Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 71813 July 20, 1987
ROSALINA PEREZ ABELLA!"A. "ANAO#RAMONA, petitioners,
vs.
T!E !ONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO
$UITCO %&' RICAR"O "IONELE, SR., respondents.
PARAS, J.:
This is a petition for review on certiorari of the April 8, !8" Resolution of the Ministr# of $abor
and E%plo#%ent affir%in& the 'ul# (, !8) *ecision of the $abor Arbiter, which ruled in favor
of &rantin& separation pa# to private respondents.
+n 'une ),, !(-, herein petitioner Rosalina Pere. Abella leased a far% land in Monteverde,
Ne&ros +ccidental, /nown as 0acienda *anao1Ra%ona, for a period of ten 2-3 #ears,
renewable, at her option, for another ten 2-3 #ears 2Rollo, pp. (1)-3.
+n Au&ust 4, !,-, she opted to e5tend the lease contract for another ten 2-3 #ears 2Ibid, pp.
)(1),3.
*urin& the e5istence of the lease, she e%plo#ed the herein private respondents. Private
respondent Ricardo *ionele, 6r. has been a re&ular far% wor/er since !7! and he was pro%oted
to Cabo in !(4. +n the other hand, private respondent Ro%eo 8uitco started as a re&ular
e%plo#ee in !(8 and was pro%oted to Cabo in Nove%ber of the sa%e #ear.
9pon the e5piration of her leasehold ri&hts, petitioner dis%issed private respondents and turned
over the hacienda to the owners thereof on +ctober ", !8, who continued the %ana&e%ent,
cultivation and operation of the far% 2Rollo, pp. 44: 8!3.
+n Nove%ber )-, !8, private respondents filed a co%plaint a&ainst the petitioner at the
Ministr# of $abor and E%plo#%ent, Bacolod Cit# *istrict +ffice, for overti%e pa#, ille&al
dis%issal and reinstate%ent with bac/wa&es. After the parties had presented their respective
evidence, $abor Arbiter Manuel M. $ucas, 'r., in a *ecision dated 'ul# (, !8) 2Ibid, pp. )!1
43, ruled that the dis%issal is warranted b# the cessation of business, but &ranted the private
respondents separation pa#. Pertinent portion of the dispositive portion of the *ecision reads;
<n the instant case, the respondent closed its business operation not b# reason of business
reverses or losses. Accordin&l#, the award of ter%ination pa# in co%plainants= favor is
warranted.
>0ERE?+RE, the respondent is hereb# ordered to pa# the co%plainants separation pa#
at the rate of half1%onth salar# for ever# #ear of service, a fraction of si5 2(3 %onths
bein& considered one 23 #ear. 2Rollo pp. )!14-3
+n appeal on Au&ust , !8), the National $abor Relations Co%%ission, in a Resolution dated
April 8, !8" 2Ibid, pp. 4!7-3, affir%ed the decision and dis%issed the appeal for lac/ of %erit.
+n Ma# )), !8", petitioner filed a Motion for Reconsideration 2Ibid, pp. 717"3, but the sa%e
was denied in a Resolution dated 'une -, !8" 2Ibid, p. 7(3. 0ence, the present petition 2Ibid,
pp. 4183.
The ?irst *ivision of this Court, in a Resolution dated 6epte%ber (, !8", resolved to re@uire
the respondents to co%%ent 2Ibid, p. "83. <n co%pliance therewith, private respondents filed their
Co%%ent on +ctober )4, !8" 2Ibid, pp. "41""3: and the 6olicitor Aeneral on *ece%ber ,,
!8" 2Ibid, pp. ,1,41B3.
+n ?ebruar# !, !8(, petitioner filed her Consolidated Repl# to the Co%%ents of private and
public respondents 2Ibid, pp. 8-183.
The ?irst *ivision of this Court, in a Resolution dated March 4, !8(, resolved to &ive due
course to the petition: and to re@uire the parties to sub%it si%ultaneous %e%oranda 2Ibid., p. 843.
