Case Summary (G.R. No. L-36309)
Key Dates and Procedural History
- February 11, 2010: Noel Awayan informs DOLE of impending closure and sale of New ANJH assets.
- February 13-15, 2010: Petitioners are informed of termination due to cessation of operations, and separation pay is offered.
- March 5, 2010: Deed of Sale executed transferring assets from New ANJH to NH Oil Mill Corporation.
- March 16-29, 2010: Petitioners receive separation pay and sign quitclaim agreements; LA Guan issues dismissal orders on the labor dispute claims.
- April 29, 2011: Executive Labor Arbiter (ELA) Santos rules in favor of petitioners for illegal dismissal and orders reinstatement and backwages.
- September 24, 2011: NLRC initially denies respondents' motion to reduce appeal bond and dismisses their appeal for non-perfection.
- December 28, 2011 and February 28, 2012: NLRC subsequently reverses its position, dismisses petitioners’ complaint citing res judicata, and denies petitioners' motion for reconsideration.
- September 5, 2012: Court of Appeals affirms NLRC’s decisions, holding the la Guan’s orders final and binding, and that petitioners' illegal dismissal complaint was barred by res judicata.
- August 18, 2015: Supreme Court decision reversing CA and NLRC.
Applicable Law and Legal Framework
The 1987 Philippine Constitution safeguards workers’ security of tenure. Jurisdiction over labor disputes involving cessation of employment and separation pay lies with labor arbiters and the NLRC as governed by the Labor Code, particularly Articles 219 and 224 (formerly Articles 212 and 217), defining “labor dispute” and labor arbiters’ jurisdiction over termination disputes. Procedural rules on appeal bonds and motions to reduce bonds are governed by the NLRC Rules of Procedure.
Issue on Perfection of Appeal and Motion to Reduce Bond
The dispute involved whether the filing of a motion to reduce the appeal bond suspends the running of the period to perfect an appeal to the NLRC. The Supreme Court held following its prior decisions (Garcia v. KJ Commercial and McBurnie v. Ganzon) that:
- The filing of a motion to reduce appeal bond, together with posting a provisional bond in a reasonable amount (at least 10% of the award, excluding damages and attorneys’ fees), suspends the reglementary period to perfect the appeal.
- NLRC’s discretion is wide in determining the reasonableness of the bond and a motion may be ruled upon even beyond the 10-day appeal period.
- The Court may relax strict procedural rules in favor of substantial justice and on meritorious grounds.
- Respondents ultimately posted the full bond, and the NLRC and CA reasonably exercised discretion in upholding the perfection of appeal.
Hence, the appeal by respondents was perfected according to procedural requirements.
Application of Res Judicata Doctrine
The NLRC and CA applied res judicata to bar petitioners’ illegal dismissal complaint, relying on labor arbiter Guan’s earlier dismissal orders following payment and execution of quitclaims. The Supreme Court disagreed, explaining the four requisites for res judicata:
- Finality of former judgment
- Jurisdiction over parties and subject matter
- Judgment on the merits
- Identity of parties, subject matter, and cause of action between cases
While jurisdiction and parties were established, the Court found:
- The labor arbiter’s orders were not judgments on the merits but merely acknowledgments of petitioners’ acceptance of separation pay computations. They did not determine the legality of dismissal.
- The subject matter and causes of action differ: acceptance of separation pay does not bar subsequent challenge to the legality of dismissal (per SME Bank v. De Guzman).
Thus, res judicata did not apply to bar petitioners’ complaints.
Jurisdiction Over Payment of Separation Pay as a Labor Dispute
The Court held that Noel’s request for guidance in paying separation pay falls within the definition of a labor dispute under Article 219 of the Labor Code. The proper payment of separation pay involves terms and conditions of employment, falling under the exclusive jurisdiction of labor arbiters per Article 224. The use of a letter request instead of a formal complaint to invoke jurisdiction is permissible given the flexible procedural rules in labor cases.
