Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at Agusan, Pequeño, Butuan City, leased to Industrial Timber Corporation (ITC) on August 30, 1985 for a period of five years.^[4] Thereafter, ITC commenced operation of the plywood plant and hired 387 workers.

On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and its workers that effective March 19, 1990 it will undergo a "no plant operation" due to lack of raw materials and will resume only after it can secure logs for milling.^[5]

Meanwhile, IPGC notified ITC of the expiration of the lease contract in August 1990 and its intention not to renew the same.

On June 26, 1990, ITC notified the DOLE and its workers of the plant's shutdown due to the non-renewal of anti-pollution permit that expired in April 1990.^[6] This fact and the alleged lack of logs for milling constrained ITC to lay off all its workers until further notice. This was followed by a final notice of closure or cessation of business operations on August 17, 1990 with an advice for all the workers to collect the benefits due them under the law and CBA.^[7]

On October 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing Plant Permit No. WPR-1004-081791-042,^[8] which included the anti-pollution permit, by the Department of Environment and Natural Resources (DENR) coincidentally on the same day the ITC ceased operation of the plant.

This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for illegal dismissal, unfair labor practice and damages. They alleged, among others, that the cessation of ITC's operation was intended to bust the union and that both corporations are one and the same entity being controlled by one owner.

On January 20, 1992, after requiring both parties to submit their respective position papers, Labor Arbiter Irving A. Petilla rendered a decision which refused to pierce the veil of corporate fiction for lack of evidence to prove that it was used to perpetuate fraud or illegal act; upheld the validity of the closure; and ordered ITC to pay separation pay of ½ month for every year of service. The dispositive portion of the decision reads:

PREMISES CONSIDERED, judgment is hereby rendered ordering respondent Industrial Timber Corporation (ITC) to pay herein ninety-seven individual complainants their separation pay at the rate of one-half (1/2) month's pay for every year of service, a fraction of at least six (6) months to be considered as one whole year, reckoned until August 1990.

All other claims of complainants are hereby ordered DISMISSED for want of merit.

SO ORDERED.^[9]

Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the decision of the Labor Arbiter and ordered the reinstatement of the employees to their former positions, and the payment of full back wages, damages and attorney's fees.^[10]

ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on June 24, 1993.^[11] However, it was dismissed for being filed out of time having been filed only on the date of actual receipt by the NLRC on June 29, 1993, three days after the last day of the reglamentary period.^[12] Thus, they filed a Petition for Relief from Resolution,^[13] which was treated as a second motion for reconsideration by the NLRC and dismissed for lack of merit in a Resolution dated September 29, 1994.^[14]

From said dismissal, petitioners filed a Notice of Appeal with the Supreme Court.^[15] Subsequently, they filed a Motion for Reconsideration/Second Petition for Relief with the NLRC.^[16]

On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for being a wrong mode of appeal from the NLRC decision.^[17] On the other hand, the NLRC granted the Second Petition for Relief and set aside all its prior decision and resolutions. The dispositive portion of the May 24, 1995 decision reads:

WHEREFORE, the decision of this Commission dated May 10, 1993 and its subsequent resolutions dated June 22, 1994 and September 29, 1994 are Set Aside and Vacated. Accordingly, the appeal of complainants is Dismissed for lack of merit and the decision of the Labor Arbiter dated January 20, 1992 is Reinstated and hereby Affirmed.

SO ORDERED.^[18]

On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the Supreme Court, which was docketed as G.R. No. 121977.^[19] However, pursuant to our ruling in St. Martin's Funeral Home v. NLRC, we referred the petition to the Court of Appeals for appropriate action and disposition.^[20]

On October 21, 2002, the Court of Appeals rendered a decision setting aside the May 24, 1995 decision of the NLRC and reinstated its May 20, 1993 decision and September 29, 1993 resolution, thus:

WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995 of the National Labor Relations Commission is ANNULLED and SET ASIDE, with the result that its decision dated May 20, 1993 and resolution dated September 29, 1994 are REINSTATED.

SO ORDERED.^[21]

Both parties filed their respective motions for reconsideration which were denied, hence, the present consolidated petitions for review based on the following assigned errors:

In G.R. No. 164518

THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE RULES OF PROCEDURE WITH RESPECT TO RESPONDENTS BUT BEING RIGID IN ITS APPLICATION AS REGARDS PETITIONERS.^[22]

In G.R. No. 164965

WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT REFUSED TO APPLY SECTION 279 OF THE LABOR CODE AS AMENDED BY RA 6715 TO MODIFY THE DECISION OF 20 MAY 1993 WITH RESPECT TO BACKWAGES FOR PETITIONERS.^[23]

ITC and IPGC contend that the Court of Appeals erred in reversing the May 24, 1995 decision of the NLRC since its May 20, 1993 decision had become immutable for their failure to file motion for reconsideration within the reglementary period. While they admit filing their motion for reconsideration out of time due to excusable negligence of their counsel's secretary, however, they advance that the Court of Appeals should have relaxed the rules of technicality in the paramount interest of justice, as it had done so in favor of the employees, and ruled on the merits of the case; after all, the delay was just three days.

