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TPI PHILIPPINES CEMENT
CORPORATION, TPI PHILIPPINES VINYL CORPORATION, AND THUN TRITASAVIT,
Petitioners,
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versus - BENEDICTO A. CAJUCOM
VII, Respondent. |
G.R. No. 149138
Present: Puno, J., Chairperson, Sandoval-Gutierrez, * AZCUNA, and
GARCIA, JJ. Promulgated: February 28, 2006 |
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D E C I S I O N
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SANDOVAL-GUTIERREZ,
J.: |
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For our
resolution is the instant petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision[1]
dated April 6, 2001 and the Resolution[2]
dated July 18, 2001 rendered by the Court of Appeals in CA-G.R. SP No. 58076,
entitled “Benedicto A. Cajucom VII v. TPI Philippines Cement Corporation,
TPI Philippines Vinyl Corporation, Thun Tritasavit and the National Labor
Relations Commission.”
The factual antecedents are:
TPI Philippines Cement Corporation (TP Cement) and TPI
Philippines Vinyl Corporation (TP Vinyl), petitioners, are wholly owned
subsidiaries of Thai Petrochemical Industry Public Company, Ltd. Both petitioner companies were registered
with the Securities and Exchange Commission.
On P70,000.00.
As a result of the economic slowdown then experienced in
this country, petitioner TP Cement, having no viable projects, shortened its
corporate term from 50 years to 2 years and 7 months. It was dissolved on
Thus,
petitioners implemented cost-cutting measures resulting in the termination from
the service of their employees, including respondent.
On
Respondent
contested petitioners’ action, claiming that the termination of his services
was based erroneously on petitioners’ probable losses, instead of their actual, substantial and imminent losses,
as shown by
the following: (1)
an increase or raise in his monthly salary from P70,000.00 in
1995 to P80,000.00 in 1996; (2)
hiring by petitioners of more marketing and accounting employees for the period
from July 1997 to December 1998; (3)
acquisition by petitioners in 1998 of a warehouse; and (4) expansion in 1998 of
their operations by including sales and marketing of oil products. Respondent further claimed that petitioners
were motivated by revenge in terminating his services. This stemmed from his
Eventually, or on January 12, 1999, respondent filed
with the Office of the Labor Arbiter a complaint for illegal dismissal against
petitioners, docketed as NLRC-NCR Case No. 00-01-00485-99.
In due
course, the Labor Arbiter rendered a Decision dated
WHEREFORE, premises
considered, judgment is hereby rendered ordering respondents TPI Phils. Cement
Corp., TPI Phil. Vinyl Corp., and Thun Tritasavit, jointly and solidarily to:
1. reinstate
complainant Benedicto A. Cajucom VII to his former position without loss of
seniority rights and privileges with backwages of P240,000.00, subject
to adjustment upon actual reinstatement;
2. pay
complainant moral and exemplary damages at
P5,000,000.00.
SO ORDERED.
Upon appeal, the National Labor Relations Commission (NLRC)
promulgated its Decision dated
The appeal is
meritorious.
x x x
Respondents,
as early as April 1996, began downsizing their operations. More than a year
after such initial cost cutting measure or on September 1997, when they sensed
a continuous business decline and difficulty in implementing their projects,
respondents decided to reduce their office space by moving to a smaller and
cheaper three-storey building at
Also
known to complainant are the voluntary terminations from the service of the
following: Accounting Manager on
Complainant
was even consulted legally. In fact, he
vehemently rejected the intention of respondents to fight the business crisis
by avoiding mass lay-offs, and slashing by 15% to 20% employees’ salaries.
Despite
the downsizing of respondents’ group of companies, which started as early as
April 1996, they even increased the salary of complainant from P70,000.00
to P80,000.00 effective June 1996.
In order to accommodate such increase, respondent Tritasavit agreed to
deduct the same from his own salary, thereby, reducing his (respondent
Tritasavit’s) total monthly salary and making it lower than that of
complainant. This fact is also known to
complainant.
In
addition to these measures being adopted by respondents, they also sold some
company vehicles and used the proceeds to meet their operational expenses and
pay their obligations.
We
are convinced that respondents are suffering from substantial losses and
serious business reverses. The audited financial reports prepared by Sycip
Gorres Velayo and Co. show that as of P12,375,166.00.
After the start of its business in June 1995, respondent, still having
no economically-viable projects in 1996, made use of its entire paid-in capital
of P12,815,000.00 for operational and administrative expenses.
