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NorthDavaoMiningCorp.vs.NLRC:112546:March13,1996:Panganiban,J.:EnBanc

[Syllabus]

ENBANC

[G.R.No.112546.March13,1996]

NORTH DAVAO MINING CORPORATION and ASSET PRIVATIZATION

TRUST,petitioners,vs.NATIONALLABORRELATIONSCOMMISSION,
LABOR ARBITER ANTONIO M. VILLANUEVA and WILFREDO
GUILLEMA,respondents.
DECISION
PANGANIBAN,J.:

Is a company which is forced by huge business losses to close its business, legally
required to pay separation benefits to its employees at the time of its closure in an amount
equivalenttotheseparationpaypaidtothosewhowereseparatedwhenthecompanywasstill
a going concern? This is the main question brought before this Court in this petition for
certiorariunderRule65oftheRevisedRulesofCourt,whichseekstoreverseandsetaside
the Resolutions dated July 29, 1993[1] and September 27, 1993[2] of the National Labor
RelationsCommision[3](NLRC)inNLRCCANo.M00139593.
The Resolution dated July 29, 1993 affirmed in tow the decision of the Labor Arbiter in
RAB11080067292andRAB11080071392orderingpetitionerstopaythecomplainants
thereincertainmonetaryclaims.
The Resolution dated September 27, 1993 denied the motion for reconsideration of the
saidJuly29,1993Resolution.
TheFacts
Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a
100%privatelyownedcompany.Later,thePhilippineNationalBank(PNB)becamepartowner
thereof as a result of a conversion into equity of a portion of loans obtained by North Davao
fromsaidbank.OnJune30,1986,PNBtransferredallitsloanstoandequityinNorthDavaoin
favor of the national government which, by virtue of Proclamation No. 50 dated December 8,
1986,laterturnedthemovertopetitionerAssetPrivatizationTrust(APT).AsofDecember31,
1990 the national government held 81.8% of the common stock and 100% of the preferred
stockofsaidcompany.[4]
RespondentWilfredoGuillemaisoneamongseveralemployeesofNorthDavaowhowere
separated by reason of the companys closure on May 31, 1992, and who were the
complainantsinthecasesbeforetherespondentlaborarbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due to serious
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business reverses. From 1988 until its closure in 1992, North Davao suffered net losses
averagingthreebillionpesos(P3,000,000,000.00)peryear,foreachofthefiveyearspriortoits
closure.Alltold,asofDecember31,1991,orfivemonthspriortoitsclosure,itstotalliabilities
hadexceededitsassetsby20.392billionpesos,asshownbyitsfinancialstatementsaudited
by the Commission on Audit. When it ceased operations, its remaining employees were
separated and given the equivalent of 12.5 days pay for every year of service, computed on
their basic monthly pay, in addition to the commutation to cash of their unused vacation and
sick leaves. However, it appears that, during the life of the petitioner corporation, from the
beginningofitsoperationsin1981untilitsclosurein1992,ithadbeengivingseparationpay
equivalenttothirty(30)dayspayforeveryyearofservice.Moreover,inasmuchastheregion
whereNorthDavaooperatedwasplaguedbyinsurgencyandotherpeaceandorderproblems,
the employees had to collect their salaries at a bank in Tagum, Davao del Norte, some 58
kilometers from their workplace and about 2 hours travel time by public transportation this
arrangementlastedfrom1981upto1990.
Subsequently,acomplaintwasfiledwithrespondentlaborarbiterbyrespondentWilfredo
Guillemaand271otherseperatedemployeesfor:(1)additionalseparationpayof17.5daysfor
every year of service (2) back wages equivalent to two days a month (3) transportation
allowance (4) hazard pay (5) housing allowance (6) food allowance (7) postemployment
medicalclearanceand(8)futuremedicalallowance,allofwhichamountedtoP58,022,878.31
ascomputedbyprivaterespondent.[5]
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North
Davaotopaythecomplainantsthefollowing:
(a)Additionalseparationpayof17.5daysforeveryyearofservice
(b)Backwagesequivalenttotwo(2)daysamonthtimesthenumberofyearsofservicebutnottoexceed
three(3)years
(c)TransportationallowanceatP80amonthtimesthenumberofyearsofservicebutnottoexceedthree
(3)years.
ThebenefitsawardedbyrespondentLaborArbiteramountedtoP10,240,517.75.Attorneys
feesequivalenttotenpercent(10%)thereofwerealsogranted.[6]
Onappeal,respondentNLRCaffirmedthedecisionintoto.PetitionerNorthDavaosmotion
forreconsiderationwaslikewisedenied.Hence,thispetition.
ThePartiesSubmissionsandtheIssues
InaffirmingtheLaborArbitersdecision,respondentNLRCruledthatsince(NorthDavao)
hasbeenpayingitsemployeesseparationpayequivalenttothirty(30)dayspayforeveryyear
of service, knowing fully well that the law provides for a lesser separation pay, then such
companypolicyhasripenedintoanobligation,andtherefore,deprivingnowthehereinprivate
respondent and others similarly situated of the same benefits would be discriminatory.[7]
