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742 PHIL. 361


[ G.R. No. 201237, September 03, 2014 ]




Before the Court is a petition for review on certiorari[1] assailing the Decision[2] dated November 25, 2011 and the Resolution[3] dated March 12, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 96000 which reversed and set aside the Decision[4] dated January 20, 2006 of the National Labor Relations Commission (NLRC) in NLRC NCR CN. 30-04-01713-01/ CA No. 036901-03, thereby reinstating  the Decision[5] dated July 14, 2003 of the Labor Arbiter (LA) finding MAS Transit, Inc. (MTI) and petitioners Philippine Touristers, Inc. (PTI) and/or its president, Alejandro R. Yague, Jr. (Yague) guilty of unfair labor practice, i.e., illegal lock out.

The Facts

On June 14, 2000, respondent Samahan ng Manggagawa sa Mas Transit-Anglo-KMU (the Union) – a union organized through the affiliation of certain MTI bus drivers/conductors with the Alliance of Nationalist and Genuine Labor Organizations – filed a petition[6] for certification election before the Department of Labor and Employment (DOLE) - National Capital Region (NCR), docketed as Case No. NCR-OD-M-0006-018.[7] The DOLE granted the Union’s petition, prompting MTI to file a motion for reconsideration which was, however, denied in a Resolution dated February 7, 2001.[8]

Earlier, or on September 15, 2000, MTI decided to sell[9] its passenger buses together with its Certificate of Public Convenience (CPC) issued by the Land Transportation Franchising and Regulatory Board (LTFRB) to PTI for a total consideration of P98,345,834.43. Records disclose that the sale of 50 passenger buses together with MTI’s CPC was approved by the LTFRB in a Decision[10] dated December 28, 2000. As such, PTI was issued a new CPC authorizing it to operate the service on the Baclaran-Malabon via EDSA route using the passenger buses that were sold.[11]

In light of the foregoing, MTI issued a “Patalastas[12] dated March 7, 2001 apprising all of its employees of the sale and transfer of its operations to PTI, and the former’s intention to pay them separation benefits in accordance with law and based on the resources available. The employees were also advised to apply anew with PTI should they be interested to transfer. Thereafter, or on March 31, 2001, MTI sent each of the individual respondents[13] a Memorandum[14] informing them of their termination from work, effective on said date, in line with the cessation of its business operations caused by the sale of the passenger buses to the new owners.[15]

Claiming that the sale was intended to frustrate their right to self-organization and that there was no actual transfer of ownership of the passenger buses as the stockholders of MTI and PTI are one and the same, the Union, on behalf of its 98 members (respondents),[16] filed a complaint[17] for illegal dismissal, unfair labor practice, i.e., illegal lock out, and damages against MTI and/or Tomas Alvarez (Alvarez), and PTI and Yague (petitioners), before the NLRC, docketed as NLRC NCR CN. 30-04-01713-01/ CA No. 036901-03.

In their defense,[18] MTI and Alvarez denied that the individual respondents were illegally dismissed or locked out, contending that the closure of its business operations was valid and justified. They claimed that the company was forced to sell its passenger buses to PTI as it was already suffering from serious financial reverses; and that since there was nothing more to operate, it had no choice but to cease operations. They further added that the required Establishment Termination Report was submitted to the DOLE on March 29, 2001, while several employees – including some of the individual respondents – were paid their separation benefits. Hence, they contended that the claims for reinstatement and backwages were without factual and legal bases. Finally, they sought the dismissal of the complaint against 30 of the respondents[19] since they had executed a “Sinumpaang Salaysay Para sa Pag-uurong ng Demanda” dated June 11, 2001 where they categorically moved for the withdrawal of their complaint.[20]

For their part, petitioners denied any liability to the respondents considering that no employer-employee relationship existed between them and that petitioners were impleaded just because PTI happened to be the buyer of some of MTI’s passenger buses. They further pointed out that PTI is not the predecessor-in-interest of MTI as the sale involved the passenger buses only and did not include the latter’s other assets.[21]

The LA Ruling

In a Decision[22] dated July 14, 2003, the LA ruled in favor of the respondents, finding MTI and petitioners guilty of unfair labor practice, i.e., illegal lock out.

