SECOND DIVISION
G.R. No. 174184, January 28, 2015
G.J.T. REBUILDERS MACHINE SHOP, GODOFREDO TRILLANA, AND JULIANA TRILLANA, Petitioners, v. RICARDO AMBOS, BENJAMIN PUTIAN, AND RUSSELL AMBOS, Respondents.
D E C I S I O N
LEONEN, J.:
To prove serious business losses, employers must present in evidence financial statements showing the net losses suffered by the business within a sufficient period of time. Generally, it cannot be based on a single financial statement showing losses. Absent this proof, employers closing their businesses must pay the dismissed employees separation pay equivalent to one-month pay or to at least one-half-month pay for every year of service, whichever is higher.
This is a Petition for Review on Certiorari1 of the Court of Appeals’ Decision,2 granting Ricardo Ambos, Russell Ambos,3 and Benjamin Putian’s Petition for Certiorari. The Court of Appeals found that G.J.T. Rebuilders Machine Shop (G.J.T. Rebuilders) failed to prove its alleged serious business losses. Thus, when it closed its establishment on December 15, 1997, G.J.T. Rebuilders should have paid the affected employees separation pay.4cralawred
G.J.T. Rebuilders is a single proprietorship owned by the Spouses Godofredo and Juliana Trillana (Trillana spouses). It was engaged in steel works and metal fabrication, employing Ricardo Ambos (Ricardo), Russell Ambos (Russell), and Benjamin Putian (Benjamin) as machinists.5cralawred
G.J.T. Rebuilders rented space in the Far East Asia (FEA) Building in Shaw Boulevard, Mandaluyong City, which served as the site of its machine shop. On September 8, 1996, a fire partially destroyed the FEA Building.6cralawred
Due to the damage sustained by the building, its owner notified its tenants to vacate their rented units by the end of September 1996 “to avoid any unforeseen accidents which may arise due to the damage.”7cralawred
Despite the building owner’s notice to vacate, G.J.T. Rebuilders continued its business in the condemned building. When the building owner finally refused to accommodate it, G.J.T. Rebuilders left its rented space and closed the machine shop on December 15, 1997.8 It then filed an Affidavit of Closure before the Department of Labor and Employment on February 16, 1998 and a sworn application to retire its business operations before the Mandaluyong City Treasurer’s Office on February 25, 1998.9cralawred
Having lost their employment without receiving separation pay, Ricardo, Russell, and Benjamin filed a Complaint for illegal dismissal before the Labor Arbiter. They prayed for payment of allowance, separation pay, and attorney’s fees.10cralawred
In their defense, G.J.T. Rebuilders and the Trillana spouses argued that G.J.T. Rebuilders suffered serious business losses and financial reverses, forcing it to close its machine shop. Therefore, Ricardo, Russell, and Benjamin were not entitled to separation pay.11cralawred
Labor Arbiter Facundo L. Leda (Labor Arbiter Leda) decided the Complaint, finding no convincing proof of G.J.T. Rebuilders’ alleged serious business losses. Labor Arbiter Leda, in the Decision12 dated December 28, 1999, found that Ricardo, Russell, and Benjamin were entitled to separation pay under Article 283 of the Labor Code.13 In addition, they were awarded attorney’s fees, having been constrained to litigate their claims.14cralawred
Even assuming that G.J.T. Rebuilders’ closure was due to serious business losses, Labor Arbiter Leda held that the employees affected were still entitled to separation pay “based on social justice and equity.”15cralawred
G.J.T. Rebuilders and the Trillana spouses appealed Labor Arbiter Leda’s Decision before the National Labor Relations Commission.16cralawred
In contrast with the Labor Arbiter’s finding, the National Labor Relations Commission found G.J.T. Rebuilders to have suffered serious business losses. Because of the fire that destroyed the building where G.J.T. Rebuilders was renting space, the demand for its services allegedly declined as “no same customer would dare to entrust machine works to be done for them in a machine shop lying in a ruined and condemned building.”17 The National Labor Relations Commission then concluded that the fire “proximately caused”18 G.J.T. Rebuilders’ serious business losses, with its financial statement for the fiscal year 1997 showing a net loss of P316,210.00.19cralawred
In the Decision20 dated January 25, 2001, the National Labor Relations Commission vacated and set aside Labor Arbiter Leda’s Decision and dismissed the Complaint for lack of merit. Since the Commission found that G.J.T. Rebuilders ceased operations due to serious business losses, it held that G.J.T. Rebuilders and the Trillana spouses need not pay Ricardo, Russell, and Benjamin separation pay.