QuotingfromBusinessdayInformationSystemsandServices.Inc.(BISSI)vs.NLRC.[8]itsaid
that petitioners may not pay separation benefits unequally for such discrimination breeds
resentmentandillwillamongthosewhohavebeentreatedlessgenerouslythanothers.Italso
cited Abella vs. NLRC,[9] as authority for saying that Art. 283 of the Labor Code protects
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workersincaseoftheclosureoftheestablishment.
To justify the award of two days a month in backwages and P80 per month of
transportationallowance,respondentCommissionruled:
AstotheappellantsclaimthatcomplainantsappealleestimespentincollectingtheirwagesatTagum,
Davaoisnotcompensableallegedlybecauseitwasonofficialtimecannotbegivencredence.Noiotaof
evidencehasbeenpresentedtobackupsaidcontention.Thesameistruewithappellantsassertionthat
theclaimfortransportationexpensesiswithoutbasissincetheywereincurredbythecomplainants.
Appellantsshouldhavesubmittedthepayrollstoprovethatcomplainantsappelleeswerenottheones
whopersonallycollectedtheirwagesand/orthebus/jeeptripticketsorvoucherstoshowthatthe
complainantsappelleeswereprovidedwithfreetransportationasclaimed.
Petitioner,throughtheGovernmentCorporateCounsel,raisedthefollowinggroundsforthe
allowanceofthepetition:
1.TheNLRCactedwithgraveabuseofdiscretioninaffirmingwithoutlegalbasistheawardof
additionalseparationpaytoprivaterespondentswhowereseparatedduetoseriousbusinesslossesonthe
partofpetitioner.
2.TheNLRCactedwithgraveabuseofdiscretioninaffirmingwithoutsufficientfactualbasistheaward
ofbackwagesandtransportationexpensestoprivaterespondents.
3.Thereisnoappeal,noranyplain,speedyandadequateremedyintheordinarycourseofthelaw.
andthefollowingissues:
1.Whetherornotanemployerwhosebusinessoperationsceasedduetoseriousbusinesslossesor
financialreversesisobligedtopayseparationpaytoitsemployeesseparatedbyreasonofsuchclosure.
2.Whetherornottimespentincollectingwagesinaplaceotherthantheplaceofemploymentis
compensablenotwithstandingthatthesameisdoneduringofficialtime.
3.Whetherornotprivaterespondentsareentitledtotransportationexpensesintheabsenceofevidence
thattheseexpenseswereincurred.
TheFirstIssue:SeparationPay
Toresolvethisissue,itisnecessarytorevisittheprovisionoflawadvertedtobytheparties
intheirsubmissions,namelyArt.283oftheLaborCode,whichreadsasfollows:
Art.283.Closureofestablishmentandreductionofpersonnel.Theemployermayalsoterminatethe
employmentofanyemployeeduetotheinstallationoflaborsavingdevices,redundancy,retrenchmentto
preventlossesortheclosingorcessationofoperationoftheestablishmentorundertakingunlessthe
closingisforthepurposeofcircumventingtheprovisionsofthisTitle,byservingawrittennoticeonthe
workersandtheMinistryofLaborandEmploymentatleastone(1)monthbeforetheintendeddate
thereof.Incaseofterminationduetotheinstallationoflaborsavingdevicesorredundancy,theworker
affectedtherebyshallbeentitledtoaseparationpayequivalenttoatleasthisone(1)monthpayortoat
leastone(1)monthpayforeveryyearofservice,whicheverishigher.Incaseofretrenchmenttoprevent
lossesandincasesofclosuresorcessationofoperationsofestablishmentorundertakingnotdueto
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seriousbusinesslossesorfinancialreverses,theseparationpayshallbeequivalenttoone(1)monthpay
oratleastonehalf()monthpayforeveryyearofservice,whicheverishigher.Afractionofatleastsix
(6)monthsshallbeconsideredone(1)wholeyear.(italicssupplied)
The underscored portion of Art. 283 governs the grant of seperation benefits in case of
closures or cessation of operation of business establishments NOT due to serious business
lossesorfinancialreversesxxx.Where,however,theclosurewasduetobusinesslossesas
in the instant case, in which the aggregate losses amounted to over P20 billion the Labor
Codedoesnotimposeanyobligationupontheemployertopayseparationbenefits,forobvious
reasons. There is no need to belabor this point. Even the public respondents, in their
Comment[10]filedbytheSolicitorGeneral,impliedlyconcedethispoint.
However, respondents tenaciously insist on the award of separation pay, anchoring their
claimsolelyonpetitionerNorthDavaoslongstandingpolicyofgivingseparationpaybenefits
equivalent to 30 days pay, which policy had been in force in the years prior to its closure.
Respondentscontendthat,bydenyingthesameseparationbenefitstoprivaterespondentand
the others similarly situated, petitioners discriminated against them. They rely on this Courts
ruling in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In
said case, petitioner BISSI, after experiencing financial reverses, decided as a retrenchment
measuretolayoffsomeemployeesonMay16,1988andgavethemseparationpayequivalent
to onehalf () month pay for every year of service. BISSI retained some employees in an
attempt to rehabilitate its business as a trading company. However, barely two and a half