On
the other hand, TPI Philippines Vinyl Corporation, as of 30 June 1998, suffered
losses at P14,186,907.00, which, barely three (3) months thereafter or
as of 30 September 1998, increased to P15,236,103.00. Initially, this company was incorporated
purposely to engage in manufacturing and trading of plastic raw materials, but
due to continuous and worsening economic situation, as shown by its financial trend,
the same incurred a deficit of P15,236,103.00, thus, prompting it to
shift to marketing and trading of TPI products or being a mere marketing arm of
Thai Petrochemicals.
x x x
Respondent
was in fact very honest to complainant by forewarning him, a year in advance,
of the possibility of his separation from the service, should there be no
changes in the economic condition, and by helping complainant in seeking
another job by referring him to other companies. These acts of respondents, to us, are clear
signs of good faith.
We
are persuaded that retrenchment due to substantial losses has been sufficiently
established and that the dismissal of complainant pursuant to Art. 283 of the
Labor Code, was justified.
WHEREFORE,
premises considered, judgment is hereby rendered SETTING ASIDE the decision of
the Labor Arbiter. However, respondents
are ordered to pay complainant his separation pay equivalent to one month
salary per year of service. Claims for
moral and exemplary damages are hereby DISMISSED for utter lack of merit.
SO
ORDERED.
Both parties filed their respective motions for
reconsideration but were denied by the NLRC in a Resolution dated
Respondent then filed a petition for certiorari with
the Court of Appeals alleging that the NLRC committed grave abuse of discretion
in finding that the termination of his employment is justified.
On
However, with respect to
the monetary reward, we have to modify.
x x x
In the recent case of Serrano
v. NLRC, et al. (323 SCRA 445),
the Supreme Court abandoned the policy of just directing the employer to
indemnify the dismissed employees by imposing fines of varying amounts. In this landmark case, the High Court
enunciated that, should there be any just cause for dismissing an employee
under any of the causes enumerated in Art. 282 or any of the authorized causes
under Art. 283 of the Labor Code, as amended, but there was no prior notice or
investigation, the remedy is to order the payment of full backwages although
his dismissal must be upheld. His
termination should not be considered void but he should simply be paid
separation pay.
x x x
In their memorandum of appeal, private respondents
alleged that on
Private respondents admitted that a notice of termination
was served upon the DOLE on
With respect to the payment of separation pay, Sec. 9
(b), Rule VI of the New Rules of Procedure of the NLRC provides:
Sec. 9. x x x
(b) Where the
termination of employment is due to retrenchment to prevent losses and in case
of closure or cessation of operations of establishment or undertaking not due
to serious business losses or financial reverses, or where the employee suffers
from a disease and his continued employment is prohibited by law or is
prejudicial to his health or to the health of his co-employees, the employee
shall be entitled to termination pay equivalent to at least one-half month’s
pay for every year of service, a fraction of at least six months being
considered as one whole year. (emphasis ours.)
In the case at bar, public respondent awarded petitioner one month salary pay per year of
service as his separation pay. Although
private respondents filed a motion for partial reconsideration regarding the
same, they did not push through with it when it was denied by public
respondent. Thus, the same has become
final.
WHEREFORE, in view of the foregoing, the decision of the
public respondent is AFFIRMED with modification that private respondents are
ordered to pay petitioner backwages from the time he was dismissed from work up
to the time the dismissal is adjudged to be just.
SO ORDERED.
In
a Resolution dated
This prompted petitioners to file with this Court the
present petition. They contend
that since the separation of respondent from the service is by reason of
retrenchment, an authorized cause, the Court of Appeals erred in awarding him backwages.
Normally,
this Court is not a trier of facts.[3] However, since the findings of fact of the
Labor Arbiter, on one hand, and the NLRC and the Court of Appeals, on the
other, are conflicting,[4] we
shall discuss our factual findings and our determination of the main issue.
Retrenchment,
under Article 283 of the Labor Code, as amended, is recognized as an authorized
cause for the dismissal of an employee from the service. This article 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 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 worker 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 closure or cessation of operations of the
establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (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.
In Trendline Employees
Association-Southern Philippines Federation of Labor v. NLRC,[5]
we enumerated the requisites of retrenchment, thus:
To be valid, three
requisites must concur, as provided in Article 283 of the Labor Code, as
amended, namely: (1) The retrenchment is necessary to prevent losses and
the same is proven; (2) Written notice to the employees and to
the DOLE at least one month prior to the intended date thereof; and (3) Payment of separation pay
equivalent to one month pay or at least ½ month pay for every year of service,
whichever is higher.
We
observe that the Court of Appeals, in finding that petitioners suffered from
financial losses and justifying the separation of respondent from the service,
relied on the audited reports[6] prepared
by Sycip Gorres Velayo & Co. Such
reliance is in order. In
x x x. We believe that
the standard proof of a company’s financial standing is its financial
statements duly audited by independent and credible external auditors. Financial statements audited by an
independent external auditor, as in the case at bar, constitute the
normal method of proof of profit and loss performance of a company.
