LABREL CASE DIGESTS | ART 291

1
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY VS PINGOL
KEYWORDS: maintenance technician, prescription of action

DOCTRINE: Labor Code: Article 291. Money Claims. All money claims arising
from employer-employee relations accruing during the effectivity of this Code
shall be filed within three (3) years from the time the cause of action accrued;
otherwise they shall be barred forever.

New Civil Code: ART. 1155. The prescription of actions is interrupted when they
are filed before the Court, when there is a written extrajudicial demand by the
creditors, and when there is any written acknowledgment of the debt by the
debtor.

An action predicated "upon an injury to the rights of the plaintiff," as
contemplated under Art. 1146 of the New Civil Code, which must be brought
within four (4) years

FACTS: In 1979, respondent Roberto R. Pingol (Pingol) was hired by petitioner
PLDT as a maintenance technician. On April 13, 1999, while still under the
employ of PLDT, Pingol was admitted at The Medical City, Mandaluyong City, for
paranoid personality disorder due to financial and marital problems. On May
14, 1999, he was discharged from the hospital. Thereafter, he reported for work
but frequently absented himself due to his poor mental condition.
From September 16, 1999 to December 31, 1999, Pingol was absent from work
without official leave. According to PLDT, notices were sent to him with a stern
warning that he would be dismissed from employment if he continued to be
absent without official leave pursuant to PLDT Systems Practice A-007 which
provides that Absence without authorized leaves for seven (7) consecutive days
is subject to termination from the service. Despite the warning, he failed to
show up for work. On January 1, 2000, PLDT terminated his services on the
grounds of unauthorized absences and abandonment of office. On March 29,
2004, four years later, Pingol filed a Complaint for Constructive Dismissal and
Monetary Claims against PLDT, alleged that he was hastily dismissed from his
employment on January 1, 2000.

Petitioners Contention: Respondents cause of action had already prescribed as
the complaint was filed four (4) years and three (3) months after his dismissal.
Respondents Contention: Pingol countered that in computing the prescriptive
period, the years 2001 to 2003 must not be taken into account. He explained that
from 2001 to 2003, he was inquiring from PLDT about the financial benefits due
him as an employee who was no longer allowed to do his work, but he merely got
empty promises. It could not, therefore, result in abandonment of his claim.
LA: Granted petitioners motion to dismiss on the ground of prescription.
NLRC: Reversed the LA decision, ruling that the 4-year prescriptive period has
not yet lapsed because PLDT failed to categorically deny respondents
claims. PLDT moved for reconsideration but the same was denied by the NLRC.
CA: Denied both petition for certiorari and motion for reconsideration.
ISSUE: Whether or not respondent Pingol filed his complaint for constructive
dismissal and money claims within the prescriptive period of four (4) years as
provided in Article 1146 of the Civil Code
]
and three (3) years as provided in
Article 291 of the Labor Code, respectively.
SC RULING: NO. As this Court stated in Callanta v. Carnation, when one is
arbitrarily and unjustly deprived of his job or means of livelihood, the action
instituted to contest the legality of one's dismissal from employment constitutes,
in essence, an action predicated "upon an injury to the rights of the plaintiff," as
contemplated under Art. 1146 of the New Civil Code, which must be brought
within four (4) years. With regard to the prescriptive period for money claims,
Article 291 of the Labor Code states:
Article 291. Money Claims. All money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise they shall be barred
forever.

In the case at bench, since Pingol filed his claim only on March 29, 2004,
exactly four (4) years and three (3) months later, and respondent never denied
making such admission or raised palpable mistake as the reason therefor,
petitioner correctly relied on such allegation in the complaint to move for the
dismissal of the case on the ground of prescription.

The Labor Code has no specific provision on when a claim for illegal dismissal or
a monetary claim accrues. Thus, the general law on prescription applies. Article
1150 of the Civil Code states:

Article 1150. The time for prescription for all kinds of actions, when there is no
special provision which ordains otherwise, shall be counted from the day they
may be brought.
The day the action may be brought is the day a claim starts as a legal possibility.
In the present case, January 1, 2000 was the date that respondent Pingol was not
allowed to perform his usual and regular job as a maintenance
technician. Respondent Pingol cited the same date of dismissal in his complaint
before the LA. As, thus, correctly ruled by the LA, the complaint filed had already
prescribed.
Respondent claims that between 2001 and 2003, he made follow-ups with PLDT
management regarding his benefits. This, to his mind, tolled the running of the
prescriptive period.
The rule in this regard is covered by Article 1155 of the Civil Code. Its
applicability in labor cases was upheld in the case of International Broadcasting
Corporation v. Panganiban where it was written:
Like other causes of action, the prescriptive period for money claims is
subject to interruption, and in the absence of an equivalent Labor Code provision
for determining whether the said period may be interrupted, Article 1155 of the
Civil Code may be applied, to wit:

ART. 1155. The prescription of actions is interrupted when they are filed before
the Court, when there is a written extrajudicial demand by the creditors, and
when there is any written acknowledgment of the debt by the debtor.

In this case, respondent Pingol never made any written extrajudicial demand.
Neither did petitioner make any written acknowledgment of its alleged
obligation. Thus, the claimed follow-ups could not have validly tolled the
running of the prescriptive period. It is worthy to note that respondent never
presented any proof to substantiate his allegation of follow-ups.

