*

G.R. No. 148132. January 28, 2008.

SMART COMMUNICATIONS, INC., petitioner, vs.REGINA M. ASTORGA, respondent.

*
G.R. No. 151079. January 28, 2008.

SMART COMMUNICATIONS, INC., petitioner, vs.REGINA M. ASTORGA, respondent.

*
G.R. No. 151372. January 28, 2008.

REGINA M. ASTORGA, petitioner,  vs.  SMART COMMUNICATIONS, INC. and ANN

MARGARET V. SANTIAGO, respondents.

Actions; Provisional Remedies; Replevin; Words and Phrases;Replevin is an action whereby the owner

or person entitled to repossession of goods or chattels may recover those goods or chattels from one who has
wrongfully distrained or taken, or who wrongfully detains such goods or chattels; The term may refer
either to the action itself, for the recovery of personality, or to the provisional remedy traditionally
associated with it, by which possession of the property may be obtained by the plaintiff and retained
during the pendency of the action.—Replevin  is an action whereby the owner or person entitled to
repossession of goods or chattels may recover those goods or chattels from one who has wrongfully
distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one having
right to possession to recover property in specie from one who has wrongfully taken or detained the
property. The term may refer either to the action itself, for the recovery of personalty, or to the
provisional remedy traditionally associated with it, by which possession of the property may be obtained
by the plaintiff and retained during the pendency of the action.

Same;  Same;  Same;  Jurisdictions;  Labor Law;  An employer’s demand for payment of the market
value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute; A

_______________

* THIRD DIVISION.

435

VOL. 542, JANUARY 28, 2008 435

Smart Communications, Inc. vs. Astorga

dispute which involves the relationship of debtor and creditor rather than employee-employer
relations falls within the jurisdiction of the regular courts.—Contrary to the CA’s ratiocination, the RTC
rightfully assumed jurisdiction over the suit and acted well within its discretion in denying Astorga’s
motion to dismiss. SMART’s demand for payment of the market value of the car or, in the alternative,
the surrender of the car, is not a labor, but a civil, dispute. It involves the relationship of debtor and
creditor rather than employeeemployer relations. As such, the dispute falls within the jurisdiction of the
regular courts.

Labor Law;  Termination of Employment;  Redundancy;  Management Prerogatives;  Words and

Phrases; Redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication
of work; A position is redundant where it is superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the
enterprise; The characterization of an employee’s services as superfluous or no longer necessary and,
therefore, properly terminable, is an exercise of business judgment on the part of the employer. The
wisdom and soundness of such characterization or decision is not subject to discretionary review provided,
of course, that a violation of law or arbitrary or malicious action is not shown.—Astorga was terminated
due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of
redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co.,
Inc. v. National Labor Relations Commission, 193 SCRA 665 (1991),  viz.: x x x redundancy in an
employer’s personnel force necessarily or even ordinarily refers to duplication of work. That no other
person was holding the same position that private respondent held prior to termination of his services
does not show that his position had not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of
one person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as overhir-

436

436 SUPREME COURT REPORTS

ANNOTATED

Smart Communications, Inc. vs. Astorga

ing of workers, decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise. The characterization of an employee’s
services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of
business judgment on the part of the employer. The wisdom and soundness of such characterization or
decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary or
malicious action is not shown.

Same;  Same;  Same;  Due Process;  The validity of termination can exist independently of the
procedural infirmity of the dismissal.—SMART’s assertion that Astorga cannot complain of lack of notice
because the organizational realignment was made known to all the employees as early as February 1998
fails to persuade. Astorga’s actual knowledge of the reorganization cannot replace the formal and written
notice required by the law. In the written notice, the employees are informed of the specific date of the
termination, at least a month prior to the effectivity of such termination, to give them sufficient time to
find other suitable employment or to make whatever arrangements are needed to cushion the impact of
termination. In this case, notwithstanding Astorga’s knowledge of the reorganization, she remained
uncertain about the status of her employment until SMART gave her formal notice of termination. But
such notice was received by Astorga barely two (2) weeks before the effective date of termination, a
period very much shorter than that required by law. Be that as it may, this procedural infirmity would
not render the termination of Astorga’s employment illegal. The validity of termination can exist
independently of the procedural infirmity of the dismissal. In  DAP Corporation v. CA, 477 SCRA 792
(2005), we found the dismissal of the employees therein valid and for authorized cause even if the
employer failed to comply with the notice requirement under Article 283 of the Labor Code. This Court
upheld the dismissal, but held the employer liable for noncompliance with the procedural requirements.

