JOSE M. MAGLUTAC, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, COMMART (PHIL.), INC. AND JESUS T. MAGLUTAC, RESPONDENTS.

These petitions for certiorari seek the review of the
decision of respondent National Labor Relations Commission promulgated on April 30, 1987 in NLRC Case No. NCR-11-3887-84.  Both
parties filed their petitions with this Court which
were consolidated on motion of Jesus T. Maglutac and Commart (Phils.), Inc. and by
resolution of this Court dated August
12, 1987 (p. 74, Rollo of G.R. No.
78345).

Jose M. Maglutac, petitioner in G.R.
No. 78345 hereinafter referred to as complainant) was employed by Commart (Phils.), Inc.
(hereinafter referred to as Commart) sometime in
February, 1980 and rose to become the Manager of its Energy Equipment
Sales.  On October 3, 1984, he received a
notice of termination signed by Joaquin S. Cenzon,
Vice-President – General Manager and Corporate Secretary of CMS International,
a corporation controlled by Commart.  The notice of termination reads:

“You are hereby notified and advised that the Board of
Directors of this Corporation, acting on the unanimous resolution, have decided
that your continued employment in this company, will
not be in the best interest of the corporation.

“You are therefore discharged of all your duties and responsibilities
as Manager, Energy Equipment Sales effective immediately.

“The termination of your services is without prejudice to any
future action, private or legal, that the Company may take to demand
restitution, enforce collection or require repayment of whatever financial
obligations you now have incurred, to the company.  (p. 50, Rollo)

Thereafter, Jose Maglutac filed a
complaint for illegal dismissal against Commart and
Jesus T. Maglutac, President and Chairman of the
Board of Directors of Commart.  The complainant alleged that his dismissal
was part of a vendetta drive against his parents who dared to expose the
massive and fraudulent diversion of company funds to the company president’s
private accounts, stressing that complainant’s efficiency and effectiveness
were never put to question when very suddenly he received his notice of
termination (p. 51, Rollo).

Commart and Jesus T. Maglutac, on the other hand, justified the dismissal for
lack of trust and confidence brought about by complainant and his family’s
establishment of a company, MM International, in direct competition with Commart.

After the parties submitted their respective position papers, the
Labor Arbiter assigned to the case, Jose Collado,
Jr., rendered a decision on January
11, 1986 finding that complainant was illegally dismissed.  The dispositive
portion of the decision reads:

“WHEREFORE, respondents are hereby ordered to reinstate
complainant to his former position with full backwages
without loss of seniority rights and other personnel (sic) privileges, to pay
complainant jointly and severally P200,000.00 in moral damages, P20,000.00 in
exemplary damages and to pay ten percent (10%) attorney’s fees.

“SO ORDERED.” (p. 57, Rollo)

Commart and Jesus T. Maglutac filed a motion for reconsideration of the decision
of the Labor Arbiter which was treated as an appeal to the National Labor
Relations Commission (NLRC).  On April 30, 1987, a decision was
rendered by the NLRC modifying the decision of the Labor Arbiter.  The NLRC affirmed the finding of the Labor
Arbiter that complainant was illegally dismissed by Commart
but it deleted the award for moral and exemplary damages in favor of
complainant and absolved Jesus T. Maglutac from any
personal liability to the complainant. 
The pertinent portion of the decision reads:

“x x x.

“We agree however, to the contention of individual respondent
that he should not have been held liable in solidum
with the corporation.  He is merely a
nominal party to the case and made so only in his capacity as President and
Chairman of the Board of Directors of the respondent corporation.  The respondent corporation has a separate and
distinct personality from that of its stockholders and its officers, and
respondent Jesus T. Maglutac simply cannot be held
personally liable for his corporate acts.

“Finally, we delete the award of moral and exemplary damages
to complainant for lack of factual and legal basis.

“WHEREFORE, as above modified, the appealed decision is hereby
Affirmed and the appeal dismissed for lack of merit.

