UNION OF FILIPINO WORKERS (UFW), PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, SIMEX INTERNATIONAL INC., LILIA SANTANDER, GEORGE SANTANDER AND JOSEPH SANTANDER, RESPONDE…

This Petition for Certiorari seeks to set aside the
Decision of public respondent National Labor Relations Commission (NLRC), dated
26 August 1989, which reversed the Decision of the Labor Arbiter, dated 27 June
1988, and sustained the closure of private respondent company. SIMEX International Inc., as valid.

On 4 September 1987, a Petition for Direct Certification among
the rank-and-file workers of SIMEX was filed before the Med Arbiter, docketed
as Case No. 00-09-634-87 (Petition for Direct Certification), with the hearing
thereof set for 18 September 1987. These workers subsequently affiliated with petitioner Union of Filipino
Workers (UFW).

On 19 September 1987, thirty-six (36) workers of the
“Iumpia” department were not given their usual working materials and
equipment for that day and, instead, were asked to clean their respective
working areas. Since these workers were
employed on a “pakiao” basis, they refused. Nevertheless, they still reported for work on 21 September 1987 but
to their surprise, they found out that SIMEX had removed all materials and
equipments from their workplaces. The
Union claims that its members were, therefore, effectively locked out.

From 1 October 1987 to 7 October 1987, sixteen (16) more workers
from the other departments were similarly refused employment. As a consequence, these workers, through
UFW, instituted a Complaint for Unfair Labor Practices and violation of labor
standard laws against SIMEX and its principal officers and stockholders, namely
private respondents Lilia, George and Joseph, all surnamed SANTANDER, docketed
as NLRC-NCR-00-09-03329-87 (for Illegal Dismissal/Lockout of 36
“Iumpia” department workers and 16 others, etc.).

On 9 October 1987, however, SIMEX had filed a Notice of “Permanent
Shutdown/Total Closure of All Units of Operation in the Establishment”
with the Department of Labor and Employment to take effect on 9 November 1987,
allegedly due to business reverses brought about by the enormous rejection of
their products for export to the United States. This notice of closure rendered the Petition for Direct
Certification moot and academic. Notices of Closure were placed in conspicuous places around the company
premises.

Meanwhile, in sympathy with their fifty-two (52) co-workers who
were allegedly illegally dismissed by SIMEX and in “protest to the
continued acts of unfair labor practices committed” by SIMEX, thirty-nine
(39) other workers staged a picket outside the company premises from 10 October
1987 to 27 October 1987. By reason
thereof, SIMEX’s supposed offer of separation pay totaling P280,000.00 was
withdrawn. When these workers lifted
their picket on 27 October 1987 and voluntarily reported for work, SIMEX
refused to give them their usual work. They were dismissed effective 1 November 1987.

Another Complaint for Unfair Labor Practice was, therefore, filed
against the same respondents, this time involving the thirty-nine (39) workers
who picketed the company premises in sympathy with their other co-workers,
docketed as NLRC-NCR-11-03887-87 (for Unfair Labor Practice, Illegal
Dismissal/Lockout of thirty-nine [39] workers). It is this case that is the subject of this Petition for Certiorari.

On 27 June 1988, the Labor Arbiter rendered his verdict declaring
that the closure of SIMEX was a mere subterfuge in order to discourage the
formation of the union. The
respondents, SIMEX and the SANTANDERs, were found guilty of unfair labor
practice and were ordered, jointly and solidarily, to reinstate the 39 workers
without loss of seniority rights, benefits and privileges, with full backwages
from 1 November 1987 until such time that these workers are actually
reinstated. They were also ordered to
pay ten per cent (10%) of the total awards as attorney’s fees.

On appeal, the NLRC, in a Decision, dated 28 August 1989, set
aside the Labor Arbiter’s Decision when it held that the “determination of
the wisdom or expediency to close a department in a corporation, e.g., the
‘lumpia’ department in this case, due to financial reverses, is the sole
prerogative of the corporation.” It ruled that since SIMEX had filed a
Notice of Closure on 9 October 1987 and had complied with the requirements of
the applicable rules and regulations when it posted in their main gate the
aforesaid Notice, its failure to accept the workers of UFW did not constitute
unfair labor practice considering that SIMEX had already closed the
“lumpia” department. Hence,
SIMEX was merely ordered to pay the workers affected a separation pay
equivalent to one (1) month’s salary for every year of service rendered.

Petitioner UFW has thus elevated its cause before us in this
Petition for Certiorari, seeking the reversal of the NLRC Decision, for
having been rendered with grave abuse of discretion, and the reinstatement
instead of the Decision of the Labor Arbiter and its affirmance in toto.

