Square Meter Trading Construction v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondents, construction workers hired by petitioner Square Meter Trading Construction and its proprietor Lito C. Pascual between 2002 and 2008, filed two separate complaints. The first complaint (NCR-02-02511-11) was for money claims (underpayment of wages, overtime pay, holiday pay, service incentive leave, and 13th month pay) for the years 2007-2010. The second complaint (NCR-04-06754-11, consolidated with NCR-06-08563-11) alleged illegal dismissal and unfair labor practices, seeking damages and attorney's fees. In the first case, the Labor Arbiter (LA) dismissed the money claims due to lack of probative value of supporting documents and found that Oscar Borja was not an employee, which the National Labor Relations Commission (NLRC) affirmed. However, the Court of Appeals (CA) reversed the NLRC, declaring private respondents (except Borja) as project employees entitled to monetary benefits and remanding the case for computation, a decision that became final. In the second case, the LA ruled that private respondents were regular employees, not project employees, due to petitioners' failure to present evidence meeting DOLE Department Order No. 19, Series of 1993 indicators for project employment, finding them illegally dismissed but not victims of unfair labor practice, and ordering reinstatement with backwages and attorney's fees. The NLRC initially dismissed the appeal for insufficient bond but later reinstated it, reversing the LA's decision based on res judicata due to the prior CA ruling in the first case. The CA, however, reversed the NLRC, holding that res judicata did not apply due to the lack of identity of causes of action and affirmed the LA's ruling that private respondents were regular employees who were illegally dismissed. Procedural History: Petitioners assailed the CA's decision and resolution via a petition for certiorari under Rule 65, arguing that the CA committed grave abuse of discretion by violating the doctrine of res judicata. The CA had denied petitioners' motion for reconsideration for being filed late. The Petition: Petitioners contend that the CA violated the principle of res judicata by relitigating the nature of private respondents' employment, which they claim was already determined in the first case. Private respondents argue that certiorari under Rule 65 was the wrong remedy and that the CA correctly applied res judicata.
Issue(s)
Whether a petition for certiorari under Rule 65 is the proper remedy. Whether the CA 12th Division's Decision in CA-G.R. SP No. 124979, finding private respondents as project employees, precluded litigation of the issues in the present case based on res judicata. Whether the private respondents were regular employees of petitioners. Whether petitioners dismissed private respondents with just or authorized cause and with due process; and the propriety of damages and attorney's fees.
Ruling
The Supreme Court ruled that the petition is partially meritorious. It held that a petition for certiorari under Rule 65 is generally not the proper remedy to assail a CA decision when an appeal under Rule 45 is available. However, in the interest of justice, the Court resolved the substantive merits. The Court found that res judicata in the concept of 'conclusiveness of judgment' applies only to private respondent Oscar Borja. For the other private respondents, the Court affirmed the CA's ruling that they were regular employees who were illegally dismissed, ordering petitioners to pay backwages, separation pay in lieu of reinstatement, legal interest, moral and exemplary damages, and attorney's fees. The case was remanded for computation.
Ratio Decidendi
On the propriety of the remedy: The Court reiterated that a special civil action for certiorari under Rule 65 is not the proper remedy to assail a decision of the Court of Appeals when an appeal by certiorari under Rule 45 is available. Petitioners had lost their chance to file a Rule 45 petition by filing their motion for reconsideration four days late. Despite this procedural lapse, the Court opted to resolve the case on its merits in the interest of justice, particularly concerning the application of res judicata in labor cases. On res judicata and conclusiveness of judgment: The Court clarified that res judicata has two concepts: 'bar by prior judgment' and 'conclusiveness of judgment.' 'Bar by prior judgment' requires identity of parties, subject matter, and causes of action, which was not present here as the first case involved pure money claims while the second involved illegal dismissal. 'Conclusiveness of judgment' applies when there is identity of parties but not causes of action, making a prior judgment conclusive only on matters actually and directly controverted and determined. The Court found that the nature of employment was not the primary issue directly controverted and determined in the first case concerning the other private respondents, thus res judicata did not bar the second case for them. However, for Oscar Borja, the prior determination that he was not an employee was conclusive, precluding him from filing an illegal dismissal case. On the nature of employment: The Court affirmed the CA's ruling that private respondents, except Borja, were regular employees. Petitioners failed to present evidence meeting the indicators of project employment under DOLE Department Order No. 19, Series of 1993, such as defined project duration and scope, and crucially, failed to file termination reports with the DOLE after each project completion. This failure created a presumption of regularity of employment under Article 295 of the Labor Code. On illegal dismissal, due process, damages, and attorney's fees: Since private respondents were found to be regular employees, they were entitled to security of tenure and could only be dismissed for just or authorized cause and with due process. Petitioners failed to prove any just or authorized cause and did not comply with the two-notice requirement. The Court noted that private respondents, after a long wait for resolution, expressed that reinstatement might no longer be feasible, thus ordering separation pay in lieu of reinstatement. The Court found that the dismissals were effected with ill will and in bad faith, justifying the award of moral and exemplary damages. The petitioners' baseless assertion of project employment and denial of due process, especially given the timing of dismissals after the first case was filed, indicated malice. Attorney's fees were also awarded at 10% of the total monetary award, consistent with Article 2208 of the New Civil Code.
Main Doctrine
The doctrine of res judicata, specifically 'conclusiveness of judgment,' applies only to issues actually and directly controverted and determined, not to matters merely involved. In labor cases, the determination of whether an employee is a project employee or a regular employee requires specific evidence, and the failure to present such evidence, particularly the required termination reports to the DOLE, leads to the presumption of regularity of employment.