McBurnie vs. Ganzon

A motion to reduce appeal bond before the NLRC, when filed with meritorious grounds and accompanied by the posting of a provisional cash or surety bond equivalent to 10% of the monetary award (exclusive of damages and attorney's fees), suspends the running of the 10-day reglementary period to perfect an appeal from the Labor Arbiter's decision. The NLRC retains authority to determine the final amount of bond after resolving the motion, and if it denies the motion or requires a greater amount, the appellant is given a fresh period of 10 days from notice to perfect the appeal.

McBurnie, an Australian national, entered into a five-year employment agreement with EGI-Managers, Inc. on May 11, 1999, ostensibly to serve as Executive Vice-President overseeing the management of the company's hotels and resorts in the Philippines. The respondents contended that the agreement was executed solely to facilitate McBurnie's application for an alien work permit and was subject to conditions set forth in a letter dated May 11, 1999 from respondent Eulalio Ganzon—namely, the successful completion of project financing for a Baguio hotel project and McBurnie's acquisition of an Alien Employment Permit. Neither condition was fulfilled. McBurnie never obtained the required employment permit from the Department of Labor, a prerequisite under Article 40 of the Labor Code for non-resident aliens seeking employment in the Philippines.

On May 11, 1999, Andrew James McBurnie, an Australian national, signed a five-year employment agreement with EGI-Managers, Inc. to serve as Executive Vice-President overseeing the management of the company's hotels and resorts in the Philippines. Respondent Eulalio Ganzon signed the agreement with the notation "per my note," referring to a letter of the same date stating that the contract was effective only when project financing for a Baguio hotel project pushed through, and that the agreement was executed to support McBurnie's need to facilitate a work permit with the Department of Labor. McBurnie performed work for the company until sometime in November 1999, when he figured in an accident that compelled him to return to Australia to recuperate. While in Australia, he was informed by Ganzon that his services were no longer needed because the intended project would not push through. At the time McBurnie left for Australia, he had not yet obtained an alien employment permit, and the Department of Labor certified that McBurnie had neither applied for nor been issued one.

On October 4, 2002, McBurnie filed a complaint for illegal dismissal and other monetary claims against the respondents. The respondents opposed the complaint, contending that their agreement with McBurnie was to jointly invest in and establish a company for hotel management, that no employer-employee relationship was intended, and that the employment contract was executed solely to allow McBurnie to obtain an alien work permit. On September 30, 2004, the Labor Arbiter declared McBurnie illegally dismissed, awarding US$985,162.00 as salary and benefits for the unexpired term of the employment contract, ₱2,000,000.00 as moral and exemplary damages, and attorney's fees equivalent to 10% of the total monetary award.

The respondents appealed to the NLRC, posting an appeal bond of ₱100,000.00 and filing a motion to reduce bond, arguing that the LA's monetary award was null and excessive and that they lacked the financial capacity to post the full amount due to business losses. The NLRC denied the motion to reduce bond on March 31, 2005, requiring an additional bond of ₱54,083,910.00, and subsequently dismissed the appeal on March 8, 2006 for failure to post the additional bond. The respondents elevated the matter to the Court of Appeals, which granted their petitions on October 27, 2008, allowing a reduced bond of ₱10,000,000.00 and ordering the remand of the case to the NLRC. The Supreme Court's Third Division, however, reversed the CA in a Decision dated September 18, 2009, reinstating the NLRC's dismissal of the respondents' appeal. Following the CA's remand, the NLRC rendered a Decision on November 17, 2009 reversing the LA and dismissing McBurnie's complaint, finding that McBurnie was never an employee but a potential investor, and that the employment agreement was void for lack of an alien employment permit. This NLRC decision was later set aside on January 14, 2010 upon McBurnie's motion for reconsideration, which cited the Supreme Court's September 18, 2009 Decision. The Supreme Court's September 18, 2009 Decision became final and executory on March 14, 2012, with entry of judgment made.

On March 27, 2012, the respondents filed a third motion for reconsideration with a motion to refer the cases to the Court En Banc. On September 4, 2012, the Court En Banc accepted the case from the Third Division and issued a temporary restraining order enjoining the implementation of the LA's decision. McBurnie filed a motion for reconsideration of the En Banc resolution, invoking the finality of the September 18, 2009 Decision. The NLRC's findings in its November 17, 2009 Decision—that McBurnie was never an employee of the respondents, that the employment agreement was void for lack of an alien employment permit, and that McBurnie was instead a potential investor whose project failed due to lack of funds—were supported by the case records and ultimately adopted by the Supreme Court in its October 17, 2013 Resolution.

