Smart vs Astorga

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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 148132 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,vs.REGINA M. ASTORGA,respondent.

x---------------------------------------------------x

G.R. No. 151079 January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,vs.REGINA M. ASTORGA,respondent.

x---------------------------------------------------x

G.R. No. 151372 January 28, 2008

REGINA M. ASTORGA, petitioner,vs.

SMART COMMUNICATIONS, INC. and ANNMARGARET V. SANTIAGO,respondents.

D E C I S I O N

NACHURA, J .:


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For the resolution of the Court are threeconsolidated petitions for review on certiorariunderRule 45 of the Rules of Court. G.R. No. 148132

assails the February 28, 2000 Decision1and the May7, 2001 Resolution2of the Court of Appeals (CA) inCA-G.R. SP. No. 53831. G.R. Nos. 151079 and151372 question the June 11, 2001 Decision3andthe December 18, 2001 Resolution4in CA-G.R. SP.No. 57065.

Regina M. Astorga (Astorga) was employed byrespondent Smart Communications, Incorporated(SMART) on May 8, 1997 as District Sales Managerof the Corporate Sales Marketing Group/ FixedServices Division (CSMG/FSD). She was receiving amonthly salary of P33,650.00. As District SalesManager, Astorga enjoyed additional benefits,

namely, annual performance incentive equivalent to30% of her annual gross salary, a group life andhospitalization insurance coverage, and a car plan inthe amount of P455,000.00.5

In February 1998, SMART launched anorganizational realignment to achieve more efficient

operations. This was made known to the employeeson February 27, 1998.6Part of the reorganizationwas the outsourcing of the marketing and salesforce. Thus, SMART entered into a joint venture
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agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMIwas formed to do the sales and marketing work,

SMART abolished the CSMG/FSD, Astorgasdivision.

To soften the blow of the realignment, SNMI agreedto absorb the CSMG personnel who would berecommended by SMART. SMART then conducteda performance evaluation of CSMG personnel and

those who garnered the highest ratings werefavorably recommended to SNMI. Astorga landedlast in the performance evaluation, thus, she was notrecommended by SMART. SMART, nonetheless,offered her a supervisory position in the CustomerCare Department, but she refused the offer becausethe position carried lower salary rank and rate.

Despite the abolition of the CSMG/FSD, Astorgacontinued reporting for work. But on March 3, 1998,SMART issued a memorandum advising Astorga ofthe termination of her employment on ground ofredundancy, effective April 3, 1998. Astorgareceived it on March 16, 1998.7

The termination of her employment promptedAstorga to file a Complaint8for illegal dismissal, non-payment of salaries and other benefits with prayerfor moral and exemplary damages against SMART
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and Ann Margaret V. Santiago (Santiago). Sheclaimed that abolishing CSMG and, consequently,terminating her employment was illegal for it violated

her right to security of tenure. She also posited thatit was illegal for an employer, like SMART, tocontract out services which will displace theemployees, especially if the contractor is an in-house agency.9

SMART responded that there was valid termination.

It argued that Astorga was dismissed by reason ofredundancy, which is an authorized cause fortermination of employment, and the dismissal waseffected in accordance with the requirements of theLabor Code. The redundancy of Astorgas positionwas the result of the abolition of CSMG and thecreation of a specialized and more technically

equipped SNMI, which is a valid and legitimateexercise of management prerogative.10

In the meantime, on May 18, 1998, SMART sent aletter to Astorga demanding that she pay the currentmarket value of the Honda Civic Sedan which wasgiven to her under the companys car plan program,

or to surrender the same to the company for properdisposition.11Astorga, however, failed and refused todo either, thus prompting SMART to file a suit forreplevin with the Regional Trial Court of Makati
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(RTC) on August 10, 1998. The case was docketedas Civil Case No. 98-1936 and was raffled to Branch57.12

Astorga moved to dismiss the complaint on groundsof (i) lack of jurisdiction; (ii) failure to state a cause ofaction; (iii) litis pendentia; and (iv) forum-shopping.