<n co%pliance therewith, the 6olicitor Aeneral filed his Me%orandu% on 'une 8, !8( 2Ibid, pp.
8!1!73: and petitioner on 'ul# )4, !8( 2Ibid, pp. !(1!73.
The petition is devoid of %erit.
The sole issue in this case is B
>0ET0ER +R N+T PR<CATE RE6P+N*ENT6 ARE ENT<T$E* T+ 6EPARAT<+N PAD.
Petitioner clai%s that since her lease a&ree%ent had alread# e5pired, she is not liable for pa#%ent
of separation pa#. Neither could she reinstate the co%plainants in the far% as this is a co%plete
cessation or closure of a business operation, a Eust cause for e%plo#%ent ter%ination under
Article ),) of the $abor Code.
+n the other hand, the le&al basis of the $abor Arbiter in &rantin& separation pa# to the private
respondents is Batas Pa%bansa Bl&. 4-, a%endin& the $abor Code, 6ection " of which,
specificall# provides;
6ec " Articles )8" and )87 of the $abor Code are hereb# a%ended to read as follows;
5 5 5 5 5 5 5 5 5
Art. )87. Closure of establishment and reduction of personnel. B The e%plo#er %a# also
ter%inate the e%plo#%ent of an# e%plo#ee due to the installation of labor1savin&
devices, redundanc#, retrench%ent to prevent losses or the closin& or cessation of
operation of the establis%ent or underta/in& unless the closin& is for the purpose of
circu%ventin& the provisions of this title, b# servin& a written notice on the wor/ers and
the Ministr# of $abor and E%plo#%ent at least one 23 %onth before the intended date
thereof. <n case of ter%ination due to the installation of labor1savin& devices or
redundanc#, the wor/er affected thereb# shall be entitled to a separation pa# e@uivalent to
at least his one 23 %onth pa# or to at least one 23 %onth pa# for ever# #ear of service,
whichever is hi&her. <n case of retrench%ent to prevent losses and in cases of closure or
cessation of operations of establish%ent or underta/in& not due to serious business losses
or financial reverses, the separation pa# shall be e@uivalent to one 23 %onth pa# or at
least one1half 2F)3 %onth pa# for ever# #ear of service whichever is hi&her. A fraction of
at least si5 2(3 %onths shall be considered one 23 whole #ear.1avvphi1
There is no @uestion that Article )87 of the $abor Code as a%ended b# BP 4- is the law
applicable in this case.
Article ),) of the sa%e Code invo/ed b# the petitioner pertains to the Eust causes of ter%ination.
The $abor Arbiter does not ar&ue the Eustification of the ter%ination of e%plo#%ent but applied
Article )87 as a%ended, which provides for the ri&hts of the e%plo#ees under the circu%stances
of ter%ination.
Petitioner then contends that the afore@uoted provision violates the constitutional &uarantee
a&ainst i%pair%ent of obli&ations and contracts, because when she leased 0acienda *anao1
Ra%ona on 'une ),, !(-, neither she nor the lessor conte%plated the creation of the obli&ation
to pa# separation pa# to wor/ers at the end of the lease.
6uch contention is untenable.
This issue has been laid to rest in the case of Anucension v. National $abor 9nion 28- 6CRA
4(814(! G!,,H3 where the 6upre%e Court ruled;
<t should not be overloo/ed, however, that the prohibition to i%pair the obli&ation of
contracts is not absolute and un@ualified. The prohibition is &eneral, affordin& a broad
outline and re@uirin& construction to fill in the details. The prohibition is not to read with
literal e5actness li/e a %athe%atical for%ula for it prohibits unreasonable i%pair%ent
onl#. <n spite of the constitutional prohibition the 6tate continues to possess authorit# to
safe&uard the vital interests of its people. $e&islation appropriate to safe&uard said
interest %a# %odif# or abro&ate contracts alread# in effect. ?or not onl# are e5istin& laws
read into contracts in order to fi5 the obli&ations as between the parties but the
reservation of essential attributes of soverei&n power is also read into contracts as a
postulate of the le&al order. All contracts %ade with reference to an# %atter that is subEect
to re&ulation under the police power %ust be understood as %ade in reference to the
possible e5ercise of that power. +therwise, i%portant and valuable refor%s %a# be
precluded b# the si%ple device of enterin& into contracts for the purpose of doin& that
which otherwise %a#be prohibited. ...