• Finality of Judgment: McBurnie invoked the fact that the Court's Decision dated September 18, 2009 had become final and executory, with an entry of judgment already made by the Court, arguing against the En Banc's acceptance of the case and the issuance of the TRO.

• Procedural Error in Denying Second Motion for Reconsideration: The respondents contended that the Court's March 15, 2010 Resolution actually granted their motion for leave to submit a second motion for reconsideration, and therefore the subsequent January 25, 2012 Resolution could not deny the second motion on the ground that it was a prohibited pleading.
• Substantial Compliance Through ₱10 Million Bond: The respondents argued that the ₱10,000,000.00 bond posted in compliance with the CA's October 27, 2008 Decision constituted a substantial and special meritorious circumstance warranting reconsideration.
• Liberal Interpretation of Article 223: The respondents maintained that the Court has held in numerous labor cases that the requirements of Article 223 of the Labor Code should be given a liberal interpretation, especially where there are special meritorious circumstances.
• Patent Nullity of LA Judgment: The respondents asserted that the LA's judgment was patently void, as it awarded more than ₱60 Million to a single foreigner who had no work permit and no working visa.
• Failure to Implead NLRC: The respondents argued that McBurnie did not implead the NLRC in his appeal, rendering the appeal ineffective against the NLRC.
• NLRC Dismissal of Complaint: The respondents pointed out that the NLRC had already dismissed McBurnie's complaint in its November 17, 2009 Decision.
• Merits of the Case: The respondents raised multiple factual grounds, including McBurnie's non-attendance at LA hearings, his self-description as a victim of Leisure Experts, Inc. rather than any of the respondents, his positive letter to Ganzon showing he was not dismissed, his work for Coronado Beach Resort which was neither owned nor connected with the respondents, the absence of any evidence of dismissal by the respondents, his departure from the Philippines two months after the alleged employment agreement, and the impossibility of his personal appearance before the NLRC administering officer.

• Acceptance of Third Motion for Reconsideration: Whether the Court may accept and grant the respondents' third motion for reconsideration despite the general proscription against second and subsequent motions for reconsideration and the rule on immutability of judgments.
• Grave Abuse of Discretion by NLRC: Whether the NLRC committed grave abuse of discretion in outrightly denying the respondents' motion to reduce appeal bond without considering its merits.
• Perfection of Appeal: Whether the respondents perfected their appeal to the NLRC through the posting of a bond in a reasonable amount coupled with meritorious grounds.
• Dismissal of Complaint on the Merits: Whether McBurnie's complaint for illegal dismissal should be dismissed on the merits, considering the absence of an employer-employee relationship and his failure to obtain an alien employment permit.

• Acceptance of Third Motion for Reconsideration: Yes. The third motion for reconsideration was accepted in the higher interest of substantial justice, as the assailed Decision was legally erroneous, patently unjust, and potentially capable of causing unwarranted and irremediable injury to the respondents.
• Grave Abuse of Discretion by NLRC: Yes. The NLRC committed grave abuse of discretion in peremptorily denying the motion to reduce bond without considering the respondents' arguments, effectively refusing to exercise its discretion to determine meritorious grounds and the reasonableness of the bond tendered.
• Perfection of Appeal: Yes. The respondents perfected their appeal by posting a bond in a reasonable amount coupled with meritorious grounds, satisfying the conditions under Section 6, Rule VI of the NLRC Rules of Procedure as construed in prevailing jurisprudence.
• Dismissal of Complaint on the Merits: Yes. The complaint was dismissed because no employer-employee relationship existed between McBurnie and the respondents, and McBurnie failed to obtain the alien employment permit required under Article 40 of the Labor Code, rendering any employment agreement void.

• Acceptance of Third Motion for Reconsideration: While second and subsequent motions for reconsideration are generally prohibited under Section 2, Rule 52 of the Rules of Court, the Internal Rules of the Supreme Court (Section 3, Rule 15) allow exceptions in the higher interest of justice when the assailed decision is not only legally erroneous but likewise patently unjust and potentially capable of causing unwarranted and irremediable injury. The Court found that its prior March 15, 2010 Resolution granting the respondents' motion for leave to submit a second motion for reconsideration already warranted a resolution on the merits; the subsequent January 25, 2012 Resolution denying it as a prohibited pleading was erroneous. Consistent with precedents such as De Guzman vs. Sandiganbayan, Navarro vs. Executive Secretary, and Barnes vs. Judge Padilla, the Court may suspend its own rules or recall entries of judgment when the purposes of justice require it, particularly where matters of substantial justice, compelling circumstances, and the merits of the case so warrant.

