SMART COMMUNICATIONS, INC.

,
Petitioner,

G.R. No. 148132

- versus REGINA M. ASTORGA,

Respondent.
x---------------------------------------------------x
SMART COMMUNICATIONS, INC.,
Petitioner,

G.R. No. 151079

- versus REGINA M. ASTORGA,

Respondent.
x---------------------------------------------------x
REGINA M. ASTORGA,
Petitioner,

G.R. No. 151372

Present:

- versus -

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.

SMART COMMUNICATIONS, INC. and ANN MARGARET V.

SANTIAGO,
Respondents.

Promulgated:
____________________

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of
Court. G.R. No. 148132 assails the February 28, 2000 Decision[1] and the May 7, 2001 Resolution[2] of the Court of Appeals (CA) in
CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision [3] and the December 18,
2001 Resolution[4] in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8,
1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a
monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely, annual performance
incentive equivalent to 30% of her annual gross salary, a group life and hospitalization insurance coverage, and a car plan in the
amount of P455,000.00.[5]
In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made
known to the employees on February 27, 1998.[6] Part of the reorganization was the outsourcing of the marketing and sales
force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated
(SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorgas division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by
SMART. SMART then conducted a performance evaluation of CSMG personnel and those who garnered the highest ratings were
favorably recommended to SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended by
SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer
because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART issued a
memorandum advising Astorga of the termination of her employment on ground of redundancy, effective April 3, 1998. Astorga
received it on March 16, 1998.[7]
The termination of her employment prompted Astorga to file a Complaint [8] for illegal dismissal, non-payment of salaries
and other benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She
claimed that abolishing CSMG and, consequently, terminating her employment was illegal for it violated her right to security of

tenure. She also posited that it was illegal for an employer, like SMART, to contract out services which will displace the employees,
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 of redundancy, which
is an authorized cause for termination of employment, and the dismissal was effected in accordance with the requirements of the
Labor Code. The redundancy of Astorgas position was the result of the abolition of CSMG and the creation of a specialized and
more technically equipped SNMI, which is a valid and legitimate exercise of management prerogative. [10]
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of
the Honda Civic Sedan which was given to her under the companys car plan program, or to surrender the same to the company
for proper disposition.[11] Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin with
the Regional Trial Court of Makati (RTC) on August 10, 1998.The case was docketed as Civil Case No. 98-1936 and was raffled to
Branch 57.[12]
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii) litis
pendentia; and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the complaint because the
subject thereof pertains to a benefit arising from an employment contract; hence, jurisdiction over the same is vested in the labor
tribunal and not in regular courts.[13]
Pending resolution of Astorgas motion to dismiss the replevin case, the Labor Arbiter rendered a Decision [14] dated August
20, 1998, declaring Astorgas dismissal from employment illegal. While recognizing SMARTs right to abolish any of its departments,
the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the
abolition of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Astorgas
employment. The Arbiter also ruled that contracting out the functions performed by Astorga to an in-house agency like SNMI was
illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and
unjust. [SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of
seniority rights and other privileges, with full backwages, inclusive of allowances and other benefits from the
time of [her] dismissal to the date of reinstatement, which computed as of this date, are as follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
UNPAID SALARIES (February 15, 1998April 3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE
(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
xxxx
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary
damages in the amount of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorneys fees.
SO ORDERED.[15]
Subsequently, on March 29, 1999, the RTC issued an Order [16] denying Astorgas motion to dismiss the replevin case. In so
ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession over a company car assigned to
the defendant under a car plan privilege arrangement.The car is registered in the name of the plaintiff. Recovery
thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within
the jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant
refused to return said car. This is clearly sufficient statement of plaintiffs cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the
judgment in the labor dispute will not constitute res judicata to bar the filing of this case.

