RURAL BANK OF COTABATO, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, FELISA G. EUGENIO, EDNA C. TAN AND BESSIE A. BAJAR, RESPONDENTS.

The principal issue in this Petition is whether or not the
retrenchment of the private respondents amounts to an illegal dismissal.  The Petition is erroneously captioned as a
Petition for Review on Certiorari.  This error notwithstanding, and in the interest
of justice, the Court resolved to treat the Petition as a special civil action
for certiorari on account of the jurisdictional issues raised
herein.

The petitioner Rural Bank of Cototabato,
Inc. is a banking corporation organized under the laws of the Philippines.  Its principal business office is in Cotabato City.  The private respondents Felisa
G. Eugenio, Edna C. Tan and Bessie A. Bajar were employees of the said bank.

On October 1, 1984,
the petitioner informed the private respondents that they were going to be
retrenched effective November 1, 1984
on account of serious financial problems confronting the bank.  The private respondents were eventually
terminated.

The petitioner offered each of the private respondents one–half month salary for every year of service as separation pay apart from
other benefits due them.  The private
respondents refused the offer.  They were
of the view that there was no valid retrenchment inasmuch as the business of the petitioner had
been profitable for the past several years. 
Accordingly, they demanded
one month salary for every year of service as separation pay, as well as other benefits due
them.  The petitioner, however, refused
to accede to their demands.

On November 7, 1984,
the private respondents filed a Complaint
for illegal dismissal against the petitioner
with the Regional Arbitration Branch of the National Labor Relations
Commission.

The parties submitted their respective position papers.  In the
course of the proceedings, the
hearing officer assigned to the case submitted his report to the Executive Labor Arbiter.  The hearing officer was of the view that the petitioner was guilty of illegal dismissal.  Accordingly,
he recommended that the petitioner be made to pay the private respondents one month salary for every year of service as their
separation pay, as well as their benefits
due them, including costs of litigation,
interest, attorney’s fees
and moral and exemplary damages. 
The Executive Labor Arbiter adopted the recommendation of the
hearing officer in his Decision dated October
18, 1985.^[1]

On December 9, 1985, the petitioner brought an appeal to the
National Labor Relations Commission.^[2]
On October 30, 1986, while the case was pending on appeal, private respondent
Edna C. Tan entered into a compromise agreement with the petitioner.^[3]
For this reason, the said parties sought the dismissal of the Complaint filed
by the said private respondent against the petitioner.  They filed a joint Motion to Dismiss for this
purpose.^[4]

In a Resolution dated August 31, 1987, the Second Division of the
National Labor Relations Commission upheld in toto the
Decision of the Executive Labor Arbiter and dismissed the appeal of the
petitioner.^[5]

On December 18, 1987, the petitioner elevated the case to this
Court by way of the instant Petition.^[6]

The petitioner argues that
the retrenchment it had undertaken was valid on account of the serious
financial problems of the firm.  The
petitioner points out that although its audited financial statements show that
the firm generated profits from 1981 up to the time the private respondents
were retrenched on November 1, 1984,
it still suffered losses for the said years considering that the bank has a
number of accounts to settle
with the Central Bank.  The petitioner
also alleges that it will suffer greater losses as a result of the withdrawal of
various tax exemptions enjoyed
by rural banks upon the effectivity of Presidential Decree
No. 1955 on October 15, 1984.  For these reasons, the petitioner maintains that the award of separation pay in favor of private
respondents Eugenio and Bajar should have been on the basis of a valid retrenchment, i.e., one-half
month for every year of service, and that the award of interest, attorney’s fees, costs of litigation as well
as moral and exemplary damages has no
legal basis.

The petitioner also
argues that the award in
favor of private respondent Tan
should not have been sustained inasmuch as she
had already executed a compromise agreement with the company.

In fine, the Petition is anchored on the argument that the respondent Commission committed a grave abuse of discretion amounting to loss
of jurisdiction
when it
dismissed the petitioner’s appeal.

In his Comment
dated June 24, 1988,^[7]
the Solicitor General contends
that at the time of the
retrenchment of the private respondents, the petitioner had substantial credits in the form of accrued receivables from
funds it had loaned to the public in an amount that was more than enough
to pay for all of its
outstanding obligations to the Central Bank. 
He points out that if this observation were not true, the petitioner
should have been out of business a long time ago.