Astorga posited that the regular courts have nojurisdiction over the complaint because the subjectthereof pertains to a benefit arising from an

employment contract; hence, jurisdiction over thesame is vested in the labor tribunal and not inregular courts.13

Pending resolution of Astorgas motion to dismissthe replevincase, the Labor Arbiter rendered aDecision14dated August 20, 1998, declaring

Astorgas dismissal from employment illegal. Whilerecognizing SMARTs right to abolish any of itsdepartments, the Labor Arbiter held that such rightshould be exercised in good faith and for causesbeyond its control. The Arbiter found the abolition ofCSMG done neither in good faith nor for causesbeyond the control of SMART, but a ploy to

terminate Astorgas employment. The Arbiter alsoruled that contracting out the functions performed by

Astorga to an in-house agency like SNMI was illegal,
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CAR MAINTENANCEALLOWANCE(P2,000.00 x 4)

= P 8,000.00

FUEL ALLOWANCE(300 liters/mo. x 4 mos.at P12.04/liter)

= P 14,457.83

TOTAL = P211,415.52

x x x x

3. Jointly and severally pay moral damages inthe amount of P500,000.00 x x x and exemplarydamages in the amount of P300,000.00. x x x

4. Jointly and severally pay 10% of the amountdue as attorneys fees.

SO ORDERED.15

Subsequently, on March 29, 1999, the RTC issuedan Order16denying Astorgas motion to dismiss thereplevin case. In so ruling, the RTC ratiocinated that:

Assessing the [submission] of the parties, theCourt finds no merit in the motion to dismiss.

As correctly pointed out, this case is to enforce aright of possession over a company carassigned to the defendant under a car planprivilege arrangement. The car is registered in


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the name of the plaintiff. Recovery thereof viareplevin suit is allowed by Rule 60 of the 1997Rules of Civil Procedure, which is undoubtedly

within the jurisdiction of the Regional Trial Court.

In the Complaint, plaintiff claims to be the ownerof the company car and despite demand,defendant refused to return said car. This isclearly sufficient statement of plaintiffs cause ofaction.

Neither is there forum shopping. The element oflitis penden[t]ia does not appear to existbecause the judgment in the labor dispute willnot constitute res judicata to bar the filing of thiscase.

WHEREFORE, the Motion to Dismiss is herebydenied for lack of merit.

SO ORDERED.17

Astorga filed a motion for reconsideration, but theRTC denied it on June 18, 1999.18

Astorga elevated the denial of her motion viacertiorarito the CA, which, in its February 28, 2000Decision,19reversed the RTC ruling. Granting thepetition and, consequently, dismissingthe replevincase, the CA held that the case is
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intertwined with Astorgas complaint for illegaldismissal; thus, it is the labor tribunal that hasrightful jurisdiction over the complaint. SMARTs

motion for reconsideration having been denied,20itelevated the case to this Court, now docketed asG.R. No. 148132.

Meanwhile, SMART also appealed the unfavorableruling of the Labor Arbiter in the illegal dismissalcase to the National Labor Relations Commission

(NLRC). In its September 27, 1999 Decision,21theNLRC sustained Astorgas dismissal. Reversing theLabor Arbiter, the NLRC declared the abolition ofCSMG and the creation of SNMI to do the sales andmarketing services for SMART a valid organizationalaction. It overruled the Labor Arbiters ruling thatSNMI is an in-house agency, holding that it lacked

legal basis. It also declared that contracting,subcontracting and streamlining of operations for thepurpose of increasing efficiency are allowed underthe law. The NLRC further found erroneous theLabor Arbiters disquisition that redundancy to bevalid must be impelled by economic reasons, and

upheld the redundancy measures undertaken bySMART.

The NLRC disposed, thus:
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WHEREFORE, the Decision of the Labor Arbiteris hereby reversed and set aside. [Astorga] isfurther ordered to immediately return the

company vehicle assigned to her. [Smart andSantiago] are hereby ordered to pay the finalwages of [Astorga] after [she] had submitted therequired supporting papers therefor.

SO ORDERED.22

Astorga filed a motion for reconsideration, but theNLRC denied it on December 21, 1999.23

Astorga then went to the CA via certiorari. On June11, 2001, the CA rendered a Decision24affirmingwith modification the resolutions of the NLRC. Ingist, the CA agreed with the NLRC that the

reorganization undertaken by SMART resulting inthe abolition of CSMG was a legitimate exercise ofmanagement prerogative. It rejected Astorgasposturing that her non-absorption into SNMI wastainted with bad faith. However, the CA found thatSMART failed to comply with the mandatory one-month notice prior to the intended termination.

