Republic of the
G.R. No. 170464
and JEWELRY CORPORATION
and LAMBERT LIM,
- versus -
ABAD, ** and
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 assails the Decision dated
August 4, 2005 of the Court of Appeals (CA) in CA-G.R. CEB SP No. 00010, which reversed and set aside the Resolutions dated July 30, 2003 and May 31, 2004 issued by the National Labor Relations Commission (NLRC) in NLRC Case No. V-000454-00 (RAB VII-01-0003-99-B).
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.
September 14, 1998, Helen received a letter 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. In her Position Paper 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, 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
November 26, 1999, Labor Arbiter Geoffrey P. Villahermosa rendered a Decision which held that Helen was not illegally dismissed but was validly retrenched. The dispositive portion of the Labor Arbiter’s 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.
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 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.
Petitioners filed a Motion for Reconsideration. 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.
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 dated
May 31, 2004.
Ruling of the Court of Appeals
On petition for certiorari, 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.
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, 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 (
4. Exemplary damages in the amount of Twenty Five Thousand Pesos (
5. Attorney’s fees in the amount equivalent to Ten Percent (10%) of the monetary awards herein above enumerated; and
The Motion for Reconsideration filed by petitioners was denied by the CA through its Resolution dated
November 7, 2005.
Hence, this petition raising the following issues:
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.
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.
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.
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.
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.
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, 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 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. 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.
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 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 Helen’s 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.
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.
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.
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. 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. 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.  They are only solidarily liable with the corporation for the illegal termination of services of employees if they acted with malice or bad faith. InPhilippine American Life and General Insurance v. Gramaje, 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
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.
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.
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.
RENATO C. CORONA
ARTURO D. BRION
ROBERTO A. ABAD
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
* Per Special Order No. 856 dated
July 1, 2010.
** Per Special Order No. 869 dated
July 5, 2010.
 Rollo, pp. 21-42.
 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.
at 164-168. Id.
at 185-187. Id.
 CA rollo, p. 46.
at 21-32. Id.
at 21-26. Id.
at 33-46. Id.
at 98-104. Id.
at 103. Id.
at 135-138; penned by Commissioner Edgardo M. Enarlan and concurred in by Presiding Commissioner Irenea E. Ceniza and Commissioner Oscar S. Uy. Id.
at 137. Id.
at 139-154. Id.
at 164-168. Id.
at 185-187. Id.
at 3-204, inclusive of attachments. Id.
at 330-331. Id.
at 452-456. Id.
 Rollo, 27.
 Pascua v. National Labor Relations Commission, 351 Phil 48, 61 (1998).
 Anabe v. Asian Construction, G.R. No. 183233,
December 23, 2009.
 CA rollo, p.45.
 Asian Alcohol Corporation v. National Labor Relations Commission, 364 Phil 912, 930 (1999).
 Philippine Carpet Employees Association (PHILCEA) v. Sto. Tomas, G.R. No. 168719,
February 22, 2006, 483 SCRA 128, 145-146.
 CA rollo, p. 46.
 Equitable Banking Corporation v. National Labor Relations Commission, 339 Phil. 541, 566 (1977).
v. National Labor Relations Commission, 325 Phil. 145, 156 (1996). Santos
 Tan v. Timbal, 478 Phil. 497, 505 (2004).
 484 Phil 880, 891 (2004).
 Manila Water Company, Inc. v. Peña, 478 Phil. 68, 84 (2004).
 Quijano v. Mercury Drug Corporation and National Labor Relations Commission, 354 Phil. 112, 127 (1998).