Unfortunately, respondent Pingol has no one but himself to blame for his own
predicament. By his own allegations in his complaint, he has barred his remedy
and extinguished his right of action.

ROBERTO R. SERRANO vs. COURT OF APPEALS, NATIONAL LABOR
RELATIONS COMMISSION, MAERSK-FILIPINAS CREWING, INC. and A.P.
MOLLER

FACTS: From 1974 to 1991, respondent Maersk-Filipinas Crewing, Inc., the local
agent of respondent foreign corporation A.P. Moller, deployed petitioner Serrano
as a seaman to Liberian, British and Danish ships. As petitioner was on board a
ship most of the time, respondent Maersk offered to send portions of petitioners
salary to his family in the Philippines. The amounts would be sent by money
order. Petitioner agreed and from 1977 to 1978, he instructed respondent
Maersk to send money orders to his family. Respondent Maersk deducted the
amounts of these money orders totaling HK$4,600.00 and 1,050.00 Sterling
Pounds from petitioner's salary. Respondent Maersk, it is also alleged, deducted
various amounts from his salary for Danish Social Security System (SSS), welfare
contributions, ship club, and SSS Medicare.

It appears that petitioner's family failed to receive the money orders petitioner
sent through respondent Maersk. Upon learning this in 1978, petitioner
demanded that respondent Maersk pay him the amounts the latter deducted
from his salary. Respondent Maersk assured him that they would look into the
matter, then assigned him again to board one of their vessels.

Whenever he returned to the Philippines, petitioner would go to the office of
respondent Maersk to follow up his money claims but he would be told to return
after several weeks as respondent Maersk needed time to verify its records and
to bring up the matter with its principal employer, respondent
A.P. Moller. Meantime, respondent Maersk would hire him again to board
another one of their vessels for about a year.

Finally, in October 1993, petitioner wrote to respondent Maersk demanding
immediate payment to him of the total amount of the money orders deducted
from his salary from 1977 to 1978. On November 11, 1993, respondent A.P.
Moller replied to petitioner that they keep accounting documents only for a
certain number of years, thus data on his money claims from 1977 to 1978 were
no longer available. Likewise, it was claimed that it had no outstanding money
orders. A.P. Moller declined petitioner's demand for payment.

In April 1994, petitioner filed a complaint for collection of the total amount of the
unsent money orders and illegal salary deductions against the respondent
Maersk in the Philippine Overseas Employment Agency (POEA). The case was
transferred to the NLRC where Labor Arbiter Arthur Amansec ruled: Being
government imposed deductions, the same cannot be said to be unlawful. In fact,
a non-deduction could have been unlawful and could have meant official
sanctions against the respondents. MR denied. CA dismissed petition for being
filed out of time.

The Labor Arbiter's dismissal of petitioners complaint for illegal salary
deductions was not appealed and has thus become final. In his petition before
this Court, petitioner takes issue only on the dismissal of his claim for the unsent
money orders.

ISSUE: Whether or not the claim of the petitioner has prescribed.

RULING:
Article 291. Money claims. All money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed within three
years from the time the cause of action accrued, otherwise they shall be forever
barred. (emphasis supplied)

Petitioner contends that his cause of action accrued only in 1993 when
respondent A.P. Moller wrote to him that its accounting records showed it had no
outstanding money orders and that his case was considered outdated. Thus, the
three (3) year prescriptive period should be counted from 1993 and not 1978
and since his complaint was filed in 1994, he claims that it has not prescribed.

We agree. Petitioner's cause of action accrued in November 1993 upon
respondent Maersk's definite denial of his money claims following this Court's
ruling in the similar case of Baliwag Transit , Inc. v. Ople.[10] In that case, a bus of
the petitioner Baliwag Transit bus company driven by the respondent driver
figured in an accident with a train of the Philippine National Railways (PNR) on
August 10, 1974. This resulted to the death of eighteen (18) passengers and
caused serious injury to fifty-six (56) other passengers. The bus itself also
sustained extensive damage. The bus company instituted a complaint against the
PNR. The latter was held liable for its negligence in the decision rendered on
LABREL CASE DIGESTS | ART 291
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April 6, 1977. The respondent driver was absolved of any contributory
negligence. However, the driver was also prosecuted for multiple homicide and
multiple serious physical injuries, but the case was provisionally dismissed in
March 1980 for failure of the prosecution witness to appear at the scheduled
hearing. Soon after the PNR decision was rendered, the driver renewed his
license and sought reinstatement with Baliwag Transit. He was advised to wait
until his criminal case was terminated. He repeatedly requested for
reinstatement thereafter, but to no avail, even after termination of the criminal
case against him. Finally, on May 2, 1980, he demanded reinstatement in a letter
signed by his counsel. On May 10, 1980, petitioner Baliwag Transit replied that
he could not be reinstated as his driver's license had already been revoked and
his driving was "extremely dangerous to the riding public." This prompted
respondent driver to file on July 29, 1980 a formal complaint with the Ministry of
Labor and Employment for illegal dismissal against Baliwag Transit praying for
reinstatement with back wages and emergency cost of living allowance. The
complaint was dismissed by the regional director on the ground of prescription
under Art. 291 of the Labor Code. This was reversed by then Labor and
Employment Minister Ople. On appeal to this Court, we ruled that the action had
not prescribed, viz:

. . . (T)he antecedent question that has to be settled is the date when the cause of
action accrued and from which the period shall commence to run. The parties
disagree on this date. The contention of the petitioner is that it should be August
10, 1974, when the collission occurred. The private respondent insists it is May
10, 1980, when his demand for reinstatement was rejected by the petitioner.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a
right in favor of the plaintiff by whatever means and under whatever law it arises
or is created; (2) an obligation on the part of the named defendant to respect or
not to violate such right; and (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the obligation of
the defendant to the plaintiff.

