Martos vs. New San Jose Builders, Inc.

Failure to verify a position paper in labor proceedings warrants dismissal of the complaint without prejudice, and the liberal construction of procedural rules cannot rescue complainants who consistently neglected to rectify their procedural defect despite ample opportunity to do so.

New San Jose Builders, Inc. is a domestic corporation engaged in the construction of roads, bridges, buildings, and low-cost houses primarily for the government. One of its projects is the San Jose Plains Project (SJPP) in Montalban, Rizal, also known as "Erap City," which calls for the construction of low-cost housing units turned over to the National Housing Authority for award to deserving poor families. The petitioners were workers who claimed to have been hired by respondent on various dates and in different positions for the SJPP and other projects.

The petitioners were workers hired by New San Jose Builders, Inc. on various dates and in different positions for the San Jose Plains Project (SJPP) in Montalban, Rizal, a low-cost housing project also known as "Erap City," which involved the construction of houses turned over to the National Housing Authority for award to deserving poor families. Sometime in 2000, respondent was constrained to slow down and suspend most of the works on the SJPP due to lack of funds from the National Housing Authority. Workers were informed that many would be laid off and the rest reassigned to other projects. Juan Villaber, Terso Garay, Rowell Batta, Pastor Pantig, Rafael Villa, and Melvin Garay were among those laid off. On the other hand, Felix Martos, Ariel Dominguez, Greg Bisonia, Allan Caballera, Orlando Limos, Mandy Mamalateo, Eric Castrence, Anthony Molina, and Roy Silva were among those retained and issued new appointment papers indicating they were project employees. However, they refused to sign the appointment papers as project employees and subsequently refused to continue working.

On different dates, three complaints for illegal dismissal and money claims were filed before the NLRC against respondent and Jose Acuzar: one dated March 11, 2002, docketed as NLRC-NCR Case No. 03-01639-2002 (Felix Martos, et al. vs. NSJBI); another dated July 9, 2002, docketed as NLRC-NCR Case No. 07-04969-2002 (Jimmy Campana, et al. vs. NSJBI); and a third dated July 4, 2002, docketed as NLRC-NCR Case No. 07-02888-2002 (Greg Bisonia, et al. vs. NSJBI). The three complaints were consolidated and assigned to Labor Arbiter Facundo Leda. Respondent denied that the workers were illegally dismissed, alleging they were project employees whose employments were automatically terminated upon completion of the project for which they were hired. The workers, for their part, claimed they were regular employees continuously employed until their dismissal on February 28, 2002.

The Labor Arbiter, on May 23, 2003, declared Martos illegally dismissed and entitled to separation pay, backwages, and other monetary benefits, while dismissing without prejudice the complaints of the other complainants. Both parties appealed to the NLRC. On July 30, 2008, the NLRC dismissed respondent's appeal and partially granted the petitioners' appeal, ordering reinstatement of all complainants with full backwages, salary differentials, service incentive leave pay, and 13th month pay. Respondent filed a petition for certiorari under Rule 65 before the CA, which on July 31, 2009 reversed the NLRC and reinstated the LA decision. The CA found that the NLRC committed grave abuse of discretion in reviving the complaints of petitioners despite their failure to verify the position paper—out of 102 complainants, only Martos verified. The CA also held that the factual circumstances of Martos' employment could not equally apply to the other petitioners because they were not similarly situated, and that the NLRC inappropriately granted monetary awards to petitioners who had either denied filing a case or withdrawn it. As to Martos, the CA ruled he was a regular employee because respondent failed to present employment contracts showing he was a project employee, and respondent did not report the termination to DOLE as required under Department Order No. 19. Being a regular employee, Martos was constructively dismissed when asked to sign a new appointment paper indicating he was a project employee co-terminus with the project.

• Verification as Formal Defect: Petitioners argued that the lack of verification of a position paper is only a formal and not a jurisdictional defect, and that the CA could have required them to submit the needed verification rather than dismissing their complaints.
• Substantial Compliance: Petitioners insisted that all of them verified their complaints by declaring under oath relevant and material facts such as their names, addresses, employment status, salary rates, causes of action, and reliefs common to all, and that the information supplied was sufficient to prove their employment status and entitlement to monetary claims.
• Liberal Construction in Labor Cases: Petitioners maintained that in the adjudication of labor cases, adherence to stringent technical rules may be relaxed in the interest of the working man, and that respondent failed to adduce evidence of payment of their money claims.
• Similarly Situated: Petitioners argued that they and Martos were similarly situated and should receive the same relief, including reinstatement and full backwages.
• Strained Relations Not Established: Petitioners contended that the award of separation pay instead of reinstatement was improper because strained relations between the parties was not clearly established.
• Damages: Petitioners claimed entitlement to actual, moral, and exemplary damages for respondent's illegal act of violating labor standard laws, the minimum wage law, and the 13th month pay law.