PETITIONS for review on certiorari of the decisions and resolutions of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Picazo, Buyco, Tan, Fider & Santos for Smart Communications, Inc. and Ann Margaret
V. Santiago.
437
 VOL. 542, JANUARY 28, 2008 437
Smart Communications, Inc. vs. Astorga

     Federico C. Leynes & Partners for Regina Astorga.

NACHURA, J.:

For the resolution of the Court are three consolidated petitions for review on certiorari under
1
Rule 45 of the Rules of Court. G.R.
2
No. 148132 assails the February 28, 2000 Decision  and the
May 7, 2001 Resolution   of the Court of Appeals (CA) in  CA-G.R.
3
SP. No. 53831.  G.R. Nos.
151079 and 4
151372  question the June 11, 2001 Decision   and the December 18, 2001
Resolution  in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications,
Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales
Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary
of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely, annual
performance incentive equivalent to 30% of her annual gross salary, a group 5
life and
hospitalization insurance coverage, and a car plan in the amount of P455,000.00.
In February 1998, SMART launched an organizational realignment to achieve 6
more
efficient operations. This was made known to the employees on February 27, 1998.  Part of the
reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered
into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multime-

_______________
1  Penned by Associate Justice Elvi John S. Asuncion (dismissed), with Associate Justices Corona Ibay-Somera
(retired) and Portia Aliño-Hormachuelos, concurring; Rollo (G.R. No. 148132), pp. 146-152.
2 Rollo, pp. 164-165.
3 Penned by Associate Justice Romeo Brawner (retired), with Associate Justices Remedios Salazar-Fernando and

Josefina Guevara-Salonga, concurring; Rollo (G.R. No. 151079), pp. 24-36.

4 Id., at pp. 42-45.
5 Rollo (G.R. No. 151372), pp. 58-59.
6 Rollo (G.R. No. 151079), p. 46.

438

438 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

dia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work,
SMART abolished the CSMG/FSD, Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who
would be recommended by SMART. SMART then conducted a performance evaluation of
CSMG personnel and those who garnered the highest ratings were favorably recommended to
SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended by
SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on
March 3, 1998, SMART issued a memorandum advising Astorga of the termination of her
employment
7
on ground of redundancy, effective April 3, 1998. Astorga received it on March 16,
1998. 8
The termination of her employment prompted Astorga to file a Complaint   for illegal
dismissal, non-payment of salaries and other benefits with prayer for moral and exemplary
damages against SMART and Ann Margaret V. Santiago (Santiago). She claimed that
abolishing CSMG and, consequently, terminating her employment was illegal for it violated
her right to security of tenure. She also posited that it was illegal for an employer, like
SMART, to contract out 9
services which will displace the employees, especially if the contractor
is an in-house agency.
SMART responded that there was valid termination. It argued that Astorga was dismissed
by reason of redundancy, which is an authorized cause for termination of employment, and the
dismissal was effected in accordance with the re-