The problem in the case at bar is with the third element as the first two are
deemed established.

We hold that the private respondent's right of action could not have accrued from
the mere fact of the occurrence of the mishap on August 10, 1974, as he was not
considered automatically dismissed on that date. At best, he was deemed
suspended from his work, and not even by positive act of the petitioner but as a
result of the suspension of his driver's license because of the accident. There
was no apparent disagreement then between (respondent driver) Hughes and his
employer. As the private respondent was the petitioner's principal witness in its
complaint for damages against the Philippine National Railways, we may assume
that Baliwag Transit and Hughes were on the best of terms when the case was
being tried. Hence, there existed no justification at that time for the private
respondent to demand reinstatement and no opportunity warrant (sic) either for
the petitioner to reject that demand.

The facts in the case at bar are similar to the Baliwag case. Petitioner repeatedly
demanded payment from respondent Maersk but similar to the actuations of
Baliwag Transit in the above cited case, respondent Maersk warded off these
demands by saying that it would look into the matter until years passed by. In
October 1993, Serrano finally demanded in writing payment of the unsent money
orders. Then and only then was the claim categorically denied by respondent A.P.
Moller in its letter dated November 22, 1993. Following the Baliwag Transit
ruling, petitioners cause of action accrued only upon respondent A.P. Moller's
definite denial of his claim in November 1993. Having filed his action five (5)
months thereafter or in April 1994, we hold that it was filed within the three-year
(3) prescriptive period provided in Article 291 of the Labor Code.

CASE TITLE: ACCESSORIES SPECIALIST INC vs.ERLINDA B. ALABANZA
KEYWORDS: promissory estoppel
Doctrine: Promissory estoppel may arise from the making of a promise, even
though without consideration, if it was intended that the promise should be
relied upon, as in fact it was relied upon, and if a refusal to enforce it would
virtually sanction the perpetration of fraud or would result in other injustice. The
principle of promissory estoppel is a recognized exception to the three-year
prescriptive period enunciated in Article 291of the Labor Code. Labor Law. The
posting of a bond is indispensable to the perfection of an appeal in cases
involving monetary awards from the decision of the Labor Arbiter. The filing of
the bond is not only mandatory but also a jurisdictional requirement that must be
complied with in order to confer jurisdiction upon the NLRC.

FACTS: Erlinda B. Alabanza, for and in behalf of her husband Jones B. Alabanza
filed a complaint against petitioners Accessories Specialists, Inc. (ASI) also known
as ARTS 21 Corporation, and Tadahiko Hashimoto for non-payment of salaries,
separation pay, and 13th month pay.

Erlinda alleged, among others, that her husband Jones was the Vice- President,
Manager and Director of ASI. Jones rendered outstanding services for the
petitioners from 1975 to October 1997. That Jones was compelled by the owner
of ASI, Tadahiko Hashimoto, to file his involuntary resignation on the ground that
ASI allegedly suffered losses due to lack of market and incurred several debts
caused by a slam in the market. Jones demanded payment of his money claims
upon resignation but ASI informed him that it would just settle first the money
claims of the rank- and-file employees, and his claims will be paid thereafter.
Knowing the predicament of the company, Jones patiently waited for his turn to
be paid. Several demands were made by Jones but ASI just kept on assuring him
that he will be paid his monetary claims. Jones died on August 5, 2002 and failed
to receive the same.

ASI contended that Jones voluntarily resigned on October 31, 1997. Thus,
Erlindas cause of action has already prescribed and is forever barred on the
ground that under Article 291 of the Labor Code, all money claims arising from an
employer-employee relationship shall be filed within three (3) years from the
time the cause of action accrues. Since the complaint was filed only on September
27, 2002, or almost five (5) years from the date of the alleged illegal dismissal of
her husband Jones, Erlindas complaint is now barred.

The Labor Arbiter rendered a decision ordering ASI to pay Erlinda in the total of
P4,765,200.00 representing her husbands unpaid salaries, 13th month pay, and
separation pay.

ASI filed a notice of appeal with motion to reduce bond and attached thereto
photocopies of the receipts for the cash bond in the amount of P290,000.00, and
appeal fee in the amount ofP170.00.

NLRC denied the ASIs motion to reduce bond and directing the latter to post an
additional bond, and in case the ASI opted to post a surety bond, the latter were
required to submit a joint declaration, indemnity agreement and collateral
security within ten (10) days from receipt of the said order, otherwise their
appeal shall be dismissed. ASI moved for a reconsideration of the said order.
However, the NLRC denied the same and dismissed the appeal.

The resolution became final and executory. Thus, Erlinda filed a motion for
execution. ASI filed an opposition to the said motion for execution. The Labor
Arbiter issued an order directing the issuance of a writ of execution.

ASI filed a petition for certiorari before the CA and prayed for the issuance of a
temporary restraining order (TRO) and a writ of preliminary injunction. The CA
issued a TRO directing the respondents, their agents, assigns, and all persons
acting on their behalf to refrain and/or cease and desist from executing the
Decision of the Labor Arbiter (LA).