months later, these remaining employees were likewise discharged because the company
decidedtoceasebusinessoperationsaltogether.Unliketheearlierterminatedemployees,the
second batch received separation pay equivalent to a full months salary for every year of
service, plus a midyear bonus. This Court ruled that there was impermissible discrimination
againsttheprivaterespondentsinthepaymentoftheirseparationbenefits.Thelawrequiresan
employer to extend equal treatment to its employees. It may not, in the guise of exercising
managementprerogatives,grantgreaterbenefitstosomeandlesstoothers.xxx
In resolving the present case, it bears keeping in mind at the outset that the factual
circumstancesofBISSIare quite different from the current case. The Court noted that BISSI
continuedtosufferlossesevenaftertheretrenchmentofthefirstbatchofemployeesclearly,
business did not improve despite such drastic measure. That notwithstanding, when BISSI
finallyshutdown,itcouldwellaffordto(andactuallydid)payoffitsremainingemployeeswith
MORE separation benefits as compared with those earlier laid off obviously, then, there was
no reason for BISSI to skimp on separation pay for the first batch of discharged employees.
Thatitwasabletopayonemonthseparationbenefitforemployeesatthetimeofclosureofits
businessmeantthatitmusthavebeenalsoinapositiontopaythesameamounttothosewho
wereseparatedpriortoclosure.Thatitdidnotdosowasawrongfulexerciseofmanagement
prerogatives. That is why the Court correctly faulted it with impermissible discrimination.
Clearly,itexerciseditsmanagementprerogativescontrarytogeneralprinciplesoffairplayand
justice.
In the instant case however, the companys practice of giving one months pay for every
yearofservicecouldnolongerbecontinuedpreciselybecausethecompanycouldnotaffordit
anymore. It was forced to close down on account of accumulated losses of over P20 billion.
ThiscouldnotbesaidofBISSI.InthecaseofNorthDavao,itgave30daysseparationpayto
itsemployeeswhenitwasstillagoingconcernevenifitwasalreadylosingheavily.Asagoing
concern,itscashflowcouldstillhavesustainedthepaymentofsuchseparationbenefits.But
when a business enterprise completely ceases operations, i.e., upon its death as a going
businessconcern,itsvitallifeblooditscashflowliterallydriesup.Therefore,thefactthatless
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separation benefits were granted when the company finally met its business death cannot be
characterizedasdiscrimination.Suchactionwasdictatednotbyadiscriminatorymanagement
option but by its complete inability to continue its business life due to accumulated losses.
Indeed,onecannotsqueezebloodoutofadrystone.Norwateroutofparchedland.
As already stated, Art. 283 of the Labor Code does not obligate an employer to pay
separationbenefitswhentheclosureisduetolosses.Inthecasebeforeus,thebasisforthe
claim of the additional separation benefit of 17.5 days is alleged discrimination, i.e., unequal
treatmentofemployees,whichisproscribedasanunfairlaborpracticebyArt.248(e)ofsaid
Code.Underthefactsandcircumstancesofthepresentcase,thegrantofalesseramountof
separationpaytoprivaterespondentwasdone,notbyreasonofdiscrimination,butrather,out
ofsheerfinancialbankruptcyafactthatisnotcontrolledbymanagementprerogatives.Stated
differently,thetotalcessationofoperationduetomindbogglinglosseswasasuperveningfact
thatpreventedthecompanyfromcontinuingtograntthemoregenerousamountofseparation
pay.ThefactthatNorthDavaoatthepointofitsforcedclosurevoluntarilypaidanyseparation
benefitsatallalthoughnotrequiredbylawand12.5daysworthatthat,shouldhaveelicited
admirationinsteadofcondemnation.Buttorequireittocontinuebeinggenerouswhenitisno
longerinapositiontodosowouldcertainlybeundulyoppressive,unfairandmostrevoltingto
theconscience.AsthisCourtheldinManilaTrading&SupplyCo.vs.Zulueta,[11]andreiterated
inSanMiguelCorporationvs.NLRC[12]andlater,in Allied Banking Corporation vs. Castro,[13]
(t)he law, in protecting the rights of the laborer, authorizes neither oppression nor self
destructionoftheemployer.
At this juncture, we note that the Solicitor General in his Comment challenges the
petitionersassertionthatNorthDavao,havingcloseddown,nolongerhasthemeanstopayfor
thebenefits.TheSolicitorGeneralstressesthatNorthDavaowasamongtheassetstransferred
byPNBtothenationalgovernment,andthatbyvirtueofProclamationNo.50datedDecember
8,1986,theAPTwasconstitutedtrusteeofthisgovernmentasset.Hethenconcludesthat(i)t
would,therefore,beincongruoustodeclarethattheNationalGovernment,whichshouldalways
be presumed to be solvent, could not pay now private respondents money claims. Such
argumentation is completely misplaced. Even if the national government owned or controlled
81.8%ofthecommonstockand100%ofthepreferredstockofNorthDavao,itremainsonlya
stockholder thereof, and under existing laws and prevailing jurisprudence, a stockholder as a
