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BANI RURAL BANK v. TERESA DE GUZMAN

FACTS:

The petitioners, Bani Rural Bank, Inc., ENOC Theater I and II, and Rafael de Guzman, are seeking a review of the decision of the Court of Appeals (CA) in CA-G.R. SP No. 70085. Respondents Teresa de Guzman and Edgar C. Tan filed a complaint for illegal dismissal against the petitioners. The National Labor Relations Commission (NLRC) ruled in favor of the respondents and ordered the petitioners to reinstate them to their former positions, with backwages from the time of their dismissal until their actual reinstatement. The NLRC's ruling became final and executory, and the computation of the awards was remanded to the labor arbiter. Initially, the labor arbiter computed the backwages until August 25, 1995, based on a manifestation made by the respondents. However, the NLRC reversed the labor arbiter's computation and awarded separation pay instead, due to the strained relations between the parties. The NLRC's decision became final and the computation was referred back to the labor arbiter. The petitioners then filed a motion to quash the writ of execution and suspend further execution, arguing that the backwages should only be computed until August 25, 1995. The labor arbiter granted the petitioners' motion, but the NLRC reversed the decision on appeal. The case now goes to the Supreme Court.

ISSUES:

  1. Whether the NLRC was justified in modifying its final March 17, 1995 resolution awarding reinstatement and backwages to the respondents.

  2. Whether the NLRC was correct in awarding separation pay in lieu of reinstatement due to the strained relations between the parties.

  3. Whether the Court of Appeals correctly determined the absence of grave abuse of discretion in the NLRC's ruling.

  4. Whether the computation of backwages and separation pay in the NLRC's decision is consistent with the provisions of law and jurisprudence.

  5. What is the basis of computation for backwages in cases of illegal dismissal?

  6. How is the computation of backwages affected when there is an order of separation pay in lieu of reinstatement?

  7. Whether the computation of the respondents' backwages should be from the time of their illegal dismissal until the date of finality of the NLRC's decision.

RULING:

  1. The NLRC was justified in modifying its final March 17, 1995 resolution. The existence of strained relations between the parties was considered a supervening event that warranted the modification. The NLRC based its conclusion on the conduct of the parties during the first execution proceedings, where there was a delay in the respondents' reinstatement and conflicting claims on whether the respondents wanted to be reinstated. The NLRC observed that neither party actually took steps to implement the reinstatement decree, indicating the strained relations between them. Therefore, the modification of the resolution was valid and cannot be disturbed after it became final.

  2. The NLRC was correct in awarding separation pay in lieu of reinstatement due to the strained relations between the parties. The NLRC concluded that the award of reinstatement was no longer possible and instead awarded separation pay. The Court held that unless exceptional reasons are presented, these findings and conclusions cannot be disturbed once they became final.

  3. The Court finds no reversible error committed by the Court of Appeals when it found no grave abuse of discretion in the NLRC's ruling.

  4. The computation of backwages and separation pay in the NLRC's decision is consistent with the provisions of law and jurisprudence.

  5. The computation of backwages in cases of illegal dismissal depends on the final awards adjudged as a consequence of illegal dismissal. When reinstatement is ordered, backwages are computed from the time of dismissal until the employee's reinstatement. The computation of backwages can even continue beyond the decision of the labor arbiter or NLRC and ends only when the employee is actually reinstated. When separation pay is ordered in lieu of reinstatement or when reinstatement is waived by the employee, backwages are computed from the time of dismissal until the finality of the decision ordering separation pay.

  6. When there is an order of separation pay in lieu of reinstatement, the employment relationship is terminated only upon the finality of the decision ordering the separation pay. Backwages no longer accumulate upon the finality of the decision ordering the payment of separation pay since the employee is no longer entitled to any compensation from the employer by reason of the severance of employment.

  7. The respondents' backwages should be computed from the time of their illegal dismissal until January 29, 1999, the date of finality of the NLRC's decision.

PRINCIPLES:

  • A final judgment may not be altered, amended, or modified, even by the highest court, except in cases of supervening events.

  • The existence of strained relations between the parties can be considered a supervening event that justifies the modification of a final decision.

  • The award of separation pay in lieu of reinstatement is justified when strained relations between the parties make reinstatement no longer possible.

  • In a Rule 45 review of a Court of Appeals (CA) decision in a labor case, the Court's review is limited to the determination of whether the CA correctly resolved the presence or absence of grave abuse of discretion in the decision of the Secretary of Labor, and not on the basis of whether the latter's decision on the merits of the case was strictly correct. The review is confined to questions of law raised against the CA decision.

  • Grave abuse of discretion, amounting to lack or excess of jurisdiction, is defined as the capricious and whimsical exercise of judgment equivalent to lack of jurisdiction. It is present when the exercise of power is arbitrary or despotic due to passion or personal hostility, and must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.

  • The computation of backwages and separation pay in illegal dismissal cases is guided by Article 279 of the Labor Code. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, full backwages, inclusive of allowances, and other benefits or their monetary equivalents computed from the time compensation was withheld until actual reinstatement.

  • Separation pay may be awarded in lieu of reinstatement to an illegally dismissed employee in certain instances, such as when reinstatement is no longer possible, the relationship between the employer and employee is no longer viable due to strained relations, or when the employee opts not to be reinstated or the payment of separation benefits is for the best interest of the parties involved.

  • The computation of backwages and separation pay are different. Backwages are computed from the time compensation was withheld until actual reinstatement, while separation pay is based on the length of the employee's service. An illegally dismissed employee is entitled to either reinstatement or separation pay, and both remedies are exclusive.

  • The computation of backwages depends on the final awards adjudged as a consequence of illegal dismissal, whether reinstatement or separation pay is ordered.

  • When reinstatement is ordered, backwages are computed until the employee's reinstatement.

  • When separation pay is ordered in lieu of reinstatement or when reinstatement is waived by the employee, backwages are computed until the finality of the decision ordering separation pay.

  • The finality of the decision ordering separation pay cuts-off the employment relationship and represents the final settlement of the rights and obligations of the parties.

  • Backwages no longer accumulate upon the finality of the decision ordering the payment of separation pay since the employee is no longer entitled to any compensation from the employer.

  • Once a decision of the NLRC becomes final, it becomes a judgment for money and is subject to the payment of interest in case of delay. This is not barred by the principle of immutability of judgment as it is compensatory interest arising from the final judgment.

  • Backwages should be computed from the time of illegal dismissal until the date of finality of the NLRC's decision.

  • The labor arbiter is ordered to make another recomputation of the monetary awards based on the above directives.