The LA held that MTI’s closure of business and cessation of operations, allegedly due to serious financial reverses, were actually made to subvert the right of its employees to self-organization.[23] In this relation, the LA pointed out that MTI never disclosed its intent to conduct the said closure during the proceedings for certification election but only after the refusal of the Union officers and members to abandon their union,[24] despite threats from its managerial personnel to do so, under pain of termination.[25] The LA also adverted to the fact that only the Union’s officers and members were locked out and terminated by MTI on March 31, 2001, while the other workers who withdrew from the complaint were re-admitted back to work,[26] adding too that MTI’s claim of serious financial reverses had no basis in fact.[27] Furthermore, the LA observed that there was no actual stoppage of operations as the remaining employees of MTI continuously worked for PTI,[28] the owners and stockholders of both corporations being one and the same.[29] Accordingly, MTI and petitioners were adjudged jointly and severally liable for the individual respondents’ backwages, separation pay, and attorney’s fees.[30]

The NLRC Proceedings

Dissatisfied, petitioners appealed before the NLRC by filing their Notice of Appeal[31] and Appeal Memorandum,[32] accompanied by a Manifestation with Motion for Reduction of Bond,[33] praying that the required bond covering the monetary judgment of P12,833,210.00 (full judgment award) be reduced in view of PTI’s liquidity problems. Simultaneously, petitioners posted South Sea Surety and Insurance Company, Inc. (SSSICI) Surety Bond No. G(21) 002718[34] in the amount of P5,000,000.00 (partial bond), seeking that the same be considered as substantial compliance for purposes of perfecting their appeal.

MTI, on the other hand, did not interpose any appeal.

Meanwhile, respondents opposed petitioners’ motion to reduce bond and moved for the dismissal of their appeal for failure to perfect the same as the bond posted was not in an amount equivalent to the full judgment award as mandated by law.[35]

On September 12, 2003, petitioners filed a Manifestation and Motion attaching thereto PTI’s Audited Financial Statement (AFS) as of December 31, 2001 in support of the motion to reduce bond.[36]

Pending the NLRC’s action, petitioners subsequently filed a Supplemental Manifestation on January 12, 2004, withdrawing its initial motion and, instead, submitting for approval their additional surety bond, SSSICI Surety Bond No. G(16) 002066 in the amount of P7,833,210.00, to cover the full judgment award.[37] This was followed by another motion seeking to substitute SSSICI Surety Bond No. G(21)002718  in the amount of P5,000,000.00 with that of SSSICI Surety Bond No. G(16) 003459 for the same amount as the former bond was found to have been erroneously and inadvertently issued in favor of MTI and not PTI.[38]

Again, respondents vehemently opposed the foregoing actions of petitioners and sought for the inhibition[39] of the Commissioners of the NLRC-Third Division for failure to dismiss the appeal despite the apparent failure to perfect the same.

In a Decision[40] dated April 19, 2004, the NLRC dismissed the appeal for petitioners’ failure to post the required bond equal to the full judgment award within the ten (10)-day reglementary period prescribed under the NLRC Rules of Procedure. It also pointed out that the partial bond petitioners posted was invalid since it was not signed by an authorized signatory of the insurance company as advised by the NLRC in a Memorandum dated January 5, 2004, and that the ground relied upon for the reduction of the bond was not substantiated.[41] Likewise, it dismissed respondents’ motion for inhibition for lack of basis.[42]

Undeterred, petitioners moved for reconsideration,[43] insisting that the NLRC should adopt a liberal interpretation of the rules on perfection of appeal considering that they had substantially complied with the same and had in fact completely posted the required bond prior to the resolution of their motion to reduce bond.[44]

Finding merit in petitioners’ motion for reconsideration, the NLRC, in an Order[45] dated September 30, 2004, reinstated their appeal. It held that there was substantial compliance with the rules considering the subsequent posting of an additional bond to complete the full judgment award, adding too that petitioners’ initial motion to reduce bond was based on a meritorious ground – that is, the inability of PTI to post the full amount due to its liquidity problems as evidenced by its submitted AFS.[46] However, considering that PTI’s bonding company, SSSICI, was not authorized to transact business in all courts all over the country per the Court’s Certification dated August 6, 2004, petitioners were directed to replace the bond,[47] which they timely complied with through the posting of Supersedeas Bond No. SS-B-10150,[48] in the amount of P12,833,000.00, issued on November 8, 2004 by the Far Eastern Surety & Insurance Company, Inc.[49]