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

SO ORDERED.[17]
Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.[18]
Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision, [19] reversed
the RTC ruling.Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with
Astorgas complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMARTs
motion for reconsideration having been denied,[20] it elevated the case to this Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the National
Labor Relations Commission (NLRC). In its September 27, 1999 Decision,[21] the NLRC sustained Astorgas dismissal. Reversing the
Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services for SMART
a valid organizational action. It overruled the Labor Arbiters ruling that SNMI is an in-house agency, holding that it lacked legal
basis. It also declared that contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are
allowed under the law. The NLRC further found erroneous the Labor Arbiters disquisition that redundancy to be valid must be
impelled by economic reasons, and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further
ordered to immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby ordered to
pay the final wages of [Astorga] after [she] had submitted the required supporting papers therefor.
SO ORDERED.[22]
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.[23]
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision [24] affirming with modification
the resolutions of the NLRC. In gist, the CA agreed with the NLRC that the reorganization undertaken by SMART resulting in the
abolition of CSMG was a legitimate exercise of management prerogative. It rejected Astorgas posturing that her non-absorption
into SNMI was tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory one-month notice
prior to the intended termination. Accordingly, the CA imposed a penalty equivalent to Astorgas one-month salary for this noncompliance. The CA also set aside the NLRCs order for the return of the company vehicle holding that this issue is not essentially a
labor concern, but is civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had
not been fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On December 18,
2001, the CA resolved the motions, viz.:
WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is hereby ordered to
pay [Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smarts] motion for reconsideration
is outrightly DENIED.
SO ORDERED.[25]
Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R Nos.
151079 and 151372. OnFebruary 27, 2002, this Court ordered the consolidation of these petitions with G.R. No. 148132. [26]
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGAS DISMISSAL DESPITE THE FACT THAT
HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.
II
SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE
223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION
OVER THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic)
BENEFIT.[27]

On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO
FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE
REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND EMPLOYMENT
ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION FINDS
APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO
NOTICE AT ALL.[28]
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS
SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT HAVE
JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY VEHICLE
FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE
REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A
COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER
BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE. [29]
The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for
lack of jurisdiction, which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods
or chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It is designed to
permit one having right to possession to recover property in specie from one who has wrongfully taken or detained the property.
[30]
The term may refer either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally
associated with it, by which possession of the property may be obtained by the plaintiff and retained during the pendency of the
action.[31]
That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of
doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following
disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment
package. We doubt that [SMART] would extend [to Astorga] the same car plan privilege were it not for her
employment as district sales manager of the company. Furthermore, there is no civil contract for a loan between
[Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit arising out of employeremployee relationship. Thus, the claim for such falls squarely within the original and exclusive jurisdiction of the
labor arbiters and the NLRC.[32]
We do not agree. Contrary to the CAs ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well
within its discretion in denying Astorgas motion to dismiss. SMARTs demand for payment 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 of debtor and creditor rather
than employee-employer relations.[33] As such, the dispute falls within the jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,[34] this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained:

Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief
sought therein is the return of the property in specie wrongfully detained by another person. It is an ordinary
statutory proceeding to adjudicate rights to the title or possession of personal property. The question of whether
or not a party has the right of possession over the property involved and if so, whether or not the adverse party
has wrongfully taken and detained said property as to require its return to plaintiff, is outside the pale of
competence of a labor tribunal and beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues
raised in each forum can be resolved independently on the other. In fact in 18 November 1986, the NLRC in the
case before it had issued an Injunctive Writ enjoining the petitioners from blocking the free ingress and egress to
the Vessel and ordering the petitioners to disembark and vacate. That aspect of the controversy is properly
settled under the Labor Code. So also with petitioners right to picket. But the determination of the question of
who has the better right to take possession of the Vessel and whether petitioners can deprive the Charterer, 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 jurisdiction as laid
down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the replevin case for
lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorgas dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The
nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National
Labor Relations Commission,[35] viz:
x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of
work. That no other person was holding the same position that private respondent held prior to termination of
his services does not show that his position had not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise.Succinctly put, a
position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a
number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular
product line or service activity previously manufactured or undertaken by the enterprise.
The characterization of an employees services as superfluous or no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not shown. [36]
Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the
reorganization was done in order to get rid of her. But except for her barefaced allegation, no convincing evidence was offered to
prove it. This Court finds it extremely difficult to believe that SMART would enter into a joint venture agreement with NTT, form
SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular employee, such as Astorga. Moreover, Astorga
never denied that SMART offered her a supervisory position in the Customer Care Department, but she refused the offer because
the position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a
position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was no compelling economic
reason for redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more
economical and effective management even if it is not experiencing economic reverses. Neither does the law require that the
employer should suffer financial losses before he can terminate the services of the employee on the ground of redundancy. [37]
We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of
CSMG/FSD and termination of Astorgas employment was an honest effort to make SMARTs sales and marketing departments more
efficient and competitive. As the CA had taken pains to elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization
undertaken by SMART is for no purpose other than its declared objective as a labor and cost savings
device. Indeed, this Court finds no fault in SMARTs decision to outsource the corporate sales market to SNMI in
order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed Services
Division (CSMG/FSD), a distinct sales force of SMART in charge of selling SMARTs telecommunications services to
the corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customers
requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI
Multimedia Incorporated, a joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD
does not have the necessary technical expertise required for the value added services. By transferring the
duties of CSMG/FSD to SNMI, SMART has created a more competent and specialized organization to perform the

work required for corporate accounts. It is also relieved SMART of all administrative costs management, time and
money-needed in maintaining the CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to
SNMI was, to Our mind, a sound business judgment based on relevant criteria and is therefore a legitimate
exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld
his cause in most of his conflicts with his employer. This favored treatment is consonant with the social justice policy of the
Constitution. But while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right of the
employer to reasonable returns for his investment. [38] In this light, we must acknowledge the prerogative of the employer to adopt
such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always
within the framework of existing laws. Accordingly, we sustain the reorganization and redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to
termination. The record is clear that Astorga received the notice of termination only on March 16, 1998[39] or less than a month
prior to its effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was notified of the redundancy
program only on March 6, 1998.[40]
Article 283 of the Labor Code clearly 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 x x x.
SMARTs assertion that Astorga cannot complain of lack of notice because the organizational realignment was made
known to all the employees as early as February 1998 fails to persuade. Astorgas actual knowledge of the reorganization cannot
replace the formal and written notice required by the law. In the written notice, the employees are informed of the specific date of
the termination, at least a month prior to the effectivity of such termination, to give them sufficient time to find other suitable
employment or to make whatever arrangements are needed to cushion the impact of termination. In this case, notwithstanding
Astorgas knowledge of the reorganization, she remained uncertain about the status of her employment until SMART gave her
formal notice of termination. But such notice was received by Astorga barely two (2) weeks before the effective date of
termination, a period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of Astorgas employment illegal. The validity
of termination can exist independently of the procedural infirmity of the dismissal. [41] In DAP Corporation v. CA,[42] we found the
dismissal of the employees therein valid and for authorized cause even if the employer failed to comply with the notice
requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but held the employer liable for non-compliance
with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorgas dismissal and at the same time, awarding
indemnity for violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on
SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food Processing
Corporation v. Pacot,[43] viz.:
[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the
notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process
was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is based on an authorized
cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative.
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent 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. She is, therefore, also entitled to separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted
by SMART in the proceedings a quo. No proof of payment was presented by SMART to disprove the allegation. It is settled that in
labor cases, the burden of proving payment of monetary claims rests on the employer. [44] SMART failed to discharge the onus
probandi. Accordingly, it must be held liable for Astorgas salary from February 15, 1998 until the effective date of her termination,
on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to
an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal
from work.[45] The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiters
ruling and categorically declared Astorgas dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since

Astorgas dismissal is for an authorized cause, she is not entitled to backwages. The CAs award of backwages is totally inconsistent
with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.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. 53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch
57 is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June
11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga
is declared validly dismissed.However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its non-compliance with
procedural due process, her separation pay equivalent to one (1) month pay, and her salary from February 15, 1998 until the
effective date of her termination on April 3, 1998. The award of backwages is DELETED for lack of basis.
SO ORDERED.
TERLYNGRACE RIVERA,

G.R. No. 165895

Petitioner,

Present:
YNARES-SANTIAGO, J.,
Chairperson,
CARPIO,*
CORONA,**
NACHURA, and
PERALTA, JJ.

- versus -

Promulgated:
FLORENCIO L. VARGAS,

Respondent.

June 5, 2009

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

What is the effect of a writ of replevin that has been improperly served?
This is the sole issue to be resolved in this petition for review on certiorari seeking to set aside the Decision [1] of the Court
of Appeals (CA) dated November 18, 2003 in CA-G.R. SP No. 78529, as well as its October 20, 2004 Resolution, [2] denying the
petition for certiorari filed by petitioner Terlyngrace Rivera (Rivera).
The facts follow.
On February 24, 2003, respondent Florencio Vargas (Vargas) filed a complaint [3] against petitioner and several John Does
before Branch 02 of the Regional Trial Court (RTC) in Tuguegarao City, Cagayan, for the recovery of a 150 T/H rock crushing plant
located in Sariaya, Quezon. In his complaint and affidavit, [4] Vargas claims ownership of the said equipment, having purchased and
imported the same directly from Hyun Dae Trading Co., in Seoul, South Korea, in December 1993.[5] The equipment was allegedly
entrusted to petitioners husband, Jan T. Rivera, who died sometime in late 2002, as caretaker of respondents construction
aggregates business in Batangas. According to Vargas, petitioner failed to return the said equipment after her husbands death
despite his repeated demands, thus forcing him to resort to court action. [6] The complaint was accompanied by a prayer for the
issuance of a writ of replevin and the necessary bond amounting to P2,400,000.00.
Summons[7] dated February 24, 2003 was served upon petitioner through her personal secretary on April 28, 2003 at her
residence in ParaaqueCity. Interestingly, however, the writ of replevin [8] was served upon and signed by a certain Joseph Rejumo,
the security guard on duty in petitioners crushing plant in Sariaya, Quezon on April 29, 2003, [9] contrary to the sheriffs
return[10] stating that the writ was served upon Rivera.
On May 8, 2003, Rivera filed her answer, manifestation, and motion for the acceptance of petitioners redelivery bond.
In her answer, petitioner countered that the rock-crushing plant was ceded in favor of her husband as his share following the
dissolution of the partnership formed between Jan Rivera and respondents wife, Iluminada Vargas (Iluminada), on May 28, 1998,
while the partnerships second rock-crushing plant in Cagayan was ceded in favor of Iluminada. [12] She further averred that from
the time that the partnership was dissolved sometime in 2000 until Jan Riveras death in late 2002, it was petitioners husband who
exercised ownership over the said equipment without any disturbance from respondent. [13]
[11]

On May 12, 2003, the RTC issued an Order[14] disapproving petitioners redelivery bond application for failure to comply with the
requirements under Sections 5 and 6 of Rule 60 of the Rules of Court. [15] Without directly saying so, the RTC faulted petitioner for
her failure to file the application for redelivery bond within five (5) days from the date of seizure as provided in the Rules of Court.
Petitioner moved for reconsideration,[16] but the same was also denied.[17]

Aggrieved, petitioner elevated the matter to the CA through a petition for certiorari under Rule 65. This, too, was denied for lack of
merit.[18]Petitioner moved for reconsideration,[19] but it was also denied.[20]
Undaunted, petitioner now comes to us via this Rule 45 petition.
Petitioner argues that the RTC committed grave abuse of discretion in denying her counterbond on the ground that it was
filed out of time. She contends that the mandatory five-day period did not even begin to run in this case due to the improper
service of the writ of replevin, contrary to Section 4 of Rule 60. [21]
We find the petition meritorious.
Replevin is one of the most ancient actions known to law, taking its name from the object of its process. [22] It originated in
common law as a remedy against the wrongful exercise of the right of distress for rent [23] and, according to some authorities, could
only be maintained in such a case.[24] But by the weight of authority, the remedy is not and never was restricted to cases of
wrongful distress in the absence of any statutes relating to the subject, but is a proper remedy for any unlawful taking.
[25]
Replevied, used in its technical sense, means delivered to the owner, [26] while the words to replevy means to recover
possession by an action of replevin.[27]
Broadly understood in this jurisdiction, replevin is both a form of principal remedy and of provisional relief. It may refer
either to the action itself, i.e., to regain the possession of personal chattels being wrongfully detained from the plaintiff by
another, or to the provisional remedy that would allow the plaintiff to retain the thing during the pendency of the action and to
hold it pendente lite.[28] The action is primarily possessory in nature and generally determines nothing more than the right of
possession.[29]
The law presumes that every possessor is a possessor in good faith. [30] He is entitled to be respected and protected in his
possession[31] as if he were the true owner thereof until a competent court rules otherwise. [32] Before a final judgment, property
cannot be seized unless by virtue of some provision of law. [33] The Rules of Court, under Rule 60, authorizes such seizure in cases
of replevin. However, a person seeking a remedy in an action for replevin must follow the course laid down in the statute, since
the remedy is penal in nature.[34] When no attempt is made to comply with the provisions of the law relating to seizure in this kind
of action, the writ or order allowing the seizure is erroneous and may be set aside on motion [35] by the adverse party. Be it noted,
however, that a motion to quash the writ of replevin goes to the technical regularity of procedure, and not to the merits of the
case[36] in the principal action.
The process regarding the execution of the writ of replevin in Section 4 of Rule 60 is unambiguous: the sheriff, upon
receipt of the writ of replevin and prior to the taking of the property, must serve a copy thereof to the adverse party (petitioner, in
this case) together with the application, the affidavit of merit, and the replevin bond. [37] The reasons are simple, i.e., to provide
proper notice to the adverse party that his property is being seized in accordance with the courts order upon application by the
other party, and ultimately to allow the adverse party to take the proper remedy consequent thereto.
Service of the writ upon the adverse party is mandatory in line with the constitutional guaranty on procedural due
process and as safeguard against unreasonable searches and seizures. [38] If the writ was not served upon the adverse party but
was instead merely handed to a person who is neither an agent of the adverse party nor a person authorized to receive court
processes on his behalf, the service thereof is erroneous and is, therefore, invalid, running afoul of the statutory and constitutional
requirements. The service is likewise invalid if the writ of replevin was served without the required documents. Under these
circumstances, no right to seize and to detain the property shall pass, the act of the sheriff being both unlawful and
unconstitutional.
In the case at bar, petitioner avers that the writ of replevin was served upon the security guard where the rock-crushing plant to
be seized was located.[39] The signature of the receiving party indicates that the writ was received on April 29, 2003 by a certain
Joseph Rejumo, the guard on duty in a plant in Sariaya, Quezon, where the property to be seized was located, and witnessed by
Claudio Palatino, respondents caretaker.[40] The sheriffs return,[41]however, peremptorily states that both the writ of replevin and
the summons were served upon Rivera. On May 8, 2003, or nine (9) days after the writ was served on the security guard,
petitioner filed an answer to the complaint accompanied by a prayer for the approval of her redelivery bond. The RTC, however,
denied the redelivery bond for having been filed beyond the five-day mandatory period prescribed in Sections 5 and 6 of Rule 60.
[42]
But since the writ was invalidly served, petitioner is correct in contending that there is no reckoning point from which the
mandatory five-day period shall commence to run.
The trial court is reminded that not only should the writ or order of replevin comply with all the requirements as to
matters of form or contents prescribed by the Rules of Court. [43] The writ must also satisfy proper service in order to be valid and
effective: i.e. it should be directed to the officer who is authorized to serve it; and it should be served upon the person who not
only has the possession or custody of the property involved but who is also a party or agent of a party to the action.
Consequently, a trial court is deemed to have acted without or in excess of its jurisdiction with respect to the ancillary action of
replevin if it seizes and detains a personalty on the basis of a writ that was improperly served, such as what happened in this
case.
At the outset, petitioners proper remedy should have been to file a motion to quash the writ of replevin or a motion to
vacate the order of seizure. Nevertheless, petitioners filing of an application for a redelivery bond, while not necessary, did not
thereby waive her right to question the improper service. It now becomes imperative for the trial court to restore the parties to
their former positions by returning the seized property to petitioner and by discharging the replevin bond filed by respondent. The
trial, with respect to the main action, shall continue. Respondent may, however, file a new application for replevin should he
choose to do so.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, as well as its Resolution, in CA-G.R. SP No. 78529 is
hereby SET ASIDE. The Regional Trial Court is hereby ordered to restore the parties to their former positions, discharge
respondents replevin bond, and proceed with the trial of the main action with dispatch.

SO ORDERED.
TWIN ACE HOLDINGS CORPORATION,
Petitioner,

G.R. No. 160191

Present:

- versus PANGANIBAN, C.J.

Chairperson,
RUFINA AND COMPANY,
Respondent.

YNARES-SANTIAGO,*
AUSTRIA-MARTINEZ,**
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
Promulgated:

June 8, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
From the records, it appears that on 3 December 1991, Twin Ace Holdings Corporation (Twin Ace) filed a Complaint [1] for recovery
of possession of personal property, permanent injunction and damages with prayer for the issuance of a writ of replevin,
temporary restraining order and a writ of preliminary injunction against Rufina and Company (Rufina).
As alleged in the complaint, Twin Ace is a private domestic corporation engaged in the manufacture of rhum, wines and liquor
under the name and style Tanduay Distillers. It has registered its mark of ownership of its bottles with the Bureau of Patent,
Trademarks and Technology Transfer under Republic Act No. 623. In the conduct of its business, it sells its products to the public
excluding the bottles. It makes substantial investments in brand new bottles which it buys from glass factories and which they use
for about five times in order to recover the cost of acquisition. Twin Ace thus retrieves its used empty bottles, washes and uses
them over and over again as containers for its products.
On the other hand, Rufina is engaged in the production, extraction, fermentation and manufacture of patis and other food
seasonings and is engaged in the buying and selling of all kinds of foods, merchandise and products for domestic use or for export
to other countries. In producing patis and other food seasonings, Rufina uses as containers bottles owned by Twin Ace without any
authority or permission from the latter. In the process, Rufina is unduly benefited from the use of the bottles.
Upon the posting of Twin Ace of the required bond, the Regional Trial Court (RTC) of Manila, Branch 26, issued an Order dated 5
February 1992 granting the application for the issuance of a writ of replevin.[2] Upon the implementation of the said writ, Deputy
Sheriff Amado P. Sevilla was able to seize a total of 26,241 empty bottles marked TANDUAY DISTILLERY, INC., [3] at the address
of Rufina.
In its Answer with counter-application for a Writ of Preliminary Injunction, Rufina claimed that the marked bottles it used as
containers for its products were purchased from junk dealers; hence, it became the owner thereof.
After hearing, the trial court rendered its decision dated 20 May 1995 the dispositive portion of which states:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the defendant as follows:
a) dismissing the complaint for lack of merit;
b) dissolving the order of replevin;
c) ordering the plaintiff to return 26,241 bottles to the defendant in the place where the bottles were seized at
the expense of the plaintiff within 48 hours from receipt hereof;
d) ordering the plaintiff to pay the defendant the sum of P100,000.00 as actual damages sustained by the latter
to be taken from the replevin bond;
e) ordering the plaintiff to pay the defendant the sum of P1,000,000.00 as damages for besmirched reputation;

f) ordering the plaintiff to pay the sum of P100,00.00 as nominal damages;

