FIRST DIVISION

[G.R. No. 164518. January 25, 2006.]

INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD

GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC
and TOMAS TAN , petitioners, vs . VIRGILIO ABABON, IGNACIO
ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA,
BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO
ADVINCULA, GERTRUDES AMPARO, VIRGILIO ANTONIO, MILA
ARQUITA, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUTIDA,
ALICIA AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO
BANATE, LOLITA BATAN, RAMIL BUTALON, CARMILITA CAINGLES,
VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO,
ALFREDO CARILLO, NILA CARILLO, ALGER CORBETA, GREGORIO
DABALOS, TERESITA DABALOS, VENERANDO DALAUTA, RICARDO
DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO
DUMULAO, EDITHA DUMANON, ALFREDO FAELNAR, RAUL FORTUN,
MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE,
VERGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO,
SERGIO HORO-HORO, FRANCISCO IBARRA, ABRAHAM JALE, DANDY
LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA, VICTORIA LOOD,
NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS MAKINANO,
REMEGIO MAKINANO, VICENTE MAKINANO, REYNALDO MASUHAY,
HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA MONTEROSO,
GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR.,
ELISEO ORONGAN, ARMANDO OROPA, ASUNCION OROPA, JOSE
EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME PAGALAN,
DAMASO PALOMA, MANALO PLAZA, JEREMIAS PELAEZ,
FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO QUINTOS,
FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC
RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE
SON, SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA TABANAO,
PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN,
TOLENTINO TEE, ROGELIO TAMADA, MINDA TUMAOB and
ROBERTO TUTOR , respondents.

[G.R. No. 164965. January 25, 2006.]

VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY,

EDITH ABREA, SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO
ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO,
MILA ARQUITA, VIRGILIO ANTONIO, PRUDENCIO ARQUITA, ALBERT
ATON, WARLITA AUDITA, ALICIA AWITAN, LEOPOLDO AYATON,
ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL
BUTALON, CARMELITA CAINGLES, VICENTE CAHARIAN, BENEDICTA
CAJIPE, FELIPE CALLANO, ALFREDO CARILLO, NILA CARILLO,
ALGIER CORBETA, GREGORIO DABALOS, TERESITA DABALOS,
VENERANDO DALAUTA, RICARDO DANGCULOS, MONTANO
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 DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA
DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA,
ANGELES GALUPO, PERFECTO GAMBE, VIRGINITA GANGCA,
RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HOR-HORO,
FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA
LAMBANG, ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JR.,
ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO,
VICENTE MAKINANO, REYNALDO MAHUSAY, HELEN MARATAS,
ELIZABETH MENDOZA, GUILBERTA MONTEROSO, GILDA NAVALTA,
PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN,
ARMANDO OROPA, ASUNCION OROPA, JOSE EDWIN OROPA,
BALDEMAR PAGALAN, BARTOLOME PAGALAN, DAMASO PALOMA,
MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL,
HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL QUITA, FELICIANO
RANADA, RODOLFO RARU, LEAN CILDRIC RODRIGUEZ, SAMUEL
SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA,
VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO TABANAO, ROBERTO
TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO
TAMADA, MINDA TUMAOB, and ROBERTO TUTOR , petitioners, vs. THE
HONORABLE COURT OF APPEALS, INDUSTRIAL TIMBER
CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION,
TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN ,
respondents.

Gutierrez Sundiam Villanueva & Doronila for Industrial Timber Corp., et al.
Wilfred D. Asis for V. Ababon, et al.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; LIBERAL

APPLICATION OF TECHNICAL RULES AND PROCEDURE BEFORE THE NLRC AND
LABOR ARBITERS BEST SERVE SUBSTANTIAL JUSTICE; CASE AT BAR. — 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 ling 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. 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.
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 2. ID.; ID.; ID.; PETITION FOR RELIEF OF NLRC RESOLUTION ALLOWED
DESPITE PROCEDURAL DEFECT IN CASE AT BAR. — 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
led within 10 calendar days from receipt of the order, resolution or decision should
not be interpreted as to sacri ce 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 ling 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."
3. ID.; ID.; TERMINATION OF EMPLOYMENT; RIGHT TO CLOSE OPERATION
OF ESTABLISHMENT, AN AUTHORIZED CAUSE IN TERMINATING EMPLOYMENT;
KINDS OF CLOSURE. — 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. . . . A reading of
Article 283 of the Labor Code shows that a partial or total closure or cessation of
operations of establishment or undertaking may either be due to serious business
losses or nancial reverses or otherwise. Under the rst kind, the employer must
su ciently and convincingly prove its allegation of substantial losses, while under the
second kind, the employer can lawfully close shop anytime as long as cessation of or
withdrawal from business operations was bona de in character and not impelled by a
motive to defeat or circumvent the tenurial rights of employees, and as long as he pays
his employees their termination pay in the amount corresponding to their length of
service. 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 just because
the business is not suffering from any loss or because of the desire to provide the
workers continued employment.
4. ID.; ID.; ID.; REQUIREMENTS FOR A VALID CESSATION OF BUSINESS; CASE
AT BAR. — 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 de 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 nd 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.
5. ID.; ID.; ID.; ID.; EMPLOYEES ENTITLED TO SEPARATION PAY, NOT
BACKWAGES, WHEN CLOSURE IS VALID; CASE AT BAR. — Having established that
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 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 nd 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.
6. ID.; ID.; ID.; ID.; REQUIREMENT OF ONE MONTH PRIOR NOTICE OF
CLOSURE DUE TO AUTHORIZED CAUSE GIVEN TO DOLE AND EMPLOYEES; STIFF
SANCTION IMPOSED UPON EMPLOYER FOR NON-COMPLIANCE THEREWITH; CASE
AT BAR. — Although the closure was done in good faith and for valid reasons, we nd
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, 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 noti ed 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
nal notice of closure or cessation of business operations to take effect on the same
day it was released. We nd 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. . . . 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 in rmity 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. 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.

