Veterans Federation Of The Philippines v. Montenejo

JR., J.:

This case is an appeal1 from the Decision dated July 29, 20082 and Resolution dated October 2, 20083 of the Court of Appeals (CA) in CA-G.R. SP No. 101041. The Facts VFP. VFPIA and the VMDC Petitioner Veteran's Federation of the Philippines (VFP) is a national federation of associations of Filipino war veterans.

It was created in 1960 by virtue of Republic Act No. 2640.4 In 1967, through the government's Proclamation No. 192, VFP was able to obtain control and possession of a vast parcel of land located in Taguig. VFP eventually developed said land into an industrial complex, which is now known as the VFP Industrial Area (VFPIA). Respondent VFP Management and Development Corporation (VMDC), on the other hand, is a private management company organized in 1990 pursuant to the general incorporation law.

The Management Agreement and its Termination On January 4, 1991, VFP entered into a management agreement5 In managing and operating the VFPIA, VMDC hired its own personnel and employees. Among those hired by VMDC were respondents Eduardo L. Montenejo, Mylene M. Bonifacio, Evangeline E. Valverde and Deana N. Pagal (hereafter collectively referred to as "Montenejo, et al.").6 The management agreement between VFP and VMDC had a term of five (5) years, or up to 4 January 1996, and is renewable for another five (5) years.7 Subsequently, both parties acceded to extend the agreement up to 1998.8 After 1998, the agreement was again extended by VFP and VMDC albeit only on a month-to-month basis. Then, in November 1999, the VFP board passed a resolution terminating the management agreement effective December 31, 1999.9 VMDC conceded to the termination and eventually agreed to turn over to VFP the possession of all buildings, equipment and other properties necessary to the operation of the VFPIA.10 On January 3, 2000, the President of VMDC11 issued a memorandum12 informing the company's employees of the termination of their services effective at the close of office hours on January 31, 2000 "[i]n view of the termination of the [management agreement]."

True to the memorandum's words, on January 31, 2000, VMDC dismissed all of its employees and paid each his or her separation pay. The Illegal Dismissal Complaint Contending in the main that their dismissals had been effected without cause and observance of due process, Montenejo, et al. filed before the Labor Arbiter (LA) a complaint for illegal dismissal,13 money claims and damages. They impleaded both VMDC and VFP as defendants in the complaint.

VMDC, for its part, denied the contention. It argued that the dismissals of Montenejo, et al. were valid as they were due to an authorized cause-the cessation or closure of its business. VMDC claimed that the cessation of its operations was but the necessary consequence of the termination of such agreement.

VFP, on the other hand, seconded the arguments of VMDC. In addition, however, VFP asserted that it could not, at any rate, be held liable under the complaint because it is not the employer of Montenejo, et al. The Ruling of the LA On November 7, 2005, the LA rendered a decision14 disposing of the illegal dismissal complaint as follows:

WHEREFORE, judgment is hereby made dismissing as lacking in merit the [Montenejo et al.'s] charge of illegal dismissal but ordering [VFP] and [VMDC] to pay, solidarily, each complainant his/her salaries for eleven (11) months. [VFP and VMDC] are so ordered to recompute their separation pay with the date January 4, 2001 as their last day of service and accordingly pay them their balance. [VFP and VMDC] are also ordered to pay, solidarily, [Montenejo et al. 's] proportionate 13th month pay for the year 2000. Other claims are dismissed for lack of merit. SO ORDERED. The LA hinged its disposition on the following findings:15 1. Montenejo, et al. were not illegally dismissed. Their separation was the result of the closure of VMDC, an authorized cause. Hence, Montenejo, et al. are not entitled to reinstatement and backwages. 2. Montenejo, et al. were contractual employees; they were hired for a definite term that is similar to the maximum term of the management agreement between VFP and VMDC. As the management agreement between VFP and VMDC can have a maximum term of ten (10) years from January 4, 1991, or until January 4, 2001, the employments of Montenejo, et al. also have terms of up to January 4, 2001. In this case, however, Montenejo, et al. were dismissed on January 3, 2000-which is eleven (11) months short of their January 4, 2001 contract date. Accordingly, Montenejo, et al. are each entitled: (a) to their salary corresponding to the unexpired portion of their contract and (b) also to a separation pay computed with January 4, 2001 as their last day of employment. 3. Montenejo, et al. are not entitled to recover damages. Their dismissals were not shown to be tainted with bad faith. 4. VFP and VMDC are solidarily liable for the monetary awards in favor of Montenejo, et al. The basis of VFP's liability is the fact that it is an indirect employer of Montenejo, et al. Montenejo, et al. and VFP filed separate appeals16 with the National Labor Relations Commission (NLRC). The Ruling of the NLRC On appeal, the NLRC reversed and set aside17 the decision of the LA. It decreed: WHEREFORE, premises considered, the appeal is GRANTED. The Decision of [the LA] dated November 7, 2005 is hereby REVERSED[,] SET ASIDE and a NEW ONE entered declaring that [VFP and VMDC] ILLEGALLY DISMISSED [Montenejo et al.]. [VFP and VMDC] are therefore ordered to pay [Montenejo et al.' s] separation pay in lieu of reinstatement and to pay them full backwages, 13th month pay and SLIP (sic), as computed below: A. EDUARDO L. MONTENEJO Rate: ₱30,000.00 VP for Operation Cut-off date: 8/7/06 Pd: 1/1/91-1/4/0l(GIVEN) 1)SEP. PAY (1 MO.): 1/1/91-8/7/06 ₱30,000.00 x 16 yrs.= ₱480,000.00 2)BACKWAGES: 1/4/01-8/7/06 ₱30,000.00 x 67.10 = ₱2,013,000.00 13th MO. PAY: ₱2,013,000/12 = 167,750.00 2,180,750.00 ₱2,660,750.00 Less: Amt. already rcvd (See, Annexes "2-5, "pp. 358-361, Vol. II, Records) 175,000 TOTAL: