Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

LAMBERT PAWNBROKERS G.R. No. 170464

and JEWELRY CORPORATION
and LAMBERT LIM,
Petitioners, Present:

CORONA, C. J., Chairperson,

BRION,
- versus - DEL CASTILLO,
ABAD,  and
PEREZ, JJ.

HELEN BINAMIRA, Promulgated:

Respondent. July 12, 2010
x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

It is fundamental that an employer is liable for illegal dismissal when it terminates

the services of the employee without just or authorized cause and without due process of
law.

 Per Special Order No. 856 dated July 1, 2010.

 Per Special Order No. 869 dated July 5, 2010.

 This Petition for Review on Certiorari1 assails the Decision2 dated August 4, 2005
of the Court of Appeals (CA) in CA-G.R. CEB SP No. 00010, which reversed and set aside
the Resolutions dated July 30, 20033 and May 31, 20044 issued by the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000454-00 (RAB VII-01-0003-99-
B).

Factual Antecedents

Petitioner Lambert Lim (Lim) is a Malaysian national operating various businesses

in Cebu and Bohol one of which is Lambert Pawnbrokers and Jewelry Corporation. Lim
is married to Rhodora Binamira, daughter of Atty. Boler Binamira, Sr., (Atty. Binamira),
who is also the counsel and father-in-law of respondent Helen Binamira (Helen). Lambert
Pawnbrokers and Jewelry Corporation Tagbilaran Branch hired Helen as an appraiser in
July 1995 and designated her as Vault Custodian in 1996.

On September 14, 1998, Helen received a letter5 from Lim terminating her
employment effective that same day. Lim cited business losses necessitating retrenchment
as the reason for the termination.

Helen thus filed a case for illegal dismissal against petitioners docketed as NLRC
RAB-VII CASE NO. 01-0003-99-B.6 In her Position Paper7 Helen alleged that she was
dismissed without cause and the benefit of due process. She claimed that she was a mere
casualty of the war of attrition between Lim and the Binamira family. Moreover, she
claimed that there was no proof that the company was suffering from business losses.

1 Rollo, pp. 21-42.

2 CA rollo, pp. 323-331; penned by Associate Justice Vicente L. Yap and concurred in by
Associate Justices Isaias P. Dicdican and Enrico A. Lanzanas.

3 Id. at 164-168.

4 Id. at 185-187.

5 CA rollo, p. 46.

6 Id. at 21-32.

7 Id. at 21-26.
 In their Position Paper,8 petitioners asserted that they had no choice but to retrench
respondent due to economic reverses. The corporation suffered a marked decline in profits
as well as substantial and persistent increase in losses. In its Statement of Income and
Expenses, its gross income for 1998 dropped from P1million to P665,000.00.

Ruling of the Labor Arbiter

On November 26, 1999, Labor Arbiter Geoffrey P. Villahermosa rendered a

Decision9 which held that Helen was not illegally dismissed but was validly retrenched.
The dispositive portion of the Labor Arbiters Decision reads:

WHEREFORE, all the foregoing premises being considered judgment is hereby

rendered declaring the respondent not guilty of illegally terminating the complainant but is
however directed to pay the complainant her retrenchment benefit in the amount of Seven
Thousand Five Hundred Pesos (P7,500.00), considering that she was receiving a monthly
salary of P5,000.00 and rendered service for three (3) years.

SO ORDERED.10

Ruling of the NLRC

On appeal, the NLRC reversed and set aside the Decision of the Labor Arbiter. It
observed that for retrenchment to be valid, a written notice shall be given to the employee
and to the Department of Labor and Employment (DOLE) at least one month prior to the
intended date thereof. Since none was given in this case, then the retrenchment of Helen
was not valid. The dispositive portion of the Decision11 reads:

WHEREFORE, premises duly considered, the decision of the Labor Arbiter dated
26 November 1999 is hereby REVERSED and SET ASIDE and respondents are ordered
to reinstate complainant Helen Binamira to her former position without loss of seniority

8 Id. at 33-46.

9 Id. at 98-104.

10 Id. at 103.

11 Id. at 135-138; penned by Commissioner Edgardo M. Enarlan and concurred in by Presiding

Commissioner Irenea E. Ceniza and Commissioner Oscar S. Uy.
 rights and with full backwages from the time of her dismissal up to the promulgation of
this decision.

