Case Summary (G.R. No. 148132)
Employment and Benefits
Astorga was hired by SMART on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group / Fixed Services Division (CSMG/FSD) with a monthly salary of P33,650.00. Her employee benefits included an annual performance incentive equal to 30% of annual gross salary, group life and hospitalization insurance, and participation in a company car plan (a Honda Civic Sedan valued at P455,000.00 assigned under that program).
Reorganization, Non‑absorption and Termination
In February 1998 SMART implemented an organizational realignment and entered a joint venture with NTT (forming SNMI) to outsource sales and marketing functions, leading to abolition of the CSMG/FSD. SMART conducted a performance evaluation of CSMG personnel for recommendation to SNMI; Astorga ranked last and was not recommended. SMART offered her a supervisory position in the Customer Care Department, which she declined because it carried a lower salary rank and rate. SMART issued a memorandum dated March 3, 1998 terminating Astorga for redundancy, effective April 3, 1998; she received that memorandum on March 16, 1998.
Post‑termination Civil and Labor Filings
SMART demanded return or payment for the assigned company car (letter dated May 18, 1998). After Astorga refused to surrender or pay for the vehicle, SMART filed a replevin action in the RTC (Civil Case No. 98‑1936, Branch 57) on August 10, 1998 to recover possession of the car. Astorga filed a separate complaint for illegal dismissal, unpaid wages and benefits, and damages with the labor tribunal against SMART and Santiago.
Labor Tribunal and NLRC Rulings
The Labor Arbiter (August 20, 1998) found Astorga’s dismissal illegal, concluding the abolition of CSMG/FSD and the contracting out to SNMI were not done in good faith and constituted an illegal displacement; the Arbiter ordered reinstatement with full backwages, allowances, and sizeable awards of moral and exemplary damages and attorney’s fees. On appeal, the NLRC (September 27, 1999) reversed the Labor Arbiter, ruling the reorganization and abolition of CSMG/FSD and transfer of functions to SNMI were legitimate exercises of management prerogative and that redundancy was valid; the NLRC ordered return of the company vehicle and payment of final wages.
RTC Replevin Proceedings and CA Intervention
The RTC denied Astorga’s motion to dismiss the replevin suit (March 29, 1999), holding the action (for recovery of possession of the company car registered in SMART’s name) was a civil replevin action within the jurisdiction of the RTC. The CA, however, reversed the RTC in G.R. Sp. No. 53831 (February 28, 2000), concluding that the car plan was a benefit arising out of the employer‑employee relationship and that jurisdiction over the dispute belonged to the labor tribunal; the CA dismissed the replevin case for lack of jurisdiction.
Issues Raised in the Petitions
The consolidated petitions presented, among others: whether the RTC had jurisdiction over SMART’s replevin action; whether SMART validly terminated Astorga for redundancy and whether such action was tainted by bad faith; whether SMART complied with the statutory one‑month notice requirement to the employee and to the Department of Labor and Employment (DOLE); the applicability of prior jurisprudence (e.g., Serrano); and whether non‑compliance with procedural notice requirements entitles Astorga to reinstatement or only to indemnity/separation pay.
Supreme Court on Jurisdiction of the Replevin Action
The Supreme Court held that the RTC properly exercised jurisdiction over SMART’s replevin action. Replevin is a possessory civil action aimed at recovery of personal property in specie from one who wrongfully detains it; it concerns debtor‑creditor or owner‑possession relations rather than the specialized employment disputes within the competence of the labor tribunal. The Court emphasized that the claim for possession of the company car (registered in SMART’s name) is a civil matter distinct from the labor dispute and that resolution of property possession issues is outside the field of specialization of Labor Arbiters. Consequently, the CA erred in dismissing the replevin case for lack of jurisdiction; the RTC was directed to proceed with trial of Civil Case No. 98‑1936.
Supreme Court on Redundancy and Validity of Dismissal
On the merits of the illegal dismissal claim, the Supreme Court affirmed that redundancy is an authorized cause for termination under Article 283 of the Labor Code. The Court applied established jurisprudence (e.g., Wiltshire / Dole) defining redundancy as the superfluity of an employee’s services relative to the actual needs of the enterprise and as a management judgment that is generally not subject to discretionary review unless arbitrary, malicious, or violative of law. The Court found no convincing evidence of bad faith by SMART: formation of SNMI and abolition of CSMG/FSD were reasonable business judgments to create a more technically capable, specialized entity for value‑added services; SMART had offered Astorga a different position; and the record did not demonstrate SMART undertook reorganization solely to remove a particular employee. Accordingly, Astorga’s dismissal was declared valid.