Issues: Whether the cause of action of respondents has already prescribed;

The Ruling of the Court: The petition is DENIED. ASI contends that the three-year
prescriptive period under Article 291 of the Labor Code had already set-in,
thereby barring all of respondents money claims arising from their employer-
employee relations.

Based on the findings of facts of the LA, it was ASI which was responsible for the
delay in the institution of the complaint. When Jones filed his resignation, he
immediately asked for the payment of his money claims. However, the
management of ASI promised him that he would be paid immediately after the
claims of the rank-and-file employees had been paid. Jones relied on this
representation. Unfortunately, the promise was never fulfilled even until the time
of Jones death.

The Court applied the principle of promissory estoppel, which is a recognized
exception to the three-year prescriptive period enunciated in Article 291 of the
Labor Code.

Promissory estoppel may arise from the making of a promise, even though
without consideration, if it was intended that the promise should be relied upon,
as in fact it was relied upon, and if a refusal to enforce it would virtually sanction
the perpetration of fraud or would result in other injustice. Promissory estoppel
presupposes the existence of a promise on the part of one against whom estoppel
is claimed. The promise must be plain and unambiguous and sufficiently specific
so that the court can understand the obligation assumed and enforce the promise
according to its terms.

In order to make out a claim of promissory estoppel, a party bears the burden of
establishing the following elements: (1) a promise was reasonably expected to
induce action or forbearance; (2) such promise did, in fact, induce such action or
forbearance; and (3) the party suffered detriment as a result.

All the requisites of promissory estoppel are present in this case. Jones relied on
the promise of ASI that he would be paid as soon as the claims of all the rank-and-
file employees had been paid. If not for this promise that he had held on to until
the time of his death, we see no reason why he would delay filing the complaint
before the LA. Thus, we find ample justification not to follow the prescriptive
period imposed under Article 291 of the Labor Code. Great injustice will be
committed if we will brush aside the employees claims on a mere technicality,
LABREL CASE DIGESTS | ART 291
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especially when it was petitioners own action that prevented respondent from
interposing the claims within the required period.

Extra Issue Resolved: (For your consumption and satisfaction) Issue No. 2:

WON the posting of the complete amount of the bond in an appeal from the
decision of the Labor Arbiter to the NLRC is an indispensable requirement for the
perfection of the appeal despite the filing of a motion to reduce the amount of the
appeal bond.

Held: YES. Ratio: Article 223 of the Labor Code mandates that in case of a
judgment of the Labor Arbiter involving a monetary award, an appeal by the
employer to the NLRC maybe perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the Commission,
in the amount equivalent to the monetary award in the judgment appealed from.
AUTO BUS TRANSPORT SYSTEMS VS. BAUTISTA
KEYWORD: BUS DRIVER, Service Incentive Leave, Money Claims
DOCTRINE: Article 291 of the Labor Code states that all money claims arising
from employer-employee relationship shall be filed within three (3) years from
the time the cause of action accrued; otherwise, they shall be forever barred. In
the computation of the three-year prescriptive period, a determination must be
made as to the period when the act constituting a violation of the workers right
to the benefits being claimed was committed.
FACTS: Antonio Bautista was employed by Auto Bus Transport Systems, Inc. in
May 1995. He was assigned with travel routes Manila-Tuguegarao via Baguio,
Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio and he was paid by
commission (7% of gross income per travel for twice a month). In January 2000,
while he was driving his bus he bumped another bus owned by Auto Bus. He
claimed that he bumped the he accidentally bumped the bus as he was so tired
and that he has not slept for more than 24 hours because Auto Bus required him
to return to Isabela immediately after arriving at Manila. Damages were
computed and 30% or P75,551.50 of it was being charged to Bautista. Bautista
refused payment. Auto Bus terminated Bautista after due hearing as part of Auto
Bus management prerogative. Bautista sued Auto Bus for Illegal Dismissal with
Money Claims for nonpayment of 13
th
month pay and service incentive leave pay.
LABOR ARBITER: Dismissed Bautistas petition but ruled that Bautista is entitled
to P78,117.87 13
th
month pay payments and P13,788.05 for his unpaid service
incentive leave pay.
NLRC: Modified the LAs ruling. It deleted the award for 13
th
Month pay. The
award of service incentive leave pay was maintained.
COURT OF APPEALS: Denied the petitioners petition for review
ISSUES: Whether or not Bautista is entitled to Service Incentive Leave. If he is,
Whether or not the three (3)-year prescriptive period provided under Article 291
of the Labor Code, as amended, is applicable to respondents claim of service
incentive leave pay.
RULING OF THE COURT:
a. Yes, Bautista is entitled to Service Incentive Leave
Auto Bus averred that Bautista is a commissioned employee and if that is
not reason enough that Bautista is also field personnel hence he is not entitled to
a service incentive leave. They invoke:
Art. 95. RIGHT TO SERVICE INCENTIVE
LEAVE

