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G.R. No.

170464

July 12, 2010

LAMBERT PAWNBROKERS and JEWELRY CORPORATION and LAMBERT LIM, Petitioners, vs. HELEN BINAMIRA, Respondent. DECISION DEL CASTILLO, J.: It is fundamental that an employer is liable for illegal dismissal when it terminates the services of the employee without just or authorized cause and without due process of law. This Petition for Review on Certiorari1 assails the Decision2 dated August 4, 2005 of the Court of Appeals (CA) in CA-G.R. CEB SP No. 00010, which reversed and set aside the Resolutions dated July 30, 20033 and May 31, 20044 issued by the National Labor Relations Commission (NLRC) in NLRC Case No. V-000454-00 (RAB VII-01-0003-99-B). Factual Antecedents Petitioner Lambert Lim (Lim) is a Malaysian national operating various businesses in Cebu and Bohol one of which is Lambert Pawnbrokers and Jewelry Corporation. Lim is married to Rhodora Binamira, daughter of Atty. Boler Binamira, Sr., (Atty. Binamira), who is also the counsel and father-in-law of respondent Helen Binamira (Helen). Lambert Pawnbrokers and Jewelry Corporation Tagbilaran Branch hired Helen as an appraiser in July 1995 and designated her as Vault Custodian in 1996. On September 14, 1998, Helen received a letter5 from Lim terminating her employment effective that same day. Lim cited business losses necessitating retrenchment as the reason for the termination. Helen thus filed a case for illegal dismissal against petitioners docketed as NLRC RAB-VII CASE NO. 01-0003-99-B.6 In her Position Paper7 Helen alleged that she was dismissed without cause and the benefit of due process. She claimed that she was a mere casualty of the war of attrition between Lim and the Binamira family. Moreover, she claimed that there was no proof that the company was suffering from business losses. In their Position Paper,8 petitioners asserted that they had no choice but to retrench respondent due to economic reverses. The corporation suffered a marked decline in profits as well as substantial and persistent increase in losses. In its Statement of Income and Expenses, its gross income for 1998 dropped from P1million to P665,000.00. Ruling of the Labor Arbiter

On November 26, 1999, Labor Arbiter Geoffrey P. Villahermosa rendered a Decision9 which held that Helen was not illegally dismissed but was validly retrenched. The dispositive portion of the Labor Arbiters Decision reads: WHEREFORE, all the foregoing premises being considered judgment is hereby rendered declaring the respondent not guilty of illegally terminating the complainant but is however directed to pay the complainant her retrenchment benefit in the amount of Seven Thousand Five Hundred Pesos (P7,500.00), considering that she was receiving a monthly salary of P5,000.00 and rendered service for three (3) years. SO ORDERED.10 Ruling of the NLRC On appeal, the NLRC reversed and set aside the Decision of the Labor Arbiter. It observed that for retrenchment to be valid, a written notice shall be given to the employee and to the Department of Labor and Employment (DOLE) at least one month prior to the intended date thereof. Since none was given in this case, then the retrenchment of Helen was not valid. The dispositive portion of the Decision11 reads: WHEREFORE, premises duly considered, the decision of the Labor Arbiter dated 26 November 1999 is hereby REVERSED and SET ASIDE and respondents are ordered to reinstate complainant Helen Binamira to her former position without loss of seniority rights and with full backwages from the time of her dismissal up to the promulgation of this decision. Other claims are denied for lack of merit. SO ORDERED.12 Petitioners filed a Motion for Reconsideration.13 On July 30, 2003, the NLRC set aside its Decision dated September 27, 2002 and entered a new one, the dispositive portion of which reads: WHEREFORE, the Decision of November [sic] 27, 2002 is hereby SET ASIDE and a New One Entered declaring as valid the redundancy of the position of the complainant. Accordingly respondent is hereby ordered to pay the complainant her redundancy pay of one month for every year of service and in lieu of notice, she should also be paid one (1) month salary as indemnity. SO ORDERED.14 In arriving at this conclusion, the NLRC opined that what was actually implemented by the petitioners was not retrenchment due to serious business losses but termination due to redundancy. The NLRC observed that the Tagbilaran operations was overstaffed thus necessitating the termination of some employees. Moreover, the redundancy program was not properly implemented because no written notices were furnished the employee and the DOLE one month before the intended date of termination.

The Motion for Reconsideration filed by Helen was denied by the NLRC through its Resolution15 dated May 31, 2004. Ruling of the Court of Appeals On petition for certiorari,16 the CA found that both the Labor Arbiter and the NLRC failed to consider substantial evidence showing that the exercise of management prerogative, in this instance, was done in bad faith and in violation of the employees right to due process. The CA ruled that there was no redundancy because the position of vault custodian is a requisite, necessary and desirable position in the pawnshop business. There was likewise no retrenchment because none of the conditions for retrenchment is present in this case. On August 4, 2005, the CA issued its Decision which provides: WHEREFORE, the Resolution dated July 30, 2003 and May 31, 2004 issued by the National Labor Relations Commission in NLRC Case No. V-000454-00 (RAB VII-01-0003-99-B), is hereby REVERSED and SET ASIDE. A new Decision is hereby entered declaring the dismissal of petitioner, Helen B. Binamira, as illegal and directing the private respondents, Lamberts Pawnbroker and Jewelry Corporation and Lambert Lim, jointly and solidarily, to pay to the petitioner, the following monetary awards: 1. Backwages from the date of her illegal suspension and dismissal until she is reinstated; 2. Considering that reinstatement is not feasible in view of the strained relations between the employer and the employee, separation pay is hereby decreed at the rate of one (1) months pay for every year of service; 3. Moral damages in the amount of Twenty Five Thousand Pesos (P25,000.00); 4. Exemplary damages in the amount of Twenty Five Thousand Pesos (P25,000.00); 5. Attorneys fees in the amount equivalent to Ten Percent (10%) of the monetary awards herein above enumerated; and 6. Costs. SO ORDERED.17 The Motion for Reconsideration filed by petitioners was denied by the CA through its Resolution18 dated November 7, 2005. Issues Hence, this petition raising the following issues:

I. Whether the CA gravely erred in reversing, through the extra-ordinary remedy of certiorari, the findings of facts of both the Labor Arbiter and the NLRC that the dismissal of respondent was with valid and legal basis. II. Whether the CA gravely erred in reversing, through the extra-ordinary remedy of certiorari, the unanimous findings of fact of both the Labor Arbiter and the NLRC that the dismissal of respondent was not attended by bad faith or fraud. III. Whether the CA erred in reversing, through the extra-ordinary remedy of certiorari, the findings of facts of both the Labor Arbiter and the NLRC based merely on the allegations and evidences made and submitted by the former counsel, adviser and business partner of petitioners.19 Petitioners Arguments Petitioners assail the propriety of the reversal by the CA of the factual findings of both the Labor Arbiter and the NLRC on a Petition for Certiorari under Rule 65. Petitioners posit that a writ of certiorari is proper only to correct errors of jurisdiction or when there is grave abuse of discretion tantamount to lack or excess of jurisdiction committed by the labor tribunals. They asserted that where the issue or question involved affects the wisdom or legal soundness of a decision, the same is beyond the province of a special civil action for certiorari. Petitioners further contend that the CA erred in ruling that the dismissal was not valid and that it was done in bad faith. Respondents Arguments On the other hand, Helen avers that the contradictory findings of fact of the Labor Arbiter and the NLRC justifies the CA to review the findings of fact of the labor tribunals. She further submits that both labor tribunals failed to consider substantial evidence showing that petitioners exercise of management prerogative was done in utter bad faith and in violation of her right to due process. Our Ruling The petition is without merit. The CA correctly reviewed the factual findings of the labor tribunals. As a rule, a petition for certiorari under Rule 65 is valid only when the question involved is an error of jurisdiction, or when there is grave abuse of discretion amounting to lack or excess of

jurisdiction on the part of the court or tribunals exercising quasi-judicial functions. Hence, courts exercising certiorari jurisdiction should refrain from reviewing factual assessments of the respondent court or agency. Occasionally, however, they are constrained to wade into factual matters when the evidence on record does not support those factual findings; or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on record,20 as in the present case. We find that the CA rightfully reviewed the correctness of the labor tribunals factual findings not only because of the foregoing inadequacies, but also because the NLRC and the Labor Arbiter came up with conflicting findings. The Labor Arbiter found that Helens dismissal was valid on account of retrenchment due to economic reverses. On the other hand, the NLRC originally ruled that Helens dismissal was illegal as none of the requisites of a valid retrenchment was present. However, upon motion for reconsideration, the NLRC changed its posture and ruled that the dismissal was valid on the ground of redundancy due to over-hiring. Considering the diverse findings of the Labor Arbiter and the NLRC, it behooved upon the CA in the exercise of its certiorari jurisdiction to determine which findings are more in conformity with the evidentiary facts. There was no valid dismissal based on retrenchment. Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice to the employees. It is resorted to during periods of business recession, industrial depression, seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant to a new production program, or automation.21 It is a management prerogative resorted to avoid or minimize business losses, and is recognized by Article 283 of the Labor Code, which reads: Art. 283. Closure of establishment and reduction of personnel.- The employer may also terminate the employment of any employee due to x x x retrenchment to prevent losses or the closing or cessation of operations of the establishment x x x by serving a written notice on the worker and the DOLE at least one month before the intended date thereof. x x x In case of retrenchment to prevent losses, the separation pay shall be equivalent to one (1) month pay or at least one-half month for every year of service whichever is higher. x x x (Emphasis ours) To effect a valid retrenchment, the following elements must be present: (1) the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious and real, or only if expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) the employer serves written notice both to the employee/s concerned and the DOLE at least one month before the intended date of retrenchment; (3) the employer pays the retrenched employee separation pay in an amount prescribed by the Code; (4) the employer exercises its prerogative to retrench in good faith; and (5) the employer uses fair and reasonable criteria in ascertaining who would be retrenched or retained.22 The losses must be supported by sufficient and convincing evidence. The normal method of discharging this is by the submission of financial statements duly audited by independent

external auditors. In this case, however, the Statement of Income and Expenses23 for the year 1997-1998 submitted by the petitioners was prepared only on January 12, 1999. Thus, it is highly improbable that the management already knew on September 14, 1998, the date of Helens retrenchment, that they would be incurring substantial losses. At any rate, we perused over the financial statements submitted by petitioners and we find no evidence at all that the company was suffering from business losses. In fact, in their Position Paper, petitioners merely alleged a sharp drop in its income in 1998 from P1million to only P665,000.00. This is not the business losses contemplated by the Labor Code that would justify a valid retrenchment. A mere decline in gross income cannot in any manner be considered as serious business losses. It should be substantial, sustained and real. To make matters worse, there was also no showing that petitioners adopted other cost-saving measures before resorting to retrenchment. They also did not use any fair and reasonable criteria in ascertaining who would be retrenched. Finally, no written notices were served on the employee and the DOLE prior to the implementation of the retrenchment. Helen received her notice only on September 14, 1998, the day when her termination would supposedly take effect. This is in clear violation of the Labor Code provision which requires notice at least one month prior to the intended date of termination. There was no valid dismissal based on redundancy. Redundancy, on the other hand, exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands of the enterprise. A redundant position is one rendered superfluous by any number of factors, such as over hiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company, or phasing out of a service activity previously undertaken by the business. Under these conditions, the employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.24 For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1) written notice served on both the employees and the DOLE at least one month prior to the intended date of termination of employment; (2) payment of separation pay equivalent to at least one month pay for every year of service; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.25 In this case, there is no proof that the essential requisites for a valid redundancy program as a ground for the termination of the employment of respondent are present. There was no showing that the function of respondent is superfluous or that the business was suffering from a serious downturn that would warrant redundancy considering that such serious business downturn was the ground cited by petitioners in the termination letter sent to respondent.26 In fine, Helens dismissal is illegal for lack of just or authorized cause and failure to observe due process of law.