<n order to deter%ine whether le&islation unconstitutionall# i%pairs contract of
obli&ations, no unchan&in& #ardstic/, applicable at all ti%es and under all circu%stances,
b# which the validit# of each statute %a# be %easured or deter%ined, has been fashioned,
but ever# case %ust be deter%ined upon its own circu%stances. $e&islation i%pairin& the
obli&ation of contracts can be sustained when it is enacted for the pro%otion of the
&eneral &ood of the people, and when the %eans adopted %ust be le&iti%ate, i.e. within
the scope of the reserved power of the state construed in har%on# with the constitutional
li%itation of that power. 2Citin& Basa vs. ?ederacion +brera de la <ndustria Taba@uera #
+tros TrabaEadores de ?ilipinas G?+<TA?H G$1),4H, Nove%ber !, !,7: ( 6CRA
!4,-)14H3.
The purpose of Article )87 as a%ended is obvious1the protection of the wor/ers whose
e%plo#%ent is ter%inated because of the closure of establish%ent and reduction of personnel.
>ithout said law, e%plo#ees li/e private respondents in the case at bar will lose the benefits to
which the# are entitled B for the thirt# three #ears of service in the case of *ionele and fourteen
#ears in the case of 8uitco. Althou&h the# were absorbed b# the new %ana&e%ent of the
hacienda, in the absence of an# showin& that the latter has assu%ed the responsibilities of the
for%er e%plo#er, the# will be considered as new e%plo#ees and the #ears of service behind the%
would a%ount to nothin&.
Moreover, to co%e under the constitutional prohibition, the law %ust effect a chan&e in the ri&hts
of the parties with reference to each other and not with reference to non1parties.
As correctl# observed b# the 6olicitor Aeneral, Article )87 as a%ended refers to e%plo#%ent
benefits to far% hands who were not parties to petitioner=s lease contract with the owner of
0acienda *anao1Ra%ona. That contract cannot have the effect of annullin& subse@uent
le&islation desi&ned to protect the interest of the wor/in& class.
<n an# event, it is well1settled that in the i%ple%entation and interpretation of the provisions of
the $abor Code and its i%ple%entin& re&ulations, the wor/in&%an=s welfare should be the
pri%ordial and para%ount consideration. 2Colshel $abor 9nion v. Bureau of $abor Relations,
4, 6CRA 74 G!8"H3. <t is the /ind of interpretation which &ives %eanin& and substance to the
liberal and co%passionate spirit of the law as provided for in Article 7 of the New $abor Code
which states that Iall doubts in the i%ple%entation and interpretation of the provisions of this
Code includin& its i%ple%entin& rules and re&ulations shall be resolved in favor of labor.I The
polic# is to e5tend the applicabilit# of the decree to a &reater nu%ber of e%plo#ees who can avail
of the benefits under the law, which is in consonance with the avowed polic# of the 6tate to &ive
%a5i%u% aid and protection to labor. 26ar%iento v. E%plo#ees Co%pensation Co%%ission, 77
6CRA 7)) G!8(H citin& Cristobal v. E%plo#ees Co%pensation Co%%ission, -4 6CRA 4)!:
Acosta v. E%plo#ees Co%pensation Co%%ission, -! 6CRA )-!3.
PREM<6E6 C+N6<*ERE*, the instant petition is hereb# *<6M<66E* and the 'ul# (, !8)
*ecision of the $abor Arbiter and the April 8, !8" Resolution of the Ministr# of $abor and
E%plo#%ent are hereb# A??<RME*.
6+ +R*ERE*.