_______________
7 Rollo (G.R. No. 151372), p. 62.
8 Id., at pp. 40-42.
9 Id., at pp. 43-54.

439

VOL. 542, JANUARY 28, 2008 439

Smart Communications, Inc. vs. Astorga

quirements of the Labor Code. The redundancy of Astorga’s position was the result of the
abolition of CSMG and the creation of a specialized and more technically10
equipped SNMI,
which is a valid and legitimate exercise of management prerogative.
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay
the current market value of the Honda Civic Sedan which was given to her under the
company’s 11car plan program, or to surrender the same to the company for proper
disposition.  Astorga, however, failed and refused to do either, thus prompting SMART to file
a suit for replevin with the Regional Trial Court of Makati (RTC) on August
12
10, 1998. The case
was docketed as Civil Case No. 981936 and was raffled to Branch 57.
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to
state a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the
regular courts have no jurisdiction over the complaint because the subject thereof pertains to a
benefit arising from an employment contract;
13
hence, jurisdiction over the same is vested in the
labor tribunal and not in regular courts.
Pending resolution
14
of Astorga’s motion to dismiss the  replevin  case, the Labor Arbiter
rendered a Decision  dated August 20, 1998, declaring Astorga’s dismissal from employment
illegal. While recognizing SMART’s right to abolish any of its departments, the Labor Arbiter
held that such right should be exercised in good faith and for causes beyond its control. The
Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the
control of SMART, but a ploy to terminate Astorga’s employment. The Arbiter also

_______________
10 Id., at pp. 68-78.
11 Rollo (G.R. No. 148132), p. 47.
12 Id., at pp. 30-34.
13 Id., at pp. 51-59.
14 Rollo (G.R. No. 151372), pp. 79-92.

440

440 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga
ruled that contracting out the functions performed by Astorga to an in-house agency like
SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
“WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and
unjust. [SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of
seniority rights and other privileges, with full backwages, inclusive of allowances and other benefits from
the time of [her] dismissal to the date of reinstatement, which computed as of this date, are as follows:

(a) Astorga
  BACKWAGES; (P33,650.00 x 4 =
months) P134,600.00
  UNPAID SALARIES (February 15,  
1998-
April 3, 1998
            February 15-28, 1998 =P
16,823.00
            March 1-31, [1998] =P
33,650.00
            April 1-3, 1998 = P 3,882.69
  CAR MAINTENANCE = P 8,000.00
ALLOWANCE 
(P2,000.00 x 4)
  FUEL ALLOWANCE (300 =P
liters/mo. x  14,457.83
4 mos. at P12.04/liter)
                                     TOTAL =
P211,415.52

xxxx
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary
damages in the amount of P300,000.00. x x x
4. Jointly and severally
15
pay 10% of the amount due as attorney’s fees.
SO ORDERED.”

_______________
15 Id., at pp. 90-92.

441

VOL. 542, JANUARY 28, 2008 441

Smart Communications, Inc. vs. Astorga
16
Subsequently, on March 29, 1999, the RTC issued an Order   denying Astorga’s motion to
dismiss the replevincase. In so ruling, the RTC ratiocinated that:

“Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.
 As correctly pointed out, this case is to enforce a right of possession over a company car assigned to
the defendant under a car plan privilege arrangement. The car is registered in the name of the plaintiff.
Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is
undoubtedly within the jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant
refused to return said car. This is clearly sufficient statement of plaintiff’s cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the
judgment in the labor dispute will not constitute res judicata to bar the filing of this case.
WHEREFORE, the 17
Motion to Dismiss is hereby denied for lack of merit.
SO ORDERED.”
18
Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.
Astorga elevated
19
the denial of her motion via certiorarito the CA, which, in its February 28,
2000 Decision, reversed the RTC ruling. Granting the petition and, consequently, dismissing
the replevin case, the CA held that the case is intertwined with Astorga’s complaint for illegal
dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint.
SMART’s motion for reconsideration having

_______________
16 Rollo (G.R. No. 148132), pp. 79-80.
17 Id.
18 Id., at p. 110.
19 Id., at pp. 146-152.

442

442 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga
20
been denied,  it elevated the case to this Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal
dismissal21case to the National Labor Relations Commission (NLRC). In its September 27, 1999
Decision,  the NLRC sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC
declared the abolition of CSMG and the creation of SNMI to do the sales and marketing
services for SMART a valid organizational action. It overruled the Labor Arbiter’s ruling that
SNMI is an in-house agency, holding that it lacked legal basis. It also declared that
contracting, subcontracting and streamlining of operations for the purpose of increasing
efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiter’s
disquisition that redundancy to be valid must be impelled by economic reasons, and upheld
the redundancy measures undertaken by SMART.
The NLRC disposed, thus:

“WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further
ordered to immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby
ordered to pay the final wages of [Astorga] after [she] had submitted the required supporting papers
therefor. 22
SO ORDERED.”
23
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.
Astorga
24
then went to the CA  via certiorari. On June 11, 2001, the CA rendered a
Decision  affirming with modification the resolutions of the NLRC. In gist, the CA agreed with

_______________
20 Id., at pp. 164-165.
21 Rollo (G.R. No. 151079), pp. 102-120.
 22 Id., at p. 120.
23 Id., at p. 122.
24 Id., at pp. 24-36.

