J.A.B. Bulao & Associates

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.

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CARMELA BROBIO MANGAHAS VS. EUFROCINA A. BROBIO (G.R. NO. 183852, 20 OCTOBER 2010)

DOCTRINE RE CONSENT AND CONSIDERATION IN CONTRACTS

DIGEST

FACTS:

ABC needed from  XYZ an original copy of a deed of extrajudicial settlement. XYZ told ABC that he will sign only if ABC will give him the additional money he promised as his share in the estate in the amount of P1,000,000.00. XYZ bargained until the reduced amount of P600,000.00was agreed. Since XYZ has no money at that time, he executed a promissory note. When the due date came, XYZ refused to pay. ABC sued. The defense of XYZ was there was no consent since  he was just forced to sign the promissory note and there was no consideration. RTC ruled in favor of ABC. Court of Appeals reversed the RTC decision on the ground that there was indeed no consent and consideration in the execution of the promissory note.

ISSUE: Was the promissory note void for lack of consent and consideration?

RULING:

When XYZ signed the promissory note there was consent and consideration.

As to the matter of  consent, the Court ruled as follows:

Contracts are voidable where consent thereto is given through mistake, violence, intimidation, undue influence, or fraud. In determining whether consent is vitiated by any of these circumstances, courts are given a wide latitude in weighing the facts or circumstances in a given case and in deciding in favor of what they believe actually occurred, considering the age, physical infirmity, intelligence, relationship, and conduct of the parties at the time of the execution of the contract and subsequent thereto, irrespective of whether the contract is in a public or private writing.^[1][14]

Nowhere is it alleged that mistake, violence, fraud, or intimidation attended the execution of the promissory note.  Still, respondent insists that she was “forced” into signing the promissory note because petitioner would not sign the document required by the BIR.  In one case, the Court – in characterizing a similar argument by respondents therein – held that such allegation is tantamount to saying that the other party exerted undue influence upon them.  However, the Court said that the fact that respondents were “forced” to sign the documents does not amount to vitiated consent.^[2][15]

There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice.^[3][16] For undue influence to be present, the influence exerted must have so overpowered or subjugated the mind of a contracting party as to destroy his free agency, making him express the will of another rather than his own.^[4][17]

Respondent may have desperately needed petitioner’s signature on the Deed, but there is no showing that she was deprived of free agency when she signed the promissory note. Being forced into a situation does not amount to vitiated consent where it is not shown that the party is deprived of free will and choice. Respondent still had a choice: she could have refused to execute the promissory note and resorted to judicial means to obtain petitioner’s signature.  Instead, respondent chose to execute the promissory note to obtain petitioner’s signature, thereby agreeing to pay the amount demanded by petitioner.

The fact that respondent may have felt compelled, under the circumstances, to execute the promissory note will not negate the voluntariness of the act. As rightly observed by the trial court, the execution of the promissory note in the amount of P600,000.00 was, in fact, the product of a negotiation between the parties.

Contrary to the CA’s findings, the situation did not amount to intimidation that vitiated consent. There is intimidation when one of the contracting parties is compelled to give his consent by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants, or ascendants.^[5][19] Certainly, the payment of penalties for delayed payment of taxes would not qualify as a “reasonable and well-grounded fear of an imminent and grave evil.”

We join the RTC in holding that courts will not set aside contracts merely because solicitation, importunity, argument, persuasion, or appeal to affection was used to obtain the consent of the other party. Influence obtained by persuasion or argument or by appeal to affection is not prohibited either in law or morals and is not obnoxious even in courts of equity.^[6][20]

As to the matter of consideration, the court ruled as follows:

On the issue that the promissory note is void for not being supported by a consideration, we likewise disagree with the CA.

A contract is presumed to be supported by cause or consideration.^[7][21] The presumption that a contract has sufficient consideration cannot be overthrown by a mere assertion that it has no consideration. To overcome the presumption, the alleged lack of consideration must be shown by preponderance of evidence.^[8][22] The burden to prove lack of consideration rests upon whoever alleges it, which, in the present case, is respondent.

Respondent failed to prove that the promissory note was not supported by any consideration. From her testimony and her assertions in the pleadings, it is clear that the promissory note was issued for a cause or consideration, which, at the very least, was petitioner’s signature on the document.

It may very well be argued that if such was the consideration, it was inadequate. Nonetheless, even if the consideration is inadequate, the contract would not be invalidated, unless there has been fraud, mistake, or undue influence.^[9][23]  As previously stated, none of these grounds had been proven present in this case.

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FACTS:  BIR filed a case against XYZ Inc. CTA ruled in favor of XYZ Inc. BIR appealed and  raised an issue on whether the rule in the Tax Code on the apportionment of tax credits can be applied in appreciating XYZ’ s claim for tax refund. It was previously raised by the parties but CTA did not rule on it. 

ISSUE:  Can an issue not ruled upon at the court below be raised on appeal?

RULING:  Yes. The rule that  matters not taken up in the court below cannot be raised on appeal is not without exception. Courts may relax a procedural rule when compelling reasons so warrant or when justice requires it. What constitutes good and sufficient cause that would merit suspension of the rules is discretionary upon the courts. 

SOURCE:  CIR vs. Eastern Telecommunications Philippines, Inc. (G.R. No. 163835, 07 July 2010).