G.R. No.

127673 March 13, 2000

RICARDO S. MEDENILLA, ZOSIMO LACONSAY, RIZALINA REPEDRO, TERESITA

CONSUEGRA, LILIA COLLADO, RIEGO DE DIOS, DALISAY BARCELLANO, SOCORRO
ESPINELLI, MILAGROS LEE, EDUARDO CRUZ, LUCIANO RAMIREZ JR., EUGENIO SAN
PASCUAL JR., AGNES ROBLES, PATRIA FE SAULO, BERNADETTE BARTOLOME, CARMEN
BHOJARA, FELICIANO ROMEO, EMETRIO MARQUEZ, LEONARDO SERRANO, AMANDO
ALINCASTRE JR., REYNALDO DEFUNTORUM, CARMELITO RONQUILLO, ELIZABETH
VERGARA, AMELIA ABAYA, MANUEL GARCIA, MANUEL HONTILLANO, ROSITA VELASCO,
PATRIA ECHALUCE, AURORA AGBUGGO, SOCORRO CAMONAY, MAURICIA MANZANARES,
AIDA MENES, NORA VEGA, YOLANDO BALANCIO, ROBERTO DE ASIS, TERESITA
MONTEVIRGEN and FLORDELIZ REYES, petitioners,
vs.
PHILIPPINE VETERANS BANK, RENAN V. SANTOS, PACIFICO U. CERVANTES, LOIS
OLARTE, respondents.

PURISIMA, J.:

Before the Court is a petition for certiorari under Rule 65 of the Rules of Court to set aside the
Decision,1 of the National Labor Relations Commission (NLRC),2 and the Order3 dated June 21, 1995,
denying petitioner's motion for reconsideration in NLRC-NCR-CA No. 002761-92, on the ground of
grave abuse of discretion amounting to lack or excess of jurisdiction.

The antecedent facts are as follows:

Petitioners were employees of the Philippine Veterans Bank (PVB). On June 15, 1985, their services
were terminated as a result of the liquidation of PVB pursuant to the order of the Monetary Board of
the Central Bank embodied in MB Resolution No. 612 dated June 7, 1985.

On the same day of their termination, petitioners were rehired through PVB's Bank Liquidator,
Antonio T. Castro, Jr.. However, all of them were required to sign employment contracts which
provided that:

xxx xxx xxx

(1) The employment shall be strictly on a temporary basis and only for the duration of the
particular undertaking for which a particular employee is hired;

xxx xxx xxx

(2) Such temporary employment will not entitle an employee to any benefits except those
granted by law;

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(3) The Liquidator reserves the right to terminate the services of the employee at any time
during the period of such employment if the employee is found not qualified, competent or,
efficient in the performance of his job, or have violated any rules and regulations, or such
circumstances and conditions recognized by law.

xxx xxx xxx

On January 18, 1991, petitioners received a uniform notice of dismissal effective a month from the
date of receipt, which notice contained the reasons justifying the termination:

(a) To reduce costs and expenses in the liquidation of closed banks in order to protect the
interests of the depositors, creditors and stockholders of the Philippine Veterans Bank.

(b) The employment were on strictly temporary basis.

On February 4, 1991, petitioners instituted a case for illegal dismissal before Honorable Labor
Arbiter Oswald Lorenzo.

On January 14, 1992, the said Labor Arbiter came out with a decision declaring petitioners' dismissal
illegal, and disposing thus:

WHEREFORE, premises considered, judgment is hereby rendered ordering the Philippine

Veterans Bank, through its Liquidator or his Deputies, to reinstate complainants to their
former or substantially equivalent position, without loss of seniority rights with full backwages
from the time they were illegally dismissed up to the time they were reinstated, and to pay
moral damages in the amount of ONE HUNDRED THOUSAND PESOS (P100,000) each as
moral damages, plus the sum equivalent to Ten (10%) per centum of the total amount due as
attorney's fees. The claim for exemplary damages is hereby dismissed for lack of merits.

SO ORDERED.4

Respondent Bank appealed the aforesaid decision of the Labor Arbiter. On July 12, 1994, the NLRC
reversed the decision of the Labor Arbiter and dismissed the Complaints for lack of merit.

