NUEVA ECIJA I ELECTRIC COOPERATIVE, INC., (NEECO I) EMPLOYEES ASSOCIATION, PRESIDENT RODOLFO JIMENEZ, AND MEMBERS, REYNALDO FAJARDO, ERNESTO MARIN, EVER GUEVARRA, PETRONILO BAGU…

Nueva Ecija I Electric Cooperative Employees Association versus Nueva Ecija I Electric Cooperative

The Case

This is a labor case about six rank-and-file employees and union officers of an electric cooperative who were made to file retirement forms, then retired one by one against their will, and one of whom was dismissed outright for alleged dishonesty. The employees and their association, through its president, brought a complaint for illegal dismissal and damages against the cooperative and its general manager. The case matters because it gathers in one decision three rules a labor lawyer must carry: the appeal bond in labor cases, the relaxation of that bond requirement in meritorious cases, and the standards for awarding moral and exemplary damages to illegally dismissed workers.

Procedural History

The complaint for illegal dismissal and damages was filed with the Regional Arbitration Branch of the National Labor Relations Commission in San Fernando. The labor arbiter ruled for the employees, declaring the cooperative and its general manager guilty of illegal dismissal and unfair labor practice, ordering reinstatement with backwages, and awarding moral and exemplary damages, attorney's fees, and litigation costs. The cooperative appealed to the National Labor Relations Commission, posting a surety bond. The employees moved to dismiss the appeal as filed out of time and with an insufficient bond. The Commission denied the motion, gave due course to the appeal, and modified the arbiter's decision by deleting the damages, attorney's fees, and costs, and by directing that the retirement benefits received be applied to the backwages. Both sides sought reconsideration and both were denied. The employees then came to the Supreme Court through a special civil action for certiorari under Rule 65.

Facts

The cooperative is under the general supervision and control of the National Electrification Administration, and its management is vested in a Board of Directors. In February 1987 the Board adopted a policy setting the guidelines for retirement benefits. In October 1987 all regular employees were ordered to accomplish a form that was an application for retirement, resignation, or separation from service. In October 1991 and February 1992 the applications of two employees were approved and they were paid separation pay.

These events, followed by the promotion of certain union officers to supervisory rank, alarmed the labor association, which saw them as harassment and as a circumvention of security of tenure. In February 1992 the union held a snap election of officers, and Reynaldo Fajardo was elected treasurer while others were elected public relations officers. In March 1992 the association passed a resolution withdrawing the retirement applications of all its members, except those who were truly willing to retire, and invoked the security of tenure clause of the Labor Code, furnishing a copy to the general manager.

Despite the resolution, Ernesto Marin, Reynaldo Fajardo, and Victorino Carillo were compulsorily retired in March and April 1992, and they received their separation pay under protest. Earlier, in August 1991, Erdie Javate had been terminated for alleged misappropriation of funds and dishonesty, without separation or retirement benefits. The employees alleged they were singled out from the listing of employees made to submit retirement forms precisely because they were union officers, past officers, or active members, and that their acceptance of the money was not estoppel or waiver because it was made under vehement objection. Javate added that he was framed up and dismissed without due process.

Issues

• Whether or not the appeal taken by the cooperative from the decision of the labor arbiter was perfected within the ten calendar day reglementary period, given that the surety bond was forwarded to the Commission only after that period.
• Whether or not the National Labor Relations Commission acted without or in excess of jurisdiction when it deleted in their entirety the awards of moral damages, exemplary damages, attorney's fees, and costs of litigation.
• Whether or not the order to apply and deduct the backwages due from the benefits already received is reasonable or arbitrary.

Applicable Provisions

Article 223 of the Labor Code, as amended by Republic Act Number 6715, provides:

Article 223. Appeal. Decisions, awards or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.

This is the provision that fixes both the period and the manner of perfecting an appeal, and the Court measures the cooperative's appeal against it.

Article 2229 of the Civil Code provides:

Article 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.

This is the basis for the award of exemplary damages in addition to the moral damages granted to the dismissed employees.

Article 2232 of the Civil Code provides:

Article 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.

This supplies the standard of conduct, wanton, fraudulent, reckless, oppressive, or malevolent, that justifies exemplary damages against the cooperative.

Ruling

On the first issue, the Court acknowledged the doctrine that an appeal involving a monetary award is perfected only upon the posting of a cash or surety bond, and that perfection within the reglementary period and in the manner prescribed by law is jurisdictional, so that noncompliance renders the judgment final and executory. But the Court also recalled that in a number of cases it had relaxed the rule to resolve controversies on the merits where there are special meritorious circumstances and issues, and where there was substantial compliance. Here the labor arbiter's decision was issued in December 1992, the appeal was filed seven days later, the bonding company issued the bond on the last day for filing, and it reached the Commission only the following day. Considering these circumstances and the holiday season, the Court found it equitable to ease the rules and to consider that there was substantial compliance.

On the amount of the bond, the Court noted that the rules of the Commission had changed over time, the phrase excluding moral and exemplary damages and attorney's fees having been deleted and later restored, and that the Commission retained the power to reduce the bond in meritorious cases upon motion of the appellant. Citing its earlier ruling in Cosico versus the National Labor Relations Commission, the Court held that an unreasonable and excessive bond would be oppressive and unjust and would deprive a party of the right to appeal, and that the Commission should have called attention to any inadequacy instead of dismissing the appeal.

On the second issue, the Court held that moral damages may be awarded only where the dismissal was attended by bad faith, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. The labor arbiter had found unfair labor practice, and the Court stressed that unfair labor practices violate the constitutional rights of workers to self-organization and disrupt industrial peace. It found it proper to impose moral and exemplary damages, but reduced them because the amounts awarded were excessive, taking into account the business, social, and financial position of the parties and the fact that a cooperative promotes the welfare of its members. Moral damages were fixed at ten thousand pesos for each petitioner and exemplary damages at five thousand pesos for each, under Articles 2229 and 2232 of the Civil Code.

On the third issue, the Court held that the illegally dismissed employees are entitled to backwages from the time of dismissal until reinstatement, minus the amounts they were forced to receive as retirement pay, and that the arbiter's computation, which stopped in December 1992, had to be extended to cover the period until reinstatement. Where the retirement pay exceeds the backwages, the excess is treated as an advance of salary refundable from the employee's salary until fully repaid.

Doctrine

First, an appeal from a labor arbiter's monetary award is perfected only upon the posting of a cash or surety bond equivalent to the monetary award, and perfection within the ten calendar day period is jurisdictional. Second, that rule is relaxed where there is substantial compliance and special meritorious circumstances, because an excessive bond would be oppressive and would deprive the employer of the right to appeal. Third, moral damages for illegal dismissal require bad faith, oppression of labor, or a manner contrary to morals, good customs, or public policy, and exemplary damages under Articles 2229 and 2232 require wanton, fraudulent, reckless, oppressive, or malevolent conduct. Fourth, backwages run from dismissal to actual reinstatement, and retirement pay received under protest is deducted from them, any excess being a refundable advance.

Disposition

The petition was partially granted: the decision of the National Labor Relations Commission was affirmed with modification, ordering the cooperative to pay full backwages minus retirement pay, moral damages of ten thousand pesos and exemplary damages of five thousand pesos to each illegally terminated petitioner, attorney's fees of ten percent of the total amount due, and costs, with the Commission directed to recompute the total monetary benefits.

Remember This

Memorize the line that the appeal bond is jurisdictional but may be relaxed for substantial compliance where an excessive bond would be oppressive. Examiners use this case to test the appeal bond rule in labor cases and the standards for moral and exemplary damages in illegal dismissal.