Ricardo, Russell, and Benjamin filed a Motion for Reconsideration, which the National Labor Relations Commission denied in the Resolution21 dated March 5, 2001.
Because of the alleged grave abuse of discretion of the National Labor Relations Commission, a Petition for Certiorari was filed before the Court of Appeals.22cralawred
The Court of Appeals reversed the National Labor Relations Commission’s Decision, agreeing with Labor Arbiter Leda that G.J.T. Rebuilders failed to prove its alleged serious business losses. The Court of Appeals conceded that G.J.T. Rebuilders had to close the machine shop for reasons connected with the fire that partially destroyed the building where it was renting space. Nevertheless, G.J.T. Rebuilders continued its business for more than one year after the fire. Thus, according to the Court of Appeals, G.J.T. Rebuilders did not suffer from serious business losses but closed the machine shop to prevent losses.23cralawred
With respect to G.J.T. Rebuilders’ financial statement showing an alleged net loss in 1997, the Court of Appeals refused to admit it in evidence since it was not subscribed under oath by the Certified Public Accountant who prepared it. According to the Court of Appeals, the financial statement was subscribed under oath only after G.J.T. Rebuilders had submitted it to Labor Arbiter Leda as an annex to its Motion to re-open proceedings and to submit additional evidence. Thus, the Court of Appeals gave G.J.T. Rebuilders’ financial statement “scant consideration.”24cralawred
In the Decision25 dated January 17, 2006, the Court of Appeals granted the Petition for Certiorari, vacating and setting aside the National Labor Relations Commission’s Decision. It reinstated Labor Arbiter Leda’s Decision dated December 28, 1999.
G.J.T. Rebuilders and the Trillana spouses filed a Motion for Reconsideration, which the Court of Appeals denied in the Resolution26 dated August 11, 2006.
Petitioners G.J.T. Rebuilders and the Trillana spouses filed before this court a Petition for Review on Certiorari.27 Respondents Ricardo, Russell, and Benjamin commented28 on the Petition, after which petitioners filed a Reply.29cralawred
In their Petition for Review on Certiorari, petitioners maintain that G.J.T. Rebuilders suffered serious business losses as evidenced by its financial statement covering the years 1996 and 1997. Petitioners admit that the financial statement was belatedly subscribed under oath.30 Nevertheless, “the credibility or veracity of the entries”31 in the financial statement was not affected since the Bureau of Internal Revenue received the same unsubscribed financial statement when G.J.T. Rebuilders allegedly filed its income tax return on April 15, 1998.32cralawred
Considering that petitioners sufficiently proved G.J.T. Rebuilders’ serious business losses, petitioners argue that respondents are not entitled to separation pay.
As for respondents, they contend that G.J.T. Rebuilders failed to prove its alleged serious business losses. They argue that the financial statement showing a net loss for the year 1997 was not credible, having been belatedly subscribed under oath by the Certified Public Accountant who prepared it.33cralawred
With no credible proof of G.J.T. Rebuilders’ supposed serious business losses, respondents argue that petitioners must pay them separation pay under Article 283 of the Labor Code.34cralawred
The issue for our resolution is whether petitioners sufficiently proved that G.J.T. Rebuilders suffered from serious business losses.