• Verification Requirement: Respondent countered that the CA and LA correctly dismissed the complaints of the 88 petitioners who failed to verify their position paper, without prejudice, and correctly ruled that they were not entitled to reinstatement.
• Waiver Through Neglect: Respondent argued that petitioners should be considered to have waived their rights and interests for their consistent neglect and passive attitude, as only Felix Martos verified the position paper and the memorandum of appeal.
• Lack of Authorization: Respondent maintained that Martos was never authorized by any of his fellow complainants through a special power of attorney or other document to represent them before the LA and the NLRC, and that his acts and verifications were made only in his personal capacity and did not bind or benefit the other petitioners.
• Strangers to Respondent: Respondent argued that the logical reason why most petitioners failed to verify was that they were not employees of respondent at all—they were total strangers who refused to identify themselves during the proceedings by their failure to appear.
• Strained Relations: Respondent contended that reinstatement was no longer practicable due to strained relations, an issue petitioners never raised before the NLRC and only raised after losing in the CA.
• No Damages: Respondent argued that no proof of actual damages was presented and that there was no clear and convincing evidence that termination was carried out in an arbitrary, capricious, or malicious manner.

• Verification of Position Papers: Whether the CA was correct in dismissing the complaints filed by those petitioners who failed to verify their position papers.
• Reinstatement of Martos: Whether Martos should be reinstated or awarded separation pay in lieu thereof.

• Verification of Position Papers: Yes. The CA correctly dismissed the complaints of the 99 petitioners who failed to verify their position papers, the dismissal having been brought about by their own negligence and passive attitude in failing to rectify a curable procedural defect despite ample opportunity.
• Reinstatement of Martos: No. Reinstatement was no longer practicable due to strained relations between the parties; separation pay was awarded in lieu of reinstatement, the issue of strained relations never having been raised before the NLRC and only raised after Martos lost his appeal in the CA.

• Verification of Position Papers: The verification requirement is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of imagination or speculation, and that the pleading is filed in good faith. A pleading required to be verified which lacks proper verification shall be treated as an unsigned pleading, and the absence of a proper verification is cause to treat the pleading as unsigned and dismissible. While verification is deemed substantially complied with when one who has ample knowledge signs the verification, the lone signature of Martos would have sufficed only if he was authorized by his co-petitioners to sign for them—which petitioners failed to prove. The liberal construction of rules may be invoked where there is some excusable formal deficiency, provided it does not subvert the essence of the proceeding and connotes a reasonable attempt at compliance. Rules of procedure are meant to facilitate, not thwart, the attainment of justice, and their rigid application may be subordinated for deserving reasons; however, they ought to be relaxed only when there is subsequent or substantial compliance. Because the LA's dismissal was without prejudice, the other complainants should have taken steps to rectify their procedural mistake by filing another complaint with the correct verification. They did not, and worse, committed the same error when they filed their appeal with the NLRC. Their dismissal was thus due to their own negligence and passive attitude. Moreover, the list submitted was incomplete, and respondent alleged that only 17 out of approximately 104 complainants appeared on its records as former project employees, while several executed sworn statements withdrawing their complaints. Their status and cause of action not being clear and proven, it was not proper to consider them similarly situated as Martos.

• Reinstatement of Martos: The reinstatement sought by Martos was no longer practicable because of strained relations between the parties. This issue was never raised or taken up on appeal before the NLRC; it was only after Martos lost the appeal in the CA that he raised it. Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when the latter is no longer desirable or viable. Such payment liberates the employee from what could be a highly oppressive work environment and releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. Separation pay in lieu of reinstatement may likewise be awarded if the employee decides not to be reinstated. Accordingly, the Court deemed it fair to award separation pay in lieu of reinstatement, together with full backwages, 13th month pay, service incentive leave pay, and attorney's fees.

• Verification of Pleadings — Verification is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of imagination or speculation, and that the pleading is filed in good faith. A pleading required to be verified which lacks proper verification shall be treated as an unsigned pleading, and the absence of a proper verification is cause to treat the pleading as unsigned and dismissible. Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations signs the verification, and when matters alleged have been made in good faith or are true and correct. However, a single signatory's verification suffices for co-parties only if he was duly authorized by them to sign on their behalf; absent proof of such authorization, the verification does not bind or benefit the co-parties.