Other claims are denied for lack of merit.

SO ORDERED.12
Petitioners filed a Motion for Reconsideration.13 On July 30, 2003, the NLRC set
aside its Decision dated September 27, 2002 and entered a new one, the dispositive portion
of which reads:

WHEREFORE, the Decision of November [sic] 27, 2002 is hereby SET ASIDE
and a New One Entered declaring as valid the redundancy of the position of the
complainant. Accordingly respondent is hereby ordered to pay the complainant her
redundancy pay of one month for every year of service and in lieu of notice, she should
also be paid one (1) month salary as indemnity.

SO ORDERED.14

In arriving at this conclusion, the NLRC opined that what was actually implemented
by the petitioners was not retrenchment due to serious business losses but termination due
to redundancy. The NLRC observed that the Tagbilaran operations was overstaffed thus
necessitating the termination of some employees. Moreover, the redundancy program was
not properly implemented because no written notices were furnished the employee and the
DOLE one month before the intended date of termination.

The Motion for Reconsideration filed by Helen was denied by the NLRC through
its Resolution15 dated May 31, 2004.

Ruling of the Court of Appeals

On petition for certiorari,16 the CA found that both the Labor Arbiter and the
NLRC failed to consider substantial evidence showing that the exercise of management

12 Id. at 137.

13 Id. at 139-154.

14 Id. at 164-168.

15 Id. at 185-187.

16 Id. at 3-204, inclusive of attachments.

prerogative, in this instance, was done in bad faith and in violation of the employees right
to due process. The CA ruled that there was no redundancy because the position of vault
custodian is a requisite, necessary and desirable position in the pawnshop business. There
was likewise no retrenchment because none of the conditions for retrenchment is present
in this case.

On August 4, 2005, the CA issued its Decision which provides:

WHEREFORE, the Resolution dated July 30, 2003 and May 31, 2004 issued by
the National Labor Relations Commission in NLRC Case No. V-000454-00 (RAB VII-
01-0003-99-B), is hereby REVERSED and SET ASIDE.

A new Decision is hereby entered declaring the dismissal of petitioner, Helen B.

Binamira, as illegal and directing the private respondents, Lamberts Pawnbroker and
Jewelry Corporation and Lambert Lim, jointly and solidarily, to pay to the petitioner, the
following monetary awards:

1. Backwages from the date of her illegal suspension and dismissal until she is
reinstated;

2. Considering that reinstatement is not feasible in view of the strained relations

between the employer and the employee, separation pay is hereby decreed at the rate of
one (1) months pay for every year of service;

3. Moral damages in the amount of Twenty Five Thousand Pesos

(P25,000.00);

4. Exemplary damages in the amount of Twenty Five Thousand Pesos

(P25,000.00);

5. Attorneys fees in the amount equivalent to Ten Percent (10%) of the

monetary awards herein above enumerated; and

6. Costs.

SO ORDERED.17

17 Id. at 330-331.
 The Motion for Reconsideration filed by petitioners was denied by the CA through
its Resolution18 dated November 7, 2005.

Issues

Hence, this petition raising the following issues:

I.
Whether the CA gravely erred in reversing, through the extra-ordinary remedy of certiorari,
the findings of facts of both the Labor Arbiter and the NLRC that the dismissal of
respondent was with valid and legal basis.

II.
Whether the CA gravely erred in reversing, through the extra-ordinary remedy of certiorari,
the unanimous findings of fact of both the Labor Arbiter and the NLRC that the dismissal
of respondent was not attended by bad faith or fraud.

