Republic of the
Supreme Court
FIRST DIVISION
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LAMBERT PAWNBROKERS |
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G.R. No. 170464 |
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and JEWELRY CORPORATION |
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and LAMBERT LIM, |
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Petitioners, |
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Present: |
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BRION,* |
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- versus - |
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ABAD, ** and |
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PEREZ, JJ. |
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HELEN BINAMIRA, |
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Promulgated: |
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Respondent. |
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July 12, 2010 |
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D E C I S I O N
It is fundamental that an employer is liable for illegal dismissal when
it terminates the services of the employee without just or authorized cause and
without due process of law.
This Petition for Review
on Certiorari[1] assails the Decision[2] dated
Factual Antecedents
Petitioner Lambert Lim (Lim) is a
Malaysian national operating various businesses in Cebu and
On
Helen thus filed
a case for illegal dismissal against petitioners docketed as NLRC RAB-VII CASE
NO. 01-0003-99-B.[6] In her Position Paper[7]
Helen alleged that she was dismissed without cause and the benefit of due
process. She claimed that she was a mere
casualty of the war of attrition between Lim and the Binamira family. Moreover, she claimed that there was no proof
that the company was suffering from business losses.
In their
Position Paper,[8]
petitioners asserted that they had no choice but to retrench respondent due to
economic reverses. The corporation
suffered a marked decline in profits as well as substantial and persistent
increase in losses. In its Statement of
Income and Expenses, its gross income for 1998 dropped from P1million to
P665,000.00.
Ruling of the Labor Arbiter
On
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 Decision[11]
reads:
WHEREFORE, premises duly considered, the decision
of the Labor Arbiter dated
Other claims are denied for lack of merit.
SO ORDERED.[12]
Petitioners filed
a Motion for Reconsideration.[13]
On
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 Resolution[15]
dated
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 employee’s 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
WHEREFORE, the Resolution dated
A new Decision is hereby entered declaring the
dismissal of petitioner, Helen B. Binamira, as illegal and directing the
private respondents, Lambert’s 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) month’s 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.
Attorney’s
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 Resolution[18]
dated
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.
Respondent’s
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 Helen’s dismissal was valid on account of
retrenchment due to economic reverses.
On the other hand, the NLRC originally ruled that Helen’s 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 Expenses[23]
for the year 1997-1998 submitted by the petitioners was prepared only on
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
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, Helen’s 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 one’s 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
A dismissal may be contrary to law
but by itself alone, it does not establish bad faith to entitle the dismissed
employee to moral damages. The award of
moral and exemplary damages cannot be justified solely upon the premise that
the employer dismissed his employee without authorized cause and due process.[31]
Considering that there is no clear
and convincing evidence showing that the termination of Helen’s 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 attorney’s fee is warranted pursuant to Article 111 of the Labor
Code. Ten (10%) percent of the total
award is usually the reasonable amount of attorney’s 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 attorney’s 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.
MARIANO
C.
Associate Justice
WE
CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
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ARTURO
D. BRION Associate
Justice |
ROBERTO A. ABAD Associate
Justice |
JOSE
Associate Justice
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.
RENATO C. CORONA
Chief Justice
* Per Special Order No. 856 dated
** Per
Special Order No. 869 dated
[1] Rollo, pp. 21-42.
[2] CA rollo, pp. 323-331; penned by Associate Justice Vicente L. Yap and concurred in by Associate Justices Isaias P. Dicdican and Enrico A. Lanzanas.
[3]
[4]
[5] CA rollo, p. 46.
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19] Rollo, 27.
[20] Pascua v. National Labor Relations Commission, 351 Phil 48, 61 (1998).
[21] Anabe v. Asian Construction, G.R. No.
183233,
[22]
[23] CA rollo, p.45.
[24] Asian Alcohol Corporation v. National Labor Relations Commission, 364 Phil 912, 930 (1999).
[25] Philippine Carpet Employees Association
(PHILCEA) v. Sto. Tomas, G.R. No. 168719,
[26] CA rollo, p. 46.
[27] Equitable Banking Corporation v. National Labor Relations Commission, 339 Phil. 541, 566 (1977).
[28]
[29] Tan v. Timbal, 478 Phil. 497, 505 (2004).
[30] 484 Phil 880, 891 (2004).
[31] Manila Water Company, Inc. v. Peña, 478 Phil. 68, 84 (2004).
[32] Quijano v. Mercury Drug Corporation and National Labor Relations Commission, 354 Phil. 112, 127 (1998).