“SO ORDERED.” (pp. 44-45, Rollo)

Both parties filed their respective motions for reconsideration
of the decision of the NLRC.  Commart and Jesus T. Maglutac
questioned the NLRC’s finding that the complainant
was dismissed without just cause.  For
his part, complainant questioned the decision insofar as it deleted the award
of moral and exemplary damages and the non-holding of a joint and several liability of Jesus T. Maglutac and
Commart. 
Complainant’s motion was denied on June 5, 1987 (p. 46, Rollo
in G.R. No. 78345).  Commart
and Jesus T. Maglutac’s motion for reconsideration
was also denied on May 29, 1987
(p. 25, Rollo in G.R. No. 78637).  Hence, the instant petitions both alleging grave abuse of discretion on the part of
respondent NLRC.

In G.R. No. 78345, complainant Jose M. Maglutac
raised the following grounds:

“(1) RESPONDENT
NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION AND EVEN CONTRAVENED EXISTING LAWS AND
JURISPRUDENCE  IN HOLDING THAT THERE IS
NO FACTUAL OR LEGAL BASIS FOR THE AWARD OF MORAL AND EXEMPLARY DAMAGES.

“(2) RESPONDENT
NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION AND
CONTRAVENED EXISTING LAWS AND JURISPRUDENCE IN HOLDING THAT RESPONDENT JESUS T.
MAGLUTAC SHOULD NOT HAVE BEEN HELD LIABLE IN SOLIDUM WITH THE RESPONDENT
CORPORATION FOR HE IS MERELY A NOMINAL PARTY TO THE CASE AND MADE SO ONLY IN
HIS CAPACITY AS PRESIDENT AND CHAIRMAN OF THE BOARD OF DIRECTORS OF RESPONDENT
CORPORATION, AND SIMPLY CANNOT BE HELD LIABLE FOR HIS CORPORATE ACT.” (p. 30, Rollo)

In G.R. No. 78637, Commart and Jesus Maglutac raised the following grounds:

“(I) RESPONDENT
NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE REINSTATEMENT OF
PRIVATE RESPONDENT PLUS PAYMENT OF BACKWAGES DESPITE CLEAR PROOF THAT SAID
RESPONDENT COMMITTED AN ACT INIMICAL TO PETITIONER’S INTEREST.

“(II)
RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN SUSTAINING THE ARBITER’S
DECISION WHICH WAS ISSUED IN VIOLATION OF DUE PROCESS OF LAW.” (p. 8, Rollo)

On August 29, 1988,
Commart filed a manifestation stating that it had
become insolvent and that it had suspended operations since January, 1986 (p.
172-A, Rollo).

In G.R. No. 78345, complainant argued that because of the Labor
Arbiter and the NLRC’s findings that is dismissal was
not merely without just cause but was also an act of vendetta, malice attended
the act.  Consequently, he is entitled to
moral and exemplary damages under the Civil Code.

We agree.  In the case of Primero v. Intermediate Appellate Court, G.R. No. 72644,
December 14, 1987, 156 SCRA 435, We held that in cases of illegal dismissal, in
addition to the reliefs granted under the Labor Code,
other forms of damages under the Civil Code may be granted.  Thus,

“The legislative intent appears clear to allow recovery in
proceedings before Labor Arbiters of moral and other forms of damages, in all
cases or matters arising from employer-employee relations.  This would no doubt include, particularly,
instances where an employee has been unlawfully dismissed.  In such a case, the Labor Arbiter has
jurisdiction to award to the dismissed employee not only the reliefs specifically provided by labor laws, but also moral
and other forms of damages governed by the Civil Code.  Moral damages would be recoverable, for
example, where the dismissal of the employee
was not only effected without authorized
cause and/or due process – for which relief is
granted by the Labor Code – but was attended by bad
faith or fraud, or constituted an act
oppressive to labor, or was done in
a manner contrary to morals, good customs
or public policy – for which the obtainable
relief determined by the Civil Code
(not the Labor Code).  Stated otherwise,
if the evidence adduced by the employee before the Labor Arbiter should
establish that the employer did indeed terminate the employee’s services
without just cause or without according him due process, the Labor arbiter’s
judgment shall be for the employer to reinstate the employee and pay him his backwages or, exceptionally, for the employee simply to
receive separation pay.  These are reliefs explicitly prescribed by the Labor Code.  But any award of moral damages by the Labor
Arbiter obviously cannot be based on the Labor Code but should be grounded on
the Civil Code”.