• Grave Abuse of Discretion by NLRC: The NLRC outrightly denied the respondents' motion to reduce bond without considering their arguments, merely citing Calabash Garments vs. NLRC for the proposition that the employer is "unconditionally required" to post a bond equivalent to the monetary award. This was grave abuse of discretion because prevailing rules and jurisprudence—including Section 6, Rule VI of the NLRC Rules of Procedure and the line of cases from Garcia vs. KJ Commercial through Intertranz Container Lines, Inc. vs. Bautista—allow the reduction of appeal bonds upon meritorious grounds and the posting of a bond in a reasonable amount. The NLRC's refusal to exercise its discretion to determine whether meritorious grounds existed and whether the bond tendered was reasonable effectively denied the respondents their right to appeal.

• Perfection of Appeal: The Court clarified that the filing of a motion to reduce bond, coupled with compliance with the two conditions—(1) meritorious ground and (2) posting of a bond in a reasonable amount—suspends the running of the period to perfect an appeal. To require the full amount of the bond within the 10-day reglementary period would render nugatory the provisions allowing reduction. The respondents posted a bond of ₱10,000,000.00, which the Court deemed reasonable in light of the merits of their appeal—particularly the absence of an employer-employee relationship, the void nature of the employment agreement for lack of an alien employment permit, and the excessive and prohibitive amount of the LA's monetary award. The Court also established new guidelines requiring the posting of a provisional bond equivalent to 10% of the monetary award (exclusive of damages and attorney's fees) to suspend the running of the reglementary period, with the NLRC retaining authority to determine the final amount.

• Dismissal of Complaint on the Merits: Rather than remanding the case to the NLRC, the Court ruled directly on the dismissal of McBurnie's complaint, finding sufficient basis in the records for a proper evaluation. First, no employer-employee relationship was established: the employment agreement was subject to conditions in Ganzon's May 11, 1999 letter—project financing and acquisition of an alien employment permit—that never materialized. McBurnie failed to present evidence of payment of wages, such as payslips or vouchers, and did not satisfy the four-fold test for employer-employee relationship. Second, McBurnie never obtained an alien employment permit required under Article 40 of the Labor Code, rendering any employment agreement void for being contrary to law, pursuant to WPP Marketing Communications, Inc. vs. Galera. Third, the NLRC's findings in its November 17, 2009 Decision—that McBurnie was a potential investor, not an employee—were supported by the records. The Court found that a remand would serve no purpose and would only cause further delay, consistent with Medline Management, Inc. vs. Roslinda and Real vs. Sangu Philippines, Inc.

• Immutability of Judgments — Exceptions — A final and executory judgment can no longer be modified, but the Court has relaxed this rule to serve substantial justice considering: (a) matters of life, liberty, honor or property; (b) the existence of special or compelling circumstances; (c) the merits of the case; (d) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules; (e) a lack of any showing that the review sought is merely frivolous and dilatory; and (f) the other party will not be unjustly prejudiced thereby. The Court applied this doctrine to justify the acceptance of the respondents' third motion for reconsideration and the lifting of the entry of judgment, finding that the September 18, 2009 Decision was legally erroneous and patently unjust.

• Second and Subsequent Motions for Reconsideration — Exception in the Higher Interest of Justice — Under Section 3, Rule 15 of the Internal Rules of the Supreme Court, a second motion for reconsideration may be entertained by the Court En Banc upon a vote of at least two-thirds of its actual membership when the assailed decision is not only legally erroneous but likewise patently unjust and potentially capable of causing unwarranted and irremediable injury or damage to the parties. The Court found that the prior grant of leave to file a second motion for reconsideration (March 15, 2010 Resolution) meant the second motion was no longer a prohibited pleading, and the subsequent denial on that ground (January 25, 2012 Resolution) was erroneous.

• Appeal Bond in Labor Cases — Motion to Reduce Bond — The filing of a motion to reduce bond, coupled with (1) meritorious grounds and (2) posting of a bond in a reasonable amount, suspends the running of the period to perfect an appeal from the Labor Arbiter's decision to the NLRC. The NLRC has full discretion to grant or deny the motion and may rule beyond the 10-day reglementary period. If the NLRC grants the motion, the appeal is perfected; if denied, the appellant may file a motion for reconsideration; if still denied, the LA's decision becomes final. The Court established new guidelines: (a) a motion to reduce bond must be accompanied by a provisional cash or surety bond equivalent to 10% of the monetary award, exclusive of damages and attorney's fees; (b) compliance with these conditions suspends the running of the 10-day reglementary period; (c) the NLRC retains authority to determine the final amount; and (d) if the NLRC denies the motion or requires a greater amount, the appellant is given a fresh 10-day period from notice to perfect the appeal.

