G.R. No. 192650 - Martos vs. New San Jose Builders, Inc.

Case Summary (G.R. No. 192650)

Factual Background

Respondent is a domestic construction corporation engaged in public works and low cost housing, including the San Jose Plains Project (SJPP) in Montalban, Rizal. Petitioners alleged that respondent hired them on various dates as regular employees and that they worked continuously until their dismissal in or about February and July 2001 and in some instances later dates. Respondent recounted that it slowed and suspended works on SJPP in 2000 due to lack of funds from the National Housing Authority, informed many workers that they would be laid off or reassigned to other projects, and issued new appointment papers to certain personnel designating them as project employees. Some employees allegedly refused to sign the new appointment papers and thereafter ceased to work. Three complaints for illegal dismissal and money claims were filed before the NLRC: NLRC-NCR Case No. 03-01639-2002 (Martos, et al.), NLRC-NCR Case No. 07-02888-2002 (Greg Bisonia, et al.), and NLRC-NCR Case No. 07-04969-2002 (Jimmy Campana, et al.). The complaints were consolidated and assigned to Labor Arbiter Facundo L. Leda.

Labor Arbiter Proceedings and Ruling

The Labor Arbiter heard the consolidated complaints and rendered a decision dated May 23, 2003. The Labor Arbiter declared that respondent illegally dismissed complainant Felix Martos and awarded him separation pay, backwages, and other monetary benefits. The Labor Arbiter dismissed, without prejudice, the complaints of the other complainants.

National Labor Relations Commission Ruling

Both parties appealed to the NLRC. On July 30, 2008, the NLRC dismissed respondent’s appeal for lack of merit and partially granted the appeal of the complainants. The NLRC modified the Labor Arbiter’s decision by ordering reinstatement of all complainants to their former positions, without loss of seniority rights and with full backwages from the time compensation was withheld until actual reinstatement. The NLRC likewise ordered payment of salary differentials, service incentive leave pay, and 13th month pay, using the computation made for Martos as basis.

Court of Appeals Decision

Respondent filed a petition for certiorari under Rule 65, 1997 Rules of Civil Procedure before the Court of Appeals. On July 31, 2009, the CA granted the petition, reversed and set aside the NLRC decision and reinstated the Labor Arbiter’s May 23, 2003 decision. The CA held that the NLRC committed grave abuse of discretion in reviving the complaints of many petitioners despite their failure to verify their position papers. The CA noted that only Martos had signed the verification and that no proof showed that he had authority to sign for the others. The CA also ruled that Martos was a regular employee and that his termination was illegal because respondent failed to produce any employment contract designating him a project employee and failed to comply with the reporting requirement of Department Order No. 19. The CA ordered that Martos be declared illegally dismissed, awarded separation pay and related monetary benefits, and dismissed the complaints of the other complainants without prejudice.

Issues for Resolution

The Supreme Court was asked to decide principally: (1) whether the CA correctly sustained the dismissal of the complaints filed by those petitioners who failed to verify their position papers; and (2) whether Martos should be reinstated or otherwise entitled to separation pay and related monetary relief.

Petitioners’ Contentions

Petitioners asserted that the CA erred in dismissing complaints for failure to verify position papers because such defect is formal and not jurisdictional. They contended that the CA should have allowed amendment or required submission of missing verifications. Petitioners maintained that their original complaints contained sufficient sworn allegations to establish employment status and monetary claims, and that procedural technicalities should be relaxed in labor cases in favor of the working man. They argued that Martos and the other petitioners were similarly situated and entitled to reinstatement rather than separation pay, and that they were entitled to actual, moral, and exemplary damages for respondent’s alleged violations of labor standards and mandatory wage laws.

Respondent’s Contentions

Respondent maintained that the rules requiring simultaneous submission of verified position papers and supporting documents under the NLRC Rules and the 1997 Rules of Civil Procedure are mandatory and assist in the just and efficient disposition of labor disputes. Respondent pointed out that only Martos verified his position paper and that no special power of attorney or other instrument authorized Martos to sign verifications for his co-complainants. Respondent alleged that many of the named complainants were not its employees and that several had withdrawn their complaints. Respondent further argued that reinstatement was impracticable because of strained relations and that petitioners failed to prove entitlement to actual, moral, or exemplary damages.