“Moral damages may be awarded to compensate one for diverse
injuries such as mental anguish, besmirched reputation, wounded feelings and
social humiliation.  It is however not
enough that such injuries have arisen; it is essential that they have sprung
from a wrongful act or omission of the defendant which was the proximate cause
thereof.” (Guita v. Court of Appeals, 139 SCRA
576)

From the findings of the Labor Arbiter as affirmed by the NLRC,
there is sufficient basis for an award of moral and exemplary damages in the
instant case.  The alleged loss of trust
and confidence on complainant because of his family’s establishment of MM
International, a company allegedly in direct competition with Commart, was belied by the findings of the Labor Arbiter:

“The formation of another corporation by complainant’s parents
including the complainant himself cannot be used to justify the termination of
complainant.  The formation came about
before complainant’s parents brought a minority stockholders’ derivative suit
and in fact, this was with the sanction of respondent company’s president.  The following handwritten
communications by respondent Jesus Maglutac show that
he even encouraged the organization of MM International Inc. which Articles of
Incorporation show complainant among the incorporating directors.”
(p. 32, Rollo)

Moreover, the complainant was dismissed without due process.  His dismissal was made effective immediately
and he was not given an opportunity to present his side.  As found by the Labor Arbiter:

“After studying in depth the facts and the evidence it is
difficult to divert from the fact that the dismissal of complainant was
triggered by his parent’s filing a derivative suit against respondents with the
Securities and Exchange Commission where it is alleged that the company’s
president and his wife siphoned company funds to their private bank
accounts.  Complainant’s cause of
termination cannot easily and simply be detached from the filing of the
minority stockholders’ derivative suit as this dismissal came abruptly shortly
after the derivative suit was filed. 
Complainant’s brother who was likewise employed by respondents was
likewise dismissed and this came on the heels of the suit filed with the
Securities and Exchange Commission.

“The sequence of events should not be overlooked.  It provides the link for the dismissal of
complainant and his brother.  Worse, the
requirement of due process was blatantly violated.  His notice of termination dated October 3, 1984 ipso facto
states that his dismissal is effective immediately.  It should have dawned upon the senses of
respondents that BP 130 strictly enjoins an employer to terminate an employee
provided the latter is given the opportunity to answer charges imputed against
him as basis for disciplinary action.  The case at bar prominently reveals respondent’s oversight of the
requirements of the law.  On this
score alone, the illegality of complainant’s dismissal is bared eloquently more
than ever.

“It appears very clearly that the feud between complainant’s
parents and respondent’s president, the brother of complainant’s father,
seethed to an intolerable point not sparing innocent people among whom is the complainant. 
Like a wild fire spreading its path, complainant’s close kins were sacked from their employ with respondent
corporation in what is termed by complainant as a ‘vendetta drive.’ But
blood spawned as a result of the derivative suit filed by complainant’s
parents, although the suit is, legally speaking, intended to ‘protect and
safeguard the company’s interest from further depredation.'” (pp. 31-32, Rollo)

Where the employee’s dismissal was effected without procedural
fairness, an award of exemplary damages in her favor can only be justified if
her dismissal was affected in a wanton, oppressive or malevolent manner
(National Service Corp., et al. v. NLRC, G.R. No. 69870, Nov. 29, 1988).  The Labor Arbiter justified the award of
moral damages from its finding of the oppressive and malevolent manner the
complainant and his relatives were treated after Jesus T. Maglutac
found out that a derivative suit was filed by complainant’s family with the
Securities and Exchange Commission accusing him and his wife of diverting
corporation assets to their personal accounts. 
The Labor Arbiter justified the award of damages, thus:

