were and how it decided on whom to absorb these functions.

In his affidavit dated April 10, 2000,258 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:

258

Rollo, pp. 145-162.

11.3. Thus, in accordance with the reorganization of the different departments of ETPI, the Service Quality Department was abolished and its functions were absorbed by the Business and Consumer Accounts Department and the Corporate and Major Accounts Department.

11.4. With the abolition and resulting simplification of the Service Quality Department, one of the units thereunder, the Customer Premises Equipment Maintenance (CPEM) unit was transferred to the Business and Consumer Accounts Department. Since the Business and Consumer Accounts Department had to remain economical and focused yet versatile enough to meet all the needs of its small and medium sized clients, it was decided that, in the judgment of ETPI management, the specialized functions of a Senior Technician in the CPEM unit whose sole function was essentially the repair and servicing of ETPIs telecommunications equipment was no longer needed since the Business and Consumer [Accounts] Department had to remain economical and focused yet versatile enough to meet all the multifarious needs of its small and medium sized clients.

11.5. The business reason for the abolition of the position of Senior Technician was because in ETPIs judgment, what was needed in the Business and Consumer Accounts Department was a versatile, yet economical position with functions which were not limited to the mere repair and servicing of telecommunications equipment. It was determined that what was called for was a position that could also perform varying functions such as the actual installation of telecommunications products for medium and small scale clients, handle telecommunications equipment inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of reports on the daily and monthly activation of telecommunications equipment by these small and medium scale clients.

11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior Technician was to be abolished due to redundancy. The functions of a Senior Technician was to be abolished due to redundancy. The functions of a Senior Technician would then be absorbed by an employee assigned to the Business and Consumer Accounts Department who was already performing the functions of actual installation of telecommunications products in the field and handling telecommunications equipment inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of reports on the daily and monthly activation of telecommunications equipment. This employee would then simply add to his many other functions the duty

of repairing and servicing telecommunications equipment which had been previously performed by a Senior Technician.259

In the new table of organization that the management approved, one hundred twelve (112) employees were redeployed and nine (9) positions were declared redundant.260 It is inconceivable that ETPI would effect a company-wide

reorganization of this scale for the mere purpose of singling out Culili and terminating him. If Culilis position were indeed indispensable to ETPI, then it would be absurd for ETPI, which was then trying to save its operations, to abolish that one position which it needed the most. Contrary to Culilis assertions that ETPI could not do away with his functions as long as it is in the telecommunications industry, ETPI did not abolish the functions performed by Culili as a Senior Technician. What ETPI did was to abolish the position itself for being too specialized and limited. The functions of that position were then added to another employee whose functions were broad enough to absorb the tasks of a Senior Technician.

Culili maintains that ETPI had already decided to dismiss him even before the second phase of the Right-Sizing Program was implemented as evidenced by the December 7, 1998 letter.

The December 7, 1998 termination letter signed by ETPIs AVP Stella Garcia hardly suffices to prove bad faith on the part of the company. The fact
259 260

Id. at 159-161. Id. at 171.

remains that the said letter was never officially transmitted and Culili was not terminated at the end of the first phase of ETPIs Right -Sizing Program. ETPI had given an adequate explanation for the existence of the letter and considering that it had been transparent with its employees, through their union ETEU, so much so that ETPI even gave ETEU this unofficial letter, there is no reason to speculate and attach malice to such act. That Culili would be subsequently terminated during

the second phase of the Right-Sizing Program is not evidence of undue discrimination or singling out since not only Culilis position, but his entire unit was abolished and absorbed by another department.

Unfair Labor Practice

Culili also alleged that ETPI is guilty of unfair labor practice for violating Article 248(c) and (e) of the Labor Code, to wit:

Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of the following unfair labor practice:

xxxx

c. To contract out services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization; xxxx

e. To discriminate in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor

organization. Nothing in this Code or in any other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement. Employees of an appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such non-union members accept the benefits under the collective agreement: Provided, that the individual authorization required under Article 242, paragraph (o) of this Code shall not apply to the non-members of the recognized collective bargaining agent.

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.

The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate interest of both labor and management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

In the past, we have ruled that unfair labor practice refers to acts that violate the workers' right to organize. The prohibited acts are related to the workers' right to self-organization and to the observance of a CBA.261 We have likewise declared that there should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers' right to selforganization.262 Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize.263

There is no showing that ETPI, in implementing its Right-Sizing Program, was motivated by ill will, bad faith or malice, or that it was aimed at interfering with its employees right to self-organize. In fact, ETPI negotiated and consulted with ETEU before implementing its Right-Sizing Program.

Both the Labor Arbiter and the NLRC found ETPI guilty of unfair labor practice because of its failure to dispute Culilis allegations.

According to jurisprudence, basic is the principle that good faith is presumed and he who alleges bad faith has the duty to prove the same.264 By
261

Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery v. Asia Brewery, Inc. , G.R. No. 162025, August 3, 2010. Great Pacific Life Employees Union v. Great Pacific Life Assurance Corporation, 362 Phil. 452, 464 (1999). Id. Central Azucarera De Bais Employees Union-NFL [CABEU-NFL] v. Central Azucarera De Bais, Inc. [CAB], G.R. No. 186605, November 17, 2010.