The public and private respondents in this case were required to
file their respective Comments. Since
the Solicitor General adopted a position contrary to that of the NLRC, the
Court required the latter to file its own Comment, which it has done.

After the Comments, Reply, Rejoinders and the parties’ respective
Memoranda were submitted, private respondents SIMEX and the SANTANDERs filed a
Manifestation, dated 10 December 1990 (p. 212, Rollo), signed by Atty. Julio F.
Andres, Jr., stating that after they had manifested to the Court on 9 December
1990 that they were adopting their Comment as their Memorandum, they discovered
that an “Acknowledgment Receipt and Undertaking,” dated 9 June 1989,
had already been signed between private respondent George SANTANDER and
petitioner’s former counsel, Atty. Modesto S. Mendoza, whereby this case as
well as two (2) others had already been settled and compromised. Thereby, this controversy has become moot and
academic. Said Undertaking reads:

“I, MODESTO S. MENDOZA, x-x-x, have today RECEIVED FROM SIMEX
INTERNATIONAL INC., through its Vice-President MR. GEORGE SANTANDER, the
following amounts:

P500,000.00 in cash and

P50,000.00 PCIB check No. 496869

dated Sept. 9, 1989

P50,000.00 PCIB check No. 496870

dated Dec. 9, 1989

P50,000.00 PCIB check No. 496871

dated March 9, 1990

P50,000.00 PCIB check No. 496872

dated June 9, 1990

in full and complete settlement
of NLRC-NCR-CASE NOS. 00-09-03329-87, 00-11-3887-87 and 00-01-00255-88.

“I undertake to take charge of obtaining the signatures of the
proper officers of the union to sign the Motion to Dismiss in order to
implement the full and final settlement of said cases between complainant and
respondents.

“I further undertake and warrant that with this payment by the
respondents, the complainant Union and each of their members, hereby RELEASE
AND DISCHARGE the SIMEX INTERNATIONAL INC., each (sic) Officers, agents and
representative (sic) from any demands, claims and liabilities from any cause
whatsoever, arising out of their employment with the said respondents (sic)
corporation.”

UFW maintains, however, that the settlement did not materialize
because of its objections as shown by the fact that it had not filed a Motion
to Dismiss and Quitclaim in this case.

The issues for determination then are: 1) whether or not a compromise had been reached by the parties;
and 2) whether or not there was a valid closure of SIMEX that entitled it to
terminate the employment of its thirty-nine (39) employees. A plea is also made that the individual
private respondents SANTANDERs be dropped from the suit since they only acted
within the scope of their authority.

We incline to the view that no valid compromise agreement was
arrived at in this case.

The alleged settlement involved three (3) cases, one of which
charges alleged violation of labor standards. Compromise agreements involving labor standards cases must be reduced to
writing and signed in the presence of the Regional Director or his duly
authorized representative (Atilano v. De la Cruz, G.R. No. 82488, 28 February
1990, 182 SCRA 886). Section 8, Rule II
of the Rules on the Disposition of Labor Standards Cases in the Regional
Offices provides:

“Section 8. Compromise
Agreement. – Should the party
arrive at an agreement as to the whole or part of the dispute, said agreement
shall be reduced [to] writing and signed by the parties in the presence of the
regional director or his duly authorized representative.”

The questioned “Acknowledgment Receipt and Undertaking”
did not comply with this requisite. It
was not, therefore, duly executed.

Even assuming arguendo that it was, Atty. Modesto Mendoza,
counsel for petitioner UFW, whose services were subsequently terminated, was
not duly authorized to enter into a compromise with SIMEX and the
SANTANDERs. As aptly pointed out by the
Solicitor General, Article 1878 of the Civil Code provides that a Special Power
of Attorney is required before an agent can be authorized to enter into a
compromise. It reads:

“Art. 1878. Special
powers of attorney are necessary in the following cases:

“x-x-x

“(3) To compromise, to submit questions to
arbitration, to renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a prescription already
acquired.” (Underscoring ours).

No evidence was adduced that would show that the aforementioned
counsel for UFW was authorized to
enter into a compromise. Correspondingly, he cannot release and
discharge SIMEX and the SANTANDERs from their obligation. A perusal of the “Acknowledgment
Receipt and Undertaking” reveals that no representative of UFW signed the
alleged settlement.

The fact that said counsel undertook to obtain the signatures of
the proper officers of UFW shows that his action was still subject to
ratification by the union members. This
confirmation was never secured as shown by the fact that no motion for the
dismissal of the case at bar had been filed by UFW or on its behalf “in
order to implement the full and final settlement of said case,” unlike in
NLRC-NCR Case No. 00-01-00255-88 where such a Motion had been filed. In an Affidavit, dated 6 May 1991 (p. 258,
Rollo), Atty. Mendoza also declared that respondent George Santander had
stopped the payment of the three (3), postdated checks, which statement has not
been refuted by private respondents.

