R & E TRANSPORT, INC., AND HONORIO ENRIQUEZ, PETITIONERS, VS. AVELINA P. LATAG, REPRESENTING HER DECEASED HUSBAND, PEDRO M. LATAG, RESPONDENTS.

R and E Transport versus Latag

The Case

This is a petition for review filed by R and E Transport, Incorporated and its president, Honorio Enriquez, against Avelina Latag, who represents her deceased husband, Pedro Latag. The widow had sued for the retirement pay due her husband, a taxi driver. The case matters because it gathers in one decision three lessons every labor reviewee must carry: the power of the Court of Appeals to review the factual findings of the National Labor Relations Commission, the strictness and the mercy of the appeal bond rule, and the judicial suspicion of quitclaims that buy off a worker's rights for a scandalously low price.

Procedural History

Pedro Latag filed a claim for retirement pay before the labor arbiter. The labor arbiter ruled in his favor, ordering the companies and Honorio Enriquez to pay the widow 277,500 pesos. The employer appealed to the National Labor Relations Commission, but the appeal was dismissed for failure to post a cash or surety bond. On motion for reconsideration, however, the Commission gave the appeal due course and later ruled that Pedro should be credited only with his service to R and E Transport. The widow went up to the Court of Appeals by petition for certiorari. The appellate court granted her petition, set aside the Commission's order, and reinstated the labor arbiter's decision. The employer then came to the Supreme Court by petition for review under Rule 45.

Facts

Pedro Latag worked as a taxi driver for La Mallorca Taxi beginning in March 1961. When La Mallorca ceased operations, he transferred to R and E Transport, Incorporated, where he earned an average daily income of 500 pesos. He fell ill in January 1995 and applied for partial disability with the Social Security System, which was granted. When he recovered and reported for work in September 1998, he was no longer allowed to continue because of his old age.

He asked the company's administrative officer for his retirement pay under Republic Act 7641, but was ignored. On December 21, 1998, he filed a claim before the labor arbiter. He died on April 30, 1999, and his wife Avelina substituted him. The labor arbiter ruled in her favor, awarding 277,500 pesos, counting 37 years of service by adding Pedro's 23 years with La Mallorca to his 14 years with R and E Transport.

Before the widow received a copy of that decision, the employer's counsel invited her and offered 38,850 pesos, which she accepted, signing a prepared quitclaim and release and a joint motion to dismiss. When she later received the decision, she moved to set aside the dismissal. The labor arbiter held that the decision stood and directed the preparation of a writ of execution. The employer's appeal was dismissed by the Commission for want of a bond, but on reconsideration the Commission gave it due course and reduced the creditable service to 14 years.

Issues

• Whether or not the Court of Appeals acted properly when it overturned the factual findings of the National Labor Relations Commission.
• Whether or not the widow violated the rule on forum shopping when two lawyers filed separate petitions for her before the Court of Appeals.
• Whether or not the labor arbiter's order of May 23, 2000 involved a monetary award, such that the employer's appeal to the Commission required the posting of a cash or surety bond.

Applicable Provisions

Article 287 of the Labor Code, as amended by Republic Act 7641, provides:

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

This is the very source of Pedro's entitlement, and it fixes the formula the Court used to compute what was legally due him.

The same Article continues:

Unless the parties provide for broader inclusions, the term one half-month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

Because Pedro was paid under the boundary system, he had no thirteenth month pay and no service incentive leave, so his retirement pay rested on his salary alone.

Article 223 of the Labor Code, as amended, provides:

An appeal from the labor arbiter's decision, award or order must be made within ten (10) calendar days from receipt of a copy thereof by the party intending to appeal it; and, if the judgment involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond.

This is the provision that made the employer's appeal defective, and the Court weighed whether to relax it in the interest of substantial justice.

Ruling

On the first issue, the Court held that the Court of Appeals may review the facts. Under the law expanding its jurisdiction, the appellate court was given the power to pass upon the evidence when necessary to resolve factual issues. When the findings of the Commission conflict with those of the labor arbiter, the doors to review are open. The Supreme Court then made its own examination and agreed with the Commission: La Mallorca and R and E Transport are separate entities. R and E Transport was established only in 1978, Honorio Enriquez was not a stockholder of La Mallorca, and no stockholder of one held stock in the other. The seven-year gap between the closure of one and the birth of the other negated any scheme to defraud. Piercing the corporate veil requires clear and convincing proof of control used to commit a wrong, and here there was none. Pedro was therefore credited with 14 years, not 37.

On the quitclaim, the Court upheld the appellate court. Not all quitclaims are invalid, but courts look with disfavor on waivers that bargain away workers' benefits, especially where the consideration is scandalously low. Computing 500 pesos times 15 days times 14 years gives 105,000 pesos. The 38,850 pesos accepted was just over one third of what was legally due, and was unconscionable.

On forum shopping, the Court found the widow's explanation sufficient. Her original counsel had asked for an extension, and she engaged another lawyer, only to discover that the first had filed a similar petition. To disallow her appeal would defeat the policy of labor laws against highly technical procedure.

On the third issue, the Court held that the May 23, 2000 order did involve a monetary award, because it reinstated by reference the award in the January 10, 2000 decision. The appeal should have posted a bond. Still, the Court relaxed the rule, because the appeal raised serious errors in the labor arbiter's factual conclusions, and substantial justice would be better served by deciding the appeal on the merits.

Doctrine

First, the Court of Appeals may review the factual findings of the National Labor Relations Commission, and the Supreme Court may in turn review the appellate court's findings, when these conflict with those of the labor arbiter. Second, the corporate veil may be pierced only upon clear and convincing proof that control was used to commit a fraud or a wrong; it is never presumed. Third, a quitclaim is ineffective to bar recovery of the full measure of a worker's rights where the consideration is scandalously low and inequitable, and acceptance of benefits does not amount to estoppel. Fourth, the posting of a cash or surety bond is jurisdictional for perfecting an employer's appeal involving a monetary award, but the requirement may be relaxed in the interest of substantial justice.

Disposition

The petition was partly granted: the appellate court's decision was modified to credit Pedro Latag with 14 years of service, entitling him to 105,000 pesos less the 38,850 pesos already received, plus six percent interest from December 21, 1998 until full payment.

Remember This

Memorize this line: a quitclaim whose consideration is scandalously low and inequitable cannot bar a worker from recovering the full measure of his rights. Examiners use this case to test the appeal bond rule under Article 223 and the narrow, cautious application of piercing the corporate veil.