g) ordering the plaintiff to pay the defendant the sum of P50,000.00 as attorneys fee; and
h) ordering the plaintiff to pay the cost of the suit.[4]
Twin Ace appealed to the Court of Appeals. On 27 September 2002, the appellate court rendered its decision [5] modifying the
decision of the trial court as follows:
WHEREFORE, in view of all the foregoing, the appealed decision dated May 20, 1995 of Branch 26, Regional Trial
Court, Manila, in Civil Case No. 92-59862 is MODIFIED, in that the award of damages, except nominal damages,
and attorneys fees is DELETED for lack of legal and factual basis. The award of nominal damages is reduced
to P50,000.00. In all other respects, the assailed decision is AFFIRMED.
Costs against plaintiff-appellant.[6]
A motion for reconsideration dated 19 October 2002[7] filed by Twin Ace was denied in a resolution of the Court of Appeals
dated 29 September 2003.[8] Hence, this Petition for Review.
For resolution are the following issues:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT RUFINA IS NOT COVERED WITHIN
THE EXEMPTION PROVIDED BY SECTION 6 OF R.A. 623, AS AMENDED BY R.A. 5700.
II.
THE HONORABLE COURT OF APPEALS ERRED IN AWARDING NOMINAL DAMAGES AGAINST PETITIONER TWIN ACE
CONSIDERING THAT IT WAS THE ONE WHOSE RIGHTS HAVE BEEN VIOLATED OR INVADED BY RESPONDENT
RUFINA.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONER AS OWNER OF THE SUBJECT
BOTTLES IS ENTITLED TO COMPENSATION FOR ITS UNAUTHORIZED USE BY RESPONDENT RUFINA. [9]
Pertinent provision of Republic Act No. 623,[10] as amended by Republic Act No. 5700,[11] is quoted hereunder for clarity:
Sec. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or seller,
who has successfully registered the marks of ownership in accordance with the provisions of the next preceding
section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other similar
containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or wantonly
destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes, foundation
pipes, for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of this
section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one
year or both.
Sec. 3. The use by any person other than the registered manufacturer, bottler or seller, without written
permission of the latter of any such bottle, cask, barrel, keg, box, steel cylinders, tanks, flasks, accumulators, or
other similar containers, or the possession thereof without written permission of the manufacturer, by any junk
dealer or dealer in casks, barrels, kegs, boxes, steel cylinders, tanks, flasks, accumulators, or other similar
containers, the same being duly marked or stamped and registered as herein provided, shall give rise to a prima
facie presumption that such use or possession is unlawful.[12]
Sec. 4. The criminal action provided in this Act shall in no way affect any civil action to which the registered
manufacturer, bottler, or seller, may be entitled by law or contract.
Sec. 5. No action shall be brought under this Act against any person to whom the registered manufacturer,
bottler, or seller, has transferred by way of sale, any of the containers herein referred to, but the sale of the
beverage contained in the said containers shall not include the sale of the containers unless specifically so
provided.
Sec. 6. The provisions of this Act shall not be interpreted as prohibiting the use of bottles as containers
for sisi, bagoong, patis, and similar native products.[13]
In sum, Twin Ace asserts that the provision under the law affords protection only to small scale producers/manufacturers who do
not have the capacity to buy new bottles for use in their products and cannot extend to Rufina which had unequivocably admitted
in its Answer[14] and affirmed in the decision of the trial court that it is engaged, on a large scale basis, in the production and
manufacture of food seasonings.
For its part, Rufina counters that the law did not really distinguish between large scale manufacturers and small time producers.
The petition is not meritorious.

