G.R. No. 217721 - Lagao y Garcia vs. People

Case Summary (G.R. No. 217721)

Issues Presented for Review

The main issues were: (1) the proper identification of the owner of Mayon Hotel & Restaurant liable in the labor complaints; (2) whether respondents were illegally dismissed; (3) entitlement to unpaid money claims, including wages and labor benefits; and (4) validity of deductions made from wages and claims for damages.

Ownership and Proper Respondent Determination

Despite the Certificate of Registration issued to Pacita O. Po, the Labor Arbiter and CA found, based on credible and substantial evidence including testimonies and non-compliance of petitioners in producing further evidence, that Josefa Po Lam exercises ownership control and is the real proprietor. Josefa’s managerial acts, such as overseeing employees, handling finances, and dealing with government labor inspections, were inconsistent with a mere managerial role but indicative of ownership. The Court applied the probative rule where a party refusing to produce evidence that could negate an adverse inference leads to the presumption that such evidence would have been unfavorable. The failure of Pacita Po to participate actively in proceedings at the Labor Arbiter level and her absence in presenting evidence further supported this conclusion. The Court emphasized that technical rules of evidence may be relaxed in labor cases for substantial justice and that the issue of ownership, despite not being alleged in complaints, could be resolved during the proceedings under due process.

Illegal Dismissal and Separation Pay

Employees filed illegal dismissal complaints after the cessation of Mayon’s hotel operations on March 31, 1997, which the Labor Arbiter found to have become a de facto termination since over six months had passed without reinstatement, consistent with Article 286 of the Labor Code. The cause of suspension was the non-renewal of the lease on the hotel premises, an event beyond the employer’s control, yet the business losses experienced did not absolve petitioners from compliance with procedural and substantive labor law requirements. The Court rejected petitioners’ contentions that the complaints were premature or unsupported by substantial evidence. The absence of recall and failure to comply with procedural requisites, including notice to DOLE, indicated bad faith. Despite petitioners’ argument that the lay-off was temporary due to business losses and lease problems, the record showed no intent to reinstate respondents. This transition effectively amounted to dismissal. Separation pay was awarded to illegally dismissed employees who are not yet eligible for retirement benefits, retirement pay was granted to qualified employees, and damages were awarded for wrongful termination. Employees who did not make specific claims for certain reliefs were not granted them.

Monetary Claims: Underpayment and Labor Benefits

Respondents also claimed unpaid wages and labor benefits such as holiday and rest day pay, overtime, night shift differential, cost of living allowance (COLA), and service incentive leave pay (SILP). The Labor Arbiter and CA found that petitioners failed to prove payment. Petitioners’ submission of affidavits allegedly acknowledging wage payments were deemed involuntary and unreliable, and the provided DOLE inspection reports and facility evaluation orders lacked sufficient proof of actual payment to respondents. Further, petitioner Josefa Po Lam did not inform the employees of the facility evaluation orders, and the quality and quantity of food purportedly provided as facilities did not conform to the orders. The Court emphasized the employer’s duty to present payroll and related records, documents solely within their custody, to discharge the burden of proof on wages paid. Failure to do so raised a presumption of nonpayment adverse to petitioners. The Court also rejected petitioners’ claim of deducting from wages the cost of meals provided as facilities, reasoning that such deductions require prior employee consent in writing, proof that the facility is customary to the trade, and charging of fair values, all of which were unmet. Additionally, the purported monthly “five percent incentive” or profit sharing paid irregularly without a prior agreement could not be considered part of regular wages for purposes of labor standards. The minimum wage applied was based on the business employing more than fifteen workers, per applicable wage order.

Legal Standards and Judicial Discretion

The Court underscored that factual findings from quasi-judicial bodies like the Labor Arbiter and NLRC carry respect but may be re-examined when findings conflict and the earlier ruling lacks substantial evidence. The Court stressed the rule that dismissal cases impost a heavy burden on the employer to show just or authorized cause and due observance of procedural requisites. In cases of doubt or conflicting evidence, the benefit of the doubt must favor the employee to effectuate the protective purposes of labor law under the 1987 Constitution. The Court affirmed that procedural relaxation in labor cases furthers substantial justice without violating due process.

Damages and Attorney’s Fees

Moral damages were awarded to respondents who filed claims for damages, in recognition of bad faith and oppressive dismissal practices by petitioners. Exemplary damages were limited to those respondents who specifically cla

Case Syllabus (G.R. No. 217721)

Case Background and Parties Involved

Petitioners are Mayon Hotel & Restaurant, a single proprietorship business, registered in the name of Pacita O. Po, with her mother, Josefa Po Lam, managing operations.
Respondents are sixteen employees formerly employed at the Mayon Hotel & Restaurant.
Employment dates start as early as 1981, with the respondents working in various roles including accountant, front desk clerk, supervisory waiter, roomboys, cashiers, cooks, waiters, technicians, dishwashers, and maintenance workers.
In 1997, due to expiration and non-renewal of the lease of the premises at Rizal Street, hotel operations were suspended; the restaurant operations continued temporarily at Elizondo Street pending construction of a new site at Peñaranda Street.
Only 9 out of 16 employees continued working at the new restaurant location.
Respondents filed complaints alleging illegal dismissal, underpayment of wages, and nonpayment of various benefits.
Previous rulings by the Labor Arbiter favored the employees, awarding monetary claims, separation pay, retirement pay, and damages.
The NLRC reversed the Labor Arbiter’s decision and dismissed the complaints.
The Court of Appeals reinstated the Labor Arbiter's ruling, holding that respondents were illegally dismissed and entitled to claims.
Petitioners filed a petition for certiorari to the Supreme Court contesting ownership, dismissal legality, payment of monetary claims, and the liability of Josefa Po Lam as the proper party.

Issues Presented for Resolution

Whether Josefa Po Lam, rather than Pacita O. Po, is the true owner and proper respondent in the case.
Whether the respondents named in the complaint were illegally dismissed.
Whether the respondents are entitled to monetary claims for underpayment of wages, nonpayment of holiday/rest day pay, service incentive leave pay (SILP), cost of living allowance (COLA), overtime pay, and night shift differential pay.
Whether the Court of Appeals erred in reversing the NLRC decision.
Whether technical rules of evidence and procedural technicalities bar respondents’ claims.

Ownership of Mayon Hotel & Restaurant

Despite the business registration certificate naming Pacita O. Po as owner, the Labor Arbiter and CA found that Josefa Po Lam was the actual owner and proprietor, based on:
- Failure by Josefa Po Lam to submit documentary proof of sale or other papers to establish ownership by Pacita O. Po.
- Testimonies from witnesses and respondents showing Josefa exercised acts of ownership (employee transfers, report receptions, managing payables, handling inspections).
- Josefa’s failure to comply with orders to submit additional evidence.
- Absence of Pacita Po’s participation or opposition during initial proceedings despite notices.
Petitioners’ claims that Josefa was merely the manager or overseer was contradicted by evidence and the pattern of appearances.
The Court emphasized that technical rules of evidence are relaxed in labor cases in the interest of substantial justice.
Judicial admission alleged by petitioners regarding ownership designation was not binding on respondents, who were employees and not in control of the procedural technicalities.
The Court upheld the Labor Arbiter’s and CA’s conclusion that Josefa Po Lam is the true owner, and therefore the proper party liable in these cases.

Illegal Dismissal and Separation/Retirement Pay Claims

Respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo, and BroAola filed for illegal dismissal claims with demands for separation or retirement pay.
The Labor Arbiter found illegal dismissal had occurred after more than six months of suspension without recall and awarded separation pay to Loveres, Macandog, Llarena; retirement pay to Guades, Nicerio, and Alamares (due to age eligibility).
The NLRC reversed the ruling, dismissing claims for lack of evidence of termination and labeling the layoff as temporary suspension due to lease expiration.
The Court of Appeals reinstated the Labor Arbiter’s decision.
Supreme Court ruled:
- The closure due to lease non-renewal led to a suspension exceeding six months, which under Article 286 of the Labor Code is considered termination unless the employees are reinstated.
- Petitioners bore the burden of proving just or authorized cause for termination, which they failed to do.
- Evidence showed respondents were not recalled nor able to work despite resumption of operations at the new site.
- Petitioners' claim that the cause of layoff was beyond their contr
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