(a) Every employee who has rendered at
least one year of service shall be entitled to a
yearly service incentive leave of five days
with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply
to all employees except:
(d) Field personnel and other employees
whose performance is unsupervised by the
employer including those who are engaged
on task or contract basis, purely
commission basis, or those who are paid in
a fixed amount for performing work
irrespective of the time consumed in the
performance thereof; . . .
The Supreme Court emphasized that it does not mean that just
because an employee is paid on commission basis he is already barred to receive
service incentive leave pay. The question actually boils down to whether or not
Bautista is a field employee.
According to Article 82 of the Labor Code, field personnel shall refer
to non-agricultural employees who regularly perform their duties away from the
principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty.
As a general rule, field personnel are those whose performance of
their job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers
cannot be said to be field personnel despite the fact that they are performing work
away from the principal office of the employee.
Certainly, Bautista is not a field employee. He has a specific route to
traverse as a bus driver and that is a specific place that he needs to be at work.
There are inspectors hired by Auto Bus to constantly check him. There are
inspectors in bus stops who inspects the passengers, the punched tickets, and the
driver. Therefore he is definitely supervised though he is away from the Auto Bus
main office.
b. Yes. His money claim was filed within the prescriptive period
provided for by Article 291 of the Labor Code
Article 291 of the Labor Code states that all money claims arising from
employer-employee relationship shall be filed within three (3) years from the
time the cause of action accrued; otherwise, they shall be forever barred. In the
computation of the three-year prescriptive period, a determination must be made
as to the period when the act constituting a violation of the workers right to the
benefits being claimed was committed. For if the cause of action accrued more
than three (3) years before the filing of the money claim, said cause of action has
already prescribed.
The 3 year prescriptive period ran but Bautista was able to file his suit in
time before the prescriptive period expired. It was only upon his filing of a
complaint for illegal dismissal, one month from the time of his dismissal, that
Bautista demanded from his former employer commutation of his accumulated
leave credits. His cause of action to claim the payment of his accumulated service
incentive leave thus accrued from the time when his employer dismissed him and
failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service
incentive leave pay only commenced from the time the employer failed to
compensate his accumulated service incentive leave pay at the time of his
dismissal. Since Bautista had filed his money claim after only one month from the
time of his dismissal, necessarily, his money claim was filed within the
prescriptive period provided for by Article 291 of the Labor Code.
Definition of Service Incentive Leave
Service incentive leave is a right which accrues to every employee who has
served within 12 months, whether continuous or broken reckoned from the date
the employee started working, including authorized absences and paid regular
holidays unless the working days in the establishment as a matter of practice or
policy, or that provided in the employment contracts, is less than 12 months, in
which case said period shall be considered as one year. It is also commutable to its
money equivalent if not used or exhausted at the end of the year. In other words, an
employee who has served for one year is entitled to it. He may use it as leave days or
he may collect its monetary value.

WHEREFORE, premises considered, the instant petition is hereby DENIED.