Thereafter, or on January 20, 2006, the NLRC rendered a Decision,[50] modifying its April 19, 2004 Decision by dismissing the complaint against petitioners. The modification was brought about by the NLRC’s finding that there were no factual and legal bases to hold petitioners jointly and severally liable with MTI as the two corporations are separate and distinct juridical entities with different stockholders and owners.[51] To this end, it ruled that the individual respondents were employees of MTI and not PTI, and that the sale of  the passenger buses to PTI was not simulated or fictitious since the deed evidencing said sale was duly notarized and approved by the LTFRB in a Decision dated December 28, 2000.[52]

Disagreeing with the NLRC, respondents filed a motion for reconsideration[53] which was, however, denied in a Resolution[54] dated June 30, 2006, prompting them to elevate the matter on certiorari before the CA.[55]

The CA Ruling

In a Decision[56] dated November 25, 2011, the CA annulled and set aside the modified ruling of the NLRC finding the latter to have acted with grave abuse of discretion in applying a liberal interpretation of the rules on perfection of appeal.

It held that PTI’s alleged liquidity problems cannot be considered as a meritorious ground to reduce the bond as there was no showing that they were incapable of posting at least a surety bond equivalent to the full judgment award.[57] It further observed that the partial bond posted was defective, having been issued in favor of MTI and not PTI, and that the bonding company which issued the same was not authorized to transact business in all courts of the Philippines during that time.[58] Perforce, the CA concluded that there was no basis to extend liberality to and relax the rules in favor of petitioners.

Aggrieved, petitioners filed a motion for reconsideration[59] which was denied in a Resolution[60] dated March 12, 2012, hence, this petition.

The Issue Before the Court

The central issue for the Court’s resolution is whether or not the CA erred in ascribing grave abuse of discretion on the part of the NLRC when the latter gave due course to petitioners’ appeal and consequently issued a modified Decision absolving petitioners from liability.

The Court’s Ruling

There is merit in the petition.

For an appeal from the LA’s ruling to the NLRC to be perfected, Article 223 (now Article 229)[61] of the Labor Code requires the posting of a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from, viz.:

ART. 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. Such appeal may be entertained only on any of the following grounds:

1.  If there is a prima facie evidence of abuse of discretion on the part of the Labor Arbiter;

2. If the decision, order or award was secured through fraud or coercion, including graft and corruption;

3.  If made purely on questions of law; and

4. If serious errors in the findings of facts are raised which would cause grave or irreparable damage or injury to the appellant.

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.

x x x x (Emphasis and underscoring supplied)

While it has been settled that the posting of a cash or surety bond is indispensable to the perfection of an appeal in cases involving monetary awards from the decision of the LA,[62] the Rules of Procedure of the NLRC[63] (the Rules), particularly Section 6, Rule VI thereof, nonetheless allows the reduction of the bond upon a showing of (a) the existence of a meritorious ground for reduction, and (b) the posting of a bond in a reasonable amount in relation to the monetary award, viz.:

SEC. 6. BOND. – In case the decision of the Labor Arbiter or the Regional Director involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond. The appeal bond shall either be in cash or surety in an amount equivalent to the monetary award, exclusive of damages and attorney’s fees.

x x x x

No motion to reduce bond shall be entertained except on meritorious grounds and upon the posting of a bond in a reasonable amount in relation to the monetary award.

The filing of the motion to reduce bond without compliance with the requisites in the preceding paragraph shall not stop the running of the period to perfect an appeal. (Emphasis and underscoring supplied)

In this regard, it bears stressing that the reduction of the bond provided thereunder is not a matter of right on the part of the movant and its grant still lies within the sound discretion of the NLRC upon a showing of meritorious grounds and the reasonableness of the bond tendered under the circumstances.[64]

In Nicol v. Footjoy Industrial Corp.,[65] the Court held that “meritorious cases” for said purpose would include “instances in which (1) there was substantial compliance with the Rules, (2) surrounding facts and circumstances constitute meritorious grounds to reduce the bond, (3) a liberal interpretation of the requirement of an appeal bond would serve the desired objective of resolving controversies on the merits, or (4) the appellants, at the very least exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.” Notably, in determining whether the arguments raised by the petitioners in their motion to reduce bond is a “meritorious ground,” the NLRC is not precluded from conducting a preliminary determination of the merits of the appellant’s contentions.[66] And since the intention is merely to give the NLRC an idea of the justification for the reduced bond, the evidence for the purpose would necessarily be less than the evidence required for a ruling on the merits.[67]

Here, it is not disputed that petitioners filed an appeal memorandum and complied with the other requirements for perfecting an appeal, save for the posting of the full amount equivalent to the monetary award of P12,833,210.00.  Instead, petitioners filed a motion to reduce bond claiming that they were suffering from liquidity problems and, in support of their claim, submitted PTI’s AFS which showed a deficit in income.[68] Since this claim was not amply controverted by respondents, and considering further the significance of petitioners’ argument raised in their appeal, i.e., that there exists no employer-employee relationship between PTI and the individual respondents, on the basis of which lies their non-liability, the Court deems that the NLRC did not gravely abuse its discretion in deciding that these circumstances constitute meritorious grounds for the reduction of the bond.[69]

The absence of grave abuse of discretion in this case is bolstered by the fact that petitioners’ motion to reduce bond was accompanied by a P5,000,000.00 surety bond which was seasonably posted within the reglementary period to appeal. In McBurnie v. Ganzon,[70] the Court ruled that, “[f]or purposes of compliance with [the bond requirement under the 2011 NLRC Rules of Procedure], a motion shall be accompanied by the posting of a provisional cash or surety bond equivalent to ten percent (10%) of the monetary award subject of the appeal, exclusive of damages, and attorney’s fees.” Seeing no cogent reason to deviate from the same, the Court deems that the posting of the aforesaid partial bond, being evidently more than ten percent (10%) of the full judgment award of P12,833,000.00, already constituted substantial compliance with the governing rules at the onset.

In this relation, it must be clarified that while the partial bond was initially tainted with defects, i.e., that it was initially issued in favor of MTI and not PTI, and that the bonding company, SSSICI, had no authority to transact business in all courts of the Philippines at that time, these defects had already been cured by the petitioners’ posting of Supersedeas Bond No. SS-B-10150, in the full amount of P12,833,000.00, issued on November 8, 2004 by the Far Eastern Surety & Insurance Company, Inc.,[71] in timely compliance with the NLRC’s September 30, 2004 Order. Verily, the subsequent completion of the bond, in addition to the reasons above-stated, behooves this Court to hold that the NLRC actually had sound bases to take cognizance of petitioners’ appeal. As the Court sees it, the NLRC’s reinstatement of petitioners’ appeal in this case was merely impelled by the doctrine that letter-perfect rules must yield to the broader interest of substantial justice,[72]  as well as the Labor Code’s mandate to “use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process.”[73] It is important to emphasize that an act of a court or tribunal can only be considered to be tainted with grave abuse of discretion when such act is done in a capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction,[74] which clearly is not extant with respect to the NLRC’s cognizance of petitioners’ appeal before it.

Thus, the CA’s ruling granting the certiorari petition on this score must be reversed and set aside. However, considering that there were other issues raised in the said petition relating to the substantial merits of the case which were left undecided,[75] a remand of the case for the CA’s resolution of these substantive issues remains in order, in line with the doctrine of hierarchy of courts as espoused in the St. Martin Funeral Home v. NLRC[76] ruling.[77]

WHEREFORE, the petition is GRANTED.  The Decision dated November 25, 2011 and the Resolution dated March 12, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 96000 are hereby reversed and SET ASIDE. Accordingly, the case is REMANDED to the CA for the resolution of the substantive issues as discussed in this Decision.


Velasco, Jr.,** Leonardo-De Castro, Acting Chairperson*** Bersamin, and Perez, JJ., concur.

* Also known as “Samahan ng Manggagawa sa Mas Transit-Anglo-KMU.” See rollo, p. 78.

** Designated Acting Member per Special Order No. 1772 dated August 28, 2014.

*** Per Special Order No. 1771 dated August 28, 2014.

[1] Rollo, pp. 35-70.

[2] Id. at 13-29. Penned by Associate Justice Rodil V. Zalameda with Associate Justices Rebecca de Guia-Salvador and Normandie B. Pizarro, concurring.

[3] Id. at 31-32.

[4] Id. at 243-253. Per curiam, signed by Presiding Commissioner Lourdes C. Javier and Commissioners Romeo C. Lagman and Tito F. Genilo.

[5] Id. at 147-167.  Penned by Labor Arbiter Edgar B. Bisana.

[6] CA rollo, pp. 55-56.

[7] Rollo, pp. 78 and 156.

[8] Id. at 245.

[9] See Deed of Sale; id. at 118-120.

[10] In Case No. MCN-2000-04452, issued by Regional Director Medardo M. Melicor. (Id. at 121-124.)

[11] Id. at 41 and 246-247.

[12] CA rollo, p. 57.

[13] See list of names of the Union members (individual respondents) as mentioned in the Decision dated July 14, 2003 of the Labor Arbiter; rollo, pp. 147-150.

[14] See sample Memorandum; CA rollo, p. 58.

[15] Rollo, p. 15.

[16] See Position Paper filed on June 22, 2001; CA rollo, pp. 69-71.

[17] Rollo, pp. 125-134.

[18] See Position Paper filed on July 12, 2001; CA rollo, pp. 79-83.

[19] See names of the 30 private respondents; id. at 82.

[20] See rollo, pp. 245-248.

[21] See Position Paper dated June 13, 2001; id. at 143-146.

[22] Id. at 147-173.

[23] Id. at 161.

[24] Id.

[25] Id. at 157.

[26] Id. at 164.

[27] Id. at 161.

[28] Id. at 164.

[29] Id. at 165.

[30] Id. at 167.

[31] Filed on August 29, 2003. (Id. at 174-175.)

[32] Id. at 176-193.

[33] Id. at 196-197.

[34] Id. at 198-202.

[35] Id. at 81, 217, and 248.

[36] Id. at 216-217.

[37] Id. at 217.

[38] See Motion for Leave to Substitute Surety Bond dated February 26, 2004; CA rollo, pp. 204-206.

[39] See Ex-Parte Motion for Inhibition dated February 12, 2014; id. at 208-212.

[40] Id. at 154-157. Penned by Commissioner Ernesto C. Verceles with Presiding Commissioner Lourdes C. Javier and Commissioner Tito F. Genilo, concurring.

[41] Id. at 156.

[42] Id. at 157.

[43] Id. at 158-179.

[44] Id. at 170.

[45] Rollo, pp. 214-221.

[46] Id. at 219-220.

[47] Id. at 221.

[48] Id. at 226-228.

[49] By way of a Manifestation with Motion dated November 8, 2004. (Id. at 222-225.)

[50] Id. at 243-253.

[51] Id. at 250.

[52] Id.

[53] Dated February 6, 2006. Per Curiam, signed by Presiding Commissioner Lourdes C. Javier with Commissioners Angelita A. Gacutan and Victoriano R. Calaycay. (Id. at 254-271. )

[54] CA rollo, pp. 52-54.

[55] Dated August 28, 2006. Rollo, pp. 272-309.

[56] Id. at 13-29.

[57] Id. at 24.

[58] Id. at 25-26.

[59] Dated December 20, 2011. Id. at 333-339.

[60] Id. at 31-32.

[61] As renumbered according to Republic Act No. 10151, entitled “An Act Allowing the Employment of Night Workers, thereby Repealing Articles 130 and 131 of Presidential Decree Number Four Hundred Forty-Two, as amended, Otherwise Known as the Labor Code of the Philippines.”

[62] Ramirez v. CA, G.R. No. 182626, December 4, 2009, 607 SCRA 752, 761.

[63] As amended by NLRC Resolution No. 01-02, Series of 2002, the applicable NLRC Rules of Procedure as petitioners’ Notice of Appeal was filed on August 29, 2003.

[64] See Garcia v. KJ Commercial, G.R. No. 196830, February 29, 2012, 667 SCRA 396, 401-402 and 409-410.

[65] 555 Phil. 275, 292 (2007).

[66] See University Plans Incorporated v. Solano, G.R. No. 170416, June 22, 2011, 652 SCRA  492, 505-506.

[67] Nicol v. Footjoy Industrial Corporation, supra note 65, at 287.

[68] CA rollo, p. 169.

[69] See Semblante v. CA, G.R. No. 196426, August 15, 2011, 655 SCRA 444, 449-451.

[70] G.R. Nos. 178034 & 178117 and 186984-85, October 17, 2013, 707 SCRA 646, 693.

[71] Rollo, p. 226.

[72] Del Mar Domestic Enterprises v. NLRC, 347 Phil. 277, 288 (1997), citing Lamsan Trading, Inc. v. Leogardo, Jr., 228 Phil. 542, 549 (1986). See also Kapisanang Manggagawang Pinagyakap v. NLRC, 236 Phil. 103, 108-109 (1987).

[73] Section 10, Rule VII of the Rules of Procedure of the NLRC, as amended by NLRC Resolution No. 01-02, Series of 2002.

[74] Ramos v. BPI Family Savings Bank, G.R. No. 203186, December 4, 2013.


[76] 356 Phil. 811 (1998).

[77] “Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65. Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict observance of the doctrine on the hierarchy of courts as the appropriate forum for the relief desired.” (Id. at 824.)

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