Danzas Intercontinental, Inc. v. Daguman
REITERATIONFacts
The Antecedents: Respondents, employees of Danzas Intercontinental, Inc. (company), claim they were illegally dismissed when the company's brokerage department was purportedly closed. They assert the department was not truly closed but its functions were transferred to newly hired personnel, and thus they should be reinstated with backwages and damages. The company, however, contends that the brokerage department was closed due to substantial accumulated losses of P5,449,000.00, necessitating the retrenchment of its personnel. The company also argues that the employees are barred from questioning their dismissal due to quitclaims they executed. Procedural History: The employees filed complaints for illegal dismissal and other monetary claims. The Labor Arbiter dismissed their complaints on September 6, 2000. The National Labor Relations Commission (NLRC) affirmed this decision on August 27, 2001, and denied reconsideration on October 8, 2001. The employees then appealed to the Court of Appeals, which, on May 27, 2002, ruled that the dismissals were illegal, setting aside the NLRC resolutions. The Court of Appeals denied the company's motion for reconsideration on July 23, 2002. The Petition: In this Petition for Review, the company and Claude F. Schaer assail the Court of Appeals' decision, arguing that the NLRC committed grave abuse of discretion. They claim the NLRC erred in finding sufficient evidence of losses to justify the closure and in failing to recognize that the brokerage department continued to operate. The petitioners also contend that the quitclaims were valid and that the dismissal was not illegal. They seek to present audited financial statements, which were not submitted to the lower courts, to prove business losses and argue that new employees were hired only to wind up operations due to Executive Order No. 11, which restricts foreign entities from engaging in brokerage.
Issue(s)
Whether the termination of private respondents was justified by retrenchment to prevent losses or closure of the brokerage department. Whether the quitclaims executed by private respondents were valid and binding. Whether the Court of Appeals erred in not admitting the audited financial statements presented for the first time on certiorari.
Ruling
The petition is denied. The Decision of the Court of Appeals dated May 27, 2002, and its Resolution dated July 23, 2002, are affirmed.
Ratio Decidendi
On the justification for termination (retrenchment/closure): The Court held that the employer bears the burden of proving that termination was for a valid cause, requiring clear and convincing evidence. For retrenchment to prevent losses, the losses must be substantial, actual, or imminent. The condition of business losses is typically shown by audited financial documents like balance sheets, profit and loss statements, and annual income tax returns, prepared by independent auditors. The Court found that petitioners failed to present sufficient evidence, such as audited financial statements, to prove substantial business losses. The affidavit of the financial comptroller and quarterly reports were deemed insufficient and self-serving. Furthermore, the Court noted that the hiring of new employees to oversee the work of outside brokers negated the claim that the brokerage department was closed down. A letter from petitioners to clients insinuating reorganization rather than closure also contradicted their claim. The Court agreed with the Court of Appeals that the evidence supporting the closure was wanting. On the validity of quitclaims: The Court affirmed the Court of Appeals' ruling that the quitclaims were not valid. For a quitclaim to be valid, there must be no fraud or deceit, the consideration must be credible and reasonable, and the contract must not be contrary to law, public order, public policy, morals, or good customs. In this case, the consent of the private respondents was procured through fraud and deceit because they signed the quitclaims under the belief that the brokerage department was closing due to business losses, which the Court found not to be the case. The transfer of responsibilities to new employees and the continued operation of the department vitiated their consent. On the admission of evidence on appeal: The Court reiterated that it is not a trier of facts and that the admission of evidence is generally outside the scope of a certiorari proceeding under Rule 65. The petitioners' failure to present audited financial statements before the labor arbiter, who is in the proper position to evaluate evidence, was lamentable. Presenting these documents for the first time to the Court of Appeals on certiorari, and subsequently to the Supreme Court, could not be considered. The Court also noted that even the audited financial statements attached to the petition did not clearly show whether the losses were attributable to the brokerage department.
Main Doctrine
An employer invoking retrenchment to prevent losses or closure of a department must substantiate its claim of substantial business losses with clear and convincing evidence, typically audited financial statements. The hiring of new employees to perform the functions of terminated employees negates the claim of closure or retrenchment. Quitclaims are invalid if consent was vitiated by fraud or deceit.