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[LIABILITY OF CORPORATE OFFICERS]
ANTONIO C. CARAG v. NATIONAL LABOR RELATIONS COMMISSION, ISABEL
G. PANGANIBAN-ORTIGUERRA, as Executive Labor Arbiter, NAFLU, and
MARIVELES APPAREL CORPORATION LABOR UNION
Case doctrine: Article 212(e) of the Labor Code, by itself, does not make a
corporate officer personally liable for the debts of the corporation. The
governing law on personal liability of directors for debts of the corporation
is still Section 31 of the Corporation Code.
LABREL CASE DIGESTS | ART 291
4
The personal liability of corporate officers validly attaches only
when (a) they assent to a patently unlawful act of the corporation; or (b)
they are guilty of bad faith or gross negligence in directing its affairs; or (c)
they incur conflict of interest, resulting in damages to the corporation, its
stockholders or other persons.
Instances when officers may be personally liable for the debts of the
corporation ; Article 212 vs. Section 31
FACTS: This is a complaint for illegal dismissal brought about by the illegal
closure and cessation of business filed by NAFLU and Mariveles Apparel
Corporation Labor Union for and in behalf of all rank and file employees
against Mariveles Apparel Corporation (MAC).
Complainants (Respondents) contentions: The complainants aver that
respondent company prior to its closure did not even bother to serve
written notice to employees and to the Department of Labor and
Employment at least one month before the intended date of closure. The
respondents did not even establish that its closure was done in good faith.
Moreover, the respondents did not pay the affected employees separation
pay, the amount of which is provided in the existing Collective Bargaining
Agreement between the complainants and the respondents.
Subsequently, the complainants moved to implead Atty. Antonio
Carag and Mr. Armando David, owners and responsible officers of
respondent company to assure the satisfaction of the judgment on the basis
of Article 212(c) of the Philippine Labor Code, should a decision favorable
to them be rendered.
The corporation opposed the impleader of Atty. Antonio C. Carag and Mr.
Armando David saying that they are not the owners of Mariveles Apparel
Corporation and they are only minority stockholders holding qualifying
shares. Piercing the veil of corporate fiction cannot be done in the present
case for such remedy can only be availed of in case of closed or family
owned corporations.
LA: granted the motion to implead Carag and David. In the same Decision,
LA declared Carag and David solidarily liable with MAC to complainants.
NLRC: Affirmed LA.
CA: The CA found that Carag and David, as the most ranking officers of MAC,
had a direct hand at the time in the illegal dismissal of MAC's employees.
The failure of Carag and David to observe the notice requirement in closing
the company shows malice and bad faith, which justifies their solidary
liability with MAC.
ISSUE: Is petitioner Carag personally liable for the unpaid salaries or
separation pay of employees of the corporation?
RULING: NO, petitioner Carag is not personally liable for the unpaid salaries
or separation pay of employees of the corporation MAC.
The rule is that a director is not personally liable for the debts of
the corporation, which has a separate legal personality of its own. However,
Section 31 of the Corporation Code lays down the exceptions to the rule:
Section 31 makes a director personally liable for corporate debts if he wilfully
and knowingly votes for or assents to patently unlawful acts of the
corporation. Section 31 also makes a director personally liable if he is guilty
of gross negligence or bad faith in directing the affairs of the corporation.
In the present case, the complainants did not allege in their
complaint that Carag wilfully and knowingly voted for or assented to any
patently unlawful act of MAC. Complainants did not present any evidence
showing that Carag wilfully and knowingly voted for or assented to any
patently unlawful act of MAC. Neither did the LA make any finding to this
effect in her Decision.
Complainants did not also allege that Carag is guilty of gross
negligence or bad faith in directing the affairs of MAC. Complainants did not
present any evidence showing that Carag is guilty of gross negligence or bad
faith in directing the affairs of MAC. Neither did the LA make any finding to
this effect in her Decision.
In fact, LA did not specify what act of bad faith Carag committed,
or what particular labor standard laws he violated.
Article 283 of the Labor Code, requiring a one-month prior
notice to employees and the Department of Labor and Employment before
any permanent closure of a company, does not state that non-compliance
with the notice is an unlawful act punishable under the Code. There is no
provision in any other Article of the Labor Code declaring failure to give
such notice an unlawful act and providing for its penalty.
Moreover, LAs assertion that "when the company had already
ceased operations and there is no way by which a judgment in favor of
employees could be satisfied, corporate officers can be held jointly and
severally liable with the company." This assertion echoes the complainants'
claim that Carag is personally liable for MAC's debts to complainants on the
basis of Article 212(e) of the Labor Code, as amended. The Court has
already ruled that Article 212(e) of the Labor Code, by itself, does not make
a corporate officer personally liable for the debts of the corporation. The
governing law on personal liability of directors for debts of the corporation
is still Section 31 of the Corporation Code.
The personal liability of corporate officers validly attaches only
when (a) they assent to a patently unlawful act of the corporation; or (b)
they are guilty of bad faith or gross negligence in directing its affairs; or (c)
they incur conflict of interest, resulting in damages to the corporation, its
stockholders or other person.
[CORPORATE LIABILITIES]
FERNANDEZ, BELTRAN VERSUS NEWFIELD STAFF SOLUTIONS, INC.
DOCTRINE:
Petitioners protest of their dismissal by sending demand letters and filing a
complaint for illegal dismissal cannot logically be said to have abandoned their
work. A charge of abandonment is totally inconsistent with the immediate filing
of a complaint for illegal dismissal. The filing thereof is proof enough of ones
desire to return to work, thus negating any suggestion of abandonment.
In labor cases, the Court has held corporate directors and officers solidarily liable
with the corporation for the termination of an employment of employees done
with malice of bad faith. Bad faith does not connote bad judgment or negligence.
It imports dishonest purpose or some moral obliquity and conscious doing of a
wrong thing.
FACTS: Newfield Staff Solutions, Inc. hired Fernandez as Recruitment Manager
and the employment agreement contains that the latter shall receive a loyalty
bonus and life insurance upon reaching six months of employment. Newfield also
hired Beltran as probationary recruitment specialist. Included as well in the
agreement that after the guaranteed period of engagement, they should send a
written notice 45 days before the effective date of termination.
Newfields General Manager terminated their employment for failure to perform
