Title
Sumifru Corp. vs. Baya
Case
G.R. No. 188269
Decision Date
Apr 17, 2017
Employee demoted and pressured to switch loyalties after refusing to abandon cooperative; Supreme Court ruled constructive dismissal, awarding separation pay, damages, and fees, with surviving merger entity held liable.

Case Summary (G.R. No. 188269)

Petitioner, Respondent and Procedural Posture

Baya filed a complaint for illegal/constructive dismissal against AMSFC and DFC before the NLRC. The Labor Arbiter (LA) ruled for Baya (Decision dated June 30, 2003). The NLRC reversed and dismissed the complaint (Resolutions dated March 10, 2004 and May 31, 2004). The Court of Appeals (CA) set aside the NLRC and reinstated the LA decision with modifications (Decision dated May 14, 2008; Resolution dated May 20, 2009). Sumifru, as the surviving entity after merging with DFC in 2008, filed a petition for review on certiorari before the Supreme Court seeking to reverse the CA.

Key Dates

  • Employment and career: Baya employed by AMSFC since February 5, 1985; became supervisor on September 1, 1997.
  • Secondment and return: Reassigned to DFC (June 1999); returned to AMSFC on August 30, 2002.
  • DAR takeover and referendum: AMSKARBEMCO referendum in October 2001 (280 to AMSKARBEMCO; 85 to SAFFPAI); DAR effected ARB takeover culminating September 20, 2002.
  • Procedural: LA Decision June 30, 2003; NLRC Resolutions March 10, 2004 and May 31, 2004; CA Decision May 14, 2008 and Resolution May 20, 2009; Supreme Court Decision April 17, 2017.

Factual Background

Baya rose from rank-and-file to supervisory positions at AMSFC and later served in supervisory posts at sister company DFC. He was an officer and active member of AMSKARBEMCO, the cooperative of AMSFC regular employees. After DAR coverage of approximately 220 hectares and ARB status for employees (including Baya), the ARBs explored an agribusiness venture; negotiations failed and AMSKARBEMCO was free to contract with third parties. AMSKARBEMCO entered an export agreement with another company; AMSFC summoned and threatened cooperative officers. A DFC manager pressured Baya to shift loyalty to SAFFPAI; he refused. DFC then issued a letter stating Baya’s secondment ended and ordered his return to AMSFC. Upon return (August 30, 2002), he was told no supervisory positions were available and was assigned rank-and-file duties; a request for reinstatement to supervisory rank was denied on September 20, 2002. After the DAR takeover on September 20, 2002, AMSKARBEMCO members were barred from working for AMSFC and were replaced by contract workers, while SAFFPAI members were retained.

Labor Arbiter’s Findings and Relief

The LA found that Baya was constructively dismissed when he was demoted from supervisory to rank-and-file assignments without justifiable reason upon return to AMSFC. The LA rejected the employers’ contention that the ARB takeover caused termination because constructive acts occurred on August 30, 2002, prior to the takeover, and because only AMSKARBEMCO members were adversely affected post-takeover. The LA ordered reinstatement without loss of seniority, or, if reinstatement were impossible, payment of separation pay (company practice: 39.25 days per year), as well as backwages, other benefits, moral and exemplary damages, and attorney’s fees.

NLRC Ruling and Rationale

The NLRC reversed the LA, dismissing the complaint for lack of merit (March 10, 2004). It concluded that the termination resulted from cessation of business operations over large portions of AMSFC’s banana plantation due to government agrarian reform—an involuntary cause attributable to the State rather than wrongful employer action—rendering separation pay inapplicable under the NLRC’s view. The NLRC affirmed only the award of 13th month pay with modification. A motion for reconsideration was denied (May 31, 2004).

Court of Appeals Ruling and Rationale

The CA found that the NLRC gravely abused its discretion and reinstated the LA decision with modifications. The CA concluded constructive dismissal existed because: (a) management knowingly ordered Baya’s return to AMSFC despite absence of supervisory positions, effectively forcing demotion; (b) the return followed harassment and pressure to abandon AMSKARBEMCO in favor of SAFFPAI; (c) management’s actions were consistent with cooperative-busting tactics supported by joint affidavits from AMSKARBEMCO members; and (d) these acts were committed before the DAR-led ARB takeover. The CA declined to award backwages because Baya received a portion of AMSFC’s plantation through agrarian reform, and instead awarded separation pay, pro-rated 13th month pay, moral damages, and attorney’s fees, totaling P278,600.05 (P194,992.82 as separation pay; P8,279.95 as 13th month pay; P50,000 moral damages; P25,327.28 attorney’s fees). Petitioner’s motion for reconsideration was denied.

Issues Presented to the Supreme Court

(1) Whether the CA correctly found that the NLRC gravely abused its discretion and that AMSFC and DFC constructively dismissed Baya. (2) Whether AMSFC and DFC are liable for separation pay, moral damages, and attorney’s fees. (3) Whether Sumifru, as surviving entity of the merger with DFC, should be held solidarily liable for monetary awards.

Supreme Court’s Analysis on Grave Abuse and Constructive Dismissal

The Supreme Court affirmed the CA, finding the NLRC’s reversal to be a grave abuse of discretion because the LA’s finding of constructive dismissal was supported by substantial evidence. The Court reiterated established principles: constructive dismissal exists when continued employment is rendered impossible, unreasonable or unlikely—often by demotion in rank or diminution of pay/benefits—or when employer conduct is so oppressive as to leave the employee no choice but to forego employment. Citing Peckson v. Robinsons Supermarket Corp., the Court emphasized that the employer bears the burden to prove that a transfer or demotion was a valid exercise of management prerogative and not a subterfuge; absent such proof, the demotion is tantamount to unlawful constructive dismissal. The Court found that AMSFC and DFC failed to overcome this burden: management ordered Baya’s return despite knowing of no supervisory vacancies; the end of secondment followed harassment and pressure to betray AMSKARBEMCO; and the acts constituting constructive dismissal occurred before the DAR takeover, undermining the NLRC’s causation theory.

Supreme Court’s Determination of Appropriate Remedy (Strained Relations Doctrine)

Although constructive dismissal was established, the Court applied the doctrine of strained relations. Given the antagonistic and oppressive relationship between Baya and his employers (rooted in cooper

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