He likewise argues that at the time of the said retrenchment,
there was then no way of assessing the perceived adverse effects of
Presidential Decree No. 1955 on the petitioner simply because there were no
rules and regulations to implement the said Decree.  The potential losses claimed by the
petitioner relating to the Decree are dismissed by the Solicitor General as
mere speculations.

Thus, he maintains that the private respondents were illegally
dismissed pursuant to an invalid retrenchment undertaken by the petitioner and
they are entitled to one month salary for every year of service as separation
pay, and such other amounts of money that are due them.

As to the award of interest, attorney’s fees, costs of litigation
as well as moral and exemplary damages, the Solicitor General stresses that
such award was based on the petitioner’s willful refusal to pay the amounts of
money due the private respondents as alleged by the latter in their
Complaint.  He adds that the petitioner
never refuted these allegations when it could have done so in its Position
Paper submitted to the hearing officer of
the respondent Commission, and that, accordingly, the petitioner cannot
be heard to disavow the same at this stage of the proceedings.

The Solicitor General agrees, however, that the award in favor of
private respondent Tan should not have been sustained by the respondent
Commission inasmuch as she had already entered into a compromise agreement with
the petitioner.  The Solicitor General
submits that her inclusion in the Resolution of the respondent Commission was
an oversight.

In sum, the Solicitor General seeks the dismissal of the instant
Petition for lack of merit.

After a careful examination of the entire record of the case, the
Court finds the instant Petition
devoid of merit.

The Court is not convinced that the retrenchment undertaken by the
petitioner was brought about by serious financial problems confronting the
company.  The petitioner admits that it
realized profits from 1981 and
thereafter, even up to the time the private respondents were terminated in
November, 1984.^[8]
This notwithstanding, the petitioner alleges that it has numerous accounts to
settle with the Central Bank in an amount
exceeding the said profits.  Be
that as it may, the petitioner makes no mention of its credits and other
receivables from funds it had loaned out
to the public.  These credits and receivables must be in an
amount greater than the alleged payables, otherwise, as observed by the Solicitor
General, the petitioner should have been out of business a long time ago.

The petitioner has not clearly demonstrated how Presidential
Decree No. 1955 can bring about adverse effects on its business to such an
extent that it has no choice but to retrench several employees.  These potential losses claimed by the
petitioner are simply speculative in character. 
They cannot justify the retrenchment undertaken by the petitioner.

Clearly then, there
is no basis for the alleged retrenchment of the private respondents.  To all intents and purposes, they were
illegally dismissed by the petitioner.

Taking this observation into account, the award of interest,
attorney’s fees, costs of litigation as well as moral and exemplary damages in
favor of the private respondents is in
order.

As regards private respondent Tan, the award in her favor should
not have been sustained by the respondent Commission.  She had already entered into a compromise
agreement with the petitioner and as such, all her claims against the
petitioner must be considered settled. 
The respondent Commission must have committed a mistake in this regard. 
Accordingly, the Resolution of the respondent Commission should be
deemed modified to include a statement that all her claims against the
petitioner are considered settled on account of the compromise agreement she had entered into with the
petitioner.

By and large, however, the Court is of the well-considered opinion that the
respondent National Labor Relations Commission did not commit a grave abuse of
discretion amounting to loss of jurisdiction in dismissing the appeal of the
petitioner.

WHEREFORE, in view of the foregoing, except for the above
stated modification of the resolution of respondent Commission that all the
claims of private respondent Edna C. Tan had been settled, the instant Petition
is hereby DISMISSED for lack of merit as to the other private respondents,
without pronouncement as to costs.

SO ORDERED.

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

^[1]
Pages 36 to 42, Rollo.

^[2]
Pages 43 to 51, Rollo.

^[3]
Pages 58 and 59, Rollo.

^[4]
Page 60, Rollo.

^[5]
Pages 52 to 56, Rollo.

^[6]
Pages 3 to 14, Rollo.

^[7]
Pages 115 to 120, Rollo.

^[8]
Pages 4 and 5, Petition; pages 6 and 7, Rollo.