satisfactorily and ordered them to turn over their records in their possession to
their successors. A week later, they received GMs return-to-work letters and
stated that they did not report without resigning in violation of their employment
agreements. Fernandez and Beltran countered with a demand letter. When they
failed to receive favorable action, a complaint for illegal dismissal was filed
against the company.
FERNANDEZ CONTENTION:
When GM called them to his office, he told them that they were fired and that it
was their last day and turn over the records to the successors.
NEWFIELD STAFFS CONTENTION:
Fernandez and Beltran signed a fixed-term employment agreements where they
agreed to perform their tasks for six months. They agreed to give a written notice
45 days in advance if they want to terminate the agreement but did not do so.
Three weeks after working for Newfield, Fernandez did not report to work and
never bothered to communicate despite the return-to-work letter. They declared
both in AWOL and terminated their contract for breach.
LA: LA ruled that Newfield Staff is guilty of illegal dismissal and rejected the claim
of abandonment, since they took steps to protest their layoff. Their complaint is
proof of their desire to return to work and negates any suggestion of
abandonment.
NLRC: NLRC affirmed the LAs decision and said that it is supported by
substantial evidence. But since they signed fixed-term employment agreements,
the NLRC limited the award of back wages to six months.
COURT OF APPEALS: CA reversed the ruling of NLRC stating that petitioners
abandoned their jobs and pre-terminated their six-month employment
agreements. They walked out of the meeting with GM and the meeting did not
prove that they were dismissed.
LABREL CASE DIGESTS | ART 291
5
ISSUE: Whether or not Fernandez and Beltran are illegally dismissed.
RULING: Petitioners employment agreements are not fixed-term contracts for
six months because they are entitled to loyalty bonus and life insurance upon
reaching six months of employment in Newfield. They merely guaranteed to
perform their tasks for six months and failure to comply with the guarantee
makes them liable for liquidated damages. It also includes that if they would want
to terminate the agreements AFTER the guaranteed period of engagement, they
must notify the company 45 days in advance. NLRC and CA misread this
guarantee.
They are probationary employees and may be terminated for a just and
authorized cause or when he fails to qualify as a regular employee in accordance
with the reasonable standards prescribed by the employer.
Abandonment is a form of neglect of duty. For it to exist, two factors must be
present: failure to report for work or absence without valid or justifiable reason
and a clear intention to sever the EE-ER relationship, with the second element as
the more determinative factor being manifested by some overt acts. These two
instances are wanting. GM fired them and they cannot be accused of being AWOL
or of breaching their employment agreements.
Petitioners protest of their dismissal by sending demand letters and filing a
complaint for illegal dismissal cannot logically be said to have abandoned their
work. A charge of abandonment is totally inconsistent with the immediate filing
of a complaint for illegal dismissal. The filing thereof is proof enough of ones
desire to return to work, thus negating any suggestion of abandonment.
In the LAs decision, it stated that GM is solidarily liable with Newfield. In labor
cases, the Court has held corporate directors and officers solidarily liable with the
corporation for the termination of an employment of employees done with malice
of bad faith. Bad faith does not connote bad judgment or negligence. It imports
dishonest purpose or some moral obliquity and conscious doing of a wrong thing.
LA and NLRC have not found GM guilty of malice or bad faith. Hence, there is no
basis to hold him solidarily liable.
[CHANGE OF EQUITY COMPOSITION OF CORP]
G.R. No. 184517 October 8, 2013
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO
VILLAFLOR, JR. vs. PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR.,
ELICERIO GASPAR, RICARDO GASPAR JR., EUFEMIA ROSETE, FIDEL
ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA
G.R. No. 186641
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO
VILLAFLOR, JR. vs. ELICERIO GASPAR, RICARDO GASPAR, JR., EUFEMIA
ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA
KEYWORD/S: change in the new majority shareholders of the corporation; asset
sales; stock sales;
DOCTRINE: Because the corporation possesses a personality separate and
distinct from that of its shareholders, a shift in the composition of its
shareholders will not affect its existence and continuity. Thus, notwithstanding
the stock sale, the corporation continues to be the employer of its people
and continues to be liable for the payment of their just claims. Furthermore,
the corporation or its new majority share holders are not entitled to lawfully
dismiss corporate employees absent a just or authorized cause.
FACTS: Respondent employees Elicerio, Ricardo, Eufemia, Fidel, Simeon, Jr., and
Liberato were employees of Small and Medium Enterprise Bank, Incorporated
(SME Bank). Originally, the principal shareholders and corporate directors of the
bank were Agustin and De Guzman.
In June 2001, SME Bank experienced financial difficulties. To remedy the
situation, the bank officials proposed its sale to Abelardo Samson (Samson).
Through his attorney-in-fact, Tomas S. Gomez IV, Samson then sent Letter
Agreements to Agustin and De Guzman, demanding the following as
preconditions for the sale of SME Banks shares of stock:
4. You shall guarantee the peaceful turn over of all assets as well as the peaceful
transition of management of the bank and shall terminate/retire the
employees we mutually agree upon, upon transfer of shares in favor of our
groups nominees;
x x x x
7. All retirement benefits, if any of the above officers/stockholders/board of
directors are hereby waived upon consummation [sic] of the above sale. The
retirement benefits of the rank and file employees including the managers shall
be honored by the new management in accordance with B.R. No. 10, S. 1997.
Agustin and De Guzman accepted the terms and conditions proposed by Samson.
Espiritu, then the general manager of SME Bank, held a meeting with all the
employees of the head office and of the Talavera and Muoz branches of SME
Bank and persuaded them to tender their resignations, with the promise
that they would be rehired upon reapplication. His directive was allegedly
done at the behest of petitioner Olga Samson.
Relying on this representation, Elicerio, Ricardo,Fidel, Simeon, Jr.,and Liberato
tendered their resignations dated 27 August 2001. As for Eufemia, the records
show that she first tendered a resignation letter dated27 August 2001, and then
a retirement letter dated September 2001.
Elicerio, Ricardo, Fidel, Simeon, Jr., and Liberato submitted application letters
on 11 September 2001. Both the resignation letters and copies of respondent
employees application letters were transmitted by Espiritu to Samsons
representative on 11 September 2001.
On 11 September 2001, Agustin and De Guzman signified their conformity to the
Letter Agreements and sold 86.365% of the shares of stock of SME Bank to