262

263 264

imputing bad faith to the actuations of ETPI, Culili has the burden of proof to present substantial evidence to support the allegation of unfair labor practice. Culili failed to discharge this burden and his bare allegations deserve no credit.

Observance of Procedural Due Process

Although the Court finds Culilis dismissal was for a lawful cause and not an act of unfair labor practice, ETPI, however, was remiss in its duty to observe procedural due process in effecting the termination of Culili.

We have previously held that there are two aspects which characterize the concept of due process under the Labor Code: one is substantive whether the termination of employment was based on the provision of the Labor Code or in accordance with the prevailing jurisprudence; the other is procedural the manner in which the dismissal was effected.265

Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:

(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:

xxxx

265

General Milling Corporation v. Casio, G.R. No. 149552, March 10, 2010.

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.

In Mayon Hotel & Restaurant v. Adana,266 we observed:

The requirement of law mandating the giving of notices was intended not only to enable the employees to look for another employment and therefore ease the impact of the loss of their jobs and the corresponding income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.267

ETPI does not deny its failure to provide DOLE with a written notice regarding Culilis termination. It, however, insists that i t 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.

In Serrano v. National Labor Relations Commission,268 we noted that a job is more than the salary that it carries. There is a psychological effect or a stigma in immediately finding ones self laid off from work.269 This is exactly why our
266

497 Phil. 892 (2005). Id. at 921. 387 Phil. 345 (2000). Id. at 354.

267 268 269

labor laws have provided for mandating procedural due process clauses. Our laws, while recognizing the right of employers to terminate employees it cannot sustain, also recognize the employees right to be properly informed of the impending severance of his ties with the company he is working for. In the case at bar, ETPI, in effecting Culilis termination, simply asked one of its guards to serve the required written notice on Culili. Culili, on one hand, claims in his petition that this was handed to him by ETPIs vice president, but previously testified before the Labor Arbiter that this was left on his table.270 Regardless of how this notice was served on Culili, this Court believes that ETPI failed to properly notify Culili about his termination. Aside from the manner the written notice was served, a reading of that notice shows that ETPI failed to properly inform Culili of the grounds for his termination.

The Court of Appeals, in finding that Culili was not afforded procedural due process, held that Culilis dismissal was ineffectual, and required ETPI to pay Culili full backwages in accordance with our decision in Serrano v. National Labor Relations Commission.271 Over the years, this Court has had the opportunity to reexamine the sanctions imposed upon employers who fail to comply with the procedural due process requirements in terminating its employees. In Agabon v. National Labor Relations Commission,272 this Court reverted back to the doctrine in Wenphil Corporation v. National Labor Relations Commission273 and held that where the dismissal is due to a just or authorized cause, but without observance of the due process requirements, the dismissal may be upheld but the employer must
270 271 272 273

CA rollo, Vol. II, p. 867. Supra note 52. G.R. No. 158693, November 17, 2004, 442 SCRA 573. 252 Phil. 73 (1989).

pay an indemnity to the employee. The sanctions to be imposed however, must be stiffer than those imposed in Wenphil to achieve a result fair to both the employers and the employees.274

In Jaka Food Processing Corporation v. Pacot,275 this Court, taking a cue from Agabon, held that since there is a clear-cut distinction between a dismissal due to a just cause and a dismissal due to an authorized cause, the legal implications for employers who fail to comply with the notice requirements must also be treated differently:

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer's exercise of his management prerogative.276

Hence, since it has been established that Culilis termination was due to an authorized cause and cannot be considered unfair labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPIs failure to comply with the notice requirements under the Labor Code, Culili is entitled to nominal damages in addition to his separation pay.

274 275 276

Agabon v. National Labor Relations Commission , supra note 56. 494 Phil. 114 (2005). Id. at 121.

Personal Liability of ETPIs Officers And Award of Damages

Culili asserts that the individual respondents, Salvador Hizon, Emiliano Jurado, Virgilio Garcia, and Stella Garcia, as ETPIs officers, should be held personally liable for the acts of ETPI which were tainted with bad faith and arbitrariness. Furthermore, Culili insists that he is entitled to damages because of the sufferings he had to endure and the malicious manner he was terminated.

As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and members. To pierce this fictional veil, it must be shown that the corporate personality was used to perpetuate fraud or an illegal act, or to evade an existing obligation, or to confuse a legitimate issue. bad faith. 277 In illegal dismissal cases, corporate officers may be held

solidarily liable with the corporation if the termination was done with malice or

In illegal dismissal cases, moral damages are awarded only where the dismissal was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public

277

Bogo Medellin Sugarcane Planters Association, Inc. v. National Labor Relations Commission , 357 Phil. 110, 127 (1998).

policy.278 Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to warrant an award for exemplary damages.279

It is our considered view that Culili has failed to prove that his dismissal was orchestrated by the individual respondents herein for the mere purpose of getting rid of him. In fact, most of them have not even dealt with Culili personally. Moreover, it has been established that his termination was for an authorized cause, and that there was no bad faith on the part of ETPI in implementing its RightSizing Program, which involved abolishing certain positions and departments for redundancy. It is not enough that ETPI failed to comply with the due process requirements to warrant an award of damages, there being no showing that the companys and its officers acts were attended with bad faith or were done oppressively.