The earlier case of Twin Ace Holdings Corporation v. Court of Appeals, [15] applies to the present petition. In said case, Twin
Ace filed a Complaint for Replevin againstLorenzana Food Corporation to recover three hundred eighty thousand bottles allegedly
owned by Twin Ace but detained and used by Lorenzana Food Corporation as containers for its native products without its express
permission, in violation of the law. In that case, this Court acknowledged that the exemption under the law is unqualified as the
law did not make a distinction that it only applies to small scale industries but not to large scale manufacturers. Thus, even if the
court in said case held that the exemption is primarily meant to give protection to small scale industries, it did not qualify that the
protection therein was intended and limited only to such. The Court held:
Petitioner itself alleges that respondent LORENZANA uses the subject 350 ml., 375 ml. and 750 ml.
bottles as containers for processed foods and other related products such as patis,toyo, bagoong, vinegar and
other food seasonings. Hence, Sec. 6 squarely applies in private respondents favor. Obviously, the contention of
TWIN ACE that the exemption refers only to criminal liability but not to civil liability is without merit. It is
inconceivable that an act specifically allowed by law, in other words legal, can be the subject of injunctive relief
and damages.Besides, the interpretation offered by petitioner defeats the very purpose for which the exemption
was provided.
Republic Act No. 623, An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks,
Kegs, Barrels and Other Similar Containers, as amended by RA No. 5700, was meant to protect the intellectual
property rights of the registrants of the containers and prevent unfair trade practices and fraud on the
public. However, the exemption granted in Sec. 6 thereof was deemed extremely necessary to provide
assistance and incentive to the backyard, cottage and small-scale manufacturers of indigenous native products
such as patis, sisi and toyo who do not have the capital to buy brand new bottles as containers nor afford to
pass the added cost to the majority of poor Filipinos who use the products as their daily condiments or viands. If
the contention of petitioner is accepted, i.e., to construe the exemption as to apply to criminal liability only but
not to civil liability, the very purpose for which the exemption was granted will be defeated. None of the smallscale manufacturers of the indigenous native products protected would possibly wish to use the registered
bottles if they are vulnerable to civil suits. The effect is a virtual elimination of the clear and unqualified
exemption embodied in Sec. 6. It is worthy to note that House Bill No. 20585 was completely rejected
because it sought to expressly and directly eliminate that which petitioner indirectly proposes to do with this
petition.[16] (Emphasis supplied.)
It is worth noting that Lorenzana Food Corporation which prevailed in the case filed by Twin Ace against it is certainly not
a small scale industry. Just like Rufina,Lorenzana Food Corporation also manufactures and exports processed foods and other
related products, e.g., patis, toyo, bagoong, vinegar and other food seasonings.
It is a basic rule in statutory construction that when the law is clear and free from any doubt or ambiguity, there is no
room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language,
there is no occasion for interpretation; there is only room for application. [17]
Notably, attempts to amend the protection afforded by Section 6 of Republic Act No. 623, by giving protection only to
small scale manufacturers or those with a capitalization of five hundred thousand pesos or less (P500,000.00), through then House
Bill No. 20585,[18] and subsequently through House Bill No. 30400, [19] proved unsuccessful as the amendment proposed in both Bills
was never passed.
In view of these considerations, we find and so hold that the exemption contained in Section 6 of Rep. Act No. 623 applies
to all manufacturers of sisi, bagoong, patis and similar native products without distinction or qualification as to whether they are
small, medium or large scale.
On the issue of nominal damages, Article 2222 of the Civil Code [20] states that the court may award nominal damages in
every obligation arising from any source enumerated in Article 1157,[21] or in every other case where any property right has been
invaded.[22] Nominal damages are given in order that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. [23] In another
case,[24] this Court held that when plaintiff suffers some species of injury not enough to warrant an award of actual damages, the
court may award nominal damages. Considering the foregoing, we find that the award of nominal damages to Rufina in the
amount of fifty thousand pesos (P50,000.00) is reasonable, warranted and justified.
As to the third issue, Rule 60, Section 2(a), of the Revised Rules of Court mandates that a party praying for the recovery
of possession of personal property must show by his own affidavit or that of some other person who personally knows the facts
that he is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof. [25] It must be borne
in mind that replevin is a possessory action the gist of which focuses on the right of possession that, in turn, is dependent on a
legal basis that, not infrequently, looks to the ownership of the object sought to be replevied.[26] Wrongful detention by the
defendant of the properties sought in an action for replevin must be satisfactorily established. If only a mechanistic averment
thereof is offered, the writ should not be issued. [27] In this case, Twin Ace has not shown that it is entitled to the possession of the
bottles in question and consequently there is thus no basis for the demand by it of due compensation. As stated by the court in
the earlier case of Twin Ace Holdings Corporation v. Court of Appeals[28]:
Petitioner cannot seek refuge in Sec. 5 of RA No. 623 to support its claim of continuing ownership over
the subject bottles. In United States v. Manuel [7 Phil. 221 (1906)] we held that since the purchaser at his
discretion could either retain or return the bottles, the transaction must be regarded as a sale of the bottles
when the purchaser actually exercised that discretion and decided not to return them to the vendor. We also
take judicial notice of the standard practice today that the cost of the container is included in the selling price of
the product such that the buyer of liquor or any such product from any store is not required to return the bottle
nor is the liquor placed in a plastic container that possession of the bottle is retained by the store.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the decision dated 27 September 2002 and
resolution dated 29 September 2003, in CA-G.R. CV No. 52852, both of the Court of Appeals are Affirmed.
SO ORDERED.