ruleisnotdirectly,individuallyand/orpersonallyliablefortheindebtednessofthecorporation.
TheobligationofNorthDavaocannotbeconsideredtheobligationofthenationalgovernment,
hence,whetherthelatterbesolventornotisnotmaterialtotheinstantcase.Therespondents
havenotshownthatthiscaseconstitutesoneoftheinstanceswherethecorporateveilmaybe
pierced.[14] From another angle, the national government is not the employer of private
respondentandhiscocomplainants,sothereisnoreasontoexpectanykindofbailoutbythe
nationalgovernmentunderexistinglawandjurisprudence.
TheSecondandThirdIssues:
BackWagesandTransportationAllowance
Anent the award of back wages and transportation allowance, the issues raised in
connection therewith are factual, the determination of which is best left to the respondent
NLRC.ItiswellsettledthatthisCourtisboundbythefindingsoffactoftheNLRC,solongas
saidfindingsaresupportedbysubstantialevidence.[15]
AstheSolicitorGeneralpointedoutinhiscomment:
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Itisundisputedthatbecauseofsecurityreasons,fromthetimeofitsoperations,petitionerNDMC
maintaineditspolicyofpayingitsworkersatabankinTagum,DavaodelNorte,whichusuallytookthe
workersabouttwoandahalf(21/2)hoursoftravelfromtheplaceofworkandsuchtraveltimeisnot
official.
RecordsalsoshowthatonFebruary12,1992,whenaninspectionwasconductedbytheDepartmentof
LaborandEmploymentatthepremisesofpetitionerNDMCatAmacan,Maco,DavaodelNorte,itwas
foundoutthatpetitionershadviolatedlaborstandardslaw,oneofwhichistheplaceofpaymentof
wages(p.109,Vol.1,Record).
Section4,RuleVIII,BookIIIoftheOmnibusRulesImplementingtheLaborCodeprovides
that:
Section4.Placeofpayment.(a)Asageneralrule,theplaceofpaymentshallbeatorneartheplaceof
undertaking.Paymentinaplaceotherthantheworkplaceshallbepermissibleonlyunderthefollowing
circumstances:
(1)Whenpaymentcannotbeeffectedatorneartheplaceofworkbyreasonofthedeteriorationofpeace
andorderconditions,orbyreasonofactualorimpendingemergenciescausedbyfire,flood,epidemicor
othercalamityrenderingpaymentthereatimpossible
(2)Whentheemployerprovidesfreetransportationtotheemployeesbackandforthand
(3)Underanyanalogouscircumstancesprovidedthatthetimespentbytheemployeesincollectingtheir
wagesshallbeconsideredascompensablehoursworked.
(b)xxxxxxxxx.
(Italicssupplied)
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol. 1, Record), the Regional
Director, Regional Office No. XI, Department of Labor and Employment, Davao City, ordered
petitionerNDMC,amongothers,asfollows:
WHEREFORE,xxx.Respondentisfurtherorderedtopayitsworkerssalariesattheplantsiteat
Amacan,NewLeyte,Maco,DavaodelNorteorwhenevernotpossible,throughthebankinTagum,
DavaodelNorteasalreadybeenpracticedsubject,howevertotheprovisionsofSection4ofRuleVIII,
BookIIIoftherulesimplementingtheLaborCodeasamended.
Thus,publicrespondentLaborArbiterAntonioM.Villanuevacorrectlyheldthat:
Fromtheevidenceonrecord,wefindthatthehoursspentbycomplainantsincollectingsalariesatabank
inTagum,DavaodelNorteshallbeconsideredcompensablehoursworked.Consideringfurtherthe
distancebetweenAmacan,MacotoTagumwhichis2hoursbytravelandtherisksincommutingallthe
timeincollectingcomplainantssalaries,wouldjustifythegrantingofbackwagesequivalenttotwo(2)
daysinamonthasprayedfor.
Corollarytotheabovefindings,andforequitablereasons,welikewiseholdrespondentsliableforthe
transportationexpensesincurredbycomplainantsatP40.00roundtripfareduringpaydays.
(p.10,Decisionp.207,Vol.1,Record)
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Onthecontrary,itwillbepetitionersburdenordutytopresentevidenceofcomplianceof
the law on labor standards, rather than for private respondents to prove that they were not
paid/providedbypetitionersoftheirbackwagesandtransportationexpenses.
Otherthanthebaredenialsofpetitioners,theabovefindingsstandsuncontradicted.Indeed
we are not at liberty to set aside findings of facts of the NLRC, absent any capriciousness,
arbitrariness,orabuseorcompletelackofbasis.InMayaFarmsEmployeesOrganizationsvs.
NLRC,[16]weheld:
ThisCourthasconsistentlyruledthatfindingsoffactofadministrativeagenciesandquasijudicial
bodieswhichhaveacquiredexpertisebecausetheirjurisdictionisconfinedtospecificmattersare
generallyaccordednotonlyrespectbutevenfinalityandarebindinguponthisCourtunlessthereisa
showingofgraveabuseofdiscretion,orwhereitisclearlyshownthattheywerearrivedatarbitrarilyor
indisregardoftheevidenceonrecord.
WHEREFORE, judgment is hereby rendered MODIFYING the assailed Resolution by
SETTING ASIDE and deleting the award for additional separation pay of 17.5 days for every
yearofservice,andAFFIRMINGitinallotheraspects.Nocosts.
SOORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug,
Kapunan,Mendoza,Francisco,andHermosisima,JJ.,concur.
[1]Rollo,pp.3345.
[2]Rollo,pp.5152.
[3] Fifth Division, Cagayan de Oro City, composed of Comm. Oscar N. AbelIa, ponente, Pres. Comm. Musib M.