Lambert Pawnbrokers and Jewelry Corporation is solely liable for the illegal dismissal of respondent. As a general rule, only the employer-corporation, partnership or association or any other entity, and not its officers, which may be held liable for illegal dismissal of employees or for other wrongful acts. This is as it should be because a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it.27 A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result of the directors and officers acts as corporate agents, are not their personal liability but the direct responsibility of the corporation they represent.28 It is settled that in the absence of malice and bad faith, a stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. 29 They are only solidarily liable with the corporation for the illegal termination of services of employees if they acted with malice or bad faith. In Philippine American Life and General Insurance v. Gramaje,30 bad faith is defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior purpose. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity. In the present case, malice or bad faith on the part of Lim as a corporate officer was not sufficiently proven to justify a ruling holding him solidarily liable with the corporation. The lack of authorized or just cause to terminate ones employment and the failure to observe due process do not ipso facto mean that the corporate officer acted with malice or bad faith. There must be independent proof of malice or bad faith which is lacking in the present case. There is no violation of attorney-client relationship. We find no merit in petitioners assertion that Atty. Binamira gravely breached and abused the rule on privileged communication under the Rules of Court and the Code of Professional Responsibility of Lawyers when he represented Helen in the present case. Notably, this issue was never raised before the labor tribunals and was raised for the first time only on appeal. Moreover, records show that although petitioners previously employed Atty. Binamira to manage several businesses, there is no showing that they likewise engaged his professional services as a lawyer. Likewise, at the time the instant complaint was filed, Atty. Binamira was no longer under the employ of petitioners. Respondent is entitled to the following relief under the law. An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges and to this full backwages, inclusive of allowances, and to her other benefits or their monetary equivalent, computed from the time the compensation was withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible, separation pay equivalent to at least one month salary or one month salary for every year of service, whichever is higher, a fraction of at least six months being considered as one whole year, should be awarded to respondent.

In this case, Helen is entitled to her full backwages from the time she was illegally dismissed on September 14, 1998. Considering the strained relations between the parties, reinstatement is no longer feasible. Consequently, Helen is also entitled to receive separation pay equivalent to one month salary for every year of service. A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the dismissed employee to moral damages. The award of moral and exemplary damages cannot be justified solely upon the premise that the employer dismissed his employee without authorized cause and due process.311avvphi1 Considering that there is no clear and convincing evidence showing that the termination of Helens services had been carried out in an arbitrary, capricious and malicious manner, the award of moral and exemplary damages is not warranted. Consequently, the moral and exemplary damages awarded by the CA are hereby deleted. However, the award of attorneys fee is warranted pursuant to Article 111 of the Labor Code. Ten (10%) percent of the total award is usually the reasonable amount of attorneys fees awarded. It is settled that where an employee was forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorneys fees is legally and morally justifiable.32 WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CEB SP No. 00010 dated August 4, 2005 finding the dismissal of respondent Helen B. Binamira as illegal is Affirmed with MODIFICATIONS that respondent is entitled to receive full backwages from the time she was illegally dismissed on September 14, 1998 as well as to separation pay in lieu of reinstatement equivalent to one month salary for every year of service. The amounts awarded as moral damages and exemplary damages are deleted for lack of basis. Finally, only petitioner Lambert Pawnbrokers and Jewelry Corporation is found liable for the illegal dismissal of respondent. SO ORDERED.

G.R. No. 165381

February 9, 2011

NELSON A. CULILI, Petitioner, vs. 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), Respondents. DECISION LEONARDO-DE CASTRO, J.: Before Us is a petition for review on certiorari1 of the February 5, 2004 Decision2 and September 13, 2004 Resolution3 of the Court of Appeals in CA-G.R. SP No. 75001, wherein the Court of Appeals set aside the March 1, 2002 Decision4 and September 24, 2002 Resolution5 of the National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters Decision6 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).7 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. 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.8 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.9 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.10 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 company-wide reorganization which would result in the transfer, merger, absorption or abolition of certain departments of ETPI.11

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.12 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.13 Thus, on February 8, 1999, ETPI reoffered the Special Retirement Program and the corresponding retirement package to the one hundred two (102) employees who qualified for the program.14 Of all the employees who qualified to avail of the program, only Culili rejected the offer.15 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.16 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. The 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.17 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.18 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: N. Culili Thru: 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 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. Garcia19 This letter was similar to the memo shown to Culili by the union president weeks before Culili was dismissed. The memo was dated December 7, 1998, and was advising him of his dismissal effective January 4, 1999 due to the Right-Sizing Program ETPI was going to implement to cut costs and avoid losses.20 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.21 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 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 coemployees an additional benefit in the form of motorcycles to induce them to avail of the Special Retirement Program, while he was not.22 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.23 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 termination24 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 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.25 ETPI claimed that Culili refused to

accept his termination and continued to report for work.26 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. However, ETPI decided to wait for a favorable response from its employees regarding the Special Retirement Program instead of terminating them.27 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: 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.) 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 2. Sick Leave (30 days/annum) P1,116.54 x 60 days 3. Birthday Leave (1 day/annum) P1,116.54 x 2 days 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) 66,992.40 2,233.08 P696,720.96 58,060.88

01 August 2000 16 March 2001 (P1,950 x 7.5 mos. = P14,625.00) e. Uniform Allowance P7,000/annum x 2 years II. Damages a. Moral P500,000.00 b. Exemplary P250,000.00 III. Attorneys Fees (10% of award) GRAND TOTAL:

44,700.00

14,000.00 P949,699.72

94,969.97 P2,744,379.4128

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 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.29 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. 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.30 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 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: I 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. B. THERE WAS NO ADEQUATE JUSTIFICATION TO DECLARE PETITIONERS POSITION AS REDUNDANT. 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. V 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.31 Procedural Issue: Court of Appeals' Power to Review Facts in a Petition For Certiorari under Rule 65 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 65,32 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.33 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. When there is a showing that a palpable and demonstrable mistake that needs rectification has been committed34 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.35 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: 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.36 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 exercise of business judgment is not subject to the discretionary review of the Labor Arbiter and the NLRC.37 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.38 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,39 such as but not limited to: preferred status, efficiency, and seniority.40 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.41 In the case at bar, ETPI was upfront with its employees about its plan to implement a RightSizing Program. Even in the face of initial opposition from and rejection of the said program by ETEU, ETPI patiently negotiated with ETEUs officers to make them understand ETPIs business dilemma and its need to reduce its workforce and streamline its organization. This evidently rules out bad faith on the part of ETPI. In 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, 2000,42 Mr. Arnel D. Reyel, the Head of both the Business Services Department and the Finance Department of ETPI, described how ETPI went about in reorganizing its departments. Mr. Reyel said that in the course of ETPIs reorganization, new departments were created, some were transferred, and two were abolished. Among the departments abolished was the Service Quality Department. Mr. Reyel said that ETPI felt that the functions of the Service Quality Department, which catered to both corporate and small and medium-sized clients, overlapped and were too large for a single department, thus, the functions of this department were split and simplified into two smaller but more focused and efficient departments. In arriving at the decision to abolish the position of Senior Technician, Mr. Reyel explained: 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.43 In the new table of organization that the management approved, one hundred twelve (112) employees were redeployed and nine (9) positions were declared redundant.44 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 remains that the said letter was never officially transmitted and Culili was not terminated at the end of the first phase of ETPIs RightSizing 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 nonmembers 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."45 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."46 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.47 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 selforganize. In fact, ETPI negotiated and consulted with ETEU before implementing its RightSizing 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."48 By 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."49 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

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,50 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.51 ETPI does not deny its failure to provide DOLE with a written notice regarding Culilis termination. It, however, insists that it has complied with the requirement to serve a written notice to Culili as evidenced by his admission of having received it and forwarding it to his union president. In Serrano v. National Labor Relations Commission,52 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.53 This is exactly why our 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.54 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.55 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,56 this Court reverted back to the doctrine in Wenphil Corporation v. National Labor Relations Commission57 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 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.58 In Jaka Food Processing Corporation v. Pacot,59 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.60 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.1avvphi1 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. In illegal dismissal cases, corporate officers may be held solidarily liable with the corporation if the termination was done with malice or bad faith. 61 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 policy.62 Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to warrant an award for exemplary damages.63 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 Right-Sizing 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. SO ORDERED.

G.R. No. 163657

April 18, 2012

INTERNATIONAL MANAGEMENT SERVICES/MARILYN C. PASCUAL, Petitioner, vs. ROEL P. LOGARTA, Respondent. DECISION PERALTA, J.: This is a petition for review on certiorari assailing the Decision1 dated January 8, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 58739, and the Resolution2 dated May 12, 2004 denying petitioners motion for reconsideration. The factual and procedural antecedents are as follows: Sometime in 1997, the petitioner recruitment agency, International Management Services (IMS), a single proprietorship owned and operated by Marilyn C. Pascual, deployed respondent Roel P. Logarta to work for Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection with general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco). Respondent was employed for a period of two (2) years, commencing on October 2, 1997, with a monthly salary of eight hundred US Dollars (US$800.00). In October 1997, respondent started to work for Petrocon as Piping Designer for works on the projects of Saudi Aramco. Thereafter, in a letter3 dated December 21, 1997, Saudi Aramco informed Petrocon that for the year 1998, the former is allotting to the latter a total work load level of 170,850 man-hours, of which 100,000 man-hours will be allotted for cross-country pipeline projects. However, in a letter4 dated April 29, 1998, Saudi Aramco notified Petrocon that due to changes in the general engineering services work forecast for 1998, the man-hours that were formerly allotted to Petrocon is going to be reduced by 40%. Consequently, due to the considerable decrease in the work requirements of Saudi Aramco, Petrocon was constrained to reduce its personnel that were employed as piping designers, instrument engineers, inside plant engineers, etc., which totaled to some 73 personnel, one of whom was respondent. Thus, on June 1, 1998, Petrocon gave respondent a written notice5 informing the latter that due to the lack of project works related to his expertise, he is given a 30-day notice of termination, and that his last day of work with Petrocon will be on July 1, 1998. Petrocon also informed respondent that all due benefits in accordance with the terms and conditions of his employment contract will be paid to respondent, including his ticket back to the Philippines.

On June 23, 1998, respondent, together with his co-employees, requested Petrocon to issue them a letter of Intent stating that the latter will issue them a No Objection Certificate once they find another employer before they leave Saudi Arabia.6 On June 27, 1998, Petrocon granted the request and issued a letter of intent to respondent.7 Before his departure from Saudi Arabia, respondent received his final paycheck8 from Petrocon amounting SR7,488.57. Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National Labor Relations Commission (NLRC), Cebu City, against petitioner as the recruitment agency which employed him for employment abroad. In filing the complaint, respondent sought to recover his unearned salaries covering the unexpired portion of his employment contract with Petrocon on the ground that he was illegally dismissed. After the parties filed their respective position papers, the Labor Arbiter rendered a Decision9 in favor of the respondent, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Marilyn C. Pascual, doing business under the name and style International Management Services, to pay the complainant Roel Logarta the peso equivalent of US $5,600.00 based on the rate at the time of actual payment, as payment of his wages for the unexpired portion of his contract of employment. The other claims are dismissed for lack of merit. So Ordered.10 Aggrieved, petitioner filed an Appeal11 before the NLRC. On October 29, 1999, the NLRC, Fourth Division, Cebu City rendered a Decision12 affirming the decision of the Labor Arbiter, but reduced the amount to be paid by the petitioner, to wit: WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby AFFIRMED with MODIFICATION reducing the award to only US $4,800.00 or its peso equivalent at the time of payment. SO ORDERED.13 Petitioner filed a motion for reconsideration, but it was denied in the Resolution14 dated April 17, 2000. Not satisfied, petitioner sought recourse before the CA,15 arguing that the NLRC gravely abused its discretion: (a) in holding that while Petrocons retrenchment was justified, Petrocon failed to observe the legal procedure for a valid retrenchment when, in fact, Petrocon did observe

the legal procedural requirements for a valid implementation of its retrenchment scheme; and (b) in making an award under Section 10 of R.A. No. 8042 which is premised on a termination of employment without just, valid or authorized cause as defined by law or contract, notwithstanding that NLRC itself found Petrocons retrenchment to be justified.16 On January 8, 2004, the CA rendered the assailed Decision dismissing the petition, the decretal portion of which reads: WHEREFORE, premises considered, the petition is DISMISSED and the impugned Decision dated October 29, 1999 and Resolution dated April 17, 2000 are AFFIRMED. Costs against the petitioner. SO ORDERED.17 In ruling in favor of the respondent, the CA agreed with the findings of the NLRC that retrenchment could be a valid cause to terminate respondents employment with Petrocon. Considering that there was a considerable reduction in Petrocons work allocation from Saudi Aramco, the reduction of its work personnel was a valid exercise of management prerogative to reduce the number of its personnel, particularly in those fields affected by the reduced work allocation from Saudi Aramco. However, although there was a valid ground for retrenchment, the same was implemented without complying with the requisites of a valid retrenchment. Also, the CA concluded that although the respondent was given a 30-day notice of his termination, there was no showing that the Department of Labor and Employment (DOLE) was also sent a copy of the said notice as required by law. Moreover, the CA found that a perusal of the check payroll details would readily show that respondent was not paid his separation pay. Petitioner filed a motion for reconsideration, but it was denied in the Resolution18 dated May 12, 2004. Hence, the petition assigning the following errors: I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE 30-DAY NOTICE TO DOLE PRIOR TO RETRENCHMENT IS NOT APPLICABLE IN THIS CASE. II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT RESPONDENT EMPLOYEE DID NOT CONSENT TO HIS SEPARATION FROM THE PRINCIPAL COMPANY.

III. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT JARIOL VS. IMS IS NOT APPLICABLE TO THE INSTANT CASE. IV. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT RESPONDENT DID NOT RECEIVE THE SEPARATION PAY REQUIRED BY LAW.19 Petitioner argues that the 30-day notice of termination, as required in Serrano v. NLRC,20 is not applicable in the case at bar, considering that respondent was in fact given the 30-day notice. More importantly, Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipino Act of 1995 nor its Implementing Rules do not require the sending of notice to the DOLE, 30 days before the effectivity of a retrenchment of an Overseas Filipino Worker (OFW) based on grounds under Article 283 of the Labor Code. Petitioner maintains that respondent has consented to his termination, since he raised no objection to his retrenchment and actually sought another employer during his 30-day notice of termination. Respondent even requested from Petrocon a No Objection Certificate, which the latter granted to facilitate respondents application to other Saudi Arabian employers. Petitioner also posits that the CA should have applied the case of Jariol v. IMS21 even if the said case was only decided by the NLRC, a quasi-judicial agency. The said case involved similar facts, wherein the NLRC categorically ruled that employers of OFWs are not required to furnish the DOLE in the Philippines a notice if they intend to terminate a Filipino employee. Lastly, petitioner insists that respondent received his separation pay. Moreover, petitioner contends that Section 10 of R.A. No. 8042 does not apply in the present case, since the termination of respondent was due to a just, valid or authorized cause. At best, respondent is only entitled to separation pay in accordance with Article 283 of the Labor Code, i.e., one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. On his part, respondent maintains that the CA committed no reversible error in rendering the assailed decision. The petition is partly meritorious. Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down costs for operation particularly on salaries and wages.22 It is one of the economic grounds to dismiss employees and is resorted by an employer primarily to avoid or minimize business losses.23 Retrenchment programs are purely business decisions within the purview of a valid and reasonable exercise of management prerogative. It is one way of downsizing an employers

workforce and is often resorted to by the employer during periods of business recession, industrial depression, or seasonal fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program, or introduction of new methods or more efficient machinery or automation. It is a valid management prerogative, provided it is done in good faith and the employer faithfully complies with the substantive and procedural requirements laid down by law and jurisprudence.24 In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia, still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations.25 In the case of Royal Crown Internationale v. NLRC,26 this Court has made the policy pronouncement, thus: x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. x x x27 Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or overseas Filipino worker under Article 283 of the Labor Code, which provides: 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 operations 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 one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least 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 as one (1) whole year. Thus, retrenchment is a valid exercise of management prerogative subject to the strict requirements set by jurisprudence, to wit: (1) That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2) That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (3) That the employer pays the retrenched employees separation pay equivalent to one month pay or at least month pay for every year of service, whichever is higher; (4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees' right to security of tenure; and (5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, x x x efficiency, seniority, physical fitness, age, and financial hardship for certain workers.28 Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that the first, fourth and fifth requirements were complied with by respondents employer. However, the second and third requisites were absent when Petrocon terminated the services of respondent. As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its employees in good faith and the considerable reduction of work allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon to reduce the number of its personnel, thus: Moreover, from the standard form of employment contract relied upon by the Labor Arbiter, it is clear that unilateral cancellation (sic) may be effected for "legal, just and valid cause or causes." Clearly, contrary to the Labor Arbiters perception, the enumerated causes for employment termination by the employer in the standard form of employment contract is not exclusive in the same manner that the listed grounds for termination by the employer is not exclusive. As pointed out above, under Sec. 10 of RA 8042, it is clear that termination of employment may be for just, valid or authorized cause as defined by law or contract. Retrenchment being indubitably a legal and authorized cause may be availed of by the respondent. From the records, it is clearly shown that there was a drastic reduction in Petrocons 1998 work allocation from 250,000 man-hours to only 80,000 man-hours. Under these circumstances over which respondents principal, Petrocon had no control, it was clearly a valid exercise of management prerogative to reduce personnel particularly those without projects to work on. To force Petrocon to continue maintaining all its workers even those without projects is tantamount to oppression. "The determination to cease operation is a prerogative of management which the state does not usually interfere with as no business or undertaking must be required to continue at a loss simply because it has to maintain its employees in employment. Such an act would be tantamount to a taking of property without due process of law. (Industrial Timber Corp. vs. NLRC, 273 SCRA 200)29 As to complying with the fifth requirement, the CA was correct when it ruled that:

As to the fifth requirement, the NLRC considered the following criteria fair and reasonable in ascertaining who would be dismissed and who would be retained among the employees; (i) less preferred status; (ii) efficiency rating; (iii) seniority; and (iv) proof of claimed financial losses. The primary reason for respondents termination is lack of work project specifically related to his expertise as piping designer. Due to the highly specialized nature of Logartas job, we find that the availability of work and number of allocated man-hours for pipeline projects are sufficient and reasonable criteria in determining who would be dismissed and who would be retained among the employees. Consequently, we find the criterion of less preferred status and efficiency rating not applicable. The list of terminated employees submitted by Petrocon, shows that other employees, with the same designation as Logartas (Piping Designer II), were also dismissed. Terminated, too, were employees designated as Piping Designer I and Piping Designer. Hence, employees whose job designation involves pipeline works were without bias terminated. As to seniority, at the time the notice of termination was given to him, Logartas employment was eight (8) months, clearly, he has not accumulated sufficient years to claim seniority. As to proof of claimed financial losses, the NLRC itself has recognized the drastic reduction of Petrocons work allocation, thereby necessitating the retrenchment of some of its employees.30 As for the notice requirement, however, contrary to petitioners contention, proper notice to the DOLE within 30 days prior to the intended date of retrenchment is necessary and must be complied with despite the fact that respondent is an overseas Filipino worker. In the present case, although respondent was duly notified of his termination by Petrocon 30 days before its effectivity, no allegation or proof was advanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated. Thus, this requirement of the law was not complied with. Also, petitioners contention that respondent freely consented to his dismissal is unsupported by substantial evidence. Respondents recourse of finding a new employer during the 30-day period prior to the effectivity of his dismissal and eventual return to the Philippines is but logical and reasonable under the circumstances. Faced with the eventuality of his termination from employment, it is understandable for respondent to seize the opportunity to seek for other employment and continue working in Saudi Arabia. Moreover, petitioners insistence that the case of Jariol v. IMS should be applied in the present case is untenable. Being a mere decision of the NLRC, it could not be considered as a precedent warranting its application in the case at bar. Suffice it to state that although Article 8 of the Civil Code31 recognizes judicial decisions, applying or interpreting statutes as part of the legal system of the country, such level of recognition is not afforded to administrative decisions.32 Anent the proper amount of separation pay to be paid to respondent, petitioner maintains that respondent was paid the appropriate amount as separation pay. However, a perusal of his Payroll Check Details,33 clearly reveals that what he received was his compensation for the month prior

to his departure, and hence, was justly due to him as his salary. Furthermore, the amounts which he received as his "End of Contract Benefit" and "Other Earning/Allowances: for July 1998"34 form part of his wages/salary, as such, cannot be considered as constituting his separation pay.1wphi1 Verily, respondent is entitled to the payment of his separation pay. However, this Court disagrees with the conclusion of the Labor Arbiter, the NLRC and the CA, that respondent should be paid his separation pay in accordance with the provision of Section 10 of R.A. No. 8042. A plain reading of the said provision clearly reveals that it applies only to an illegally dismissed overseas contract worker or a worker dismissed from overseas employment without just, valid or authorized cause, the pertinent portion of which provides: Sec. 10. Money Claims. x x x In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, x x x In the case at bar, notwithstanding the fact that respondents termination from his employment was procedurally infirm, having not complied with the notice requirement, nevertheless the same remains to be for a just, valid and authorized cause, i.e., retrenchment as a valid exercise of management prerogative. To stress, despite the employers failure to comply with the one-month notice to the DOLE prior to respondents termination, it is only a procedural infirmity which does not render the retrenchment illegal. In Agabon v. NLRC,35 this Court ruled that when the dismissal is for a 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 violation of his statutory rights.36 Consequently, it is Article 283 of the Labor Code and not Section 10 of R.A. No. 8042 that is controlling. Thus, respondent is entitled to payment of separation pay equivalent to one (1) month pay, or at least one-half (1/2) month pay for every year of service, whichever is higher. Considering that respondent was employed by Petrocon for a period of eight (8) months, he is entitled to receive one (1) month pay as separation pay. In addition, pursuant to current jurisprudence,37 for failure to fully comply with the statutory due process of sufficient notice, respondent is entitled to nominal damages in the amount P50,000.00. WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 8, 2004 and the Resolution dated May 12, 2004 of the Court of Appeals are AFFIRMED with MODIFICATIONS. Petitioner is ORDERED to pay Roel P. Logarta one (1) month salary as separation pay and P50,000.00 as nominal damages. SO ORDERED.

G.R. No. 153511

July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or, NELSON NAPUD, in his capacity as the President of Petitioner Corporation, Petitioner, vs. HERNANI S. REALUYO, also known as JOEY ROA, Respondent. DECISION BERSAMIN, J.: This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel. On August 9, 1999, respondent, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice, constructive illegal dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay, service incentive leave pay, and 13111 month pay. He prayed for attorney's fees, moral damages off P100,000.00 and exemplary damages for P100,000.00.1 Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant from September 1992 with an initial rate of P400.00/night that was given to him after each nights performance; that his rate had increased to P750.00/night; and that during his employment, he could not choose the time of performance, which had been fixed from 7:00 pm to 10:00 pm for three to six times/week. He added that the Legend Hotels restaurant manager had required him to conform with the venues motif; that he had been subjected to the rules on employees representation checks and chits, a privilege granted to other employees; that on July 9, 1999, the management had notified him that as a cost-cutting measure his services as a pianist would no longer be required effective July 30, 1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively operating as of the filing of his complaint; and that the loss of his employment made him bring his complaint.2 In its defense, petitioner denied the existence of an employer-employee relationship with respondent, insisting that he had been only a talent engaged to provide live music at Legend Hotels Madison Coffee Shop for three hours/day on two days each week; and stated that the economic crisis that had hit the country constrained management to dispense with his services. On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had no employer-employee relationship.3 The LA explained thusly: xxx On the pivotal issue of whether or not there existed an employer-employee relationship between the parties, our finding is in the negative. The finding finds support in the service contract dated September 1, 1992 xxx.

xxx Even if we grant the initial non-existence of the service contract, as complainant suggests in his reply (third paragraph, page 4), the picture would not change because of the admission by complainant in his letter dated October 8, 1996 (Annex "C") that what he was receiving was talent fee and not salary. This is reinforced by the undisputed fact that complainant received his talent fee nightly, unlike the regular employees of the hotel who are paid by monthly xxx. xxx And thus, absent the power to control with respect to the means and methods by which his work was to be accomplished, there is no employer-employee relationship between the parties xxx. xxx WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit. SO ORDERED.4 Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed the LA on May 31, 2001.5 Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on certiorari. On February 11, 2002, the CA set aside the decision of the NLRC,6 holding: xxx Applying the above-enumerated elements of the employee-employer relationship in this case, the question to be asked is, are those elements present in this case? The answer to this question is in the affirmative. xxx Well settled is the rule that of the four (4) elements of employer-employee relationship, it is the power of control that is more decisive. In this regard, public respondent failed to take into consideration that in petitioners line of work, he was supervised and controlled by respondents restaurant manager who at certain times would require him to perform only tagalog songs or music, or wear barong tagalog to conform with Filipiniana motif of the place and the time of his performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to six times a week. Petitioner could not choose the time of his performance. xxx.

As to the status of petitioner, he is considered a regular employee of private respondents since the job of the petitioner was in furtherance of the restaurant business of respondent hotel. Granting that petitioner was initially a contractual employee, by the sheer length of service he had rendered for private respondents, he had been converted into a regular employee xxx. xxx xxx In other words, the dismissal was due to retrenchment in order to avoid or minimize business losses, which is recognized by law under Article 283 of the Labor Code, xxx. xxx WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7 Issues In this appeal, petitioner contends that the CA erred: I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA. II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES. III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES. IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED TO SHOW PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION IN THEIR RESPECTIVE DECISIONS. V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT.

VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION COMMITTED BY THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT PRESENT IN THE CASE AT BAR. The assigned errors are divided into the procedural issue of whether or not the petition for certiorari filed in the CA was the proper recourse; and into two substantive issues, namely: (a) whether or not respondent was an employee of petitioner; and (b) if respondent was petitioners employee, whether he was validly terminated. Ruling The appeal fails. Procedural Issue: Certiorari was a proper recourse Petitioner contends that respondents petition for certiorari was improper as a remedy against the NLRC due to its raising mainly questions of fact and because it did not demonstrate that the NLRC was guilty of grave abuse of discretion. The contention is unwarranted. There is no longer any doubt that a petition for certiorari brought to assail the decision of the NLRC may raise factual issues, and the CA may then review the decision of the NLRC and pass upon such factual issues in the process.8 The power of the CA to review factual issues in the exercise of its original jurisdiction to issue writs of certiorari is based on Section 9 of Batas Pambansa Blg. 129, which pertinently provides that the CA "shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings." Substantive Issue No. 1: Employer-employee relationship existed between the parties We next ascertain if the CA correctly found that an employer-employee relationship existed between the parties. The issue of whether or not an employer-employee relationship existed between petitioner and respondent is essentially a question of fact.9 The factors that determine the issue include who has the power to select the employee, who pays the employees wages, who has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is accomplished.10 Although no particular form of evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship

may be admitted,11 a finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.12 Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. However, where, like here, there is a conflict between the factual findings of the Labor Arbiter and the NLRC, on the one hand, and those of the CA, on the other hand, it becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned findings.13 A review of the circumstances reveals that respondent was, indeed, petitioners employee. He was undeniably employed as a pianist in petitioners Madison Coffee Shop/Tanglaw Restaurant from September 1992 until his services were terminated on July 9, 1999. First of all, petitioner actually wielded the power of selection at the time it entered into the service contract dated September 1, 1992 with respondent. This is true, notwithstanding petitioners insistence that respondent had only offered his services to provide live music at petitioners Tanglaw Restaurant, and despite petitioners position that what had really transpired was a negotiation of his rate and time of availability. The power of selection was firmly evidenced by, among others, the express written recommendation dated January 12, 1998 by Christine Velazco, petitioners restaurant manager, for the increase of his remuneration.14 Petitioner could not seek refuge behind the service contract entered into with respondent. It is the law that defines and governs an employment relationship, whose terms are not restricted to those fixed in the written contract, for other factors, like the nature of the work the employee has been called upon to perform, are also considered. The law affords protection to an employee, and does not countenance any attempt to subvert its spirit and intent. Any stipulation in writing can be ignored when the employer utilizes the stipulation to deprive the employee of his security of tenure. The inequality that characterizes employer-employee relations generally tips the scales in favor of the employer, such that the employee is often scarcely provided real and better options.15 Secondly, petitioner argues that whatever remuneration was given to respondent were only his talent fees that were not included in the definition of wage under the Labor Code; and that such talent fees were but the consideration for the service contract entered into between them. The argument is baseless. Respondent was paid P400.00 per three hours of performance from 7:00 pm to 10:00 pm, three to six nights a week. Such rate of remuneration was later increased to P750.00 upon restaurant manager Velazcos recommendation. There is no denying that the remuneration denominated as talent fees was fixed on the basis of his talent and skill and the quality of the music he played during the hours of performance each night, taking into account the prevailing rate for similar talents in the entertainment industry.16

Respondents remuneration, albeit denominated as talent fees, was still considered as included in the term wage in the sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration. Anent this, Article 97(f) of the Labor Code clearly states: xxx wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. Clearly, respondent received compensation for the services he rendered as a pianist in petitioners hotel. Petitioner cannot use the service contract to rid itself of the consequences of its employment of respondent. There is no denying that whatever amounts he received for his performance, howsoever designated by petitioner, were his wages. It is notable that under the Rules Implementing the Labor Code and as held in Tan v. Lagrama,17 every employer is required to pay his employees by means of a payroll, which should show in each case, among others, the employees rate of pay, deductions made from such pay, and the amounts actually paid to the employee. Yet, petitioner did not present the payroll of its employees to bolster its insistence of respondent not being its employee. That respondent worked for less than eight hours/day was of no consequence and did not detract from the CAs finding on the existence of the employer-employee relationship. In providing that the " normal hours of work of any employee shall not exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of number of hours as "normal hours of work" but did not prohibit work of less than eight hours. Thirdly, the power of the employer to control the work of the employee is considered the most significant determinant of the existence of an employer-employee relationship.18 This is the socalled control test, and is premised on whether the person for whom the services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end.19 Petitioner submits that it did not exercise the power of control over respondent and cites the following to buttress its submission, namely: (a) respondent could beg off from his nightly performances in the restaurant for other engagements; (b) he had the sole prerogative to play and perform any musical arrangements that he wished; (c) although petitioner, through its manager, required him to play at certain times a particular music or song, the music, songs, or arrangements, including the beat or tempo, were under his discretion, control and direction; (d) the requirement for him to wear barong Tagalog to conform with the Filipiniana motif of the venue whenever he performed was by no means evidence of control; (e) petitioner could not require him to do any other work in the restaurant or to play the piano in any other places, areas, or establishments, whether or not owned or operated by petitioner, during the three hour period

from 7:00 pm to 10:00 pm, three to six times a week; and (f) respondent could not be required to sing, dance or play another musical instrument. A review of the records shows, however, that respondent performed his work as a pianist under petitioners supervision and control. Specifically, petitioners control of both the end achieved and the manner and means used to achieve that end was demonstrated by the following, to wit: a. He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm, three to six times a week; b. He could not choose the place of his performance; c. The restaurants manager required him at certain times to perform only Tagalog songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and d. He was subjected to the rules on employees representation check and chits, a privilege granted to other employees. Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties by the employee, for it sufficed that the employer has the right to wield that power. Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of Discipline, and that the power to terminate the working relationship was mutually vested in the parties, in that either party might terminate at will, with or without cause. The claim is contrary to the records. Indeed, the memorandum informing respondent of the discontinuance of his service because of the present business or financial condition of petitioner20 showed that the latter had the power to dismiss him from employment.21 Substantive Issue No. 2: Validity of the Termination Having established that respondent was an employee whom petitioner terminated to prevent losses, the conclusion that his termination was by reason of retrenchment due to an authorized cause under the Labor Code is inevitable. Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a management prerogative resorted to by employers to avoid or to minimize business losses. On this matter, Article 283 of the Labor Code states: Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the

provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. xxx. 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. The Court has laid down the following standards that an employer should meet to justify retrenchment and to foil abuse, namely: (a) The expected losses should be substantial and not merely de minimis in extent; (b) The substantial losses apprehended must be reasonably imminent; (c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must be proved by sufficient and convincing evidence.22 Anent the last standard of sufficient and convincing evidence, it ought to be pointed out that a less exacting standard of proof would render too easy the abuse of retrenchment as a ground for termination of services of employees.23 Was the retrenchment of respondent valid? In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer. Here, petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby imminently sustain. It only claimed that respondents termination was due to its "present business/financial condition." This bare statement fell short of the norm to show a valid retrenchment. Hence, we hold that there was no valid cause for the retrenchment of respondent. Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment.1wphi1 The employer must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to present sufficient and convincing evidence to prove that retrenchment was necessary, respondents termination due to retrenchment is not allowed. The Court realizes that the lapse of time since the retrenchment might have rendered respondent's reinstatement to his former job no longer feasible. If that should be true, then petitioner should instead pay to him separation pay at the rate of one. month pay for every year of service computed from September 1992 (when he commenced to work for the petitioners) until the finality of this decision, and full backwages from the time his compensation was withheld until the finality of this decision.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals promulgated on February 11, 2002, subject to the modification that should reinstatement be no longer feasible, petitioner shall pay to respondent separation pay of one month for every year of service computed from September 1992 until the finality of this decision, and full backwages from the time his compensation was withheld until the finality of this decision. Costs of suit to be paid by the petitioners. SO ORDERED.

G.R. No. 194795

June 13, 2012

EVER ELECTRICAL MANUFACTURING, INC., (EEMI) and VICENTE GO, Petitioners, vs. SAMAHANG MANGGAGAWA NG EVER ELECTRICAL/ NAMAWU LOCAL 224 Represented by Felimon Panganiban, Respondents. DECISION MENDOZA, J.: This petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure assails the August 31, 2010 Decision2 and the December 16, 2010 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 108978. Petitioner Ever Electrical Manufacturing, Inc. (EEMI) is a corporation engaged in the business of manufacturing electrical parts and supplies. On the other hand, the respondents are members of Samahang Manggagawa ng Ever Electrical/NAMAWU Local 224 (respondents) headed by Felimon Panganiban. The controversy started when EEMI closed its business operations on October 11, 2006 resulting in the termination of the services of its employees. Aggrieved, respondents filed a complaint for illegal dismissal with prayer for payment of 13th month pay, separation pay, damages, and attorneys fees. Respondents alleged that the closure was made without any warning, notice or memorandum and in full disregard of the requirements of the Labor Code. In its defense, EEMI explained that it had closed the business due to various factors. In 1995, it invested in Orient Commercial Banking Corporation (Orient Bank) the sum of P500,000,000.00 and during the Asian Currency crises, various economies in the South East Asian Region were hurt badly. EEMI was one of those who suffered huge losses. In November 1996, it obtained a loan in the amount of P121,400,000.00 from United Coconut Planters Bank (UCPB). As security for the loan, EEMIs land and its improvements, including the factory, were mortgaged to UCPB. EEMIs business suffered further losses due to the continued entry of cheaper goods from China and other Asian countries. Adding to EEMIs financial woes was the closure of Orient Bank where most of its resources were invested. As a result, EEMI was not able to meet its loan obligations with UCPB. In an attempt to save the company, EEMI entered into a dacion en pago arrangement with UCPB which, in effect, transferred ownership of the companys property to UCPB as reflected in TCT No. 429159. Originally, EEMI wanted to lease the premises to continue its business operation but under UCPBs policy, a previous debtor who failed to settle its loan obligation was not

eligible to lease its acquired assets. Thus, UCPB agreed to lease it to an affiliate corporation, EGO Electrical Supply Co, Inc. (EGO), for and in behalf of EEMI. On February 2, 2002, a lease agreement was entered into between UCPB and EGO.4 The said lease came to a halt when UCPB instituted an unlawful detainer suit against EGO before the Metropolitan Trial Court, Branch 5, Makati City (MeTC) docketed as Civil Case No. 88602. On August 11, 2006, the MeTC ruled in favor of UCPB and ordered EGO to vacate the leased premises and pay rentals to UCPB in the amount of P21,473,843.65.5 On September 19, 2006, a writ of execution was issued.6 Consequently, on October 11, 2006, the Sheriff implemented the writ by closing the premises and, as a result, EEMIs employees were prevented from entering the factory. On April 25, 2007, the Labor Arbiter (LA) ruled that respondents were not illegally dismissed. It, however, ordered EEMI and its President, Vicente Go (Go), to pay their employees separation pay and 13th month pay respectively.7 The decretal portion of the LA decision, reads: CONFORMABLY WITH THE FOREGOING, Judgment is hereby rendered ordering the respondent[s] in solidum to pay the complainants their separation pay, 13th month pay of the three (3) workers and the balance of their 13th month pay as computed which computation is made a part of this disposition. On September 15, 2008, the NLRC reversed and set aside the decision of the LA. The NLRC dismissed the complaint for lack of merit and ruled that since EEMIs cessation of business operation was due to serious business losses, the employees were not entitled to separation pay.8 Respondents moved for reconsideration of the NLRC decision, but the NLRC denied the motion in its March 23, 2009 Resolution.9 Unperturbed, respondents elevated the case before the CA via a petition for certiorari under Rule 65.10 On August 31, 2010, the CA granted the petition.11 It nullified the decision of the NLRC and reinstated the LA decision. The dispositive portion of the CA decision reads: ACCORDINGLY, the petition is GRANTED. The Decision dated September 15, 2008 and Resolution dated March 23, 2009 of the National Labor Relations Commission are NULLIFIED and the Decision dated April 25, 2007 of Labor Arbiter Melquiades Sol Del Rosario, REINSTATED. The CA held that respondents were entitled to separation pay and 13th month pay because the closure of EEMIs business operation was effected by the enforcement of a writ of execution and not by reason of business losses. The CA, citing Restaurante Las Conchas v. Lydia Llego,12 upheld the solidary liability of EEMI and Go, declaring that "when the employer corporation is no longer existing and unable to satisfy the judgment in favor of the employees, the officers should be held liable for acting on behalf of the corporation."13 EEMI and Go filed a motion for reconsideration but it was denied in the CA Resolution dated December 16, 2010.14

Hence, this petition.15 Issues: 1. Whether the CA erred in finding that the closure of EEMIs operation was not due to business losses; and 2. Whether the CA erred in finding Vicente Go solidarily liable with EEMI. The petition is partly meritorious. 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 Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or under taking 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. Article 283 of the Labor Code identifies closure or cessation of operation of the establishment as an authorized cause for terminating an employee. Similarly, the said provision mandates that employees who are laid off from work due to closures that are not due to business insolvency should be paid separation pay equivalent to one-month pay or to at least one-half month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one whole year. Although business reverses or losses are recognized by law as an authorized cause, it is still essential that the alleged losses in the business operations be proven convincingly; otherwise, this ground for termination of employment would be susceptible to abuse by conniving employers, who might be merely feigning business losses or reverses in their business ventures in order to ease out employees.16 In this case, EEMI failed to establish that the main reason for its closure was business reverses. As aptly observed by the CA, the cessation of EEMIs business was not directly brought about by serious business losses or financial reverses, but by reason of the enforcement of a judgment against it. Thus, EEMI should be required to pay separation pay to its affected employees.