III.
Whether the CA erred in reversing, through the extra-ordinary remedy of certiorari, the
findings of facts of both the Labor Arbiter and the NLRC based merely on the allegations
and evidences made and submitted by the former counsel, adviser and business partner of
petitioners.19

Petitioners Arguments

Petitioners assail the propriety of the reversal by the CA of the factual findings of
both the Labor Arbiter and the NLRC on a Petition for Certiorari under Rule 65.
Petitioners posit that a writ of certiorari is proper only to correct errors of jurisdiction or
when there is grave abuse of discretion tantamount to lack or excess of jurisdiction
committed by the labor tribunals. They asserted that where the issue or question involved
affects the wisdom or legal soundness of a decision, the same is beyond the province of a
special civil action for certiorari.

Petitioners further contend that the CA erred in ruling that the dismissal was not
valid and that it was done in bad faith.

18 Id. at 452-456.

19 Rollo, 27.
Respondents Arguments

On the other hand, Helen avers that the contradictory findings of fact of the Labor
Arbiter and the NLRC justifies the CA to review the findings of fact of the labor tribunals.
She further submits that both labor tribunals failed to consider substantial evidence
showing that petitioners exercise of management prerogative was done in utter bad faith
and in violation of her right to due process.
Our Ruling

The petition is without merit.

The CA correctly reviewed the factual findings of

the labor tribunals.

As a rule, a petition for certiorari under Rule 65 is valid only when the question
involved is an error of jurisdiction, or when there is grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the court or tribunals exercising quasi-judicial
functions. Hence, courts exercising certiorari jurisdiction should refrain from reviewing
factual assessments of the respondent court or agency. Occasionally, however, they are
constrained to wade into factual matters when the evidence on record does not support
those factual findings; or when too much is concluded, inferred or deduced from the bare
or incomplete facts appearing on record,20 as in the present case.

We find that the CA rightfully reviewed the correctness of the labor tribunals factual
findings not only because of the foregoing inadequacies, but also because the NLRC and
the Labor Arbiter came up with conflicting findings. The Labor Arbiter found that Helens
dismissal was valid on account of retrenchment due to economic reverses. On the other
hand, the NLRC originally ruled that Helens dismissal was illegal as none of the requisites
of a valid retrenchment was present. However, upon motion for reconsideration, the NLRC
changed its posture and ruled that the dismissal was valid on the ground of redundancy due
to over-hiring. Considering the diverse findings of the Labor Arbiter and the NLRC, it
behooved upon the CA in the exercise of its certiorari jurisdiction to determine which
findings are more in conformity with the evidentiary facts.

There was no valid dismissal based on

20 Pascua v. National Labor Relations Commission, 351 Phil 48, 61 (1998).

retrenchment.

Retrenchment is the termination of employment initiated by the employer through

no fault of and without prejudice to the employees. It is resorted to during periods of
business recession, industrial depression, seasonal fluctuations, or during lulls occasioned
by lack of orders, shortage of materials, conversion of the plant to a new production
program, or automation.21 It is a management prerogative resorted to avoid or minimize
business losses, and is recognized by Article 283 of the Labor Code, which reads:

Art. 283. Closure of establishment and reduction of personnel.- The employer may
also terminate the employment of any employee due to x x x retrenchment to prevent
losses or the closing or cessation of operations of the establishment x x x by serving a
written notice on the worker and the DOLE at least one month before the intended date
thereof. x x x In case of retrenchment to prevent losses, the separation pay shall be
equivalent to one (1) month pay or at least one-half month for every year of service
whichever is higher. x x x (Emphasis ours)

To effect a valid retrenchment, the following elements must be present: (1) the
retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious and real, or only if expected,
are reasonably imminent as perceived objectively and in good faith by the employer; (2)
the employer serves written notice both to the employee/s concerned and the DOLE at least
one month before the intended date of retrenchment; (3) the employer pays the retrenched
employee separation pay in an amount prescribed by the Code; (4) the employer exercises
its prerogative to retrench in good faith; and (5) the employer uses fair and reasonable
criteria in ascertaining who would be retrenched or retained.22

The losses must be supported by sufficient and convincing evidence. The normal
method of discharging this is by the submission of financial statements duly audited by
independent external auditors. In this case, however, the Statement of Income and
Expenses23 for the year 1997-1998 submitted by the petitioners was prepared only on
January 12, 1999. Thus, it is highly improbable that the management already knew on

21 Anabe v. Asian Construction, G.R. No. 183233, December 23, 2009.

22 Id.

23 CA rollo, p.45.
September 14, 1998, the date of Helens retrenchment, that they would be incurring
substantial losses.

At any rate, we perused over the financial statements submitted by petitioners and
we find no evidence at all that the company was suffering from business losses. In fact, in
their Position Paper, petitioners merely alleged a sharp drop in its income in 1998 from
P1million to only P665,000.00. This is not the business losses contemplated by the Labor
Code that would justify a valid retrenchment. A mere decline in gross income cannot in
any manner be considered as serious business losses. It should be substantial, sustained and
real.

To make matters worse, there was also no showing that petitioners adopted other
cost-saving measures before resorting to retrenchment. They also did not use any fair and
reasonable criteria in ascertaining who would be retrenched. Finally, no written notices
were served on the employee and the DOLE prior to the implementation of the
retrenchment. Helen received her notice only on September 14, 1998, the day when her
termination would supposedly take effect. This is in clear violation of the Labor Code
provision which requires notice at least one month prior to the intended date of termination.

There was no valid dismissal based on

redundancy.

Redundancy, on the other hand, exists when the service capability of the workforce
is in excess of what is reasonably needed to meet the demands of the enterprise. A
redundant position is one rendered superfluous by any number of factors, such as over
hiring of workers, decreased volume of business, dropping of a particular product line
previously manufactured by the company, or phasing out of a service activity previously
undertaken by the business. Under these conditions, the employer has no legal obligation
to keep in its payroll more employees than are necessary for the operation of its business.24

For the implementation of a redundancy program to be valid, the employer must

comply with the following requisites: (1) written notice served on both the employees and
the DOLE at least one month prior to the intended date of termination of employment; (2)
payment of separation pay equivalent to at least one month pay for every year of service;

24 Asian Alcohol Corporation v. National Labor Relations Commission, 364 Phil 912, 930
(1999).
(3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished.25

In this case, there is no proof that the essential requisites for a valid redundancy
program as a ground for the termination of the employment of respondent are present.
There was no showing that the function of respondent is superfluous or that the business
was suffering from a serious downturn that would warrant redundancy considering that
such serious business downturn was the ground cited by petitioners in the termination letter
sent to respondent.26

In fine, Helens dismissal is illegal for lack of just or authorized cause and failure to
observe due process of law.

Lambert Pawnbrokers and Jewelry Corporation

is solely liable for the illegal dismissal of
respondent.

As a general rule, only the employer-corporation, partnership or association or any

other entity, and not its officers, which may be held liable for illegal dismissal of employees
or for other wrongful acts. This is as it should be because a corporation is a juridical entity
with legal personality separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it.27 A corporation, as a juridical entity, may act only
through its directors, officers and employees. Obligations incurred as a result of the
directors and officers acts as corporate agents, are not their personal liability but the direct
responsibility of the corporation they represent.28 It is settled that in the absence of malice
and bad faith, a stockholder or an officer of a corporation cannot be made personally liable
for corporate liabilities. 29 They are only solidarily liable with the corporation for the
illegal termination of services of employees if they acted with malice or bad faith. In

25 Philippine Carpet Employees Association (PHILCEA) v. Sto. Tomas, G.R. No. 168719,
February 22, 2006, 483 SCRA 128, 145-146.