Piercing the Corporate Veil and Substance Over Form
The Supreme Court applied the doctrine of piercing the corporate veil, noting:
- Although generally disfavored, such doctrine is justified when corporate fiction is used to perpetrate fraud, injustice, or circumvent protective labor laws.
- Here, New ANJH’s assets were sold to NH Oil Mill, a corporation owned predominately by Noel and his family, including his sister Heidi. NH Oil resumed operations shortly after New ANJH’s cessation, using the same management, premises, machinery, and equipment.
- The sale was not genuine but a device to evade labor obligations and defeat empl
Case Syllabus (G.R. No. L-36309)
Background and Parties Involved
- Petitioners Leo R. Rosales, Edgar Solis, Jonathan G. Raniola, Lito Feliciano, Raymundo Didal, Jr., Nestor Salin, Arnulfo S. Abril, Ruben Flores, Dante Ferma, and Melchor Selga were formerly employed by New A.N.J.H. Enterprises (New ANJH).
- New ANJH is a sole proprietorship owned by respondent Noel Awayan.
- Respondents include New ANJH Enterprises, NH Oil Mill Corporation (NH Oil), and its affiliated individuals Noel Awayan, Ma. Fe Awayan, Byron Ilagan, Heidi A. Ilagan, and Avelino Awayan.
- Petitioners worked as machine operators, drivers, helpers, lead and boiler men.
- The dispute arose over the alleged illegal dismissal of petitioners when New ANJH ceased operations and sold assets to NH Oil.
Chronology of Events
- On February 11, 2010, Noel Awayan informed the DOLE Director of New ANJH’s impending closure due to dwindling capital and notice of termination of 33 employees.
- On February 13, 2010, Noel met with the affected employees, including petitioners, advising them of the planned cessation and sale.
- Uniformly-worded Notices of cessation of operations effective March 15, 2010 and sale to a corporation were given dated February 12, 2010, accompanied by offers of separation pay.
- On March 5, 2010, Noel signed a Deed of Sale selling New ANJH’s manufacturing equipment and assets to NH Oil for PHP 950,000, represented by his sister Heide Ilagan.
- NH Oil’s Articles of Incorporation were dated January 27, 2010, with Noel subscribing over two-thirds of capital stock; the remainder held by family members.
- On March 8, 2010, Noel and New ANJH filed a Letter Request for Intervention before the NLRC Sub-Regional Arbitration Branch No. IV seeking guidance on the payment of separation benefits amidst permanent closure.
- Between March 16 and March 29, 2010, petitioners received separation pay, signed corresponding check vouchers, and executed Quitclaims and Releases before Labor Arbiter Guan.
- Labor Arbiter Guan issued Orders dismissing labor disputes with prejudice due to settlement.
- Petitioners subsequently filed illegal dismissal complaints alleging that New ANJH resumed operations as NH Oil with the same assets, owners, and management, thereby circumventing security of tenure.
Findings of the Executive Labor Arbiter (ELA)
- On April 29, 2011, ELA Generoso V. Santos ruled petitioners were illegally dismissed, ordered reinstatement, and full backwages less separation pay.
- The ELA found the sale of assets to NH Oil was not genuine as the buyer was practically the same as the seller with control remaining in Noel’s family.
- The closure and sale were deemed in bad faith, constituting a pretext to circumvent petitioners’ security of tenure.
- Management, premises, machinery, and operation continued unchanged under NH Oil.
- Accordingly, the ELA pierced the corporate veil and declared the dismissals illegal.
Proceedings Before the National Labor Relations Commission (NLRC)
- Respondents appealed the ELA ruling and filed motions to reduce the appeal bond.
- They initially posted 60% of the award as bond, which was contested.
- On September 24, 2011, the NLRC denied the motion to reduce bond and dismissed the appeal for non-perfection; simultaneously, it granted petitioners’