As to whether or not Go should be held solidarily liable with EEMI, the Court agrees with the petitioner. As a general rule, corporate officers should not be held solidarily liable with the corporation for separation pay for it is settled that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.17 The LA was of the view that Go, as President of the corporation, actively participated in the management of EEMIs corporate obligations, and, accordingly, rendered judgment ordering EEMI and Go "in solidum to pay the complainants"18 their due. He explained that "[r]espondent Gos negligence in not paying the lease rental of the plant in behalf of the lessee EGO Electrical Supply, Inc., where EEMI was operating and reimburse expenses of UCPB for real estate taxes and the like, prompted the bank to file an unlawful detainer case against the lessee, EGO Electrical Supply Co. This evasion of an existing obligation, made respondent Go as liable as respondent EEMI, for complainants money awards."19 Added the LA, "being the President and the one actively representing respondent EEMI, in major contracts i.e. Real Estate Mortgage, loans, dacion en pago, respondent Go has to be liable in the case."20 As earlier stated, the CA affirmed the LA decision citing the case of Restaurante Las Conchas v. Llego,21 where it was held that "when the employer corporation is no longer existing and unable to satisfy the judgment in favor of the employees, the officers should be held liable for acting on behalf of the corporation."22 A study of Restaurante Las Conchas case, however, bares that it was an application of the exception rather than the general rule. As stated in the said case, "as a rule, the officers and members of a corporation are not personally liable for acts done in the performance of their duties."23 The Court therein explained that it applied the exception because of the peculiar circumstances of the case. If the rule would be applied, the employees would end up in an empty victory because as the restaurant had been closed for lack of venue, there would be no one to pay its liability as the respondents therein claimed that the restaurant was owned by a different entity, not a party in the case.24 In two subsequent cases, the Courts ruling in Restaurante Las Conchas was invoked but the Court refused to consider it reasoning out that it was the exception rather than the rule. The two cases were Mandaue Dinghow Dimsum House, Co., Inc. and/or Henry Uytengsu v. National Labor Relations Commission25 and Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations Commission.26 In Mandaue Dinghow Dimsum House, Co., Inc., the Court declined to apply the ruling in Restaurante Las Conchas because there was no evidence that the respondent therein, Henry Uytrengsu, acted in bad faith or in excess of his authority. It stressed that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. For said reason, the doctrine of piercing the veil of corporate fiction must be exercised with caution.27 Citing

Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos,28 the Court explained that corporate directors and officers are solidarily liable with the corporation for the termination of employees done with malice or bad faith. It stressed that bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud. In Pantranco Employees Association, the Court also rejected the invocation of Restaurante Las Conchas and refused to pierce the veil of corporate fiction. It explained: As between PNB and PNEI, petitioners want us to disregard their separate personalities, and insist that because the company, PNEI, has already ceased operations and there is no other way by which the judgment in favor of the employees can be satisfied, corporate officers can be held jointly and severally liable with the company. Petitioners rely on the pronouncement of this Court in A.C. Ransom Labor Union-CCLU v. NLRC and subsequent cases. This reliance fails to persuade. We find the aforesaid decisions inapplicable to the instant case. For one, in the said cases, the persons made liable after the companys cessation of operations were the officers and agents of the corporation. The rationale is that, since the corporation is an artificial person, it must have an officer who can be presumed to be the employer, being the person acting in the interest of the employer. The corporation, only in the technical sense, is the employer. In the instant case, what is being made liable is another corporation (PNB) which acquired the debtor corporation (PNEI). Moreover, in the recent cases Carag v. National Labor Relations Commission and McLeod v. National Labor Relations Commission, the Court explained the doctrine laid down in AC Ransom relative to the personal liability of the officers and agents of the employer for the debts of the latter. In AC Ransom, the Court imputed liability to the officers of the corporation on the strength of the definition of an employer in Article 212(c) (now Article 212[e]) of the Labor Code. Under the said provision, employer includes any person acting in the interest of an employer, directly or indirectly, but does not include any labor organization or any of its officers or agents except when acting as employer. It was clarified in Carag and McLeod that Article 212(e) of the Labor Code, by itself, does not make a corporate officer personally liable for the debts of the corporation. It added that the governing law on personal liability of directors or officers for debts of the corporation is still Section 31 of the Corporation Code. More importantly, as aptly observed by this Court in AC Ransom, it appears that Ransom, foreseeing the possibility or probability of payment of backwages to its employees, organized Rosario to replace Ransom, with the latter to be eventually phased out if the strikers win their case. The execution could not be implemented against Ransom because of the disposition posthaste of its leviable assets evidently in order to evade its just and due obligations. Hence, the Court sustained the piercing of the corporate veil and made the officers of Ransom personally liable for the debts of the latter.

Clearly, what can be inferred from the earlier cases is that the doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. In the absence of malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities.29 [Emphasis supplied] Similarly, in the case at bench, the records do not warrant an application of the exception.1wphi1 The rule, which requires the presence of malice or bad faith, must still prevail. In the recent case of Wensha Spa Center and/or Xu Zhi Jie v. Yung,30 the Court absolved the corporations president from liability in the absence of bad faith or malice. In the said case, the Court stated: In labor cases, corporate directors and officers may be held solidarily liable with the corporation for the termination of employment only if done with malice or in bad faith.31 Bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud.32 In the present case, Go may have acted in behalf of EEMI but the companys failure to operate cannot be equated to bad faith. Cessation of business operation is brought about by various causes like mismanagement, lack of demand, negligence, or lack of business foresight. Unless it can be shown that the closure was deliberate, malicious and in bad faith, the Court must apply the general rule that a corporation has, by law, a personality separate and distinct from that of its owners. As there is no evidence that Go, as EEMIs President, acted maliciously or in bad faith in handling their business affairs and in eventually implementing the closure of its business, he cannot be held jointly and solidarily liable with EEMI. WHEREFORE, the petition is PARTIALLY GRANTED. The August 31, 2010 Decision of the Court of Appeals is AFFIRMED with MODIFICATION that Vicente Go is not solidarily liable with Ever Electrical Manufacturing, Inc. SO ORDERED. JOSE CATRAL MENDOZA Associate Justice

G.R. No. 178397

October 20, 2010

PEAFRANCIA TOURS AND TRAVEL TRANSPORT, INC., Petitioner, vs. JOSELITO P. SARMIENTO and RICARDO S. CATIMBANG, Respondents. DECISION NACHURA, J.: Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA) Decision2 dated August 31, 2006. Since October 1993, until his alleged termination on October 30, 2002, respondent Joselito Sarmiento (Sarmiento) worked as a bus inspector of petitioner Peafrancia Tours and Travel Transport, Inc. (petitioner), earning a daily wage of P198.00. In his complaint3 for illegal dismissal filed on November 26, 2002, Sarmiento prayed for his reinstatement, and charged petitioner with underpayment of wages; non-payment of overtime, holiday pay, premium pay for holiday and rest day, service incentive leave pay, 13th month pay, and separation pay; unfair labor practice; damages; and attorneys fees. Meanwhile, respondent Ricardo Catimbang (Catimbang) also worked for petitioner as a bus inspector from February 1997 until his termination on October 30, 2002. He was also paid a daily wage of P198.00. He averred that petitioner was guilty of union-busting, and prayed for reinstatement with payment of full backwages, benefits, damages, and attorneys fees.4 Both Sarmiento and Catimbang (respondents) averred that they were required to work seven (7) days a week, and that they had no rest day and worked even during the holidays, except Good Friday, Christmas Eve, and New Years Eve. Sometime in the first week of October 2002, they received notices of termination on the ground of petitioners alleged irreversible business losses. In the middle of October 2002, a meeting was called by petitioners President and General Manager, Bonifacio Cu, wherein respondents were introduced to Alfredo Perez, the owner of ALPS Transportation, as the new owner of petitioner, having allegedly bought the same. On October 30, 2002, respondents received their last pay with a letter informing them that their application with the company had been held in abeyance. Sarmiento was paid P26,730.00 as separation pay and P4,686.00 as 13th month pay; while Catimbang was paid P17,820.00 as separation pay and P4,851.00 as 13th month pay. Respondents, however, learned that, several days after their termination, Bonifacio Cu continued to operate petitioner bus company. Traversing the complaint, petitioner admitted that respondents were among its bus inspectors. It asseverated, however, that due to severe business losses, petitioner made the painful decision to stop its operation and sell the business enterprise to the Perez family of ALPS Transportation. It alleged that due notice was given to the Department of Labor and Employment,5 and that all its employees were duly notified6 and were paid their corresponding separation pay, as well as their

13th month pay. The new owners maintained the business name of petitioner, and the management of petitioner was entrusted to the new owners in October 2002, with Edilberto Perez7 as Vice-President for Finance and Operations. Subsequently, several memoranda were issued by Edilberto Perez in behalf of petitioner. Petitioner argued that the matter of rehiring respondents rested on the sound discretion of its new owners, and the latter could not be compelled to absorb petitioners former employees since the same was not part of the deal. Petitioner alleged that respondents submitted their application for reemployment but, after evaluation, the new owners opted not to hire respondents. While respondents case for illegal dismissal was pending before the Labor Arbiter (LA), a notice8 was issued by Edilberto Perez to all employees of petitioner, stating that, effective February 11, 2003, the management of the company shall revert to its former President, Bonifacio Cu. On February 28, 2003, Bonifacio Cu wrote Alfredo Perez relative to the latters failure to comply with their agreement and the decision to rescind the sale involving petitioner.9 Thereafter, sometime in March 2003, Bonifacio Cu entered into a transaction, denominated as a "Deed of Sale with Assignment of Franchise (By Way of Dation in Payment)," with Southern Comfort Bus Co., Inc. (SCBC), represented by its President and General Manager, Willy Deterala.10 On July 31, 2003, the LA rendered a Joint Decision,11 the dispositive portion of which reads: WHEREFORE, finding no substantial evidence to support the action of the complainants for illegal dismissal, the same is hereby ordered DISMISSED for lack of merit. Nonetheless, respondents PTTTI and Bonifacio L. Cu are hereby ordered to pay complainants with their established service incentive leave pay, equivalent to P2,750.00 each for three (3) years for 1999, 2000, and 2001.1avvphi1 All other claims are hereby DISMISSED for lack of merit. SO ORDERED. Aggrieved, respondents sought recourse from the National Labor Relations Commission (NLRC). On August 31, 2005, the NLRC rendered a decision12 in favor of respondents, finding that no sale of the business actually took place. Thus: WHEREFORE, as above-discussed, the appeal is given due course. Accordingly, the decision appealed from is REVERSED and SET ASIDE and a NEW ONE ENTERED ordering the respondents to reinstate Joselito P. Sarmiento and Ricardo Catimbang with full backwages. The amounts already received by complainants shall be deducted from the awards they are entitled computed as follows: Backwages from day after date of dismissal (Nov. 1, 2002) to cut off date (August 30, 2005) a. Salary: P198/day x 26 days/mo. x 34months = P175,032.00

b. 13th month pay P175,032 -:- 12 =

14,586.00

c. Service Incentive Leave Pay: P198 x 15 days 2,970.00 = P192,588.00 Joselito Sarmiento Less received P192,588.00 31,416.00 P161,172.00 Ricardo Catimbang Less received P192,588.00 22,671.00 169,917.00 TOTAL SO ORDERED. Petitioner filed a motion for reconsideration, which the NLRC, however, denied in its Resolution13 dated November 15, 2005. Undaunted, petitioner assailed the NLRCs ruling before the CA on certiorari. On August 31, 2006, the CA ruled in favor of respondents. It held that petitioner failed to establish its allegation that it was suffering from business reverses. Likewise, the CA affirmed the NLRCs findings that petitioner did not actually sell its business to the Perez family and to SCBC. Accordingly, the CA disposed of the case in this wise: WHEREFORE, premises considered, the instant PETITION FOR CERTIORARI is DISMISSED. Accordingly, petitioner Peafrancia Tours and Travel Transport, Inc. is hereby ordered to reinstate private respondents Joselito Sarmiento and Ricardo S. Catimbang to their previous positions without loss of seniority rights and to pay their full backwages from the time their actual compensation was withheld from them up to the time of their actual reinstatement. The separation pay already received by private respondents Sarmiento and Catimbang shall be deducted from the full backwages they are entitled to receive from petitioner PTTTI. Let the entire record of the case be remanded to public respondent National Labor Relations Commission for the proper computation of backwages. SO ORDERED.14 P331,089.00 ============ (separation pay- P17,820.00 13th mo. pay - 4,851.00) (separation pay- P 26,730.00 13th mo. pay - 4,686.00)

On September 26, 2006, petitioner filed a Motion for Reconsideration which the CA denied in its Resolution15 dated May 21, 2007. Hence, this petition based on the sole issue of whether respondents were legally terminated from employment by reason of the sale of the business enterprise and the consequent change or transfer of ownership/management.16 Petitioner claims that a change of ownership in a business concern is not proscribed; that it is a right of an employer, as management prerogative, to close his business and terminate the employment of his employees as a consequence of such closure; that an innocent transferee of the business has no liability to the employees for their continued employment; and that, based on its annual income tax return, it suffered financial losses. Relying on the LAs findings, petitioner avers that it sold the business in good faith, and that respondents, as a result of said sale, were paid all the monetary benefits due them. Moreover, petitioner manifests that there was no compelling reason at that time, like a dispute and/or rift existing among the parties, to warrant the termination of respondents employment. It also claims that, while it had a perfected contract of sale with the Perez family, the same was not consummated, and that the Perez family did not pay the amount of P60 Million as agreed upon and as claimed by respondents.17 On the other hand, respondents argue that petitioner raised questions of fact that are beyond the province of a petition for review under Rule 45 questions which were already passed upon by both the NLRC and the CA. Further, respondents aver that Bonifacio Cu continues to run the business of petitioner, particularly through his son, Bonifacio Bryan Cu, as Operations Manager, and his nephew, Antonio Cu, as Corporate Secretary; that petitioner continues to operate the business under the same name, franchises, routes, and circumstances as before the alleged sale; that while petitioner has the prerogative of closing its business, the same must not be tainted with bad faith; and that petitioner failed to establish that it was indeed under severe financial constraints, and that the respective sales to the Perez family and to SCBC were not at all fictitious.18 The petition is bereft of merit. Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of the establishment, usually due to financial losses. Closure of business, as an authorized cause for termination of employment, aims to prevent further financial drain upon an employer who can no longer pay his employees since business has already stopped.19 Closure or cessation of operation of the establishment is an authorized cause for terminating an employee, as provided in Article 283 of the Labor Code, to wit: 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. x x x. 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.1avvphi1 On this ground, petitioner terminated the employment of respondents. However, what petitioner apparently made was a transfer of ownership. It is true that, as invoked by petitioner, in Manlimos, et al. v. NLRC, et al.,20 we held that a change of ownership in a business concern is not proscribed by law. Lest petitioner forget, however, we also held therein that the sale or disposition must be motivated by good faith as a condition for exemption from liability.21 Thus, where the charge of ownership is done in bad faith, or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed the employees and is held liable for the transgressions of his or her predecessor.22 But, in this case, there is no successor-employer because there was no actual change of ownership. We sustain the uniform factual finding of both the NLRC and the CA that no actual sale transpired and, as such, there is no closure or cessation of business that can serve as an authorized cause for the dismissal of respondents. Notable in this regard are the following observations of the CA: Petitioner PTTTI sent notices of termination to private respondents Sarmiento and Catimbang on the alleged ground that it would cease operations effective 30 October 2002 due to business reverses and it would eventually sell the same to another company. (Id. at p. 77) However, the records explicitly show that it (PTTTI) failed to establish its allegation that it was suffering from business reverses. Neither was there proof that indeed a sale was made and executed on 01 October 2002 involving the companys assets in favor of ALPS Transportation owned by the Perez family. It did not present any documentary evidence to support its claim that it sold the same to ALPS Transportation. On the contrary, it (PTTTI) continuously operates under the same name, franchises and routes and under the same circumstances as before the alleged sale. It (PTTTI) tried to convince us that it is under a new management, by presenting series of memoranda where the signatory thereon is Edelberto E. Perez, VP-Finance/Operations (Id. at pp. 78-83). To us, the series of memoranda do not conclusively show that there had been a sale in favor of ALPS Transportation. And considering that there was no sale which transpired, we also find no basis for the rescission thereof. The letter dated 19 March 2003 addressed to its employees, informing the latter that it had rescinded its sale to ALPS Transportation and thus, there is a change of management, ownership and operation of the company and it (PTTTI) is intending to sell the company to Southern Comfort Bus Co., Inc. headed by Mr. Willy D. Deterala (Id. at p. 89) could not convince us that there was actually a rescission of sale. If indeed there was sale and a consequent rescission thereof which transpired, why is it that the ALPS Transportation did not give much a fight when the contract of sale was unilaterally rescinded by Bonifacio Cu who signed as President/General Manager of petitioner PTTTI in a letter dated 28 February 2003. It is quite unconceivable for a company like ALPS Transportation which had already parted a considerable sum not to question the rescission undertaken by petitioner PTTTI. This only confirms the public respondent NLRCs finding, that the sale was indeed a sham,

designed to circumvent the law on the rights of the workers. There is thus, no basis for us to believe that there was a consequent rescission of the alleged sale made by petitioner PTTTI in favor of ALPS Transportation. Corollarily, we opine that the alleged second sale made by petitioner PTTTI, this time in favor of Southern Comfort Bus Co., Inc. represented by one Willy D. Deter[a]la is also simulated considering that the ten million pesos consideration is unbelievably too small for thirty five (35) aircon buses including its franchise and facilities thereon. It is quite an illogical move for the company to have allegedly rescinded the previous sale involving a higher consideration of sixty million pesos (P60,000,000.00) made in favor of ALPS Transportation and to resell the same, this time just for a measly amount of ten million pesos (P10,000,000.00). Additionally, the observation of private respondents Sarmiento and Catimbang is quite impressive when they claimed that the Southern Comfort Bus Co., Inc., presided by one Willy D. Deterala is a dummy corporation since it has not operated any single bus under its name, even prior to the sale and up to the present. In fact, its principal business office at No. 4 Cathedral St., Ateneo Avenue 4400 Naga City is not even known. Suffice it to stress, these private respondents allegations/observations have not at all been refuted nor controverted by petitioner PTTTI.23 It is likewise evident that, even in the petition before this Court, Bonifacio Bryan Cu signed the Verification and Certification of Non-Forum Shopping24 and Antonio Cu signed the Secretarys Certificate.25 The fact remains that the Cu family continues to operate petitioners business. Despite the alleged recent sale to SCBC, represented by Willy Deterala, petitioner failed to refute the allegations of respondents that the Cu family still continues to own and operate petitioner, or even to show that Willy Deterala is actually in charge of petitioners business. Petitioner did not confront this issue head-on, and its failure to do so is fatal to its cause. Petitioner having failed to discharge its burden of submitting sufficient and convincing evidence required by law, we hold that respondents were illegally dismissed. Finally, the CA affirmed the ruling of the NLRC and adopted as its own the latter's factual findings. Long-established is the doctrine that findings of fact of quasi-judicial bodies like the NLRC are accorded respect, even finality, if supported by substantial evidence. When passed upon and upheld by the CA, they are binding and conclusive upon this Court and will not normally be disturbed. Though this doctrine is not without exceptions, the Court finds that none are applicable to the present case.26 All told, we find no reversible error to justify disturbing, much less, reversing the assailed CA Decision. WHEREFORE, the instant petition is DENIED, and the Court of Appeals Decision dated August 31, 2006 is hereby AFFIRMED. Costs against petitioner. SO ORDERED.

G.R. No. 169191

June 1, 2011

ROMEO VILLARUEL, Petitioner, vs. YEO HAN GUAN, doing business under the name and style YUHANS ENTERPRISES, Respondent. DECISION PERALTA, J.: Assailed in the present petition are the Decision1 and Resolution2 of the Court of Appeals (CA) dated February 16, 2005 and August 2, 2005, respectively, in CA-G.R. SP No. 79105. The CA Decision modified the March 31, 2003 Decision of the National Labor Relations Commission (NLRC) in NLRC NCR CA 028050-01, while the CA Resolution denied petitioner's Motion for Reconsideration. The antecedents of the case are as follows: On February 15, 1999, herein petitioner filed with the NLRC, National Capital Region, Quezon City a Complaint3 for payment of separation pay against Yuhans Enterprises. Subsequently, in his Amended Complaint and Position Paper4 dated December 6, 1999, petitioner alleged that in June 1963, he was employed as a machine operator by Ribonette Manufacturing Company, an enterprise engaged in the business of manufacturing and selling PVC pipes and is owned and managed by herein respondent Yeo Han Guan. Over a period of almost twenty (20) years, the company changed its name four times. Starting in 1993 up to the time of the filing of petitioner's complaint in 1999, the company was operating under the name of Yuhans Enterprises. Despite the changes in the company's name, petitioner remained in the employ of respondent. Petitioner further alleged that on October 5, 1998, he got sick and was confined in a hospital; on December 12, 1998, he reported for work but was no longer permitted to go back because of his illness; he asked that respondent allow him to continue working but be assigned a lighter kind of work but his request was denied; instead, he was offered a sum of P15,000.00 as his separation pay; however, the said amount corresponds only to the period between 1993 and 1999; petitioner prayed that he be granted separation pay computed from his first day of employment in June 1963, but respondent refused. Aside from separation pay, petitioner prayed for the payment of service incentive leave for three years as well as attorney's fees. On the other hand, respondent averred in his Position Paper5 that petitioner was hired as machine operator from March 1, 1993 until he stopped working sometime in February 1999 on the ground that he was suffering from illness; after his recovery, petitioner was directed to report for work, but he never showed up. Respondent was later caught by surprise when petitioner filed the instant case for recovery of separation pay. Respondent claimed that he never terminated the

services of petitioner and that during their mandatory conference, he even told the latter that he could go back to work anytime but petitioner clearly manifested that he was no longer interested in returning to work and instead asked for separation pay. On November 27, 2000, the Labor Arbiter handling the case rendered judgment in favor of petitioner. The dispositive portion of the Labor Arbiter's Decision reads, thus: WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant and against herein respondent, as follows: 1. Ordering the respondents to pay separation benefits equivalent to one-half () month salary per year of service, a fraction of six months equivalent to one year to herein complainant based on the complainant's length of service reckoned from June 1963 up to October 1998 as provided under Article 284 of the Labor Code, the same computed by the Computation and Examination Unit which we hereby adopt and approved (sic) as our own in the amount of NINETY-ONE THOUSAND FOUR HUNDRED FORTY-FIVE PESOS (P91,445.00); 2. Ordering the respondents to pay service incentive leave equivalent to fifteen days salary in the amount of THREE THOUSAND FIFTEEN PESOS (P3,015.00). All other claims are dismissed for lack of merit. SO ORDERED.6 Aggrieved, respondent filed an appeal with the NLRC. On March 31, 2003, the Third Division of the NLRC rendered its Decision7 dismissing respondent's appeal and affirming the Labor Arbiter's Decision. Respondent filed a Motion for Reconsideration,8 but the same was denied by the NLRC in a Resolution9 dated May 30, 2003. Respondent then filed with the CA a petition for certiorari under Rule 65 of the Rules of Court. On February 16, 2005, the CA promulgated its presently assailed Decision disposing as follows: WHEREFORE, premises considered, the petition is partially GRANTED. The award of separation pay is hereby DELETED, but the Decision insofar as it awards private respondent [herein petitioner] service incentive leave pay of three thousand and fifteen pesos (P3,015.00) stands. The NLRC is permanently ENJOINED from partially executing its Decision dated November 27, 2000 insofar as the award of separation pay is concerned; or if it has already effected execution, it should order the private respondent to forthwith restitute the same. SO ORDERED.10