WHEREFORE, the instant petition is DENIED and the assailed February 5, 2004 Decision and September 13, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 75001 are AFFIRMED with the MODIFICATION that petitioner Nelson A. Culilis dismissal is declared valid but respondent Eastern Telecommunications Philippines, Inc. is ordered to pay petitioner Nelson A. Culili the amount of Fifty Thousand Pesos (P50,000.00) representing nominal damages for non-compliance with statutory due process, in addition to the mandatory separation pay required under Article 283 of the Labor Code.

278 279

Ford Philippines, Inc. v. Court of Appeals, 335 Phil. 1, 10-11 (1997). Maquiling v. Philippine Tuberculosis Society, Inc., 491 Phil. 43, 61 (2005).

SO ORDERED.

SECOND DIVISION

PLASTIMER INDUSTRIAL CORPORATION and TEO KEE BIN, Petitioners,

G.R. No. 183390

Present:

CARPIO, J., Chairperson, NACHURA, - versus PERALTA, ABAD, and MENDOZA, JJ. NATALIA C. GOPO, KLEENIA R. VELEZ, FILEDELFA T. AMPARADO, MIGNON H. JOSEPH, AMELIA L. CANDA, MARISSA D. LABUNOS, MELANIE T. CAYABYAB, MA. CORAZON DELA CRUZ, and LUZVIMINDA CABASA, Promulgated:

Respondents.

February 16, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review assailing the 13 August 2007 Decision and 5
1 2

June 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97271.

3

The Antecedent Facts

On 7 May 2004, the Personnel and Administration Manager of Plastimer Industrial Corporation (Plastimer) issued a Memorandum informing all its employees of the decision of the Board of Directors to downsize and reorganize its business operations due to withdrawal of investments and shares of stocks which resulted in the change of its corporate structure. On 14 May 2004, the employees of Plastimer, including Natalia C. Gopo, Kleenia R. Velez, Filedelfa T. Amparado, Mignon H. Joseph, Amelia L. Canda, Marissa D. Labunos, Melanie T. Cayabyab, Ma. Corazon dela Cruz and Luzviminda Cabasa (respondents) were served written notices of their termination

effective 13 June 2004. On 24 May 2004, Plastimer and Plastimer Industrial Corporation Christian Brotherhood (PICCB), the incumbent sole and exclusive collective bargaining representative of all rank and file employees, entered into a Memorandum of Agreement (MOA) relative to the terms and conditions that would govern the retrenchment of the affected employees. On 26 May 2004, Plastimer submitted to the Department of Labor and Employment (DOLE) an Establishment Termination Report containing the list of the employees affected by the reorganization and downsizing. On 28 May 2004, the affected employees, including respondents, signed individual Release Waiver and Quitclaim.

Thereafter, respondents filed a complaint against Plastimer and its President Teo Kee Bin (petitioners) before the Labor Arbiter for illegal dismissal with prayer for reinstatement and full backwages, underpayment of separation pay, moral and exemplary damages and attorneys fees. Respondents alleged that they did not voluntarily relinquish their jobs and that they were required to sign the waivers and quitclaims without giving them an opportunity to read them and without explaining their contents. Respondents further alleged that Plastimer failed to establish the causes/valid reasons for the retrenchment and to comply with the one-month notice to the DOLE as well as the standard prescribed under the Collective Bargaining Agreement between Plastimer and the employees. Petitioners countered that the retrenchment was a management prerogative and that respondents got their retrenchment or separation pay even before the effective date of their separation from service.

The Decisions of the Labor Arbiter and the NLRC

In its 22 August 2005 Decision, the Labor Arbiter ruled that petitioners were able to
4

prove that there was a substantial withdrawal of stocks that led to the downsizing of the workforce. The Labor Arbiter ruled that notice to the affected employees were given on 14 May 2004, 30 days before its effective date on 14 June 2004. It was only the notice to the DOLE that was filed short of the 30-day period. The Labor Arbiter further ruled that respondents claimed their separation pay in accordance with the MOA. The Labor Arbiter further ruled that respondents could not claim ignorance of the contents of the waivers and quitclaims because they were assisted by the union President and their counsel in signing them.

Respondents appealed the Labor Arbiters decision before the National Labor Relations Commission (NLRC).

In its 29 December 2005 Resolution, the NLRC affirmed the Labor Arbiters
5

decision. The NLRC noted that respondents did not signify any protest to the MOA entered into between Plastimer and PICCB. The NLRC held that there was no proof that respondents were intimidated or coerced into signing the waivers and quitclaims because they were assisted by the union President and their counsel. The NLRC ruled that the filing of the complaint was just an afterthought on the part of respondents.

Respondents filed a motion for reconsideration.

In its 25 October 2006 Resolution, the NLRC denied the motion.

6

Respondents filed a petition for certiorari before the Court of Appeals.

The Decision of the Court of Appeals

In its 13 August 2007 Decision, the Court of Appeals reversed the NLRC decision. The Court of Appeals ruled that there was no valid cause for retrenchment. The Court of Appeals noted that the change of management and majority stock ownership was brought about by execution of deeds of assignment by several stockholders in favor of other stockholders. Further, the Court of Appeals noted that while Plastimer claimed financial losses from 2001 to 2004, records showed an improvement of its finances in 2003.