BuatandComm.LeonG.Gonzaga,Jr.
[4]Rollo.pp.35.70and100.
[5]Rollo,p.98.
[6]Rollo,pp.3334.
[7]Rollo,p.42.
[8]221SCRA9,12(April5,1993).
[9]152SCRA141,145(July20,1987).
[10]Rollo,pp.96118.
[11]69Phil.485,486487(Jan.30,1940).
[12]115SCRA329(July20,1982).
[13]156SCRA789,800(December22,1987).
[14]ThisCourthaspiercedtheveilofcorporatefictioninnumerouscaseswhereitwasused,amongothers,toavoid

ajudgmentcredit(SibagatTimberCorp.vs.Garcia,216SCRA470[December11,1992]TanBoonBee&
Co.,Inc.vs.Jarencio,163SCRA205[June30,1988])toavoidinclusionofcorporateassetsaspartofthe
estateofadecedent(Ceasevs.CA,93SCRA483[October18,1979])toavoidliabilityarisingfromdebt
(Arcillavs.CA,215SCRA120[October23,1992]PhilippineBankofCommunicationvs.CA,195SCRA
567[March22,1991])orwhenmadeuseofasashieldtoperpetratefraudand/orconfuselegitimateissues
(Jacintovs.CA,198SCRA211[June6,1991])ortopromoteunfairobjectivesorotherwisetoshieldthem
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(Villanuevavs.Adre,172SCRA876[April27,1989]).
[15]WyethSuacoLaboratories,Inc.vs.NationalLaborRelationsCommission,219SCRA356(March2,1993).
[16]239SCRA508,512(December28,1994).

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