Procedural Noncompliance with Notice Requirement and Sanction
Although the Court sustained the substantive validity of the redundancy, it held that SMART failed to comply with Article 283’s mandatory written notice requirement to both the affected employee and the DOLE at least one month prior to the effective date. Astorga received the termination memorandum less than one month before effectivity, and DOLE was notified only on March 6, 1998. The Court reiterated that actual knowledge of reorganization by the employee cannot substitute for the formal written notice required to afford sufficient time to seek employment alternatives. Procedural noncompliance does not negate a valid redundancy dismissal but does attract sanction: citing prior decisions (DAP Corporation, Jaka Food), the Court increased the indemnity for procedural deficiency and awarded Astorga P50,000.00 as indemnity for SMART’s failure to comply with the notice requirement.
Monetary Awards and Remedies Ordered
Because Astorga’s dismissal was declared valid (authorized cause), the relief of reinstate
Case Syllabus (G.R. No. 148132)
Case Caption and Procedural Posture
- Three consolidated petitions for review on certiorari under Rule 45 of the Rules of Court: G.R. No. 148132, G.R. No. 151079, and G.R. No. 151372.
- G.R. No. 148132 assails the February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831.
- G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065.
- The Supreme Court consolidated the petitions on February 27, 2002; decision rendered by the Third Division with Justice Nachura writing the opinion.
- Ultimate disposition: G.R. No. 148132 GRANTED in part (Court of Appeals decisions SET ASIDE as to dismissal of replevin); G.R. Nos. 151079 and 151372 DENIED (Court of Appeals decision AFFIRMED with MODIFICATION).
Parties and Employment Facts
- Petitioner: Smart Communications, Inc. (SMART).
- Respondent/Counter-petitioner: Regina M. Astorga (Astorga); Ann Margaret V. Santiago also joined as respondent in certain proceedings.
- Astorga’s employment began May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group / Fixed Services Division (CSMG/FSD).
- Monthly salary: P33,650.00.
- Additional benefits: annual performance incentive equivalent to 30% of annual gross salary; group life and hospitalization insurance; car plan with car valued at P455,000.00.
Reorganization, Redundancy and Termination
- SMART implemented an organizational realignment announced to employees on February 27, 1998.
- As part of the reorganization SMART entered into a joint venture with NTT (Japan) and formed SMART-NTT Multimedia, Inc. (SNMI) to outsource marketing and sales functions.
- CSMG/FSD (Astorga’s division) was abolished because its functions were to be assumed by SNMI.
- SMART conducted performance evaluations of CSMG personnel; employees with highest ratings were recommended for absorption by SNMI; Astorga ranked last and was not recommended.
- SMART offered Astorga a supervisory position in the Customer Care Department; she refused as it carried a lower salary rank and rate.
- Despite abolition of CSMG/FSD Astorga continued reporting for work. SMART issued a memorandum on March 3, 1998 advising of termination due to redundancy effective April 3, 1998; Astorga received that memorandum on March 16, 1998.
Claims, Causes of Action and Relief Sought by Astorga
- Astorga filed a Complaint for illegal dismissal, non-payment of salaries and other benefits, and prayed for moral and exemplary damages against SMART and Santiago.
- She alleged:
- Abolition of CSMG and termination violated her right to security of tenure.
- It was illegal for SMART to contract out services which displaced employees, especially where the contractor is an in‑house agency (i.e., SNMI) — asserted illegality under Section 7(e), Rule VIII‑A of the Rules Implementing the Labor Code.
SMART’s Position and Defense
- SMART maintained the termination was valid, effected due to redundancy — an authorized ground for termination under the Labor Code.
- SMART characterized abolition of CSMG and formation of SNMI as legitimate exercise of management prerogative to make operations more efficient and specialized.
- SMART argued procedural compliance and management prerogative in subcontracting/outsourcing and denied bad faith.
Car Plan Dispute and Replevin Action
- On May 18, 1998 SMART demanded Astorga either pay the current market value of the Honda Civic assigned under the car plan or surrender the vehicle.