The Court of Appeals further ruled that Plastimer failed to use a reasonable and fair standard or criteria in ascertaining who would be dismissed and who would be retained among its employees. The Court of Appeals ruled that the MOA between Plastimer and PICCB only recognized the need for partial retrenchment and the computation of retrenchment pay without disclosing the criteria in the selection of the employees to be retrenched.

Finally, the Court of Appeals ruled that the union President and the PICCBs counsel were not present when the retrenched employees were made to sign the waivers and quitclaims.

The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, the instant petition is GRANTED. The assailed Resolutions of the NLRC in NLRC-NCR CA No. 046013-05 are hereby REVERSED AND SET ASIDE and a new judgment is entered finding petitioners to have been illegally dismissed. Plastimer Industrial Corporation is hereby ordered to reinstate petitioners to their former positions, without loss of seniority rights and other privileges, and to pay them their backwages from June 14, 2004 up to the time of actual reinstatement less the amounts they respectively received as separation pay. SO ORDERED.7

Petitioners filed a motion for reconsideration.

In its 5 June 2008 Resolution, the Court of Appeals denied the motion.

Hence, the petition before this Court.

The Issue

The only issue in this case is whether respondents were illegally retrenched by petitioners.

The Ruling of this Court

The petition has merit.

Petitioners assail the Court of Appeals in substituting its own findings of facts to the findings of the Labor Arbiter and the NLRC. Petitioners argue that the findings of fact of the Labor Arbiter and the NLRC are accorded with respect if not finality. Petitioners allege that the Court of Appeals did not find any arbitrariness or grave abuse of discretion on the part of the NLRC and thus, it had no basis in reversing the NLRC resolutions which affirmed the Labor Arbiters decision.

In a special civil action for certiorari, the Court of Appeals has ample authority to make its own factual determination. Thus, the Court of Appeals can grant a petition
8

for certiorari when it finds that the NLRC committed grave abuse of discretion by disregarding evidence material to the controversy. To make this finding, the Court of
9

Appeals necessarily has to look at the evidence and make its own factual determination. In the same manner, this Court is not precluded from reviewing the
10

factual issues when there are conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals. In this case, we find that the findings of the Labor Arbiter and
11

the NLRC are more in accord with the evidence on record.

One-Month Notice of Termination of Employment

Article 283 of the Labor Code provides:

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 Department 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 to 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.

In this case, Plastimer submitted the notice of termination of employment to the DOLE on 26 May 2004. However, notice to the affected employees were given to them on 14 May 2004 or 30 days before the effectivity of their termination from employment on 13 June 2004. While notice to the DOLE was short of the one-month notice requirement, the affected employees were sufficiently informed of their retrenchment 30 days before its effectivity. Petitioners failure to comply with the one-month notice to the DOLE is only a procedural infirmity and does not render the retrenchment illegal. In Agabon v. NLRC, we ruled that when the dismissal is for a
12

just cause, the absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the employer should indemnify the employee for the violation of his statutory rights. Here, the failure to fully comply with the one-month
13

notice of termination of employment did not render the retrenchment illegal but it entitles respondents to nominal damages.

Validity of Retrenchment

The Court of Appeals ruled that there was no valid cause for retrenchment. The Court of Appeals noted that while Plastimer claimed financial losses from 2001 to 2004, records showed an improvement of its finances in 2003.

We do not agree.

The Court of Appeals acknowledged that an independent auditor confirmed petitioners losses for the years 2001 and 2002. The fact that there was a net income
14

in 2003 does not justify the Court of Appeals ruling that there was no valid reason for the retrenchment. Records showed that the net income of P6,185,707.05 for 2003 was not even enough for petitioners to recover from the P52,904,297.88 loss in 2002.
15

Article 283 of the Labor Code recognizes retrenchment to prevent losses as a right of the management to meet clear and continuing economic threats or during periods of economic recession to prevent losses. There is no need for the employer to wait for
16

substantial losses to materialize before exercising ultimate and drastic option to prevent such losses.
17

Validity of Waivers and Quitclaims

The Court has ruled that a waiver or quitclaim is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement, and that the one accomplishing it has done so voluntarily and with a full understanding of its import.
18

We agree with the Labor Arbiter and the NLRC that respondents were sufficiently apprised of their rights under the waivers and quitclaims that they signed. Each document contained the signatures of Edward Marcaida (Marcaida), PICCB President, and Atty. Bayani Diwa, the counsel for the union, which proved that respondents were duly assisted when they signed the waivers and quitclaims. Further, Marcaidas letter to Teo Kee Bin, dated 28 May 2004, proved that proper assistance was extended upon respondents, thus:

Nais po naming iparating sa inyo na ginagampanan ng pamamahala ng unyon ang kanilang tungkulin lalo na sa pag assist ng mga miyembrong kasali sa retrenchment program at tumanggap ng kanilang separation pay sa ilalim ng napagkasunduang Memorandum of Agreement. Naipaliwanag po sa bawat miyembro ang epekto ng kanilang pagtanggap ng kanilang mga separation pay. Wala kaming natanggap na masamang reaksiyon nang sila ay aming makausap at kanilang naiintindihan ang sitwasyon ng kumpanya.19