On August 23, 1994, petitioners presented a Motion for Reconsideration but to no avail. The same
was denied by the NLRC on June 21, 1995. Thus, the said decision became final and executory and
Entry of Judgment issued on September 1, 1995.

Undaunted, petitioners brought the present petition on January 23, 1997.

The issue posed here is whether the NLRC acted with grave abuse of discretion in ruling that there
was a valid fixed-period of employment, and in reversing the finding of the Labor Arbiter that there
was illegal dismissal.

On the issue of whether the NLRC gravely abused its discretion in holding that the employment
contract entered into by the complainants and the Liquidator of PVB was for a fixed-period, the ruling
of the Court is in the negative.

There is tenability in the contention of the respondents that the employment of petitioners was really
for a fixed-period.4

For a more enlightened analysis of the contract entered into by the parties, the Court highlights the
more important features thereof, to wit:5

In connection with the liquidation of the Philippine Veterans Bank under Monetary Board
Resolution No. 612 dated June 7, 1985, we are confirming your employment under the
following terms and conditions:
 (1) The employment shall be on a strictly temporary basis and only for the duration of
the particular undertaking for which you are hired and only for the particular days
during which actual work is available as determined by the Liquidator or his
representatives since the work requirements of the liquidation process merely
demand intermittent and temporary rendition of services. (Emphasis ours).

On June 15, 1985, the services of the petitioners were terminated when the Monetary Board
ordered the liquidation of the Philippine Veterans Bank. However, petitioners were re-hired
on the following day, June 16, 1985, by the Bank's Liquidator on the basis of the
abovementioned employment contract.

The Court has repeatedly upheld the validity of fixed-term employment. In the case
of Philippine National Oil Company-Energy Development Corporation vs. NLRC,6 it was held:

As can be gleaned from the said case, the two guidelines by which fixed contracts of
employment can be said NOT to circumvent security of tenure, are either:

1. The fixed period of employment was knowingly and voluntarily agreed upon by the
parties, without any force, duress or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating his consent;

or:

2. It satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by the
former on the latter.

The employment contract entered into by the parties herein appears to have observed the
said guidelines. Furthermore, it is evident from the records that the subsequent re-hiring of
petitioners which was to continue during the period of liquidation and the process of
liquidation ended prior to the enactment of RA 7169 entitled, "An Act to Rehabilitate
Philippine Veterans Bank", which was promulgated on January 2, 1992.

But did the NLRC act with grave abuse of discretion in finding that there was no illegal
dismissal? On this crucial question, the Court rules in the affirmative.

Subject employment contract stipulated, that:

(9) The Liquidator reserves the right to terminate your services at any time during this
period of temporary employment if you are found not qualified, competent or
inefficient in the performance of your job, or if you are found to have violated any of
the rules and regulations. The Liquidator also reserves the right to terminate your
services at any time under the circumstances and conditions recognized by law on
the matter. In any event, you will be entitled to collect your compensation up to the
close of working hours of the last day of the actual service, which compensation shall
be paid to you after proper clearance. (emphasis supplied)

The reason given by the Liquidator for the termination of petitioners' employment was "in line
with the need of the objective of the Supervision and Examination Sector, Department V,
Central Bank of the Philippines, to reduce costs and expenses in the liquidation of closed
banks in order to protect the interest of the depositors, creditors and stockholders. 7
In cases of illegal dismissal, the burden is on the employer to prove that there was a valid
ground for dismissal. Mere allegation of reduction of costs without any proof to substantiate
the same cannot be given credence by the Court. As the respondents failed to rebut
petitioners' evidence, the irresistible conclusion is that the dismissal in question was illegal.
As aptly ratiocinated by the Labor Arbiter:

As can be seen from the termination letters Exhs. "A", "A-1" to "A-19" (inclusive),
complainants were terminated thirty (30) days after receipt of such letters allegedly
"to reduce costs and expenses in the liquidation of closed banks in order to protect
the interests of the depositors, creditors and stockholders of the Philippine Veterans
Bank", which termination papers speaks of "finality" by their very wordings that left
complainants with no alternative but to accept it with grief foreseen sacrifice and only
by going into this forum they may be vindicated by such action of the liquidator.