• Liberal Construction of Procedural Rules — The liberal construction of rules may be invoked in situations where there is some excusable formal deficiency or error in a pleading, provided that the same does not subvert the essence of the proceeding and at least connotes a reasonable attempt at compliance. Rules of procedure are meant not to thwart but to facilitate the attainment of justice; their rigid application may, for deserving reasons, be subordinated by the need for substantial justice. They ought to be relaxed when there is subsequent or even substantial compliance. However, liberal construction cannot rescue parties who consistently neglect to rectify a curable procedural defect despite ample opportunity, as such passivity constitutes waiver of their rights.

• Doctrine of Strained Relations — Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when reinstatement is no longer desirable or viable. Such payment liberates the employee from what could be a highly oppressive work environment and releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. Separation pay in lieu of reinstatement may likewise be awarded if the employee decides not to be reinstated. The doctrine applies where the issue of strained relations is not disputed or where the employee fails to timely contest the finding of strained relations before the proper tribunal.

• "The verification requirement is significant, as it is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith." — This passage defines the purpose and significance of the verification requirement in pleadings, articulating the rationale underlying the rule.

• "The liberal construction of the rules may be invoked in situations where there may be some excusable formal deficiency or error in a pleading, provided that the same does not subvert the essence of the proceeding and it at least connotes a reasonable attempt at compliance with the rules." — This articulates the limits of liberal construction of procedural rules, establishing that liberality presupposes at least a reasonable attempt at compliance and cannot excuse persistent neglect.

• "Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the employee from what could be highly oppressive work environment. On the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust." — This states the canonical formulation of the doctrine of strained relations and its dual rationale, frequently cited in illegal dismissal cases involving the alternative of separation pay.

• Nellie Vda. de Formoso vs. Philippine National Bank, G.R. No. 154704, June 1, 2011, 650 SCRA 35 — Followed as controlling precedent. The Formoso petitioners suffered the same fate of dismissal for failure to verify, where only one of seven petitioners signed the verification without proof of authorization from the others. The Court applied the same principle to the 99 petitioners who failed to verify their position papers.

• Christine Chua vs. Jorge Torres & Antonio Beltran, 505 Phil. 455 (2005) — Cited for the proposition that the absence of a proper verification is cause to treat the pleading as unsigned and dismissible.

• Georgia T. Estel vs. Recaredo P. Diego, Sr., G.R. No. 174082, January 16, 2012, 663 SCRA 17 — Cited for the rule that verification is deemed substantially complied with when one who has ample knowledge signs the verification and the matters alleged are true and correct or made in good faith.

• Edito Pagadora vs. Julieta S. Ilao, G.R. No. 165769, December 12, 2011, 662 SCRA 14 — Cited for the proposition that the rule on verification is not inflexible and allows for liberality.

• Golden Ace Builders and Arnold U. Azul vs. Jose A. Talde, G.R. No. 187200, May 5, 2010, 620 SCRA 283 — Cited as the source of the doctrine of strained relations and the award of separation pay in lieu of reinstatement.

• Sections 4 and 5, Rule 7, 1997 Rules of Civil Procedure — Section 4 defines verification and provides that a pleading required to be verified which lacks proper verification shall be treated as an unsigned pleading. Section 5 requires certification against forum shopping and provides that failure to comply shall be cause for dismissal without prejudice. The Court applied these provisions to uphold the dismissal of the unverified complaints of the 99 petitioners.

• Section 6, Rule 1, 1997 Rules of Civil Procedure — Provides that the Rules shall be liberally construed to promote their objective of securing a just, speedy, and inexpensive disposition of every action and proceeding. The Court cited this provision in discussing the limits of liberal construction, noting that liberality presupposes at least a reasonable attempt at compliance.

• Department Order No. 19 — Requires employers to report termination of project employees to the Department of Labor and Employment. The CA noted respondent's failure to comply with this requirement, supporting the finding that Martos was a regular employee rather than a project employee.

• 2005 Revised Rules of Procedure of the NLRC — Requires parties to submit simultaneously their verified position papers with supporting documents and affidavits. Respondent argued that petitioners disregarded these mandatory provisions, which the Court found meritorious given the petitioners' consistent failure to verify.

Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, Arturo D. Brion, and Diosdado M. Peralta.