- Astorga refused; SMART filed a replevin complaint in the Regional Trial Court (RTC) of Makati on August 10, 1998 (Civil Case No. 98‑1936, raffled to Branch 57).
- Astorga moved to dismiss the replevin complaint, asserting:
- Lack of jurisdiction of regular courts because the subject arises from employment contract and is within labor tribunal competence;
- Failure to state a cause of action;
- Litis pendentia and forum-shopping.
Labor Arbiter Decision (August 20, 1998)
- Labor Arbiter declared Astorga’s dismissal illegal and unjust.
- Arbiter’s findings included that SMART’s right to abolish departments must be exercised in good faith and for causes beyond its control; the Arbiter found SMART abolished CSMG not in good faith but as a ploy to terminate Astorga.
- Arbiter held contracting out functions to an in‑house agency (SNMI) was illegal under Section 7(e), Rule VIII‑A.
- Remedies ordered by the Labor Arbiter (excerpted computation and awards):
- Reinstate Astorga to former/substantially equivalent position without loss of seniority and privileges.
- Full backwages inclusive of allowances and other benefits from time of dismissal to date of reinstatement — computed (P33,650 x 4 months = P134,600.00) and other items (unpaid salaries, car maintenance allowance, fuel allowance) totaling P211,415.52 as reflected in the order.
- Moral damages: P500,000.00; exemplary damages: P300,000.00.
- Attorney’s fees: 10% of amount due.
- Labor Arbiter’s Decision formed basis for SMART’s appeal to the NLRC.
RTC Ruling on Replevin Motion to Dismiss (March 29, 1999) and Reconsideration
- RTC denied Astorga’s motion to dismiss the replevin complaint for lack of jurisdiction, concluding:
- The case seeks enforcement of a right of possession over a company car registered in plaintiff’s name — a replevin action under Rule 60, 1997 Rules of Civil Procedure and within RTC jurisdiction.
- Complaint sufficiently stated a cause of action; no forum-shopping or litis pendentia because labor judgment would not bar the civil action.
- Astorga’s motion for reconsideration was denied by the RTC on June 18, 1999.
Court of Appeals (First CA Ruling on Replevin; February 28, 2000)
- Astorga elevated RTC denial to CA via certiorari. The CA reversed the RTC and dismissed the replevin case for lack of jurisdiction.
- CA’s reasoning: the vehicle was issued as part of the employment package; the car plan privilege is a benefit arising out of the employer‑employee relationship; thus the claim falls within original and exclusive jurisdiction of labor arbiters and the NLRC.
NLRC Decision on Illegal Dismissal Appeal (September 27, 1999)
- NLRC sustained Astorga’s dismissal (i.e., found dismissal valid).
- NLRC reversed the Labor Arbiter, finding:
- The abolition of CSMG and creation of SNMI was a valid organizational action and legitimate exercise of management prerogative.
- The Labor Arbiter erred in finding SNMI to be an in‑house agency.
- Contracting out, subcontracting and streamlining operations for efficiency are allowed under law.
- NLRC rejected requirement that redundancy must be impelled by economic reasons.
- NLRC ordered, among others, that Astorga immediately return the company vehicle assigned to her and that SMART pay Astorga her final wages after submission of required supporting papers.
- NLRC denied Astorga’s motion for reconsideration on December 21, 1999.
Court of Appeals Decision on Illegal Dismissal Appeal (June 11, 2001) and Reconsideration Resolution (December 18, 2001)
- The CA affirmed with modification the NLRC’s resolutions:
- Agreed with NLRC that SMART’s reorganization and abolition of CSMG was a legitimate exercise of management prerogative; found no bad faith in non‑absorption into SNMI.
- Found SMART failed to comply with the mandatory one‑month notice requirement prior to termination and imposed a penalty equivalent to one‑month salary for noncompliance.
- Set aside NLRC’s order for return of company vehicle, holding that the issue is civil in nature (not essentially a labor concern) and properly within the competence of regular courts; matter had not been fully ventilated before the NLRC.
- On motions for reconsideration, CA’s December 18, 2001 resolution: Astorga’s motion partially granted — SMART ordered to pay Astorga backwages from February 15, 1998 to November 6, 1998; SMART’s motion outrightly denied.