“Complainant undoubtedly was exposed to undue humiliation as a
result of his dismissal.  From the taunts
and sleepless nights he suffered, the pain cannot be more than imagined.  The oppressive and malevolent treatment which
respondents subjected him to, including the ill-concealed attempt to deprive
him of his rights to the car that he had acquired through the company’s car
plan, not to mention the vindictive manner in which his mother was removed as a
director and his brother dismissed from CMS International, furnishes adequate
basis for the claim for moral and exemplary damages.” (pp. 35-36, Rollo)

We agree however, with the contention of the Solicitor General
that the award by the Labor Arbiter of P200,000.00 moral
damages and P20,000.00 exemplary damages is excessive.  In the exercise of our discretion, We reduce
the award of damages to P40,000.00 as moral damages
and P10,000.00 as exemplary damages (See General Bank. v. C.A.,
G.R. No. L-42724, April 9, 1985).

The second ground raised by complainant, that is, that individual
respondent Jesus T. Maglutac should be held jointly
and severally liable with Commart, is also
meritorious.  In the case of Chua V.
NLRC, G.R. 81450, Feb. 15, 1990, citing the case of A.C. Ransom Labor Union –
CCLU v. NLRC, 142 SCRA 269, We affirmed the finding of the Labor Arbiter and
the NLRC that the vice-president of a corporation who was the most ranking
officer of the corporation can be held jointly and severally liable with the
corporation for the payment of the unpaid wages of its president.  It was held:

“We resolve the issue in the light of the precedent set in the
case of A.C. Ransom Labor Union -CCLU v.
National Labor Relations Commission (142 SCRA 269
[1986]). In this case, the Court set aside the decision of the NLRC upholding
the personal non-liability of the individual officers and agents of the
corporation unless they have acted beyond the scope of their authority.  In thus reversing the NLRC decision, the Court
ruled that the president or presidents of the corporation may be held liable
for the corporations’s obligations to its workers.

‘The Court explained:

‘(c) Employer
includes any person acting in the interest of an employer directly or
indirectly.  The term shall not include
any labor organization or any of its officers or agents except when acting as
employer.

‘x x x Since RANSOM is an artificial
person, it must have an officer who can be presumed to be the employer, being
the ‘person acting in the interest of employer,’ RANSOM.  The Corporation, only in
the technical sense is the employer.’

‘The responsible officer of an employer corporation can be held
personally, not to say even criminally, liable for non-payment of backwages.  x x x ‘ (At pp. 273-274;
Underlining supplied)

‘x x x

‘This court continued:

‘x x x

‘(d) The record does
not clearly identify ‘the officer or officers of RANSOM directly responsible
for failure to pay backwages of the 22 strikers.  In the absence of definite proof in that
regard, we believe it should be presumed that the responsible officer is the
President of the corporation who can be deemed the chief operation officer
thereof.  Thus, in RA 602, criminal
responsibility is with the ‘manager or in his default, the person acting as
such.’ In RANSOM, the President appears to be the Manager.” (At p. 274)

“In the instant case, it was correct for the private
respondent to have impleaded the petitioner in the
complaint considering that the latter was the highest and most ranking official
of the corporation after the private respondent had resigned.  Certainly, there should be an officer
directly responsible for the failure to pay the wages of the corporation’s
president.  In this case, such officer
happened to be the vice-president.”

And, in the later case of Gudez, et
al., v. NLRC, et al., G.R. 83023, March
23, 1990, We held the president and
treasurer, Herminia Crisologo,
jointly and severally liable with the corporation.  In the said case, the employer corporation,
Retired Army Protective Security Agency, Inc. (RAPSA), was ordered to cease
operations and the corporation, on the same day when the Labor Arbiter
promulgated its decision, filed a petition for voluntary insolvency, We held:

“x x x.  The
foregoing circumstances make it more necessary to hold respondent Crisologo liable for the claims due to petitioners;
otherwise, any decision that would be rendered in favor of the latter would be
useless and ineffective for there would no one against whom it can be
enforced.”