Supreme Court Ruling — Verification and Dismissal of Other Complaints

The Supreme Court denied the petition. The Court agreed with the CA that Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil Procedure require proper verification and certification against forum shopping and that failure to comply renders a pleading treatable as unsigned and dismissible. The Court explained that verification secures assurance that allegations are true and that a lone signature suffices only if the signatory is authorized to sign for others, which was not shown. The Court relied on prior decisions, including Christine Chua v. Jorge Torres & Antonio Beltran, Georgia T. Estel v. Recaredo P. Diego, Sr., and Nellie Vda. de Formoso v. Philippine National Bank, to state that dismissal is appropriate where there is no substantial compliance or authorization. The Court observed that the other complainants failed to correct their procedural defect after the Labor Arbiter’s dismissal without prejudice and that many did not appear in respondent’s payroll records or were shown to have withdrawn complaints. The Court concluded that the dismissal of the other complaints resulted from the complainants’ negligence and passive attitude rather than any error by the CA.

Supreme Court Ruling — Martos: Status and Relief

As to Martos, the Court agreed with the CA that respondent failed to prove that Martos was a project employee. Respondent did not produce an employment contract showing a fixed-term or project-limited engagement, nor successive contracts for specific projects or phases. The Court further noted respondent’s failure to report any termination under Department Order No. 19. The Court therefore treated Martos as a regular employee who was constructively dismissed when asked to sign a new appointment designating him a project employee. However, the Court found that reinstatement was no longer practicable because the issue of strained relations was only belatedly raised and Martos had asserted that relations had become untenable. Applying the accepted doctrine on strained relations, the Court held that separation pay in lieu of reinstatement was appropriate. The Court awarded Martos separation pay, full backwages, 13th month pay, service incentive leave

Case Syllabus (G.R. No. 192650)

Parties and Procedural Posture

Petitioners consist of a large group of workers led by Felix Martos who filed consolidated complaints for illegal dismissal and money claims.
Respondent is New San Jose Builders, Inc., a domestic construction corporation engaged in low-cost housing projects including the San Jose Plains Project.
The consolidated complaints were assigned to a Labor Arbiter, which issued a May 23, 2003 Decision partially granting relief to Felix Martos and dismissing the other complaints without prejudice.
The National Labor Relations Commission reversed in part and ordered reinstatement and backwages for all complainants in its July 30, 2008 Decision.
The Court of Appeals granted certiorari under Rule 65 and on July 31, 2009 reversed the NLRC and reinstated the Labor Arbiter’s May 23, 2003 Decision.
The present petition for review assailed the CA decision, and the Supreme Court resolved the appeal by denying the petition.

Key Facts

New San Jose Builders, Inc. carried out the San Jose Plains Project which was slowed in 2000 due to lack of funds from the National Housing Authority.
Respondent informed workers that many would be laid off and that others would be reassigned to different projects.
Several employees were laid off while others, including Felix Martos, were issued new appointment papers designating them as project employees and were asked to sign appointment papers stating co-terminus status with the project.
Some retained workers refused to sign the new appointment papers and subsequently ceased working.
Three complaints for illegal dismissal and money claims were filed and later consolidated and docketed as NLRC cases.
Respondent maintained that the workers were project employees whose employment terminated upon project completion, while private respondents claimed regular employee status and alleged dismissal on February 28, 2002.
Only Felix Martos verified the position paper and the majority of the complainants failed to sign verifications at the Labor Arbiter and before the NLRC.

Issues Presented

Whether the Court of Appeals correctly dismissed the complaints of those petitioners who failed to verify their position papers.
Whether Felix Martos was a regular employee who was illegally dismissed and whether reinstatement or separation pay was appropriate.

Petitioners’ Contentions

Petitioners argued that failure to verify a position paper is a mere formal defect and not jurisdictional and that the CA should have allowed amendment or required compliance.
Petitioners asserted that their complaints contained sworn complaints that sufficiently alleged employment status, salary, and reliefs and that technicalities should be relaxed in favor of laborers.
Petitioners maintained that they and Martos were similarly situated and that reinstatement should have been ordered rather than separation pay.
Petitioners claimed entitlement to actual, moral, and exemplary damages for alleged violations of labor standards and related laws.

Respondent’s Contentions

Respondent argued that dismissal of complaints without proper verification complied with the mandatory NLRC Rules and the 1997 Rules of Civil Procedure and that the complainants repeatedly failed to comply.
Respondent contended that the lone verification by Martos did not bind the other complainants because no special power of attorney or authorization was shown.
Respondent maintained that many named complainants were