This petition should be denied.chanroblesvirtuallawlibrary
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 installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.cralawlawlibrary
It would indeed be stretching the intent and spirit of the law if [courts] were to unjustly interfere with the management’s prerogative to close or cease its business operations just because [the] business operation or undertaking is not suffering from any loss or simply to provide the workers continued employment.39cralawlawlibrary
[i]n the determination of the amount of nominal damages which is addressed to the sound discretion of the court, several factors are taken into account: (1) the authorized cause invoked . . .; (2) the number of employees to be awarded; (3) the capacity of the employers to satisfy the awards, taking into account their prevailing financial status as borne by the records; (4) the employer’s grant of other termination benefits in favor of the employees; and (5) whether there was bona fide attempt to comply with the notice requirements as opposed to giving no notice at all.76cralawlawlibrary
cralawlawlibrary
Ricardo Ambos P29,250.00 Russell Ambos P7,312.50 Benjamin Putian P5,850.00.
Endnotes:
* Designated acting member per S. O. No. 1910 dated January 12, 2015.
1 Rollo, pp. 3–15.
2 Id. at 18–24. The Decision dated January 17, 2006 was penned by Associate Justice Roberto A. Barrios and concurred in by Associate Justices Mario L. Guariña and Santiago Javier Ranada of the Fifth Division.
3 Russell Ambos was also referred to as “Ruzell Ambos.” See rollo, pp. 18, 36, and 44.
4Rollo, pp. 21–22.
5 Id. at 19.
6 Id. at 29.
7 Id.
8 Id. at 8 and 19.
9 Id. at 5–6 and 20.
10 Id. at 19.
11 Id. at 19–20.
12 Id. at 36–43.
13 Id. at 39–40. This Article was renumbered to Article 297 by Rep. Act No. 10151, otherwise known as An Act Allowing the Employment of Night Workers, Thereby Repealing Articles 130 and 131 of Presidential Decree Number Four Hundred Forty-Two, as amended, Otherwise Known as the Labor Code of the Philippines; Sangwoo Philippines, Inc. v. Sangwoo Philippines, Inc. Employees Union-Olalia, G.R. No. 173154, December 9, 2013, 711 SCRA 618, 624 [Per J. Perlas-Bernabe, Second Division].
14 Id. at 41–42.
15 Id. at 40, citing Banco Filipino Savings and Mortgage Bank v. National Labor Relations Commission, 266 Phil. 770, 780 (1990) [Per J. Medialdea, First Division] and International Hardware, Inc. v. National Labor Relations Commission (Third Division), 257 Phil. 261 (1989) [Per J. Gancayco, First Division].
16 Id. at 44.
17 Id. at 50.
18 Id.
19 Id. at 72.
20 Id. at 41–53.
21 Id. at 54–55.
22 Id. at 18 and 21.
23 Id. at 21–22.
24 Id. at 22.
25 Id. at 18–24.
26 Id. at 26–28.
27 Id. at 3–16.
28 Id. at 60–66.
29 Id. at 70–76.
30 Id. at 9.
31 Id.
32 Id. at 9–10.
33 Id. at 63–64.
34 Id. at 63.
35 Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc., Labor Union-Super, et al., 585 Phil. 88, 101 (2008) [Per J. Austria-Martinez, Third Division].
36Mac Adams Metal Engineering Workers Union-Independent v. Mac Adams Metal Engineering, 460 Phil. 583, 590 (2003) [Per J. Corona, Third Division].
37 Id.
38 460 Phil. 583 (2003) [Per J. Corona, Third Division].
39 Id. at 590.
40 LABOR CODE, art. 283, now renumbered to art. 297 by Rep. Act No. 10151.
41Indino v. NLRC (Second Division), 258 Phil. 792, 800 (1989) [Per J. Sarmiento, Second Division].
42Lopez Sugar Corporation v. Federation of Free Workers, G.R. Nos. 75700–01, August 30, 1990, 189 SCRA 179, 186 [Per J. Feliciano, Third Division].