DECISION

YNARES-SANTIAGO , J : p

Before us are two petitions for review under Rule 45 of the Rules of Court. G.R.
No. 164518 assails the October 21, 2002 Decision 1 of the Court of Appeals, in CA-G.R.
SP No. 51966, which set aside the May 24, 1995 Decision 2 of the National Labor
Relations Commission (NLRC), as well as the July 16, 2004 Resolution 3 denying its
motion for reconsideration. G.R. No. 164965 assails only the July 16, 2004 Resolution
of the Court of Appeals which denied their partial motion for reconsideration. These
cases were consolidated because they arose out of the same facts set forth below.
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 ve years. 4 Thereafter, ITC commenced operation
of the plywood plant and hired 387 workers.
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 On March 16, 1990, ITC noti ed 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 noti ed ITC of the expiration of the lease contract in August
1990 and its intention not to renew the same.
On June 26, 1990, ITC noti ed 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 nal notice of closure or cessation of business
operations on August 17, 1990 with an advice for all the workers to collect the bene ts
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 le 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 ction 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 1/2 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. 1 0
ITC and IPGC led a Motion for Reconsideration through JRS, a private courier,
on June 24, 1993. 1 1 However, it was dismissed for being led out of time having been
led only on the date of actual receipt by the NLRC on June 29, 1993, three days after
the last day of the reglementary period. 1 2 Thus, they led a Petition for Relief from
Resolution, 1 3 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. 1 4
From said dismissal, petitioners led a Notice of Appeal with the Supreme Court.
15 Subsequently, they led a Motion for Reconsideration/Second Petition for Relief with
the NLRC. 1 6
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 On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for
being a wrong mode of appeal from the NLRC decision. 1 7 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. HcACST

SO ORDERED. 1 8

On October 2, 1995, Virgilio Ababon, et al. led a Petition for Certiorari with the
Supreme Court, which was docketed as G.R. No. 121977. 1 9 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. 2 0
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. 2 1

Both parties led 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. 2 2
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. 2 3

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 le motion for reconsideration within the reglementary period. While they
admit ling 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.

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 Ordinarily, once a judgment has become nal and executory, it can no longer be
disturbed, altered or modi ed. 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: 2 4
It is true that after a judgment has become nal and executory, it can no
longer be modi ed 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 modi cation 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 ling 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. 2 5
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. 2 6
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 led within 10 calendar days from receipt of
the order, resolution or decision should not be interpreted as to sacri ce 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
ling 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." 2 7
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 signi cance 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
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 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. 2 8
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 nancial 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 nancial reverses or otherwise. Under the rst kind, the employer must
su ciently and convincingly prove its allegation of substantial losses, 2 9 while under
the second kind, the employer can lawfully close shop anytime 3 0 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, 3 1 and as long as
he pays his employees their termination pay in the amount corresponding to their
length of service. 3 2 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. 3 3
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 de 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 nd that ITC's closure or cessation of business
was done in good faith and for valid reasons. ESCTaA

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
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 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. 3 4
(Emphasis supplied)

Moreover, the lack of raw materials used for milling operations was a rmed in
Industrial Timber Corporation v. National Labor Relations Commission 3 5 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.
I n Shoppers Gain Supermarket v. National Labor Relations Commission , 3 6 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 nd 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 nd 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, 3 7 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 noti ed 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 nal notice of closure or cessation of business operations
to take effect on the same day it was released. We nd 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
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 employees and the DOLE at least one month before the intended date of closure.
In Ariola v. Philex Mining Corporation, 3 8 we held:
I n 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 in rmity 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 ed 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 in rmity 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. 3 9
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-G.R. 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 nding 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.

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 Footnotes
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-
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 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.

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