443

VOL. 542, JANUARY 28, 2008 443

Smart Communications, Inc. vs. Astorga

the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG
was a legitimate exercise of management prerogative. It rejected Astorga’s posturing that her
non-absorption into SNMI was tainted with bad faith. However, the CA found that SMART
failed to comply with the mandatory one-month notice prior to the intended termination.
Accordingly, the CA imposed a penalty equivalent to Astorga’s one-month salary for this non-
compliance. The CA also set aside the NLRC’s order for the return of the company vehicle
holding that this issue is not essentially a labor concern, but is civil in nature, and thus,
within the competence of the regular court to decide. It added that the matter had not been
fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of
the Decision. On December 18, 2001, the CA resolved the motions, viz.:
“WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is
hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smart’s]
motion for reconsideration
25
is outrightly DENIED.
SO ORDERED.”

Astorga and SMART came to us with their respective petitions for review assailing the CA
ruling, docketed as G.R. Nos. 151079 and 151372. On February
26
27, 2002, this Court ordered
the consolidation of these petitions with G.R. No. 148132.
In her Memorandum, Astorga argues:

THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S DISMISSAL

DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION

_______________
25 Id., at p. 45.
26 Rollo (G.R. No. 151372), p. 175.

444

444 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE

WAS NO GENUINE GROUND FOR HER DISMISSAL.

II

SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS

REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES
DURING THE PENDENCY OF THE APPEAL.

III
 THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT
HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY
27
OF A CAR WHICH ASTORGA
ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.

On the other hand, Smart in its Memoranda raises the following issues:
I

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF

SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE
OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE
NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF
REDUNDANCY.

II

WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF

LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.

_______________
27 Rollo (G.R. No. 151079), p. 250.

445

VOL. 542, JANUARY 28, 2008 445

Smart Communications, Inc. vs. Astorga

III

WHETHER THE RULE ENUNCIATED IN  SERRANO VS. NATIONAL LABOR RELATIONS
COMMISSION  FINDS APPLICATION IN THE CASE AT BAR CONSIDERING
28
THAT IN
THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.

IV

WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF

SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE
OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES
NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO
RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY
DISMISSED.

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE
SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE
BUT SIMPLY THE RECOVERY OF A COMPANY CAR.

VI

WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT

ASTORGA CAN29
NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE
LABOR CODE.
The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC
of Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132.

_______________
28 Id., at p. 273.
29 Rollo (G.R. No. 148132), p. 266.

446

446 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

Replevin is an action whereby the owner or person entitled to repossession of goods or chattels
may recover those goods or chattels from one who has wrongfully distrained or taken, or who
wrongfully detains such goods or chattels. It is designed to permit one having right to
possession30
to recover property in specie from one who has wrongfully taken or detained the
property.  The term may refer either to the action itself, for the recovery of personalty, or to
the provisional remedy traditionally associated with it, by which possession of 31
the property
may be obtained by the plaintiff and retained during the pendency of the action.
That the action commenced by SMART against Astorga in the RTC of Makati City was one
for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction,
the CA made the following disquisition, viz.:
“[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment
package. We doubt that [SMART] would extend [to Astorga] the same car plan privilege were it not for
her employment as district sales manager of the company. Furthermore, there is no civil contract for a
loan between [Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit
arising out of employer-employee relationship. Thus, the claim32for such falls squarely within the original
and exclusive jurisdiction of the labor arbiters and the NLRC.”