43Philippine Tobacco Flue-Curing & Redrying Corp. v. NLRC, 360 Phil. 218, 236 (1998) [Per J. Panganiban, First Division], citing Somerville Stainless Steel Corporation v. NLRC, 350 Phil. 859, 869 (1998) [Per J. Panganiban, First Division].
44 Id. at 236–237, citing Somerville Stainless Steel Corporation v. NLRC, 350 Phil. 859, 870 (1998) [Per J. Panganiban, First Division].
45Reahs Corporation v. NLRC, 337 Phil. 698, 705 (1997) [Per J. Padilla, First Division].
46 325 Phil. 202 (1996) [Per J. Panganiban, En Banc].
47 Id. at 205.
48 Id. at 212.
49 571 Phil. 494 (2008) [Per J. Chico-Nazario, Third Division].
50 Id. at 501.
51 Id. at 509.
52 146 Phil. 153 (1970) [Per J. Ruiz Castro, En Banc].
53 Id. at 157.
54 Id. at 157 and 166.
55 Sangwoo Philippines, Inc. v. Sangwoo Philippines, Inc. Employees Union-Olalia, G.R. No. 173154, December 9, 2013, 711 SCRA 618, 627–629 [Per J. Perlas-Bernabe, Second Division].
56Rollo, p. 13.
57 Id. at 35.
58 Id. at 21–22 and 40.
59 LABOR CODE, art. 283, now renumbered to art. 297 by Rep. Act No. 10151.
60Rollo, p. 42.
61 Id.
62 Id.
63 Id.
64 Id.
65 Id.
66 Id.
67 Id.
68 Id.
69Sangwoo Philippines, Inc. v. Sangwoo Philippines, Inc. Employees Union-Olalia, G.R. No. 173154, December 9, 2013, 711 SCRA 618, 627 [Per J. Perlas-Bernabe, Second Division].
70 Id.
71 Id.
72 Id. at 628.
73 Id. at 629, citing Abbott Laboratories, Philippines v. Alcaraz, G.R. No. 192571, July 23, 2013, 701 SCRA 682, 715 [Per J. Perlas-Bernabe, En Banc].
74 Id.
75 G.R. No. 173154, December 9, 2013, 711 SCRA 618 [Per J. Perlas-Bernabe, Second Division].
76 Id. at 629, citing Industrial Timber Corporation v. Ababon, 520 Phil. 522, 527–528 [Per J. Ynares-Santiago, First Division].
77Rollo, p. 5.
78 Id. at 5 and 30.
79Sangwoo Philippines, Inc. v. Sangwoo Philippines, Inc. Employees Union-Olalia, G.R. No. 173154, December 9, 2013, 711 SCRA 618, 630 [Per J. Perlas-Bernabe, Second Division].
80Lui Enterprises, Inc. v. Zuellig Pharma Corporation, G.R. No. 193494, March 12, 2014, 26 [Per J. Leonen, Third Division].
81 Id.
82 LABOR CODE, art. 111(1) provides:
Art. 111. Attorney’s fees. – (1) In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent (10%) of the amount of wages recovered; Reahs Corporation v. NLRC, 337 Phil. 698, 709 (1997) [Per J. Padilla, First Division].
83 LABOR CODE, art. 222(2) provides:
Art. 222. Appearances and Fees. - . . . .
(2) No attorney’s fees, negotiation fees or similar charges of any kind arising from any collective bargaining agreement shall be imposed on any individual member of the contracting union: Provided, however, That attorney’s fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void; Reahs Corporation v. NLRC, 337 Phil. 698, 709 (1997) [Per J. Padilla, First Division].
84Reahs Corporation v. NLRC, 337 Phil. 698, 709 (1997) [Per J. Padilla, First Division].
85Rollo, p. 42.
86Lui Enterprises, Inc. v. Zuellig Pharma Corporation, G.R. No. 193494, March 12, 2014, 27 [Per J. Leonen, Third Division].
87 Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439, 458 [Per J. Peralta, En Banc].
88 Id.