We now shift to the issue bearing on the legality of the closure
of SIMEX. Article 283 (then Article 284)
of the Labor Code provides:

“Art. 283. Closure
of establishment and reduction of personnel. – The employer may also terminate the employment of any employee
due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment
or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least
his one (1) month pay or at least one (1) month pay for every year of service,
whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment and undertaking not due to serious business losses
or financial losses, the separation pay shall be equivalent to one (1) month
pay or at least one half (1/2) month pay for every year of service, whichever
is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.” (Emphasis in text
supplied).

Under this provision, the closure of a business establishment is
a ground for the termination of the services of any employee unless the closing is for the purpose of
circumventing the provisions of law. But, while business reverses can be a just cause for terminating
employees, they must be sufficiently proven by the employer (Indino v. NLRC,
G.R. No. 80352, 29 September 1989, 178 SCRA 168).

In the case at bar, SIMEX alleged that it suffered export
rejections amounting to $78,959.54 for 1985, $1,654.00 for 1986 and $28,414.11
for 1987, respectively. It alleged,
that these export rejections resulted in huge financial losses to the company
(Rollo, p. 96) so much so that remedial measures were instituted as suppliers
hesitated to give the company their usual credit terms (ibid, p. 97).

The audited financial statement of SIMEX, however, clearly
depicted that for 1985 and 1986, the company actually derived retained earnings
of P35,593.21 and P73,241.25, respectively. The private respondents never refuted this fact. Instead, they merely insisted that these
export rejections resulted in heavy losses for the company. These export rejections may have, indeed,
contributed to a reduction of SIMEX’s earnings. The company, however, was not suffering from business losses, as
claimed, at the time of application for closure.

Indeed, there is no question that an employer may reduce its work
force to prevent losses. However, these
losses must be serious, actual and real (Lopez Sugar Corporation v. Federation
of Free Workers, G.R. No. 75000-01, 30 August 1990, 189 SCRA 179). Otherwise, this “ground for termination
would be susceptible to abuse by scheming employers who might be merely
feigning business losses or reverses in their business ventures in order to
ease out employees (Garcia v. NLRC, G.R. No. L-67825, 4 September 1987, 153
SCRA 639).

In this regard, then, SIMEX failed to prove its claim. What were submitted as evidence were mere
receipts of export rejections, nothing more. SIMEX never adduced evidence that would reflect the extent of losses
suffered as a result of the export rejections, which failure is fatal to its
cause.

The Notice of Closure filed by SIMEX had indicated that it will
have a permanent shutdown and/or total closure of all its units of
operation. This was not so. Workers belonging to the Marketing and
Export Divisions were never laid off. A
SEC Certification, dated 4 February 1988, shows that SIMEX never applied for
dissolution. The Labor Arbiter also
found as a fact that SIMEX
continued to export its products, including “eggroll wrap,” long
after its target date of closure.

In explaining this discrepancy, SIMEX merely alleged that not all
its operations were closed. Even on
this score alone, therefore, private respondents’ position must be rejected.

These factors strongly give more credence to the Solicitor
General and UFW’s contention that the alleged closure of business of SIMEX was
“but a subterfuge to discourage formation of a union” and that SIMEX was guilty of union busting. To all appearances, the company had filed a
Notice of Closure simply to pre-empt the employees from forming a union within
the company.

The SANTANDERs’ prayer that they be dropped from this case must
also be rejected. They should have adopted
that recourse during the earlier stages. Moreover, UFW has adequately shown that the individual private
respondents were not only officers of the company but its major stockholders as well (See Carmelcraft Corporation
v. NLRC, G.R. Nos. 90634-35, 6
June 1990, 186 SCRA 393).

Lastly, if SIMEX has not yet recovered the balance of the
compromise money given to then counsel for petitioner, its recourse is to file
the appropriate civil or criminal case against the latter. After all, in said counsel’s Affidavit, he
has stated that he is ready to return the balance of what he had received after
payment of the amount due in NLRC-NCR
Case No. 00-01-00255-88.

WHEREFORE, the Petition for Certiorari is
GRANTED. The Decision of respondent
NLRC, dated 26 August 1989, is hereby SET ASIDE and the Decision of the Labor
Arbiter, dated 27 June 1988, is hereby REINSTATED and AFFIRMED in toto.

Costs against private respondents.

SO ORDERED.

Paras, Padilla, Regalado, and
Nocon, JJ., concur.