Hence, we rule that the waivers and quitclaims that respondents signed were valid. WHEREFORE, we SET ASIDE the 13 August 2007 Decision and 5 June 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97271. We REINSTATE the 22 August 2005 Decision of the Labor Arbiter and the 29 December 2005 Resolution of the NLRC upholding the validity of respondents retrenchment with MODIFICATION that petitioners pay each of the respondents the amount of P30,000 as nominal damages for non-compliance with statutory due process. SO ORDERED.
Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 167751 March 2, 2011

HARPOON MARINE SERVICES, Inc. and JOSE LIDO T. ROSIT, Petitioners, vs. FERNAN H. FRANCISCO, Respondent. DECISION DEL CASTILLO, J.:

Satisfactory evidence of a valid or just cause of dismissal is indispensably required in order to protect a laborers right to security of tenure. In the case before us, the employer presented none despite the burden to prove clearly its cause. This Petition for Review on Certiorari with Prayer for the Issuance of a Temporary Restraining Order and/or a Writ of Preliminary Injunction1 assails the Decision2 dated January 26, 2005 and Resolution3 dated April 12, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 79630, which affirmed the Decision4 of the National Labor Relations Commission (NLRC) dated March 31, 2003, as well as the NLRC modified Decision5 dated June 30, 2003, declaring petitioners Harpoon Marine Services, Incorporated (Harpoon) and Jose Lido T. Rosit (Rosit) solidarily liable to pay respondent Fernan H. Francisco (respondent) separation pay, backwages and unpaid commissions for illegally dismissing him. Factual Antecedents Petitioner Harpoon, a company engaged in ship building and ship repair, with petitioner Rosit as its President and Chief Executive Officer (CEO), originally hired respondent in 1992 as its Yard Supervisor tasked to oversee and supervise all projects of the company. In 1998, respondent left for employment elsewhere but was rehired by petitioner Harpoon and assumed his previous position a year after. On June 15, 2001, respondent averred that he was unceremoniously dismissed by petitioner Rosit. He was informed that the company could no longer afford his salary and that he would be paid his separation pay and accrued commissions. Respondent nonetheless continued to report for work. A few days later, however, he was barred from entering the company premises. Relying on the promise of petitioner Rosit, respondent went to the office on June 30, 2001 to receive his separation pay and commissions, but petitioner Rosit offered only his separation pay. Respondent refused to accept it and also declined to sign a quitclaim. After several unheeded requests, respondent, through his counsel, sent a demand letter dated September 24, 20016 to petitioners asking for payment of P70,000.00, which represents his commissions for the seven boats7 constructed and repaired by the company under his supervision. In a letter-reply dated September 28, 2001,8 petitioners denied that it owed respondent any commission, asserting that they never entered into any contract or agreement for the payment of commissions. Hence, on October 24, 2001, respondent filed an illegal dismissal complaint praying for the payment of his backwages, separation pay, unpaid commissions, moral and exemplary damages and attorneys fees. Petitioners presented a different version of the events and refuted the allegations of respondent. They explained that petitioner Rosit indeed talked to respondent on June 15, 2001 not to dismiss him but only to remind and warn him of his excessive absences and tardiness, as evinced by his Time Card covering the period June 1-15, 2001.9 Instead of improving his work behavior, respondent continued to absent himself and sought employment with another company engaged in the same line of business, thus, creating serious damage in the form of unfinished projects. Petitioners denied having terminated respondent as the latter voluntarily abandoned his work after going on Absence Without Official Leave (AWOL) beginning June 22, 2001. Petitioners contended that when respondents absences persisted, several memoranda10 informing him of his

absences were sent to him by ordinary mail and were duly filed with the Department of Labor and Employment (DOLE) on August 13, 2001. Upon respondents continuous and deliberate failure to respond to these memoranda, a Notice of Termination dated July 30, 200111 was later on issued to him. Respondent, however, denied his alleged tardiness and excessive absences. He claimed that the three-day absence appearing on his time card cannot be considered as habitual absenteeism. He claimed that he incurred those absences because petitioner Rosit, who was hospitalized at those times, ordered them not to report for work until he is discharged from the hospital. In fact, a coworker, Nestor Solares (Solares), attested that respondent always goes to work and continued to report until June 20, 2001.12 Respondent further denied having received the memoranda that were allegedly mailed to him, asserting that said documents were merely fabricated to cover up and justify petitioners act of illegally terminating him on June 15, 2001. Respondent absolved himself of fault for defective works, justifying that he was illegally terminated even before the company projects were completed. Finally, respondent denied petitioners asseveration that he abandoned his job without any formal notice in 1998 as he wrote a resignation letter which petitioners received. As regards the commissions claimed, respondent insisted that in addition to his fixed monthly salary of P18,200.00, he was paid a commission of P10,000.00 for every ship repaired or constructed by the company. As proof, he presented two check vouchers13 issued by the company showing payment thereof. Petitioners, on the other hand, contended that respondent was hired as a regular employee with a fixed salary and not as an employee paid on commission basis. The act of giving additional monetary benefit once in a while to employees was a form of recognizing employees efforts and cannot in any way be interpreted as commissions. Petitioners then clarified that the word "commission" as appearing in the check vouchers refer to "additional money" that employees receive as differentiated from the usual "vale" and is written for accounting and auditing purposes only. Ruling of the Labor Arbiter On May 17, 2002, the Labor Arbiter rendered a Decision14 holding that respondent was validly dismissed due to his unjustified absences and tardiness and that due process was observed when he was duly served with several memoranda relative to the cause of his dismissal. The Labor Arbiter also found respondent entitled to the payment of commissions by giving credence to the check vouchers presented by respondent as well as attorneys fees for withholding the payment of commissions pursuant to Article 111 of the Labor Code. The dispositive portion of the Labor Arbiters Decision reads: WHEREFORE, premises considered, judgment is hereby rendered finding the dismissal of complainant Fernan H. Francisco legal; ordering respondents Harpoon Marine Services Inc., and Jose Lido T. Rosit, to pay complainant his commission in the sum of PHP70,000.00; as well as attorneys fees of ten percent (10%) thereof; and dismissing all other claims for lack of merit.