The same circumstances obtain in the instant case in the light of
the manifestation of Commart that it had become
insolvent and that it had suspended operations.

Moreover, not only was Jesus T. Maglutac
the most ranking officer of Commart at the time of
the termination of the complainant, it was likewise found that he had a direct
hand in the latter’s dismissal.  The
Labor Arbiter therefore, correctly ruled that Jesus T. Maglutac
was jointly and severally liable with Commart.

In G.R. No. 78637, Jesus T. Maglutac
would want Us to reverse the findings of the Labor
Arbiter and the NLRC that complainant Jose M. Maglutac
was dismissed without just cause.  The
matter, being factual, is beyond the authority of this court to review.  Factual findings of administrative agencies
are generally final and binding upon this Court when supported by substantial
evidence as in the instant case.

Likewise, respondents’ claim that they were denied due process
because the Labor Arbiter rendered judgment on the basis of complainant’s
reply-position paper without furnishing them a copy thereof, is not
meritorious.  Where the records show that
in response to the complaint before the Labor Arbiter rendered his decision, Commart and Jesus T. Maglutac
submitted a position paper, complete with annexes where they set out and argued
the factual as well as the legal basis of their positions, their due process
argument must fail.  (see
Llora Motors, Inc. v. Franklin Drilon,
G.R. 82895, 7 Nov. 1989)
The procedure by which issues are resolved based on position papers, affidavits
and other documentary evidence is recognized as not violative
of due process (AMS Farming Corp. v. Pura Ferrer-Calleja, G.R. No. 80557, Feb. 1988).  The failure of complainant to serve a copy of
his Reply?Position Paper is therefore, not fatal, it having been
established that Commart and Jesus T. Maglutac were afforded a reasonable opportunity to present
their sides.  Moreover, the existence of
the letters written by individual respondent Jesus T. Maglutac
encouraging the formation of MM International was never denied by him before
the NLRC nor before this Court.

“While an employer has its own interests to protect, and
pursuant thereto, it may terminate a managerial employee for a just cause, such
prerogative to dismiss or lay-off an employee must be exercised without abuse
of discretion.  Its implementation should
be tempered with compassion and understanding. 
The employer should bear in mind that in the execution of said
prerogative, what is at stake is not only the employees
position but his livelihood.  The fact
that one is a managerial employee does not by itself exclude him from the
protection of the constitutional guarantee of security of tenure (Santo v.
NLRC, G.R. 76991, Oct. 28, 1988).

One final point.  It cannot now be expected that the harmonious
and pleasant working relationship between the parties in this case prior to the
bringing of the derivative suit with the Securities and Exchange Commission and
the filing of complaint for illegal dismissal with the Labor Arbiter, can be
revived.  The relationship had been so
strained that to order the reinstatement of the complainant would not be
wise.  Where the relationship of employer
to employee is so strained and ruptured as to preclude a harmonious working
relationship should reinstatement of the employee be decreed, the latter should
be afforded the right to separation pay where the employer does not have to
endure the continued services of the employee in whom it has lost confidence (Esmalin v. NLRC, G.R. 67880, 15 September 1989, Bautista v.
Enciong, G.R. No. L-52824, 16 March 1988, Asiaworld Publishing House Inc., v. Hon. Ople, et al., G.R. No. 56398, July 23, 1987).

ACCORDINGLY, a decision is hereby rendered as follows:

 1. In G.R. No. 78345, the petition is GRANTED.  The decision of the Labor Arbiter is
REINSTATED but the award of damages is reduced to P40,000.00
as moral damages and P10,000.00 as exemplary damages.  In lieu of reinstatement, private respondents
are ordered to pay complainant separation pay of one month salary for every
year of service in addition to his backwages
equivalent to three years.

2. In G.R. No. 78637, the petition is DISMISSED.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Griño-Aquino, JJ., concur.