Accordingly, the CA imposed a penalty equivalent toAstorgas one-month salary for this non-compliance.The CA also set aside the NLRCs order for thereturn of the company vehicle holding that this issueis not essentially a labor concern, but is civil in
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THE COURT OF APPEALS ERRED INUPHOLDING THE VALIDITY OF ASTORGASDISMISSAL DESPITE THE FACT THAT HER

DISMISSAL WAS EFFECTED IN CLEARVIOLATION OF THE CONSTITUTIONALRIGHT TO SECURITY OF TENURE,CONSIDERING THAT THERE WAS NOGENUINE GROUND FOR HER DISMISSAL.

II

SMARTS REFUSAL TO REINSTATEASTORGA DURING THE PENDENCY OF THEAPPEAL AS REQUIRED BY ARTICLE 223 OFTHE LABOR CODE, ENTITLES ASTORGA TOHER SALARIES DURING THE PENDENCY OFTHE APPEAL.

III

THE COURT OF APPEALS WAS CORRECT INHOLDING THAT THE REGIONAL TRIALCOURT HAS NO JURISDICTION OVER THECOMPLAINT FOR RECOVERY OF A CARWHICH ASTORGA ACQUIRED AS PART OFHER EMPLOYEE (sic) BENEFIT.27

On the other hand, Smart in its Memoranda raisesthe following issues:
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I

WHETHER THE HONORABLE COURT OF

APPEALS HAS DECIDED A QUESTION OFSUBSTANCE IN A WAY PROBABLY NOT INACCORD WITH LAW OR WITH APPLICABLEDECISION OF THE HONORABLE SUPREMECOURT AND HAS SO FAR DEPARTED FROMTHE ACCEPTED AND USUAL COURSE OFJUDICIAL PROCEEDINGS AS TO CALL FOR

AN EXERCISE OF THE POWER OFSUPERVISION WHEN IT RULED THATSMART DID NOT COMPLY WITH THE NOTICEREQUIREMENTS PRIOR TO TERMINATING

ASTORGA ON THE GROUND OFREDUNDANCY.

II

WHETHER THE NOTICES GIVEN BY SMARTTO ASTORGA AND THE DEPARTMENT OFLABOR AND EMPLOYMENT ARESUBSTANTIAL COMPLIANCE WITH THENOTICE REQUIREMENTS BEFORE

TERMINATION.

III

WHETHER THE RULE ENUNCIATED INSERRANO VS. NATIONAL LABOR


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RELATIONS COMMISSION FINDSAPPLICATION IN THE CASE AT BARCONSIDERING THAT IN THE SERRANO

CASE THERE WAS ABSOLUTELY NONOTICE AT ALL.28

IV

WHETHER THE HONORABLE COURT OFAPPEALS HAS DECIDED A QUESTION OF

SUBSTANCE IN A WAY PROBABLY NOT INACCORD WITH LAW OR WITH APPLICABLEDECISION[S] OF THE HONORABLESUPREME COURT AND HAS SO FARDEPARTED FROM THE ACCEPTED ANDUSUAL COURSE OF JUDICIALPROCEEDINGS AS TO CALL FOR AN

EXERCISE OF THE POWER OFSUPERVISION WHEN IT RULED THAT THEREGIONAL TRIAL COURT DOES NOT HAVEJURISDICTION OVER THE COMPLAINT FORREPLEVIN FILED BY SMART TO RECOVERITS OWN COMPANY VEHICLE FROM AFORMER EMPLOYEE WHO WAS LEGALLY

DISMISSED.

V
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WHETHER THE HONORABLE COURT OFAPPEALS HAS FAILED TO APPRECIATETHAT THE SUBJECT OF THE REPLEVIN

CASE IS NOT THE ENFORCEMENT OF ACAR PLAN PRIVILEGE BUT SIMPLY THERECOVERY OF A COMPANY CAR.