SO ORDERED.15 Proceedings before the National Labor Relations Commission Both parties appealed to the NLRC. Petitioners alleged that the Labor Arbiter erred in ruling that respondent is entitled to the payment of commissions and attorneys fees. They questioned the authenticity of the check vouchers for being photocopies bearing only initials of a person who remained unidentified. Also, according to petitioners, the vouchers did not prove that commissions were given regularly as to warrant respondents entitlement thereto.16 Respondent, on the other hand, maintained that his dismissal was illegal because there is no sufficient evidence on record of his alleged gross absenteeism and tardiness. He likewise imputed bad faith on the part of petitioners for concocting the memoranda for the purpose of providing a semblance of compliance with due process requirements.17 In its Decision dated March 31, 2003,18 the NLRC affirmed the Labor Arbiters award of commissions in favor of respondent for failure of petitioners to refute the validity of his claim. The NLRC, however, deleted the award of attorneys fees for lack of evidence showing petitioners bad faith in terminating respondent. As the NLRC only resolved petitioners appeal, respondent moved before the NLRC to resolve his appeal of the Labor Arbiters Decision.19 For their part, petitioners filed a Verified Motion for Reconsideration20 reiterating that there was patent error in admitting, as valid evidence, photocopies of the check vouchers without substantial proof that they are genuine copies of the originals. The NLRC, in its Decision dated June 30, 2003,21 modified its previous ruling and held that respondents dismissal was illegal. According to the NLRC, the only evidence presented by the petitioners to prove respondents habitual absenteeism and tardiness is his time card for the period covering June 1-15, 2001. However, said time card reveals that respondent incurred only three absences for the said period, which cannot be considered as gross and habitual. With regard to the award of commissions, the NLRC affirmed the Labor Arbiter because of petitioners failure to question the authenticity of the check vouchers in the first instance before the Labor Arbiter. It, nevertheless, sustained the deletion of the award of attorneys fees in the absence of proof that petitioners acted in bad faith. Thus, for being illegally dismissed, the NLRC granted respondent backwages and separation pay in addition to the commissions, as contained in the dispositive portion of its Decision, as follows: WHEREFORE, the decision dated 31 March 2003 is further MODIFIED. Respondents are found to have illegally dismissed complainant Fernan H. Francisco and are ordered to pay him the following: 1. Backwages = P218,066.33 (15 June 2001 17 May 2002)

a) Salary P18,200.00 x 11.06 months = P201,292.00 b) 13th month pay: P201,292.00/12 = 16,774.33 ---------------2. Separation Pay of one month salary for every year of service (October 1999 17 May 2002) P18,200.00 x 3 yrs. = 54,600.00 3. Commission = 70,000.00 TOTAL P342,666.33 The Motion for Reconsideration filed by complainant and respondents are hereby DISMISSED for lack of merit. SO ORDERED.22 Ruling of the Court of Appeals Petitioners filed a petition for certiorari23 with the CA, which on January 26, 2005, affirmed the findings and conclusions of the NLRC. The CA agreed with the NLRC in not giving any probative weight to the memoranda since there is no proof that the same were sent to respondent. It also upheld respondents right to the payment of commissions on the basis of the check vouchers and declared petitioners solidarily liable for respondents backwages, separation pay and accrued commissions. Petitioners moved for reconsideration which was denied by the CA. Hence, this petition. Issues WHETHER The Court of Appeals committed error in rendering its Decision and its Resolution dismissing and denying the Petition for Certiorari a quo when it failed to rectify and correct the findings and conclusions of the NLRC (and of the Labor Arbiter a quo), which were arrived at with grave abuse of discretion amounting to lack or excess of jurisdiction. In particular: I WHETHER THE COURT OF APPEALS ERRED WHEN IT FAILED TO REVERSE THE FINDINGS OF THE NLRC AND OF THE LABOR ARBITER A QUO BECAUSE