Ordinarily, once a judgment has become final and executory, it can no longer be disturbed, altered or modified. However, this rule admits of exceptions in cases of special and exceptional nature as we held in Industrial Timber Corporation v. National Labor Relations Commission:^[24]

It is true that after a judgment has become final and executory, it can no longer be modified or otherwise disturbed. However, this principle admits of exceptions, as where facts and circumstances transpire which render its execution impossible or unjust and it therefore becomes necessary, "in the interest of justice, to direct its modification in order to harmonize the disposition with the prevailing circumstances."

A careful scrutiny of the facts and circumstances of these consolidated cases warrants liberality in the application of technical rules and procedure. We agree with the NLRC that substantial justice is best served by allowing the petition for relief despite procedural defect of filing the motion for reconsideration three days late, for to rule otherwise, a greater injustice would be done to ITC by ordering it to reinstate the employees to their former positions that no longer exist due to valid and legitimate cessation of business and pay huge judgment award.^[25]

Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise of its appellate powers, correct, amend, or waive any error, defect or irregularity whether in substance or in form. Further, Article 221 of the same code provides that in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.^[26]

Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the NLRC that a motion for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within 10 calendar days from receipt of the order, resolution or decision should not be interpreted as to sacrifice substantial justice to technicality. It should be borne in mind that the real purpose behind the limitation of the period is to forestall or avoid an unreasonable delay in the administration of justice, from which the NLRC absolved ITC and IPGC because the filing of their motion for reconsideration three days later than the prescribed period was due to excusable negligence. Indeed, the "Court has the power to except a particular case from the operation of the rule whenever the purposes of justice requires it because what should guide judicial action is that a party is given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, honor, or property on mere technicalities."^[27]

We now come to the main issues of whether Ababon, et al. were illegally dismissed due to the closure of ITC's business; and whether they are entitled to separation pay, backwages, and other monetary awards.

Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor provisions in the Constitution dictate so. On the other hand, employers are also accorded rights and privileges to assure their self-determination and independence, and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine whether an employer's privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking.^[28]

The right to close the operation of an establishment or undertaking is one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code.

Article 283 of the Labor Code 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. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

A reading of the foregoing law shows that a partial or total closure or cessation of operations of establishment or undertaking may either be due to serious business losses or financial reverses or otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of substantial losses,^[29] while under the second kind, the employer can lawfully close shop anytime^[30] as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees,^[31] and as long as he pays his employees their termination pay in the amount corresponding to their length of service.^[32] Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management's prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.^[33]

In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the employees of termination pay amounting to one month pay or at least one-half month pay for every year of service, whichever is higher.

In these consolidated cases, we find that ITC's closure or cessation of business was done in good faith and for valid reasons.

The records reveal that the decision to permanently close business operations was arrived at after a suspension of operation for several months precipitated by lack of raw materials used for milling operations, the expiration of the anti-pollution permit in April 1990, and the termination of the lease contract with IPGC in August 1990 over the plywood plant at Agusan, Pequeño, Butuan City. We quote with approval the observation of the Labor Arbiter:

As borne out from the records, respondent ITC actually underwent "no plant operation" since 19 March 1990 due to lack of log supply. This fact is admitted by complainants (Minutes of hearing, 28 October 1991). Since then several subsequent incidents prevented respondent ITC to resume its business operations e.g. expiration and non-renewal of the wood processing plant permit, anti-pollution permit, and the lease contract on the plywood plant. Without the raw materials respondent ITC has nothing to produce. Without the permits it cannot lawfully operate the plant. And without the contract of lease respondent ITC has no option but to cease operation and turn over the plant to the lessor.^[34] (Emphasis supplied)

Moreover, the lack of raw materials used for milling operations was affirmed in Industrial Timber Corporation v. National Labor Relations Commission^[35] as one of the reasons for the valid closure of ITC's Butuan Logs Plant in 1989. In said case, we upheld the management prerogative to close the plant as the only remedy available in order to prevent imminent heavy losses on account of high production costs, erratic supply of raw materials, depressed prices and poor market conditions for its wood products.

In Shoppers Gain Supermarket v. National Labor Relations Commission,^[36] we held that the non-renewal of petitioner corporation's lease contract and its consequent closure and cessation of operations may be considered an event beyond petitioner's control, in the nature of a force majeure situation. As such, it amounts to an authorized cause for termination of the private respondents.

Having established that ITC's closure of the plywood plant was done in good faith and that it was due to causes beyond its control, the conclusion is inevitable that said closure is valid. Consequently, Ababon, et al. could not have been illegally dismissed to be entitled to full backwages. Thus, we find it no longer necessary to discuss the issue regarding the computation of their backwages. However, they are entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher.