VI

WHETHER THE HONORABLE COURT OF

APPEALS HAS FAILED TO APPRECIATETHAT ASTORGA CAN NO LONGER BECONSIDERED AS AN EMPLOYEE OF SMARTUNDER THE LABOR CODE.29

The Court shall first deal with the propriety ofdismissing the replevin case filed with the RTC of

Makati City allegedly for lack of jurisdiction, which isthe issue raised in G.R. No. 148132.

Replevinis an action whereby the owner or personentitled to repossession of goods or chattels mayrecover those goods or chattels from one who haswrongfully distrained or taken, or who wrongfullydetains such goods or chattels. It is designed topermit one having right to possession to recoverproperty in specie from one who has wrongfullytaken or detained the property.30The term may refereither to the action itself, for the recovery of


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and acted well within its discretion in denyingAstorgas motion to dismiss. SMARTs demand forpayment of the market value of the car or, in the

alternative, the surrender of the car, is not a labor,but a civil, dispute. It involves the relationship ofdebtor and creditor rather than employee-employerrelations.33As such, the dispute falls within the

jurisdiction of the regular courts.

In Basaya, Jr. v. Militante,34this Court, in upholding

the jurisdiction of the RTC over the replevin suit,explained:

Replevin is a possessory action, the gist ofwhich is the right of possession in the plaintiff.The primary relief sought therein is the return ofthe property in specie wrongfully detained by

another person. It is an ordinary statutoryproceeding to adjudicate rights to the title orpossession of personal property. The questionof whether or not a party has the right ofpossession over the property involved and if so,whether or not the adverse party has wrongfullytaken and detained said property as to require

its return to plaintiff, is outside the pale ofcompetence of a labor tribunal and beyond thefield of specialization of Labor Arbiters.

x x x x
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The labor dispute involved is not intertwined withthe issue in the Replevin Case. The respectiveissues raised in each forum can be resolved

independently on the other. In fact in 18November 1986, the NLRC in the case before ithad issued an Injunctive Writ enjoining thepetitioners from blocking the free ingress andegress to the Vessel and ordering the petitionersto disembark and vacate. That aspect of thecontroversy is properly settled under the LaborCode. So also with petitioners right to picket.But the determination of the question of who hasthe better right to take possession of the Vesseland whether petitioners can deprive theCharterer, as the legal possessor of the Vessel,of that right to possess in addressed to the

competence of Civil Courts.In thus ruling, this Court is not sanctioning split

jurisdiction but defining avenues of jurisdictionas laid down by pertinent laws.

The CA, therefore, committed reversible error whenit overturned the RTC ruling and ordered the

dismissal of the replevin case for lack of jurisdiction.

Having resolved that issue, we proceed to rule onthe validity of Astorgas dismissal.


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Astorga was terminated due to redundancy, which isone of the authorized causes for the dismissal of anemployee. The nature of redundancy as an

authorized cause for dismissal is explained in theleading case ofWiltshire File Co., Inc. v. NationalLabor Relations Commission,35viz:

x x x redundancy in an employers personnelforce necessarily or even ordinarily refers toduplication of work. That no other person was

holding the same position that privaterespondent held prior to termination of hisservices does not show that his position had notbecome redundant. Indeed, in any wellorganized business enterprise, it would besurprising to find duplication of work and two (2)or more people doing the work of one person.

We believe that redundancy, for purposes of theLabor Code, exists where the services of anemployee are in excess of what is reasonablydemanded by the actual requirements of theenterprise. Succinctly put, a position isredundant where it is superfluous, and

superfluity of a position or positions may be theoutcome of a number of factors, such asoverhiring of workers, decreased volume ofbusiness, or dropping of a particular product line
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or service activity previously manufactured orundertaken by the enterprise.