THESE FINDINGS ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE[;] ARE CONFLICTING AND CONTRADICTORY; GROUNDED UPON SPECULATION, CONJECTURES, AND ASSUMPTIONS; [AND] ARE MERE CONCLUSIONS FOUNDED UPON A MISAPPREHENSION OF FACTS, AMONG OTHERS. II WHETHER THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS AN ILLEGAL DISMISSAL IN THE SEPARATION FROM EMPLOYMENT OF FERNAN H. FRANCISCO NOTWITHSTANDING THE FACT THAT HE WAS HABITUALLY ABSENT, SUBSEQUENTLY WENT ON AWOL, AND HAD ABANDONED HIS WORK AND CORRELATIVELY, WHETHER HE IS ENTITLED TO BACKWAGES AND SEPARATION PAY. III WHETHER THE COURT OF APPEALS ERRED WHEN IT RULED THAT FERNAN H. FRANCISCO IS ENTITLED TO COMMISSIONS IN THE AMOUNT OF P70,000 EVEN THOUGH NO SUBSTANTIAL EVIDENCE WAS SHOWN TO SUPPORT THE CLAIM. IV WHETHER THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE WAS BAD FAITH ON THE PART OF PETITIONER ROSIT EVEN THOUGH NO SUBSTANTIAL EVIDENCE WAS PRESENTED TO PROVE THIS AND CORRELATIVELY, WHETHER PETITIONER ROSIT CAN BE HELD SOLIDARILY LIABLE WITH PETITIONER HARPOON.24 Petitioners submit that there was no basis for the CA to rule that respondent was illegally dismissed since more than sufficient proof was adduced to show his habitual absenteeism and abandonment of work as when he further incurred additional absences after June 15, 2001 and subsequently went on AWOL; when he completely ignored all the notices/memoranda sent to him; when he never demanded for reinstatement in his September 24, 2001 demand letter, complaint and position paper before the Labor Arbiter; when it took him four months before filing an illegal dismissal complaint; and when he was later found to have been working for another company. Petitioners also question the veracity of the documents presented by respondent to prove his entitlement to commissions, to wit: the two check vouchers25 and the purported list26 of vessels allegedly constructed and repaired by the company. Petitioners insist that the check vouchers neither prove that commissions were paid on account of a repair or construction of a vessel nor were admissible to prove that a regular commission is given for every vessel that is constructed/repaired by the company under respondents supervision. The list of the vessels, on the other hand, cannot be used as basis in arriving at the amount of commissions due because it is self-serving, unsigned, unverified and merely enumerates a list of names of vessels which does

not prove anything. Therefore, the award of commissions was based on unsupported assertions of respondent. Petitioners also insist that petitioner Rosit, being an officer of the company, has a personality distinct from that of petitioner Harpoon and that no proof was adduced to show that he acted with malice or bad faith hence no liability, solidary or otherwise, should be imposed on him. Our Ruling The petition is partly meritorious. Respondent was illegally dismissed for failure of petitioners to prove the existence of a just cause for his dismissal. Petitioners reiterate that respondent was a habitual absentee as indubitably shown by his time card for the period covering June 1-15, 2001,27 payroll28 for the same period as well as the memoranda29 enumerating his absences subsequent to June 15, 2001. Respondent belies these claims and explained that his absence for three days as reflected in the time card was due to petitioner Rosits prohibition for them to report for work owing to the latters hospitalization. He claims that he was illegally terminated on June 15, 2001 and was subsequently prevented from entering company premises. In defense, petitioners deny terminating respondent on June 15, 2001, maintaining that petitioner Rosit merely reminded him of his numerous absences. However, in defiance of the companys order, respondent continued to absent himself, went on AWOL and abandoned his work. We find no merit in petitioners contention that respondent incurred unexplained and habitual absences and tardiness. A scrutiny of the time card and payroll discloses that respondent incurred only three days of absence and no record of tardiness. As aptly held by the NLRC, the time card and payroll presented by petitioners do not show gross and habitual absenteeism and tardiness especially since respondents explanation of his three-day absence was not denied by petitioners at the first instance before the Labor Arbiter. No other evidence was presented to show the alleged absences and tardiness. On the other hand, Solares, a co-worker of respondent has stated under oath that, as their supervisor, respondent was diligent in reporting for work until June 20, 2001 when they heard the news concerning respondents termination from his job. Likewise, we are not persuaded with petitioners claim that respondent incurred additional absences, went on AWOL and abandoned his work. It is worthy to note at this point that petitioners never denied having offered respondent his separation pay. In fact, in their letter-reply dated September 28, 2001,30 petitioners intimated that respondent may pick up the amount of P27,584.37 any time he wants, which amount represents his separation and 13th month pays. Oddly, petitioners deemed it fit to give respondent his separation pay despite their assertion that there is just cause for his dismissal on the ground of habitual absences. This inconsistent stand of

petitioners bolsters the fact that they wanted to terminate respondent, thus giving more credence to respondents protestation that he was barred and prevented from reporting for work. Jurisprudence provides for two essential requirements for abandonment of work to exist. The "failure to report for work or absence without valid or justifiable reason" and "clear intention to sever the employer-employee relationship x x x manifested by some overt acts" should both concur.31 Further, the employees deliberate and unjustified refusal to resume his employment without any intention of returning should be established and proven by the employer.32 Petitioners failed to prove that it was respondent who voluntarily refused to report back for work by his defiance and refusal to accept the memoranda and the notices of absences sent to him. The CA correctly ruled that petitioners failed to present evidence that they sent these notices to respondents last known address for the purpose of warning him that his continued failure to report would be construed as abandonment of work. The affidavit of petitioner Harpoons liaison officer that the memoranda/notices were duly sent to respondent is insufficient and self-serving. Despite being stamped as received, the memoranda do not bear any signature of respondent to indicate that he actually received the same. There was no proof on how these notices were given to respondent. Neither was there any other cogent evidence that these were properly received by respondent. The fact that respondent never prayed for reinstatement and has sought employment in another company which is a competitor of petitioner Harpoon cannot be construed as his overt acts of abandoning employment. Neither can the delay of four months be taken as an indication that the respondents filing of a complaint for illegal dismissal is a mere afterthought. Records show that respondent first attempted to get his separation pay and alleged commissions from the company. It was only after his requests went unheeded that he resorted to judicial recourse. In fine, both the NLRC and the CA did not commit manifest error in finding that there was illegal dismissal. The award of backwages and separation pay in favor of respondent is therefore proper. Respondent is not entitled to the payment of commissions since the check vouchers and purported list of vessels show vagueness as to sufficiently prove the claim. The Labor Arbiter, the NLRC and the CA unanimously held that respondent is entitled to his accrued commissions in the amount of P10,000.00 for every vessel repaired/constructed by the company or the total amount of P70,000.00 for the seven vessels repaired/constructed under his supervision.
lawph i1