. . . Thus the failure of respondent bank to dispute complainants' evidence pertinent

to the various unnecessary and highly questionable expenses incurred renders the
termination process as a mere subterfuge, as the same was not on the basis as it
purports to see, for reason that immediately after the termination from their
respective positions, the same were given to other employees who appear not
qualified. What respondent's counsel did was merely to dispute by pleadings the
jurisdiction of this Office and the claims for damages, which evidentiary matters
respondent is required to prove to sustain the validity of such dismissals.8

Since findings by the Labor Arbiter are binding on this Court if supported by substantial
evidence, the Court rules that there was illegal dismissal absent just cause, which is one of
the facets of a dismissal. Such illegal dismissal warrants reinstatement and payment of
backwages. However, since petitioners' reinstatement is now considered impractical
because the new Philippine Veterans Bank has been rehabilitated by virtue of RA 7169, the
Court limits the relief to be granted to the petitioners to the unpaid wages during the
remaining period of their employment contract.

As held by this Court,9 if the contract is for a fixed term and the employee is dismissed
without just cause, he is entitled to the payment of his salaries corresponding to the
unexpired portion of the employment contract. In the case under scrutiny, the unpaid wages
should be reckoned on February 18, 1991 to January 1, 1992. January 1, 1992 is considered
the date of expiration of the period of liquidation since January 2, 1992 was the effectivity of
RA 7169, entitled "An Act to Rehabilitate the Philippine Veterans Bank".

The prayer of petitioners' for reinstatement cannot be granted. Their reliance on the ruling in
the case of employees of Banco Filipino Savings and Mortgage Bank, which was similarly
placed under liquidation and whose separated employees were recalled upon resumption of
banking business, is misplaced. A careful study of RA 7169 indicates that it is only mandated
to create a new manning force for respondent PVB. The said law explicitly provides, thus:

Sec. 7. Rehabilitation Committee. — To facilitate the implementation of the

provisions of this Act, there is hereby created a rehabilitation committee.

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Specifically, the Committee shall:

 (b) Select and organize an initial manning force headed by a management
team to be composed of competent, experienced and professional
managers who must possess all qualifications and none of the
disqualifications provided under the Central Bank rules and regulations. The
management team shall be staffed by a trained work force: Provided, That
preference shall be given to the veterans and their dependents, other
qualifications being equal;

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In computing the petitioners' salaries corresponding to the unexpired portion of their contract,
an examination of subject employment contract is necessary. Thereunder, 10 it was stipulated
that:

(2) The temporary employment shall be effective on June 16, 1985 and will entitle
you to a compensation of P3,130.00 per month, payable every 15th and end of the
month.

(3) This temporary employment will not entitle you to any benefits apart from what
the law requires.

xxx xxx xxx

As stated earlier, the period should be reckoned from the date of dismissal on February 18, 1991 to
January 1, 1992, which latter date is deemed to be the expiration date of the period for liquidation as
January 2, 1992 was the effectivity of RA 7169, entitled "An Act to Rehabilitate the Philippine
Veterans Bank", which legislation necessarily terminated the period of liquidation.

As to the issue of attorney's fees, petitioners are entitled to an award of a reasonable amount of
attorney's fees pursuant to Article 2208 (par. 7) of the Civil Code. The award made by the Labor
Arbiter of 10% of the total claims of the employees on the basis of Article 111 of the Labor Code
cannot be upheld. The amount may be reduced as the attendant circumstances may warrant. The
Court believes and so holds, that under the attendant circumstances, the amount of P15,000.00
should suffice. 11

WHEREFORE, the petition is PARTLY GRANTED and the decision of the NLRC is accordingly
modified. Respondent Philippine Veterans Bank is hereby ordered to pay the petitioners their
corresponding salaries for the unexpired portion of their contract; without any right to reinstatement.
The award for moral damages is deleted 12 absent any showing of bad faith on the part of the
employer. The award for attorney's fees is reduced from 10% of the total claims of the petitioners to
a fixed amount of P15,000.00, which is considered just and equitable under the premises. No
pronouncement as to costs.

SO ORDERED. 1âw phi 1.nêt