Herein petitioner filed his Motion for Reconsideration11 of the CA Decision, but it was denied by the CA via a Resolution12 dated August 2, 2005. Hence, the instant petition based on the following assignment of errors: I THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FAILURE TO APPRECIATE THE ADMISSION BY [PETITIONER] OF THE FACT AND VALIDITY OF HIS TERMINATION BY THE [RESPONDENT]. II [THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED] IN DENYING [PETITIONER'S] ENTITLEMENT TO SEPARATION PAY UNDER ARTICLE 284 OF THE LABOR CODE AND UNDER THE OMNIBUS RULES IMPLEMENTING THE LABOR CODE. III THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE BURDEN OF PROOF THAT AN EMPLOYEE IS SUFFERING FROM DISEASE THAT HAS TO BE TERMINATED REST[S] UPON THE EMPLOYER IN ORDER FOR THE EMPLOYEE TO BE ENTITLED TO SEPARATION PAY. IV THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE DELETION OF THE AWARD OF SEPARATION PAY TO THE [PETITIONER].13 The Court finds the petition without merit. The assigned errors in the instant petition essentially boil down to the question of whether petitioner is entitled to separation pay under the provisions of the Labor Code, particularly Article 284 thereof, which reads as follows: An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half () month salary for every year of service whichever is greater, a fraction of at least six months being considered as one (1) whole year. A plain reading of the abovequoted provision clearly presupposes that it is the employer who terminates the services of the employee found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health

of his co-employees. It does not contemplate a situation where it is the employee who severs his or her employment ties. This is precisely the reason why Section 8,14 Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, directs that an employer shall not terminate the services of the employee unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. Hence, the pivotal question that should be settled in the present case is whether respondent, in fact, dismissed petitioner from his employment. A perusal of the Decisions of the Labor Arbiter and the NLRC would show, however, that there was no discussion with respect to the abovementioned issue. Both lower tribunals merely concluded that petitioner is entitled to separation pay under Article 284 of the Labor Code without any explanation. The Court finds no convincing justification, in the Decision of the Labor Arbiter on why petitioner is entitled to such pay. In the same manner, the NLRC Decision did not give any rationalization as the gist thereof simply consisted of a quoted portion of the appealed Decision of the Labor Arbiter. On the other hand, the Court agrees with the CA in its observation of the following circumstances as proof that respondent did not terminate petitioner's employment: first, the only cause of action in petitioner's original complaint is that he was "offered a very low separation pay"; second, there was no allegation of illegal dismissal, both in petitioner's original and amended complaints and position paper; and, third, there was no prayer for reinstatement. In consonance with the above findings, the Court finds that petitioner was the one who initiated the severance of his employment relations with respondent. It is evident from the various pleadings filed by petitioner that he never intended to return to his employment with respondent on the ground that his health is failing. Indeed, petitioner did not ask for reinstatement. In fact, he rejected respondent's offer for him to return to work. This is tantamount to resignation. Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to disassociate himself from his employment.15 It may not be amiss to point out at this juncture that aside from Article 284 of the Labor Code, the award of separation pay is also authorized in the situations dealt with in Article 28316 of the same Code and under Section 4 (b), Rule I, Book VI of the Implementing Rules and Regulations of the said Code17 where there is illegal dismissal and reinstatement is no longer feasible. By way of exception, this Court has allowed grants of separation pay to stand as "a measure of social justice" where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.18 However, there is no provision in the Labor Code which grants separation pay to voluntarily resigning employees. In fact, the rule is that an employee who voluntarily resigns from employment is not entitled to separation pay, except when it is stipulated in the employment contract or CBA, or it is sanctioned by established employer practice or policy.19 In the present case, neither the abovementioned provisions of the Labor Code and its implementing rules and regulations nor the exceptions apply because petitioner was

not dismissed from his employment and there is no evidence to show that payment of separation pay is stipulated in his employment contract or sanctioned by established practice or policy of herein respondent, his employer. Since petitioner was not terminated from his employment and, instead, is deemed to have resigned therefrom, he is not entitled to separation pay under the provisions of the Labor Code. The foregoing notwithstanding, this Court, in a number of cases, has granted financial assistance to separated employees as a measure of social and compassionate justice and as an equitable concession. Taking into consideration the factual circumstances obtaining in the present case, the Court finds that petitioner is entitled to this kind of assistance. Citing Eastern Shipping Lines, Inc. v. Sedan,20 this Court, in the more recent case of Eastern Shipping Lines v. Antonio,21 held: But we must stress that this Court did allow, in several instances, the grant of financial assistance. In the words of Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of social justice and exceptional circumstances, and as an equitable concession. The instant case equally calls for balancing the interests of the employer with those of the worker, if only to approximate what Justice Laurel calls justice in its secular sense. In this instance, our attention has been called to the following circumstances: that private respondent joined the company when he was a young man of 25 years and stayed on until he was 48 years old; that he had given to the company the best years of his youth, working on board ship for almost 24 years; that in those years there was not a single report of him transgressing any of the company rules and regulations; that he applied for optional retirement under the company's non-contributory plan when his daughter died and for his own health reasons; and that it would appear that he had served the company well, since even the company said that the reason it refused his application for optional retirement was that it still needed his services; that he denies receiving the telegram asking him to report back to work; but that considering his age and health, he preferred to stay home rather than risk further working in a ship at sea. In our view, with these special circumstances, we can call upon the same "social and compassionate justice" cited in several cases allowing financial assistance. These circumstances indubitably merit equitable concessions, via the principle of "compassionate justice" for the working class. x x x In the present case, respondent had been employed with the petitioner for almost twelve (12) years.lawwphil On February 13, 1996, he suffered from a "fractured left transverse process of fourth lumbar vertebra," while their vessel was at the port of Yokohama, Japan. After consulting a doctor, he was required to rest for a month. When he was repatriated to Manila and examined by a company doctor, he was declared fit to continue his work. When he reported for work, petitioner refused to employ him despite the assurance of its personnel manager. Respondent patiently waited for more than one year to embark on the vessel as 2nd Engineer, but the position was not given to him, as it was occupied by another person known to one of the stockholders. Consequently, for having been deprived of continued employment with petitioner's vessel,

respondent opted to apply for optional retirement. In addition, records show that respondent's seaman's book, as duly noted and signed by the captain of the vessel was marked "Very Good," and "recommended for hire." Moreover, respondent had no derogatory record on file over his long years of service with the petitioner.1avvphi1 Considering all of the foregoing and in line with Eastern, the ends of social and compassionate justice would be served best if respondent will be given some equitable relief. Thus, the award of P100,000.00 to respondent as financial assistance is deemed equitable under the circumstances.22 While the abovecited cases authorized the grant of financial assistance in lieu of retirement benefits, the Court finds no cogent reason not to employ the same guiding principle of compassionate justice applied by the Court, taking into consideration the factual circumstances obtaining in the present case. In this regard, the Court finds credence in petitioner's contention that he is in the employ of respondent for more than 35 years. In the absence of a substantial refutation on the part of respondent, the Court agrees with the findings of the Labor Arbiter and the NLRC that respondent company is not distinct from its predecessors but, in fact, merely continued the operation of the latter under the same owners and the same business venture. The Court further notes that there is no evidence on record to show that petitioner has any derogatory record during his long years of service with respondent and that his employment was severed not by reason of any infraction on his part but because of his failing physical condition. Add to this the willingness of respondent to give him financial assistance. Hence, based on the foregoing, the Court finds that the award of P50,000.00 to petitioner as financial assistance is deemed equitable under the circumstances. WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION by awarding petitioner with financial assistance in the amount of P50,000.00. SO ORDERED.

G.R. No. 187188

June 27, 2012

SALVADOR O. MOJAR, EDGAR B. BEGONIA, Heirs of the late JOSE M. CORTEZ, RESTITUTO GADDI, VIRGILIO M. MONANA, FREDDIE RANCES, and EDSON D. TOMAS, Petitioners, vs. AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC., et al.,1 Respondents. DECISION SERENO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to annul the entire proceedings before the Court of Appeals (CA) in CA-G.R. SP No. 102201, in which it issued its Decision dated 21 July 2008 and Resolution dated 16 March 2009.2 Statement of Facts and of the Case Petitioners were employed as security guards by respondent and assigned to the various branches of the Bank of Commerce in Pangasinan, La Union and Ilocos Sur. In separate Office Orders dated 23 and 24 May 2002, petitioners were relieved from their respective posts and directed to report to their new assignments in Metro Manila effective 3 June 2002. They, however, failed to report for duty in their new assignments, prompting respondent to send them a letter dated 18 June 2002. It required a written explanation why no disciplinary action should be taken against them, but the letter was not heeded. On 15 February 2005, petitioners filed a Complaint for illegal dismissal against respondent and the Bank of Commerce, Dagupan Branch, before the National Labor Relations Commission (NLRC). Petitioners claimed, among others, that their reassignment was a scheme to sever the employer-employee relationship and was done in retaliation for their pressing their claim for salary differential, which they had earlier filed against respondent and the Bank of Commerce before the NLRC. They also contended that the transfer to Manila was inconvenient and prejudicial, since they would incur additional expenses for board and lodging. On 22 May 2006, the Labor Arbiter (LA) rendered a Decision3 finding that petitioners were illegally dismissed. The dispositive portion reads: WHEREFORE, premises considered, judgment is hereby rendered ordering respondents to reinstate all the complainants to their former assignment in Pangasinan with full backwages and if reinstatement is no longer possible, to pay separation pay of one month for every year of service each of the seven complainant security guards. (A detailed computation of the judgment award is attached as Annex "A.")4 (Italicized in the original)

On appeal, the NLRC affirmed the LAs ruling, with the modification that the Complaint against the Bank of Commerce was dismissed.5 The dispositive portion provides: WHEREFORE, premises considered, the appeal of Agro Commercial Security Service Agency, Inc. is hereby DISMISSED for lack of merit. The Appeal of Bank of Commerce is GRANTED for being impressed with merit. Accordingly, judgment is hereby rendered MODIFYING the Decision of the Labor Arbiter dated May 22, 2006 by DISMISSING the complaint against Bank of Commerce-Dagupan. All other dispositions of the Labor Arbiter not so modified, STAYS.6 On 23 January 2008, respondent filed a Motion for Extension to file a Petition for Certiorari before the CA. In a Resolution dated 20 February 2008, the latter granted the Motion for Extension, allowing respondent until 10 February 2008 within which to file its Petition. On 9 February 2008, respondent filed its Petition for Certiorari before the appellate court. On 30 June 2008, the CA issued a Resolution noting that no comment on the Petition had been filed, and stating that the case was now deemed submitted for resolution. On 21 July 2008, the CA rendered its Decision. Finding merit in the Petition, it found the Orders transferring petitioners to Manila to be a valid exercise of management prerogative. The records were bereft of any showing that the subject transfer involved a diminution of rank or salaries. Further, there was no showing of bad faith or ill motive on the part of the employer. Thus, petitioners refusal to comply with the transfer orders constituted willful disobedience of a lawful order of an employer and abandonment, which were just causes for termination under the Labor Code. However, respondent failed to observe the due process requirements in terminating them. The dispositive portion of the CA Decision provides: WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision and Resolution of the NLRC dated July 31, 2007 and October 31, 2007[,] respectively, in NLRC NCR CA No. 046036-05 are REVERSED and SET ASIDE. The complaints of private respondents for illegal dismissal are hereby DISMISSED. However, petitioner is ordered to pay private respondents the sum of P 10,000.00 each for having violated the latters right to statutory due process.7 On 1 August 2008, petitioner Mojar filed a Manifestation8 before the CA, stating that he and the other petitioners had not been served a copy of the CA Petition. He also said that they were not aware whether their counsel before the NLRC, Atty. Jose C. Espinas, was served a copy thereof, since the latter had already been bedridden since December 2007 until his demise on "25 February 2008."9 Neither could their new counsel, Atty. Mario G. Aglipay, enter his appearance before the CA, as petitioners failed to "get [the] folder from the office of Atty. Espinas, as the folder can no longer be found."10 Thereafter, petitioners filed a Motion to Annul Proceedings11 dated 9 September 2008 before the CA. They moved to annul the proceedings on the ground of lack of jurisdiction. They argued that the NLRC Decision had already attained finality, since the Petition before the CA was belatedly filed, and the signatory to the Certification of non-forum shopping lacked the proper authority.