• Meritorious Grounds for Reduction of Appeal Bond — Meritorious grounds for the reduction of an appeal bond may include: the appellant's lack of financial capability to pay the full amount; the merits of the main appeal, such as a valid claim that there was no illegal dismissal to justify the award; the absence of an employer-employee relationship; prescription of claims; and other similarly valid issues raised in the appeal. The NLRC is not precluded from receiving evidence or making a preliminary determination of the merits of the appellant's contentions.

• Alien Employment Permit — Prerequisite to Valid Employment — Under Article 40 of the Labor Code, any alien seeking admission to the Philippines for employment purposes must obtain an employment permit from the Department of Labor. The absence of such a permit renders any employment agreement void for being contrary to law, and a void contract cannot be the source of any right or obligation. A foreign national who works without a proper work permit cannot claim employee benefits under Philippine labor laws, as this would sanction the violation of Philippine labor laws requiring aliens to secure work permits before employment.

• Employer-Employee Relationship — Four-Fold Test — The existence of an employer-employee relationship is determined by: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. The onus probandi falls on the claimant to establish the claim by the requisite quantum of evidence. McBurnie failed to satisfy this test, as he could not present evidence of payment of wages or other competent proof of an employer-employee relationship.

• Dispensing with Remand — When there is enough basis on which the Court may render a proper evaluation of the merits of the case, the Court may dispense with the time-consuming procedure of remanding a case to a labor tribunal to prevent delays in disposition, serve the ends of justice, and avoid further litigation. The Court applied this principle to dismiss McBurnie's complaint directly rather than remanding to the NLRC.

• "The filing of a motion to reduce bond and compliance with the two conditions stop the running of the period to perfect an appeal." — This passage, quoting Garcia vs. KJ Commercial, articulates the controlling rule that a motion to reduce bond, when properly accompanied by meritorious grounds and a reasonable bond amount, suspends the reglementary period for perfecting an appeal—a critical procedural protection for employers in labor cases.

• "To require the full amount of the bond within the 10-day reglementary period would only render nugatory the legal provisions which allow an appellant to seek a reduction of the bond." — This statement clarifies the interplay between the bond requirement and the motion to reduce bond, correcting the Court's prior erroneous pronouncement in the September 18, 2009 Decision that appellants must always post the full amount within the reglementary period.

• "Absent an employment permit, any employment relationship that McBurnie contemplated with the respondents was void for being contrary to law. A void or inexistent contract, in turn, has no force and effect from the beginning as if it had never been entered into." — This passage, quoting the NLRC's November 17, 2009 Decision, states the ratio decidendi for dismissing McBurnie's complaint: the absence of an alien employment permit rendered any employment agreement void ab initio, precluding any claim for illegal dismissal or monetary benefits under Philippine labor laws.

• "all motions to reduce bond that are to be filed with the NLRC shall be accompanied by the posting of a cash or surety bond equivalent to 10% of the monetary award that is subject of the appeal, which shall provisionally be deemed the reasonable amount of the bond in the meantime that an appellant's motion is pending resolution by the Commission." — This passage establishes the new doctrinal guideline promulgated by the Court, setting a concrete parameter for what constitutes a "reasonable amount" of provisional bond to accompany a motion to reduce appeal bond—a significant procedural innovation for labor litigation.

• Garcia vs. KJ Commercial, G.R. No. 196830, February 29, 2012 — Controlling precedent on the effect of filing a motion to reduce bond: compliance with the two conditions (meritorious ground and reasonable amount) suspends the running of the period to perfect an appeal. The Court relied on this case to clarify that the appellant may wait for the NLRC's ruling on the motion even beyond the 10-day period.

• De Guzman vs. Sandiganbayan, 326 Phil. 182 (1996) — Followed for the principle that the power to suspend or disregard rules of procedure can be so pervasive as to alter even that which the Court has declared final, and that technicalities should yield to the realities of the situation when substantial justice demands.

• WPP Marketing Communications, Inc. vs. Galera, G.R. No. 169207, March 25, 2010 — Controlling precedent on the alien employment permit requirement: a foreign national's failure to secure an employment permit prior to employment bars recovery of employee benefits under Philippine labor laws, as granting such relief would sanction the violation of Philippine labor laws.

• Nicol vs. Footjoy Industrial Corporation, 555 Phil. 275 (2007) — Followed for the guidelines on when the bond requirement may be relaxed: (1) substantial compliance with the Rules; (2) meritorious grounds to reduce the bond; (3) liberal interpretation serving the objective of resolving controversies on the merits; or (4) the appellant's willingness and good faith by posting a partial bond during the reglementary period.