Although the closure was done in good faith and for valid reasons, we find that ITC did not comply with the notice requirement. While an employer is under no obligation to conduct hearings before effecting termination of employment due to authorized cause,^[37] however, the law requires that it must notify the DOLE and its employees at least one month before the intended date of closure.

In the case at bar, ITC notified its employees and the DOLE of the "no plant operation" on March 16, 1990 due to lack of raw materials. This was followed by a "shut down" notice dated June 26, 1990 due to the expiration of the anti-pollution permit. However, this shutdown was only temporary as ITC assured its employees that they could return to work once the renewal is acted upon by the DENR. On August 17, 1990, the ITC sent its employees a final notice of closure or cessation of business operations to take effect on the same day it was released. We find that this falls short of the notice requirement for termination of employment due to authorized cause considering that the DOLE was not furnished and the notice should have been furnished both the employees and the DOLE at least one month before the intended date of closure.

In Ariola v. Philex Mining Corporation,^[38] we held:

In Agabon v. National Labor Relations Commission and Jaka Food Processing Corporation v. Pacot, the Court sustained the dismissals for just cause under Article 282 and for authorized cause under Article 283 of the Labor Code, respectively, despite non-compliance with the statutory requirement of notice and hearing. The grounds for the dismissals in those cases, namely, neglect of duty and retrenchment, remained valid because the non-compliance with the notice and hearing requirement in the Labor Code did not undermine the validity of the grounds for the dismissals. Indeed, to invalidate a dismissal merely because of a procedural defect creates absurdity and runs counter to public interest. We explained in Agabon:

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy.

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employer's exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.^[39]

In light of the factual circumstances of the cases at bar, we deem it wise and reasonable to award P50,000.00 to each employee as nominal damages.

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-GR. SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITC's motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITC's business valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month pay or to at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee.

SO ORDERED.

Panganiban, C.J., Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

---

^[1] Rollo (G.R. No. 164518), pp. 41-52. Penned by Associate Justice Edgardo P. Cruz and concurred in by Associate Justices Oswaldo D. Agcaoili and Amelita G. Tolentino.

^[2] Id. at 85-101. Penned by Commissioner Musib M. Buat and concurred in by Leon G. Gonzaga, Jr. Commissioner Oscar N. Abella, dissented.

^[3] Id. at 53-54.

^[4] CA rollo, pp. 130-131.

^[5] Id. at 121.

^[6] Id. at 122.

^[7] Id. at 123.

^[8] Id. at 124.

^[9] Rollo (G.R. No. 164518), p. 68.

^[10] Id. at 83-84. Penned by Commissioner Oscar N. Abella and concurred in by Commissioners Leon G. Gonzaga, Jr. and Musib M. Buat.

^[11] CA rollo, pp. 214-222.

^[12] Id. at 223-225.

^[13] Id. at 227-235.

^[14] Id. at 236-240.

^[15] Id. at 256-259, docketed as G.R. No. 117825.

^[16] Id. at 241.

^[17] Id. at 260.

^[18] Rollo (G.R. No. 164518), p. 100.

^[19] CA rollo, pp. 4-26.

^[20] Id. at 610.

^[21] Rollo (G.R. No. 164518), p. 52.

^[22] Id. at 21.

^[23] Rollo (G.R. No. 164965), p. 22.

^[24] G.R. No. 111985, June 30, 1994, 233 SCRA 597, 601.

^[25] Rollo (G.R. No. 164518), p. 93.

^[26] See Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458 SCRA 609, 628.

^[27] Philippine Commercial Industrial Bank v. Cabrera, G.R. No. 160368, March 31, 2005, 454 SCRA 792, 801.

^[28] Capitol Medical Center, Inc. v. Meris, G.R. No. 155098, September 16, 2005, SC E-Library.

^[29] Alabang Country Club, Inc. v. National Labor Relations Commission, G.R. No. 157611, August 9, 2005, SC E-Library.

^[30] Id.

^[31] Danzas Intercontinental, Inc. v. Daguman, G.R. No. 154368, April 15, 2005, 456 SCRA 382, 393.

^[32] Capitol Medical Center, Inc. v. Meris, supra note 28.

^[33] Alabang Country Club, Inc. v. NLRC, supra note 29.

^[34] Rollo (G.R. No. 164518), p. 64.

^[35] 339 Phil. 395, 401, 404-405 (1997).

^[36] 328 Phil. 756, 771 (1996).

^[37] See Wiltshire File Co., Inc. v. National Labor Relations Commission, G.R. No. 82249, February 7, 1991, 193 SCRA 665, 676.

^[38] G.R. No. 147756, August 9, 2005, SC E-Library.

^[39] San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 431.