We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction
over the suit and acted well within its discretion in denying Astorga’s motion to dismiss.
SMART’s demand for payment of the market value of the car or, in the alternative, the
surrender of the car, is not a

_______________
30 Black’s Law Dictionary, Fifth Edition, p. 1168.
31 Tillson v. Court of Appeals, G.R. No. 89870, May 28, 1991, 197 SCRA 587, 598.
32 Id., at p. 148.

447

VOL. 542, JANUARY 28, 2008 447

Smart Communications, Inc. vs. Astorga

labor, but a civil, dispute. It

33
involves the relationship of debtor and creditor rather than
employee-employer relations.  As such, the dispute falls within the jurisdiction of the regular
courts. 34
In  Basaya, Jr. v. Militante,   this Court, in upholding the jurisdiction of the RTC over
the replevin suit, explained:
“Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary
relief sought therein is the return of the property in specie wrongfully detained by another person. It is
an ordinary statutory proceeding to adjudicate rights to the title or possession of personal property. The
question of whether or not a party has the right of possession over the property involved and if so,
whether or not the adverse party has wrongfully taken and detained said property as to require its
return to plaintiff, is outside the pale of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective
issues raised in each forum can be resolved independently on the other. In fact in 18 November 1986, the
NLRC in the case before it had issued an Injunctive Writ enjoining the petitioners from blocking the free
ingress and egress to the Vessel and ordering the petitioners to disembark and vacate. That aspect of the
controversy is properly settled under the Labor Code. So also with petitioners’ right to picket. But the
determination of the question of who has the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in
addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as
laid down by pertinent laws.”

_______________
33 See NestléPhilippines Inc. v. National Labor Relations Commission, G.R. No. 85197, March 18, 1991, 195 SCRA
340, 343.
34 G.R. L-75837, December 11, 1987, 156 SCRA 299, 303-304.

448

448 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered
the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the
dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is
explained in35 the leading case of  Wiltshire File Co., Inc. v. National Labor Relations
Commission,  viz.:
“x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication of
work. That no other person was holding the same position that private respondent held prior to
termination of his services does not show that his position had not become redundant. Indeed, in any
well organized business enterprise, it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for purposes of the Labor Code, exists
where the services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.”

The characterization of an employee’s services as superfluous or no longer necessary and,

therefore, properly terminable, is an exercise of business judgment on the part of the
employer. The wisdom and soundness of such characterization or decision is not subject to
discretionary36review provided, of course, that a violation of law or arbitrary or malicious action
is not shown.

_______________
35 G.R. No. 82249, February 7, 1991, 193 SCRA 665, 672.
 36 Dole Philippines, Inc. v. National Labor Relations Commission, 417 Phil. 428, 440; 365 SCRA 124, 134 (2001).

449

VOL. 542, JANUARY 28, 2008 449

Smart Communications, Inc. vs. Astorga

Astorga claims that the termination of her employment was illegal and tainted with bad faith.
She asserts that the reorganization was done in order to get rid of her. But except for her
barefaced allegation, no convincing evidence was offered to prove it. This Court finds it
extremely difficult to believe that SMART would enter into a joint venture agreement with
NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular
employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a
supervisory position in the Customer Care Department, but she refused the offer because the
position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of
her, it would not have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was
no compelling economic reason for redundancy. But contrary to her claim, an employer is not
precluded from adopting a new policy conducive to a more economical and effective
management even if it is not experiencing economic reverses. Neither does the law require
that the employer should suffer financial 37
losses before he can terminate the services of the
employee on the ground of redundancy. 
We agree with the CA that the organizational realignment introduced by SMART, which
culminated in the abolition of CSMG/FSD and termination of Astorga’s employment was an
honest effort to make SMART’s sales and marketing departments more efficient and
competitive. As the CA had taken pains to elucidate:
“x x x a careful and assiduous review of the records will yield no other conclusion than that the
reorganization undertaken by SMART is for no purpose other than its declared objective—as a labor and
cost savings device. Indeed, this Court finds no fault in SMART’s decision to outsource the corporate
sales market to SNMI