But
respondent insists that actual, not probable losses, justify
retrenchment. Article 283
(quoted earlier) entails, among others, only a situation where there is
“retrenchment to prevent losses.”[8] The
phrase “to prevent losses” means that retrenchment or termination from the
service of some employees is authorized to be undertaken by the
employer sometime before the losses
anticipated are actually sustained or realized.[9] This is the situation in the case at
bar. Evidently, actual losses need not
set in prior to retrenchment.
As mandated by Article 283 of the Labor Code, the employer
shall serve on the worker and the DOLE notice of retrenchment to prevent losses,
at least one month before the intended date thereof.
Records show that on
On this point, our ruling in Agabon v. National Labor
Relations Commission[10]
is relevant, thus:
Procedurally, x x x (2)
if the dismissal is based on authorized causes under Articles 283 and 294, the
employer must give the employee and the Department of Labor and Employment
written notices 30 days prior to the effectivity of his separation.
From the foregoing rules
four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283,
or for health reasons under Article 284, and due process was observed; (2) the
dismissal is without just or authorized cause but due process was observed; (3)
the dismissal is without just or authorized cause and there was no due process;
and (4) the dismissal is for just or authorized cause but due process
was not observed. (emphasis
supplied).
x x x x
x x
In the fourth situation,
the dismissal should be upheld.
While the procedural infirmity cannot be cured, it should not invalidate
the dismissal. However, employer should
be held liable for non-compliance with the procedural requirements of due
process.
x x x x
x x
The violation of the petitioners’
right to statutory due process by the private respondent warrants the payment
of indemnity in the form of nominal damages. The
amount of such damages is addressed to the sound discretion of the court,
taking into account the relevant circumstances. Considering the prevailing
circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve
to deter employers from future violations of the statutory due process rights
of employees. At the very least, it
provides a vindication or recognition of this fundamental right granted to the
latter under the Labor Code and its Implementing Rules.
We reiterate that the dismissal of respondent from the service
is by reason of retrenchment, an authorized cause. But due process was not observed as the
required notices were not sent to respondent and the DOLE one month prior to
the effectivity of his termination.
Thus, petitioners should be liable for violation of his right to due
process and should pay him indemnity in the form of nominal damages, pursuant
to our ruling in Agabon, which we fix at P20,000.00.[11]
Now, on the issue of whether respondent is entitled to
backwages, we rule that the Court of Appeals erred in awarding him such
backwages on the basis of Serrano.
Our ruling in this case has been overturned by Agabon cited
earlier.
It bears reiterating that under Article 283, in case of
retrenchment to prevent losses, respondent is entitled to an award of separation
pay equivalent to one-half (1/2) month’s pay for every year of service
(with a fraction of at least six [6] months considered one [1] whole
year). Since he was employed by
petitioners for four (4) years, or from June 1, 1995 to December 30, 1998, with
a monthly salary of P80,000.00, he should be paid P160,000.00 as
separation pay.
WHEREFORE, the petition is
partly GRANTED. The
challenged Decision dated April 6, 2001 and Resolution dated July 18,
2001 in CA-G.R. SP No. 58076 are AFFIRMED with MODIFICATION in the sense
that petitioners are hereby ordered to pay respondent (1) P160,000.00 as
separation pay; and (2) P20,000.00 as nominal damages. The award of backwages is deleted.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
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REYNATO S. PUNO Associate Justice
Chairperson |
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(On leave) RENATO C. CORONA Associate Justice |
ADOLFO S. AZCUNA Associate Justice |
CANCIO C. GARCIA
Associate Justice |
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I attest that the conclusions in the
above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.
REYNATO S. PUNO
Associate Justice
Chairperson, Second Division
Chief Justice
* On leave.
[1] Penned
by Justice Delilah Vidallon-Magtolis and concurred in by Justice Teodoro P.
Regino and Justice Alicia L. Santos (all retired), Annex “A,” Petition for
Review, Rollo, pp. 33-43.
[2] Annex
“B,” id., pp. 44-45.
[3] Far East Bank and Trust Co. v. Court of Appeals, 326 Phil. 15 (1996).
[4] Social Security System v. Court of
Appeals, G.R. No. 100388,
[5]
G.R.
No. 112923,
[6] Rollo, pp. 101-113.
[7]
G.R.
No. 110072,
[8]
Asian
Alcohol Corporation v. NLRC, G.R. No. 131108,
[9]
Lopez Sugar Corporation v. Federation of
Free Workers, G.R. Nos. 75700-01,
[10]
G.R.
No. 158693, November 17, 2004, 442 SCRA 573, 608, 617, cited in Lavador v.
“J” Marketing Corporation, G.R. No. 157757, June 28, 2005, pp. 6-7.
[11]
The
ponente, although maintaining her dissent, submits to the ruling of the
majority in Agabon that violation by the employer of the employee’s
right to due process warrants the payment of nominal damages by the former.