In a Resolution dated 16 March 2009, the CA denied the Motion to Annul Proceedings. Hence, this Petition. The Petition raised the following arguments: (1) There was no proof of service attached to the Motion for Extension to file a Petition for Certiorari before the CA; thus, both the Motion and the Petition were mere scraps of paper. (2) Respondent purposely intended to exclude petitioners from the proceedings before the CA by omitting their actual addresses in the CA Petition, a mandatory requirement under Section 3, Rule 46; in relation to Section 1, Rule 65 of the Rules of Court. Further, respondent failed to prove the valid service of its CA Petition upon petitioners former counsel of record. (3) The CA was grossly ignorant of the law in ignoring jurisprudence, which states that when the floating status of an employee lasts for more than six months, the latter may be considered to have been constructively dismissed. On 3 September 2009, respondent filed its Comment on the Petition, pursuant to this Courts 29 June 2009 Resolution. In its Comment, it argued that the CA Decision had already become final and executory, inasmuch as the Motion to Annul Proceedings, a procedural approach not provided for in the Rules, was filed some 44 days after the service of the CA Decision on the counsel for petitioners. Further, Atty. Aglipay had then no legal standing to appear as counsel, considering that there was still no substitution of counsel at the time he filed the Motion to Annul Proceedings. In any case, petitioners are bound by the actions of their counsel, Atty. Espinas. On 1 March 2010, this Court issued a Resolution requiring petitioners to file their reply, which petitioners complied with on 26 April 2010. In their Reply, petitioners state among others that the records of the CA case showed that there was a deliberate violation of their right to due process. The CA Petition did not contain the required affidavit of service, which alone should have caused the motu proprio dismissal thereof. Further, the instant Petition before this Court is an appropriate mode to contest the CA Decision and Resolution, which petitioners contend are void judgments. They also argue that there is no rule on the clients substitution in case of the death of counsel. Instead, the reglementary period to file pleadings in that case must be suspended and made more lenient, considering that the duty of substitution is transferred to a non-lawyer. On 30 March 2011, respondent filed a Motion for Early Resolution of the case. Petitioners likewise filed a Motion for Leave (For the Admission of the Instant Comment on Private Respondents Motion for Early Resolution), stating that they were joining respondent in moving for the early resolution of the case. This Court will resolve the issues raised in seriatim. Actual Addresses of Parties Petitioners contend that the CA should not have taken cognizance of the Petition before it, as their actual addresses were not indicated therein as required under Section 3, Rule 4612 of the Rules of Court, and pursuant to Cendaa v. Avila.13 In the 2008 case Cendaa, this Court ruled that the requirement that a petition for certiorari must contain the actual addresses of all the

petitioners and the respondents is mandatory. The failure to comply with that requirement is a sufficient ground for the dismissal of a petition. This rule, however, is not absolute. In the 2011 case Santos v. Litton Mills Incorporated,14 this Court ruled that where the petitioner clearly mentioned that the parties may be served with the courts notices or processes through their respective counsels, whose addresses have been clearly specified as in this case, this act would constitute substantial compliance with the requirements of Section 3, Rule 46. The Court further observed that the notice required by law is notice to counsel if the party has already appeared by counsel, pursuant to Section 2, Rule 13 of the Rules of Court. In its Petition before the CA, respondent clearly indicated the following: THE PARTIES 2.0. The petitioner AGRO COMMERCIAL SECURITY SERVICE AGENCY, INC. (hereafter petitioner AGRO), is a corporation existing under Philippine laws, and may be served with process thru counsel, at his address hereunder indicated; private respondents (1) SALVADOR O. MOJAR; (2) EDGAR B. BEGONIA; (3) JOSE M. CORTEZ; (4) FREDDIE RANCES; (5) VIRGILIO MONANA; (6) RESTITUTU [sic] GADDI; and, (7) EDSON D. TOMAS, are all of age, and during the material period, were in the employ of petitioner AGRO as security guards; said respondents may be served with process thru their common counsel, ATTY. JOSE C. ESPINAS at No. 51 Scout Tuazon, Quezon City; on the other hand, respondent National Labor Relations Commission, 1st Division, Quezon City, is the agency having jurisdiction over labor disputes in the Philippines and may be served with process at offices in Quezon City;15 The foregoing may thus be considered as substantial compliance with Section 3, Rule 46. In any case, and as will be discussed further below, the CA had sufficient reason to take cognizance of the Petition. Affidavit of Service Section 3, Rule 46 provides that the petition for certiorari should be filed together with the proof of service thereof on the respondent. Under Section 13, Rule 13 of the Rules of Court, if service is made by registered mail, as in this case, proof shall be made by an affidavit of the person mailing and the registry receipt issued by the mailing office. Section 3, Rule 46 further provides that the failure to comply with any of the requirements shall be sufficient ground for the dismissal of the petition. Petitioners allege that no affidavit of service was attached to the CA Petition. Neither is there any in the copy of the CA Petition attached to the instant Petition. In its Comment, respondent claims that petitioners through their counsel, Atty. Aglipay can be charged with knowledge of the pendency of the CA Petition. It says that on April 2008, Atty. Aglipay filed before the NLRC an Entry of Appearance and Motion for Execution Pending Appeal.16 However, petitioners merely indicated therein that they were "respectfully mov[ing] for the execution pending appeal of the Labor Arbiters decision dated 22 May 2006 affirmed by the NLRC."17 There was no indication

that they had been served a copy of the CA Petition. No other proof was presented by respondent to show petitioners actual receipt of the CA Petition. In any case, this knowledge, even if presumed, would not and could not take the place of actual service and proof of service by respondent. In Ferrer v. Villanueva,18 petitioner therein failed to append the proof of service to his Petition for Certiorari. Holding that this failure was a fatal defect, the Court stated: There is no question that petitioner herein was remiss in complying with the foregoing Rule. In Cruz v. Court of Appeals, we ruled that with respect to motions, proof of service is a mandatory requirement. We find no cogent reason why this dictum should not apply and with more reason to a petition for certiorari, in view of Section 3, Rule 46 which requires that the petition shall be filed "together with proof of service thereof." We agree with the Court of Appeals that the lack of proof of service is a fatal defect. The utter disregard of the Rule cannot be justified by harking to substantial justice and the policy of liberal construction of the Rules. Technical rules of procedure are not meant to frustrate the ends of justice. Rather, they serve to effect the proper and orderly disposition of cases and thus effectively prevent the clogging of court dockets. (Emphasis in the original) Indeed, while an affidavit of service is required merely as proof that service has been made on the other party, it is nonetheless essential to due process and the orderly administration of justice.19 Be that as it may, it does not escape the attention of this Court that in the CA Resolution dated 16 March 2009, the appellate court stated that their records revealed that Atty. Espinas, petitioners counsel of record at the time, was duly served a copy of the following: CA Resolution dated 20 February 2008 granting respondents Motion for Extension of Time to file the CA Petition; CA Resolution dated 24 April 2008 requiring petitioners to file their Comment on the CA Petition; and CA Resolution dated 30 June 2008, submitting the case for resolution, as no comment was filed. Such service to Atty. Espinas, as petitioners counsel of record, was valid despite the fact he was already deceased at the time. If a party to a case has appeared by counsel, service of pleadings and judgments shall be made upon his counsel or one of them, unless service upon the party is specifically ordered by the court. It is not the duty of the courts to inquire, during the progress of a case, whether the law firm or partnership representing one of the litigants continues to exist lawfully, whether the partners are still alive, or whether its associates are still connected with the firm.20 It is the duty of party-litigants to be in contact with their counsel from time to time in order to be informed of the progress of their case. It is likewise the duty of parties to inform the court of the fact of their counsels death.21 Their failure to do so means that they have been negligent in the protection of their cause.22 They cannot pass the blame to the court, which is not tasked to monitor the changes in the circumstances of the parties and their counsel. Substitution of Counsel

Petitioners claim that Atty. Espinas passed away on 8 February 2008. They further claim that he was already bedridden as early as December 2007, and thus they "failed to get any information whether [he] was served with a copy of the [CA Petition]."23 Petitioners were negligent in the conduct of their litigation. Having known that Atty. Espinas was already bedridden as early as December 2007, they should have already obtained new counsel who could adequately represent their interests. The excuse that Atty. Aglipay could not enter his appearance before the CA "because [petitioners] failed to get [their] folder from the office of Atty. Espinas"24 is flimsy at best. The requirements for a valid substitution of counsel have been jurisprudentially settled in this wise: Under Section 26, Rule 138 of the Rules of Court and established jurisprudence, a valid substitution of counsel has the following requirements: (1) the filing of a written application for substitution; (2) the client's written consent; (3) the consent of the substituted lawyer if such consent can be obtained; and, in case such written consent cannot be procured, (4) a proof of service of notice of such motion on the attorney to be substituted in the manner required by the Rules. Where death of the previous attorney is the cause of substitution of the counsel, a verified proof of the death of such attorney (usually a death certificate) must accompany the notice of appearance of the new counsel.25 The fact that petitioners were unable to obtain their folder from Atty. Espinas is immaterial. Proof of service upon the lawyer to be substituted will suffice where the lawyers consent cannot be obtained. With respect to the records of the case, these may easily be reconstituted by obtaining copies thereof from the various courts involved. Petitioners allegedly went to the CA sometime prior to 31 July 2008, or the date of filing of their Manifestation before the CA, to inquire about the status of their case. Allegedly, they "always visited the Court of Appeals for [the] development of their case."26 It is doubtful that a person who regularly follows up the status of his case before a court would not be told, first, that a petition has been filed against him; and, second, that the courts resolutions have been sent to his counsel. It is questionable why, knowing these matters, petitioners did not seek the replacement of their counsel, if the latter was unable to pursue their case. Further, despite their manifestation that, sometime prior to 31 July 2008, they were already aware that the case had been submitted for resolution, they still waited until 9 September 2008 or until they allegedly had knowledge of the CA Decision before they filed the Motion to Annul Proceedings. In Ampo v. Court of Appeals,27 this Court explained the vigilance that must be exercised by a party: We are not persuaded by petitioners argument that he was not aware that his counsel had died or that an adverse judgment had already been rendered until he received the notice of promulgation from the RTC of Butuan City on April 20, 2005. Time and again we have stated that equity aids the vigilant, not those who slumber on their rights. Petitioner should have taken it upon himself to periodically keep in touch with his counsel, check with the court, and inquire about the status

of the case. Had petitioner been more prudent, he would have found out sooner about the death of his counsel and would have taken the necessary steps to prevent his present predicament. xxx xxx xxx

Litigants who are represented by counsel should not expect that all they need to do is sit back, relax and await the outcome of their cases. Relief will not be granted to a party who seeks avoidance from the effects of the judgment when the loss of the remedy at law was due to his own negligence. The circumstances of this case plainly show that petitioner only has himself to blame. Neither can he invoke due process. The essence of due process is simply an opportunity to be heard. Due process is satisfied when the parties are afforded a fair and reasonable opportunity to explain their respective sides of the controversy. Where a party, such as petitioner, was afforded this opportunity to participate but failed to do so, he cannot complain of deprivation of due process. If said opportunity is not availed of, it is deemed waived or forfeited without violating the constitutional guarantee. In this case, petitioners must bear the fruits of their negligence in the handling of their case. They may not decry the denial of due process, when they were indeed afforded the right to be heard in the first place. Substantive Issue: Illegal Dismissal Petitioners argue that they were illegally dismissed, based on the 1989 case Agro Commercial Security Services Agency, Inc. v. NLRC.,28 which holds that when the floating status of employees lasts for more than six (6) months, they may be considered to have been illegally dismissed from the service. Unfortunately, the above-mentioned case is not applicable here. In Agro, the service contracts of the security agency therein with various corporations and government agencies to which the security guards were previously assigned were terminated, generally due to the sequestration of the said offices. Accordingly, many of the security guards were placed on floating status. "Floating status" means an indefinite period of time when one does not receive any salary or financial benefit provided by law.29 In this case, petitioners were actually reassigned to new posts, albeit in a different location from where they resided. Thus, there can be no floating status or indefinite period to speak of. Instead, petitioners were the ones who refused to report for work in their new assignment. In cases involving security guards, a relief and transfer order in itself does not sever the employment relationship between the security guards and their agency. Employees have the right to security of tenure, but this does not give them such a vested right to their positions as would deprive the company of its prerogative to change their assignment or transfer them where their services, as security guards, will be most beneficial to the client.30 An employer has the right to transfer or assign its employees from one office or area of operation to another in pursuit of its legitimate business interest, provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the transfer is not motivated by

discrimination or bad faith, or effected as a form of punishment or demotion without sufficient cause.31 While petitioners may claim that their transfer to Manila will cause added expenses and inconvenience, we agree with the CA that, absent any showing of bad faith or ill motive on the part of the employer, the transfer remains valid. WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated 21 July 2008 and Resolution dated 16 March 2009 in CA-G.R. SP No. 102201 are hereby AFFIRMED. SO ORDERED. MARIA LOURDES P. A. SERENO Associate Justice

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