26 CA rollo, p. 46.

27 Equitable Banking Corporation v. National Labor Relations Commission, 339 Phil. 541, 566
(1977).

28 Santos v. National Labor Relations Commission, 325 Phil. 145, 156 (1996).

29 Tan v. Timbal, 478 Phil. 497, 505 (2004).

Philippine American Life and General Insurance v. Gramaje,30 bad faith is defined as a
state of mind affirmatively operating with furtive design or with some motive of self-
interest or ill will or for ulterior purpose. It implies a conscious and intentional design to do
a wrongful act for a dishonest purpose or moral obliquity.

In the present case, malice or bad faith on the part of Lim as a corporate officer was
not sufficiently proven to justify a ruling holding him solidarily liable with the corporation.
The lack of authorized or just cause to terminate ones employment and the failure to
observe due process do not ipso facto mean that the corporate officer acted with malice or
bad faith. There must be independent proof of malice or bad faith which is lacking in the
present case.

There is no violation of attorney-client

relationship.

We find no merit in petitioners assertion that Atty. Binamira gravely breached and
abused the rule on privileged communication under the Rules of Court and the Code of
Professional Responsibility of Lawyers when he represented Helen in the present case.
Notably, this issue was never raised before the labor tribunals and was raised for the first
time only on appeal. Moreover, records show that although petitioners previously
employed Atty. Binamira to manage several businesses, there is no showing that they
likewise engaged his professional services as a lawyer. Likewise, at the time the instant
complaint was filed, Atty. Binamira was no longer under the employ of petitioners.

Respondent is entitled to the following relief

under the law.

An illegally dismissed employee is entitled to reinstatement without loss of seniority

rights and other privileges and to this full backwages, inclusive of allowances, and to her
other benefits or their monetary equivalent, computed from the time the compensation was
withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible,
separation pay equivalent to at least one month salary or one month salary for every year
of service, whichever is higher, a fraction of at least six months being considered as one
whole year, should be awarded to respondent.

30 484 Phil 880, 891 (2004).

 In this case, Helen is entitled to her full backwages from the time she was illegally
dismissed on September 14, 1998. Considering the strained relations between the parties,
reinstatement is no longer feasible. Consequently, Helen is also entitled to receive
separation pay equivalent to one month salary for every year of service.

A dismissal may be contrary to law but by itself alone, it does not establish bad faith
to entitle the dismissed employee to moral damages. The award of moral and exemplary
damages cannot be justified solely upon the premise that the employer dismissed his
employee without authorized cause and due process.31
Considering that there is no clear and convincing evidence showing that the
termination of Helens services had been carried out in an arbitrary, capricious and
malicious manner, the award of moral and exemplary damages is not warranted.

Consequently, the moral and exemplary damages awarded by the CA are hereby
deleted.

However, the award of attorneys fee is warranted pursuant to Article 111 of the
Labor Code. Ten (10%) percent of the total award is usually the reasonable amount of
attorneys fees awarded. It is settled that where an employee was forced to litigate and, thus,
incur expenses to protect his rights and interest, the award of attorneys fees is legally and
morally justifiable.32

WHEREFORE, the instant petition for review on certiorari is DENIED. The

Decision of the Court of Appeals in CA-G.R. CEB SP No. 00010 dated August 4, 2005
finding the dismissal of respondent Helen B. Binamira as illegal is AFFIRMED WITH
MODIFICATIONS that respondent is entitled to receive full backwages from the time
she was illegally dismissed on September 14, 1998 as well as to separation pay in lieu of
reinstatement equivalent to one month salary for every year of service. The amounts
awarded as moral damages and exemplary damages are deleted for lack of basis. Finally,
only petitioner Lambert Pawnbrokers and Jewelry Corporation is found liable for the
illegal dismissal of respondent.

SO ORDERED.

31 Manila Water Company, Inc. v. Pea, 478 Phil. 68, 84 (2004).

32 Quijano v. Mercury Drug Corporation and National Labor Relations Commission, 354 Phil.
112, 127 (1998).
 MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

ARTURO D. BRION ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice