IF YOU HANDLE LABOR CASES, THIS IS A VERY INTERESTING CASE FOR YOU. THIS INVOLVES ALLEGED SALE OF A COMPANY AND THEN TERMINATION OF EMPLOYMENT. BUT THEN SINCE IT IS MERE DRAMA, THE SUPREME COURT: OPS! THERE IS ILLEGAL DISMISSAL.

 

READ THE FULL TEXT OF THE DECISION IN jabbulao.com under the category RECENT SUPREME COURT DECISIONS.

 

PEÑAFRANCIA TOURS AND TRAVEL TRANSPORT, INC. VS.  JOSELITO P. SARMIENTO AND  RICARDO S. CATIMBANG (G.R. NO. 17897, 20 OCTOBER 2010)

 

DOCTRINE: RE SALE OF COMPANY DONE IN BAD FAITH WILL NOT FREE EMPLOYER FROM LIABILITY TO EMPLOYEE

 

DIGEST

 

FACTS:

Bus drivers Respondents ABC and DEF were  told by their employer Petitioner XYZ that the company is now sold to RST. Respondents were given separation pay and other benefits. Later, respondents learned that it was still XYZ operating the company. Respondents filed a case for illegal dismissal. The Labor Arbiter dismissed the case. NLRC reversed. CA affirmed NLRC Decision. XYZ filed a Petition for Certiorari before the Supreme Court

ISSUE:       

Was there illegal dismissal.

RULING

Yes, there was illegal dismissal. The alleged sale or transfer of ownership was done in bad faith. The sale or disposition must be motivated by good faith as a condition for exemption from liability.[1][21] Thus, where the change of ownership is done in bad faith, or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed the employees and is held liable for the transgressions of his or her predecessor.

The verbatim ruling of the SC follows:

The petition is bereft of merit.

Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of the establishment, usually due to financial losses. Closure of business, as an authorized cause for termination of employment, aims to prevent further financial drain upon an employer who can no longer pay his employees since business has already stopped.[2][19]

Closure or cessation of operation of the establishment is an authorized cause for terminating an employee, as provided in Article 283 of the Labor Code, to wit:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. x x x.   In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

On this ground, petitioner terminated the employment of respondents. However, what petitioner apparently made was a transfer of ownership. It is true that, as invoked by petitioner, in Manlimos, et al. v. NLRC, et al.,[3][20] we held that a change of ownership in a business concern is not proscribed by law. Lest petitioner forget, however, we also held therein that the sale or disposition must be motivated by good faith as a condition for exemption from liability.[4][21] Thus, where the charge of ownership is done in bad faith, or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed the employees and is held liable for the transgressions of his or her predecessor.[5][22]

But, in this case, there is no successor-employer because there was no actual change of ownership. We sustain the uniform factual finding of both the NLRC and the CA that no actual sale transpired and, as such, there is no closure or cessation of business that can serve as an authorized cause for the dismissal of respondents. Notable in this regard are the following observations of the CA:

            Petitioner PTTTI sent notices of termination to private respondents Sarmiento and Catimbang on the alleged ground that it would cease operations effective 30 October 2002 due to business reverses and it would eventually sell the same to another company.  (Id. at p. 77)  However, the records explicitly show that it (PTTTI) failed to establish its allegation that it was suffering from business reverses.  Neither was there proof that indeed a sale was made and executed on 01 October 2002 involving the company’s assets in favor of ALPS Transportation owned by the Perez family.  It did not present any documentary evidence to support its claim that it sold the same to ALPS Transportation.  On the contrary, it (PTTTI) continuously operates under the same name, franchises and routes and under the same circumstances as before the alleged sale.  It (PTTTI) tried to convince us that it is under a new management, by presenting series of memoranda where the signatory thereon is Edelberto E. Perez, VP-Finance/Operations (Id. at pp. 78-83).  To us, the series of memoranda do not conclusively show that there had been a sale in favor of ALPS Transportation.  And considering that there was no sale which transpired, we also find no basis for the rescission thereof.  The letter dated 19 March 2003 addressed to its employees, informing the latter that it had rescinded its sale to ALPS Transportation and thus, there is a change of management, ownership and operation of the company and it (PTTTI) is intending to sell the company to Southern Comfort Bus Co., Inc. headed by Mr. Willy D. Deterala (Id. at p. 89) could not convince us that there was actually a rescission of sale.  If indeed there was sale and a consequent rescission thereof which transpired, why is it that the ALPS Transportation did not give much a fight when the contract of sale was unilaterally rescinded by Bonifacio Cu who signed as President/General Manager of petitioner PTTTI in a letter dated 28 February 2003.  It is quite unconceivable for a company like ALPS Transportation which had already parted a considerable sum not to question the rescission undertaken by petitioner PTTTI.  This only confirms the public respondent NLRC’s finding, that the sale was indeed a sham, designed to circumvent the law on the rights of the workers.  There is thus, no basis for us to believe that there was a consequent rescission of the alleged sale made by petitioner PTTTI in favor of ALPS Transportation.

            Corollarily, we opine that the alleged second sale made by petitioner PTTTI, this time in favor of Southern Comfort Bus Co., Inc. represented by one Willy D. Deter[a]la is also simulated considering that the ten million pesos consideration is unbelievably too small for thirty five (35) aircon buses including its franchise and facilities thereon.  It is quite an illogical move for the company to have allegedly rescinded the previous sale involving a higher consideration of sixty million pesos (P60,000,000.00) made in favor of ALPS Transportation and to resell the same, this time just for a measly amount of ten million pesos (P10,000,000.00).  Additionally, the observation of private respondents Sarmiento and Catimbang is quite impressive when they claimed that the Southern Comfort Bus Co., Inc., presided by one Willy D. Deterala is a dummy corporation since it has not operated any single bus under its name, even prior to the sale and up to the present.  In fact, its principal business office at No. 4 Cathedral St., Ateneo Avenue 4400 Naga City is not even known. Suffice it to stress, these private respondents’ allegations/observations have not at all been refuted nor controverted by petitioner PTTTI.[6][23]

It is likewise evident that, even in the petition before this Court, Bonifacio Bryan Cu signed the Verification and Certification of Non-Forum Shopping[7][24] and Antonio Cu signed the Secretary’s Certificate.[8][25] The fact remains that the Cu family continues to operate petitioner’s business. Despite the alleged recent sale to SCBC, represented by Willy Deterala, petitioner failed to refute the allegations of respondents that the Cu family still continues to own and operate petitioner, or even to show that Willy Deterala is actually in charge of petitioner’s business.  Petitioner did not confront this issue head-on, and its failure to do so is fatal to its cause. Petitioner having failed to discharge its burden of submitting sufficient and convincing evidence required by law, we hold that respondents were illegally dismissed.

Finally, the CA affirmed the ruling of the NLRC and adopted as its own the latter’s factual findings. Long-established is the doctrine that findings of fact of quasi-judicial bodies like the NLRC are accorded respect, even finality, if supported by substantial evidence. When passed upon and upheld by the CA, they are binding and conclusive upon this Court and will not normally be disturbed. Though this doctrine is not without exceptions, the Court finds that none are applicable to the present case.[9][26]

All told, we find no reversible error to justify disturbing, much less, reversing the assailed CA Decision.

WHEREFORE, the instant petition is DENIED, and the Court of Appeals Decision dated August 31, 2006 is hereby AFFIRMED. Costs against petitioner.


[1][21]          Id. at 191.

[2][19]          J.A.T. General Services v. NLRC, 465 Phil. 785, 794 (2004).

[3][20]        312 Phil. 178, 190 (1995).

[4][21]          Id. at 191.

[5][22]        Philippine Airlines, Inc. v. NLRC, 358 Phil. 919, 938 (1998).

[6][23]          Supra note 2, at 24-25.

[7][24]          Supra note 1, at 16-17.

[8][25]          Rollo, p. 18.

[9][26]          Ventura v. Court of Appeals, G.R. No. 182570, January 27, 2009, 577 SCRA 83, 92.