The Court, however, is inclined to rule otherwise. Examination of the check vouchers presented by respondent reveals that an amount of P30,000.00 and P10,000.00 alleged as commissions were paid to respondent on June 9, 2000 and September 28, 2000, respectively. Although the veracity and genuineness of these documents were not effectively disputed by petitioners, nothing in them provides that commissions were paid to respondent on account of a repair or construction of a vessel. It cannot also be deduced from said documents for what or for how many vessels the amounts stated therein are for. In other words, the check vouchers contain very

scant details and can hardly be considered as sufficient and substantial evidence to conclude that respondent is entitled to a commission of P10,000.00 for every vessel repaired or constructed by the company. At most, these vouchers only showed that respondent was paid on two occasions but were silent as to the specific purpose of payment. The list of vessels supposedly repaired/constructed by the company neither validates respondents monetary claim as it merely contains an enumeration of 17 names of vessels and nothing more. No particulars, notation or any clear indication can be found on the list that the repair or complete construction of seven of the seventeen boats listed therein was supervised or managed by respondent. Worse, the list is written only on a piece of paper and not on petitioners official stationery and is unverified and unsigned. Verily, its patent vagueness makes it unworthy of any credence to be used as basis for awarding respondent compensations as alleged commissions. Aside from these documents, no other competent evidence was presented by respondent to determine the value of what is properly due him, much less his entitlement to a commission. Respondents claim cannot be based on allegations and unsubstantiated assertions without any competent document to support it. Certainly, the award of commissions in favor of respondent in the amount of P70,000.00 should not be allowed as the claim is founded on mere inferences, speculations and presumptions. Rosit could not be held solidarily liable with Harpoon for lack of substantial evidence of bad faith and malice on his part in terminating respondent. Although we find no error on the part of the NLRC and the CA in declaring the dismissal of respondent illegal, we, however, are not in accord with the ruling that petitioner Rosit should be held solidarily liable with petitioner Harpoon for the payment of respondents backwages and separation pay. As held in the case of MAM Realty Development Corporation v. National Labor Relations Commission,33 "obligations incurred by [corporate officers], acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent."34 As such, they should not be generally held jointly and solidarily liable with the corporation. The Court, however, cited circumstances when solidary liabilities may be imposed, as exceptions: 1. When directors and trustees or, in appropriate cases, the officers of a corporation (a) vote for or assent to [patently] unlawful acts of the corporation; (b) act in bad faith or with gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons. 2. When the director or officer has consented to the issuance of watered stock or who, having knowledge thereof, did not forthwith file with the corporate secretary his written objection thereto.

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the corporation. 4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.35 The general rule is grounded on the theory that a corporation has a legal personality separate and distinct from the persons comprising it.36 To warrant the piercing of the veil of corporate fiction, the officers bad faith or wrongdoing "must be established clearly and convincingly" as "[b]ad faith is never presumed."37 In the case at bench, the CAs basis for petitioner Rosits liability was that he acted in bad faith when he approached respondent and told him that the company could no longer afford his salary and that he will be paid instead his separation pay and accrued commissions. This finding, however, could not substantially justify the holding of any personal liability against petitioner Rosit. The records are bereft of any other satisfactory evidence that petitioner Rosit acted in bad faith with gross or inexcusable negligence, or that he acted outside the scope of his authority as company president. Indeed, petitioner Rosit informed respondent that the company wishes to terminate his services since it could no longer afford his salary. Moreover, the promise of separation pay, according to petitioners, was out of goodwill and magnanimity. At the most, petitioner Rosits actuations only show the illegality of the manner of effecting respondents termination from service due to absence of just or valid cause and non-observance of procedural due process but do not point to any malice or bad faith on his part. Besides, good faith is still presumed. In addition, liability only attaches if the officer has assented to patently unlawful acts of the corporation. Thus, it was error for the CA to hold petitioner Rosit solidarily liable with petitioner Harpoon for illegally dismissing respondent. WHEREFORE, the petition is PARTLY GRANTED. The Decision dated January 26, 2005 and Resolution dated April 12, 2005 of the Court of Appeals in CA-G.R. SP No. 79630 finding respondent Fernan H. Francisco to have been illegally dismissed and awarding him backwages and separation pay are AFFIRMED. The award of commissions in his favor is, however, DELETED. Petitioner Jose Lido T. Rosit is ABSOLVED from the liability adjudged against copetitioner Harpoon Marine Services, Incorporated. SO ORDERED.