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Industrial Timber Corp. v.

Ababon (2006)

Technical rules, not binding 227 (221) / Liberality in application of rules

SUMMARY: ITC filed its MR late because of excusable negligence of counsel. Such procedural defect should
be absolved because under Art. 221, the NLRC and LAs shall use every and all reasonable means to ascertain
the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in
the interest of due process. Otherwise, a greater injustice would be done to ITC by ordering it to reinstate the
employees to their former positions that no longer exist.

FACTS:

Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant leased to Industrial
Timber Corporation (ITC) in 1985 for a period of five years. ITC commenced operation of the plywood
plant and hired 387 workers.
On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and its workers that
effective March 19, 1990 it will undergo a no plant operation due to lack of raw materials and will
resume only after it can secure logs for milling. Meanwhile, IPGC notified ITC of the expiration of the
lease contract in August 1990 and its intention not to renew the same.
On June 26, 1990, ITC notified the DOLE and its workers of the plants shutdown due to the non-
renewal of anti-pollution permit that expired in April 1990. This fact and the alleged lack of logs for
milling constrained ITC to lay off all its workers until further notice. This was followed by a final notice of
closure or cessation of business operations on August 17, 1990.
IPGC took over the plywood plant. This prompted Virgilio Ababon, et al. to file a complaint against ITC
and IPGC for illegal dismissal, alleging that the cessation of ITCs operation was intended to bust the
union and that both corporations are one and the same entity being controlled by one owner.
The Labor Arbiter refused to pierce the veil of corporate fiction for lack of evidence to prove that it was
used to perpetuate fraud or illegal act, and upheld the validity of the closure. Ababon et al. appealed to
the NLRC, which reversed the LA decision. Hence, ITC and IPGC filed a Motion for Reconsideration
but this was dismissed for being filed three days late. Thus, they filed a Petition for Relief from
Resolution, which was treated as a second Motion for Reconsideration, but this was dismissed for lack
of merit. They again filed a Motion for Reconsideration/Second Petition for Relief with the NLRC,
which was finally granted. (At this point, the LAs decision was reinstated and the closure valid)
Ababon, et al. filed a Petition for Certiorari with the SC, which petition was referred to the CA. The CA
set aside the new NLRC decision and reinstated its old decision, because the old decision had
become immutable for failure of IPGC and ITC to file their motion for reconsideration within the
reglementary period. (At this point, the closure was invalid)
Since the motions for reconsideration of both parties were denied, they filed a petition for certiorari with
the SC.

ISSUE/S:

WoN the CA erred in reversing the NLRC decision


o YES. IPGC and ITC filed late due to excusable negligence of their counsels secretary.
It is true that after a judgment has become final and executory, it can no longer be modified or
otherwise disturbed. However, where facts and circumstances transpire which render its
execution impossible or unjust, it therefore becomes necessary, in the interest of justice, to
direct its modification in order to harmonize the disposition with the prevailing circumstances.
Substantial justice is best served by allowing the petition for relief despite filing the motion for
reconsideration three days late, for to rule otherwise, a greater injustice would be done to ITC
by ordering it to reinstate the employees to their former positions that no longer exist due to
valid and legitimate cessation of business and pay huge judgment award.
o Moreover, under Art. 218(c), the NLRC may, in the exercise of its appellate powers, correct,
amend, or waive any error, defect or irregularity whether in substance or in form. Article 221
provides that in any proceeding before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and
intention of this Code that the Commission and its members and the Labor Arbiters shall use
every and all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process.
o The real purpose behind the limitation of the period is to forestall or avoid an unreasonable
delay in the administration of justice, from which the NLRC absolved ITC and IPGC because the
filing of their motion for reconsideration three days later than the prescribed period was due to
excusable negligence.
WoN Ababon et al. were illegally dismissed
o NO. Under Art. 283, the right to close the operation of an establishment or undertaking is one of
the authorized causes in terminating employment of workers, the only limitation being that the
closure must not be for the purpose of circumventing the provisions on termination of
employment. It would be stretching the intent and spirit of the law if a court interferes with
management's prerogative to close or cease its business operations just because the business
is not suffering from any loss or because of the desire to provide the workers continued
employment.
o Under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of
business operations:
(a) service of a written notice to the employees and to the DOLE at least one month
before the intended date thereof;
(b) the cessation of business must be bona fide in character; and
(c) payment to the employees of termination pay amounting to one month pay or at least
one-half month pay for every year of service, whichever is higher.
o The decision to permanently close business operations was arrived at after a suspension of
operation for several months precipitated by lack of raw materials used for milling operations,
the expiration of the anti-pollution permit, and the termination of the lease contract. Closing the
plant was the only remedy available in order to prevent imminent heavy losses. Moreover, the
non-renewal of the lease contract may be considered an event beyond petitioners control, in
the nature of a force majeure situation. As such, there was an authorized cause for termination.
o However, ITC did not comply with the notice requirement. Notice should have been furnished
both the employees and the DOLE at least one month before the intended date of closure.
o Despite not having complied with the notice requirement, the validity of the closure is upheld. To
hold otherwise would absurd situations where there is a just or authorized cause for dismissal
but a procedural infirmity invalidates the termination. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can generate employment in the local
economy. There is instead a sanction upon the employer, which should be stiff as the dismissal
process was initiated by the employers exercise of his management prerogative. Hence, the
Court awarded P50,000.00 to each employee as nominal damages.