• Intertranz Container Lines, Inc. vs. Bautista, G.R. No. 187693, July 13, 2010 — Followed for the exceptional circumstances under which the appeal bond requirement may be relaxed: (1) fundamental consideration of substantial justice; (2) prevention of miscarriage of justice or unjust enrichment; and (3) special circumstances combined with legal merits, amount, and issue involved.

• Rosewood Processing, Inc. vs. NLRC, 352 Phil. 1013 (1998) — Followed for the principle that labor determinations should be made not only according to reason but also according to equity ("secundum rationem but also secundum caritatem"), and that substantial compliance with bond requirements may suffice when clear merits appear in the appeal.

• University Plans Incorporated vs. Solano, G.R. No. 170416, June 22, 2011 — Followed for the principle that the NLRC's authority to reduce bond is not a matter of right on the part of the movant but lies within the sound discretion of the NLRC upon a showing of meritorious grounds.

• League of Cities of the Philippines (LCP) vs. Commission on Elections, G.R. No. 176951, February 15, 2011 — Followed for the principle that when a motion for leave to file and admit a second motion for reconsideration is granted by the Court, the second motion for reconsideration is no longer a prohibited pleading.

• Barnes vs. Judge Padilla, 482 Phil. 903 (2004) — Followed for the exceptions to the immutability of judgments, enumerating the circumstances under which a final and executory judgment may be reconsidered to serve substantial justice.

• Medline Management, Inc. vs. Roslinda, G.R. No. 168715, September 15, 2010 — Followed for the principle that the Court may dispense with remand when there is enough basis to render a proper evaluation of the merits, to prevent delays and serve the ends of justice.

• Article 223, Labor Code (now Article 224) — Governs appeals from the Labor Arbiter to the NLRC, requiring the posting of a cash or surety bond equivalent to the monetary award for an employer's appeal to be perfected. The Court interpreted this provision in conjunction with Section 6, Rule VI of the NLRC Rules of Procedure, clarifying that the bond requirement admits of reduction upon meritorious grounds and the posting of a reasonable amount.

• Section 6, Rule VI, 2011 NLRC Rules of Procedure — Provides that no motion to reduce bond shall be entertained except on meritorious grounds and upon the posting of a bond in a reasonable amount in relation to the monetary award. The Court applied this provision to establish the new guideline requiring a provisional bond of 10% of the monetary award (exclusive of damages and attorney's fees) to accompany motions to reduce bond.

• Article 40, Title II, Labor Code — Requires any alien seeking admission to the Philippines for employment purposes to obtain an employment permit from the Department of Labor. The Court applied this provision to hold that McBurnie's failure to obtain an alien employment permit rendered any employment agreement void for being contrary to law, precluding his claim for illegal dismissal and monetary benefits.

• Section 2, Rule 52, Rules of Court — Prohibits second motions for reconsideration of a judgment or final resolution by the same party. The Court recognized this as the general rule but applied the exception under Section 3, Rule 15 of the Internal Rules of the Supreme Court, allowing second motions for reconsideration in the higher interest of justice.

• Section 3, Rule 15, Internal Rules of the Supreme Court — Provides that a second motion for reconsideration may be entertained by the Court En Banc upon a vote of at least two-thirds of its actual membership when the assailed decision is legally erroneous, patently unjust, and potentially capable of causing unwarranted and irremediable injury. The Court invoked this provision to justify acceptance of the respondents' third motion for reconsideration.

• Section 2, Rule I, NLRC Rules of Procedure — Provides that the Rules shall be liberally construed to carry out the objectives of the Constitution, the Labor Code, and other relevant legislation, and to assist the parties in obtaining just, expeditious, and inexpensive resolution of labor disputes. The Court relied on this policy directive to support the liberal interpretation of the appeal bond requirement.

Chief Justice Maria Lourdes P. A. Sereno (Chairperson), Associate Justice Antonio T. Carpio, Associate Justice Presbitero J. Velasco, Jr., Associate Justice Teresita J. Leonardo-De Castro, Associate Justice Arturo D. Brion, Associate Justice Diosdado M. Peralta, Associate Justice Lucas P. Bersamin, Associate Justice Mariano C. Del Castillo (on official leave), Associate Justice Roberto A. Abad (on official leave), Associate Justice Martin S. Villarama, Jr., Associate Justice Jose Portugal Perez, and Associate Justice Jose Catral Mendoza.

N/A. Associate Justice Estela M. Perlas-Bernabe took no part. Associate Justice Marvic Mario Victor F. Leonen was on official leave. No dissenting opinions were filed.