The characterization of an employees services assuperfluous or no longer necessary and, therefore,properly terminable, is an exercise of business

judgment on the part of the employer. The wisdomand soundness of such characterization or decisionis not subject to discretionary review provided, ofcourse, that a violation of law or arbitrary or

malicious action is not shown.36

Astorga claims that the termination of heremployment was illegal and tainted with bad faith.She asserts that the reorganization was done inorder to get rid of her. But except for her barefacedallegation, no convincing evidence was offered to

prove it. This Court finds it extremely difficult tobelieve that SMART would enter into a joint ventureagreement with NTT, form SNMI and abolishCSMG/FSD simply for the sole purpose of easingout a particular employee, such as Astorga.Moreover, Astorga never denied that SMARToffered her a supervisory position in the Customer

Care Department, but she refused the offer becausethe position carried a lower salary rank and rate. Ifindeed SMART simply wanted to get rid of her, it


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would not have offered her a position in anydepartment in the enterprise.

Astorga also states that the justification advanced bySMART is not true because there was no compellingeconomic reason for redundancy. But contrary to herclaim, an employer is not precluded from adopting anew policy conducive to a more economical andeffective management even if it is not experiencingeconomic reverses. Neither does the law require

that the employer should suffer financial lossesbefore he can terminate the services of theemployee on the ground of redundancy.37

We agree with the CA that the organizationalrealignment introduced by SMART, whichculminated in the abolition of CSMG/FSD and

termination of Astorgas employment was an honesteffort to make SMARTs sales and marketingdepartments more efficient and competitive. As theCA had taken pains to elucidate:

x x x a careful and assiduous review of therecords will yield no other conclusion than that

the reorganization undertaken by SMART is forno purpose other than its declared objectiveasa labor and cost savings device. Indeed, thisCourt finds no fault in SMARTs decision tooutsource the corporate sales market to SNMI in


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order to attain greater productivity. [Astorga]belonged to the Sales Marketing Group underthe Fixed Services Division (CSMG/FSD), a

distinct sales force of SMART in charge ofselling SMARTs telecommunications services tothe corporate market. SMART, to ensure it canrespond quickly, efficiently and flexibly to itscustomers requirement, abolished CSMG/FSDand shortly thereafter assigned its functions tonewly-created SNMI Multimedia Incorporated, a

joint venture company of SMART and NTT ofJapan, for the reason that CSMG/FSD does nothave the necessary technical expertise requiredfor the value added services. By transferring theduties of CSMG/FSD to SNMI, SMART hascreated a more competent and specialized

organization to perform the work required forcorporate accounts. It is also relieved SMART ofall administrative costsmanagement, time andmoney-needed in maintaining the CSMG/FSD.The determination to outsource the duties of theCSMG/FSD to SNMI was, to Our mind, a soundbusiness judgment based on relevant criteria

and is therefore a legitimate exercise ofmanagement prerogative.

Indeed, out of our concern for those lessercircumstanced in life, this Court has inclined towards


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the worker and upheld his cause in most of hisconflicts with his employer. This favored treatment isconsonant with the social justice policy of the

Constitution. But while tilting the scales of justice infavor of workers, the fundamental law alsoguarantees the right of the employer to reasonablereturns for his investment.38In this light, we mustacknowledge the prerogative of the employer toadopt such measures as will promote greaterefficiency, reduce overhead costs and enhanceprospects of economic gains, albeit always withinthe framework of existing laws. Accordingly, wesustain the reorganization and redundancy programundertaken by SMART.

However, as aptly found by the CA, SMART failed tocomply with the mandated one (1) month notice prior

to termination. The record is clear that Astorgareceived the notice of termination only on March 16,199839or less than a month prior to its effectivity on

April 3, 1998. Likewise, the Department of Labor andEmployment was notified of the redundancyprogram only on March 6, 1998.40

Article 283 of the Labor Code clearly provides:

Art. 283. Closure of establishment and reductionof personnel. The employer may alsoterminate the employment of any employee due
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to the installation of labor saving devices,redundancy, retrenchment to prevent losses orthe closing or cessation of operation of the

establishment or undertaking unless the closingis for the purpose of circumventing theprovisions of this Title, by serving a writtennotice on the workers and the Ministry of Laborand Employment at least one (1) month beforethe intended date thereof x x x.

SMARTs assertion that Astorga cannot complain oflack of notice because the organizationalrealignment was made known to all the employeesas early as February 1998 fails to persuade.

Astorgas actual knowledge of the reorganizationcannot replace the formal and written notice requiredby the law. In the written notice, the employees are

informed of the specific date of the termination, atleast a month prior to the effectivity of suchtermination, to give them sufficient time to find othersuitable employment or to make whateverarrangements are needed to cushion the impact oftermination. In this case, notwithstanding Astorgas

knowledge of the reorganization, she remaineduncertain about the status of her employment untilSMART gave her formal notice of termination. Butsuch notice was received by Astorga barely two (2)


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weeks before the effective date of termination, aperiod very much shorter than that required by law.

Be that as it may, this procedural infirmity would notrender the termination of Astorgas employmentillegal. The validity of termination can existindependently of the procedural infirmity of thedismissal.41In DAP Corporation v. CA,42we foundthe dismissal of the employees therein valid and forauthorized cause even if the employer failed to

comply with the notice requirement under Article 283of the Labor Code. This Court upheld the dismissal,but held the employer liable for non-compliance withthe procedural requirements.

The CA, therefore, committed no reversible error insustaining Astorgas dismissal and at the same time,

awarding indemnity for violation of Astorga'sstatutory rights.

However, we find the need to modify, by increasing,the indemnity awarded by the CA to Astorga, as asanction on SMART for non-compliance with theone-month mandatory notice requirement, in light of

our ruling in Jaka Food Processing Corporation v.Pacot,43viz.:

[I]f the dismissal is based on a just cause underArticle 282 but the employer failed to comply
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with the notice requirement, the sanction to beimposed upon him should be temperedbecausethe dismissal process was, in effect, initiated by

an act imputable to the employee, and (2) if thedismissal is based on an authorized causeunder Article 283 but the employer failed tocomply with the notice requirement, the sanctionshould be stifferbecause the dismissal processwas initiated by the employers exercise of hismanagement prerogative.

We deem it proper to increase the amount of thepenalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code,Astorga is, likewise, entitled to separation payequivalent to at least one (1) month salary or to at

least one (1) months pay for every year of service,whichever is higher. The records show that

Astorgas length of service is less than a year. Sheis, therefore, also entitled to separation payequivalent to one (1) month pay.

Finally, we note that Astorga claimed non-payment

of wages from February 15, 1998. This assertionwas never rebutted by SMART in the proceedings aquo. No proof of payment was presented by SMARTto disprove the allegation. It is settled that in laborcases, the burden of proving payment of monetary


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claims rests on the employer.44SMART failed todischarge the onus probandi. Accordingly, it must beheld liable for Astorgas salary from February 15,

1998 until the effective date of her termination, onApril 3, 1998.

However, the award of backwages to Astorga by theCA should be deleted for lack of basis. Backwagesis a relief given to an illegally dismissed employee.Thus, before backwages may be granted, there

must be a finding of unjust or illegal dismissal fromwork.45The Labor Arbiter ruled that Astorga wasillegally dismissed. But on appeal, the NLRCreversed the Labor Arbiters ruling and categoricallydeclared Astorgas dismissal valid. This ruling wasaffirmed by the CA in its assailed Decision. Since

Astorgas dismissal is for an authorized cause, she

is not entitled to backwages. The CAs award ofbackwages is totally inconsistent with its finding ofvalid dismissal.

WHEREFORE, the petition of SMART docketed asG.R. No. 148132 is GRANTED. The February 28,2000 Decision and the May 7, 2001 Resolution of

the Court of Appeals in CA-G.R. SP. No. 53831are SET ASIDE. The Regional Trial Court of MakatiCity, Branch 57 is DIRECTEDto proceed with the
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trial of Civil Case No. 98-1936 and render itsDecision with reasonable dispatch.

On the other hand, the petitions of SMART andAstorga docketed as G.R. Nos. 151079 and 151372are DENIED. The June 11, 2001 Decision and theDecember 18, 2001 Resolution in CA-G.R. SP. No.57065, are AFFIRMEDwith MODIFICATION.

Astorga is declared validly dismissed. However,SMART is ordered to pay AstorgaP50,000.00 as

indemnity for its non-compliance with procedural dueprocess, her separation pay equivalent to one (1)month pay, and her salary from February 15, 1998until the effective date of her termination on April 3,1998. The award of backwages is DELETEDfor lackof basis.

SO ORDERED.

Documents

Smart vs Astorga