spouses Abelardo and Olga Samson. Spouses Samson then became the principal
shareholders of SME Bank, while Villaflor, Jr. was appointed bank president. As it
turned out, respondent employees, except for Simeon, Jr., were not rehired.
After a month in service, Simeon, Jr. again resigned on October 2001.
Respondent-employees demanded the payment of their respective separation
pays, but their requests were denied.
Aggrieved by the loss of their jobs, respondent employees filed a Complaint
before the National Labor Relations Commission (NLRC) Regional Arbitration
Branch No. III and sued SME Bank, spouses Abelardo and Olga Samson and
Aurelio Villaflor (the Samson Group) for unfair labor practice; illegal dismissal;
illegal deductions; underpayment; and nonpayment of allowances, separation pay
and 13th month pay. Subsequently, they amended their Complaint to include
Agustin and De Guzman as respondents to the case.
On 27 October 2004, the labor arbiter ruled that the buyer of an enterprise is
not bound to absorb its employees, unless there is an express stipulation to the
contrary. However, he also found that respondent employees were illegally
dismissed, because they had involuntarily executed their resignation letters after
relying on representations that they would be given their separation benefits and
rehired by the new management. Accordingly, the labor arbiter decided the case
against Agustin and De Guzman, but dismissed the Complaint against the Samson
Group.
The NLRC found that there was only a mere transfer of shares and therefore, a
mere change of management from Agustin and De Guzman to the Samson
Group. As the change of management was not a valid ground to terminate
respondent bank employees, the NLRC ruled that they had indeed been illegally
dismissed. It further ruled that Agustin, De Guzman and the Samson Group
should be held jointly and severally liable for the employees separation pay and
backwages. The NLRC denied the Motions for Reconsideration filed by Agustin,
De Guzman and the Samson Group.
Agustin and De Guzman filed a Rule 65 Petition for Certiorari with the CA,
docketed as CA-G.R. SP No. 97510, which was denied. The Samson Group
likewise filed a separate Rule 65 Petition for Certiorari with the CA, docketed as
CA-G.R. SP No. 97942, which was also denied. The appellate court denied the
Motions for Reconsideration filed by the parties.
The Samson Group then filed two separate Rule 45 Petitions questioning the CA
Decisions and Resolutions in CA-G.R. SP No. 97510 and CA-G.R. SP No. 97942. On
17 June 2009, the Supreme Court resolved to consolidate both Petitions.
ISSUE: Whether respondent employees were illegally dismissed.
RULING: Respondent employees were illegally dismissed.
The Samson Group contends that Elicerio, Ricardo, Fidel, and Liberato voluntarily
resigned from their posts, while Eufemia retired from her position. As their
resignations and retirements were voluntary, they were not dismissed from their
employment. In support of this argument, it presented copies of their resignation
and retirement letters, which were couched in terms of gratitude.
LABREL CASE DIGESTS | ART 291
6
We disagree. While resignation letters containing words of gratitude may
indicate that the employees were not coerced into resignation, this fact alone is
not conclusive proof that they intelligently, freely and voluntarily resigned.
In order to withstand the test of validity, resignations must be made
voluntarily and with the intention of relinquishing the office, coupled with
an act of relinquishment. Therefore, in order to determine whether the
employees truly intended to resign from their respective posts, we cannot merely
rely on the tenor of the resignation letters, but must take into consideration the
totality of circumstances in each particular case.
The records show that Elicerio, Ricardo, Fidel, and Liberato only tendered
resignation letters because they were led to believe that, upon reapplication, they
would be reemployed by the new management. As it turned out, except for
Simeon, Jr., they were not rehired by the new management. Their reliance on the
representation that they would be reemployed gives credence to their argument
that they merely submitted courtesy resignation letters because it was demanded
of them, and that they had no real intention of leaving their posts.
As to Eufemia, a review of the records shows that, unlike her co-employees, she
did not resign; rather, she submitted a letter indicating that she was retiring from
her former position. The fact that Eufemia retired and did not resign, however,
does not change our conclusion that illegal dismissal took place. Retirement,
like resignation, should be an act completely voluntary on the part of the
employee. If the intent to retire is not clearly established or if the retirement is
involuntary, it is to be treated as a discharge.
In this case, the facts show that Eufemias retirement was not of her own volition.
The facts show that Eufemia was likewise given the option to resign or retire in
order to fulfill the precondition in the Letter Agreements that the seller should
"terminate/retire the employees [mutually agreed upon] upon transfer of shares"
to the buyers.
Petitioner bank also argues that, there being a transfer of the business
establishment, the innocent transferees no longer have any obligation to continue
employing respondent employees, and that the most that they can do is to give
preference to the qualified separated employees; hence, the employees were
validly dismissed.
The argument is misleading and unmeritorious. Contrary to petitioner banks
argument, there was no transfer of the business establishment to speak of,
but merely a change in the new majority shareholders of the corporation.
There are two types of corporate acquisitions: asset sales and stock sales.
In asset sales, the rule is that the seller in good faith is authorized to dismiss the
affected employees, but is liable for the payment of separation pay under the law.
The buyer in good faith, on the other hand, is not obliged to absorb the employees
affected by the sale, nor is it liable for the payment of their claims. The most that
it may do, for reasons of public policy and social justice, is to give preference to
the qualified separated personnel of the selling firm.
The transaction in stock sales takes place at the shareholder level. Because the
corporation possesses a personality separate and distinct from that of its
shareholders, a shift in the composition of its shareholders will not affect its
existence and continuity. Thus, notwithstanding the stock sale, the
corporation continues to be the employer of its people and continues to be
liable for the payment of their just claims. Furthermore, the corporation or its
new majority share holders are not entitled to lawfully dismiss corporate
employees absent a just or authorized cause.
In the case at bar, the Letter Agreements show that their main object is the
acquisition by the Samson Group of 86.365% of the shares of stock of SME Bank.
Hence, this case involves a stock sale, whereby the transferee acquires the
controlling shares of stock of the corporation. Thus, following the rule in stock
sales, respondent employees may not be dismissed except for just or
authorized causes under the Labor Code.