_______________
37 Id.

450

450 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed
Services Division (CSMG/ FSD), a distinct sales force of SMART in charge of selling SMART’s
telecommunications services to the corporate market. SMART, to ensure it can respond quickly,
efficiently and flexibly to its customer’s requirement, abolished CSMG/FSD and shortly thereafter
assigned its functions to newly-created SNMI Multimedia Incorporated, a joint venture company of
SMART and NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical
expertise required for the value added services. By transferring the duties of CSMG/FSD to SNMI,
SMART has created a more competent and specialized organization to perform the work required for
corporate accounts. It is also relieved SMART of all administrative costs—management, time and money-
needed in maintaining the CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to
SNMI was, to Our mind, a sound business judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.”
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined
towards the worker and upheld his cause in most of his conflicts with his employer. This
favored treatment is consonant with the social justice policy of the Constitution. But while
tilting the scales of justice in favor of workers, the fundamental
38
law also guarantees the right
of the employer to reasonable returns for his investment.  In this light, we must acknowledge
the prerogative of the employer to adopt such measures as will promote greater efficiency,
reduce overhead costs and enhance prospects of economic gains, albeit always within the
framework of existing laws. Accordingly, we sustain the reorganization and redundancy
program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1)
month notice prior to termination. The record is clear that Astorga received the notice of

_______________
38 Asian Alcohol Corporation v. National Labor Relations Commission, 364 Phil. 912, 924-925; 305 SCRA 416, 427-
428 (1999).

451

VOL. 542, JANUARY 28, 2008 451

Smart Communications, Inc. vs. Astorga
39
termination only on March 16, 1998  or less than a month prior to its effectivity on April 3,
1998. Likewise, the Department 40
of Labor and Employment was notified of the redundancy
program only on March 6, 1998.
Article 283 of the Labor Code clearly 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 x x x.”

SMART’s assertion that Astorga cannot complain of lack of notice because the organizational
realignment was made known to all the employees as early as February 1998 fails to
persuade. Astorga’s actual knowledge of the reorganization cannot replace the formal and
written notice required by the law. In the written notice, the employees are informed of the
specific date of the termination, at least a month prior to the effectivity of such termination, to
give them sufficient time to find other suitable employment or to make whatever
arrangements are needed to cushion the impact of termination. In this case, notwithstanding
Astorga’s knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination. But such notice was received
by Astorga barely two (2) weeks before the effective date of termination, a period very much
shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of Astorga’s
employment illegal. The validity of termination can exist independently of the proce-

_______________
39 Rollo (G.R. No. 151372), p. 62.
40 Id., at p. 56.

452
452 SUPREME COURT REPORTS ANNOTATED
Smart Communications, Inc. vs. Astorga
41 42
dural infirmity of the dismissal.  In DAP Corporation v. CA,   we found the dismissal of the
employees therein valid and for authorized cause even if the employer failed to comply with
the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal,
but held the employer liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at
the same time, awarding indemnity for violation of Astorga’s statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to
Astorga, as a sanction on SMART for non-compliance with the one-month mandatory 43
notice
requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,  viz.:
“[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the
notice requirement, the sanction to be imposed upon him should be  tempered  because the dismissal
process was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is based on
an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of his
management prerogative.”

We deem it proper to increase the amount of the penalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay
equivalent to at least one (1) month salary or to at least one (1) month’s pay for every year of
service, whichever is higher. The records show that Astorga’s length of service is less than a
year. She is, there-

_______________
41 DAP Corporation v. Court of Appeals, G.R. No. 165811, December 14, 2005, 477 SCRA 792, 798.
42 Id.
43 G.R. No. 151378, March 28, 2005, 454 SCRA 119, 125-126.

453

VOL. 542, JANUARY 28, 2008 453

Smart Communications, Inc. vs. Astorga

fore, also entitled to separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This
assertion was never rebutted by SMART in the proceedings a quo. No proof of payment was
presented by SMART to disprove the allegation. It is settled that 44
in labor cases, the burden of
proving payment of monetary claims rests on the employer.   SMART failed to discharge
the onus probandi. Accordingly, it must be held liable for Astorga’s salary from February 15,
1998 until the effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis.
Backwages is a relief given to an illegally dismissed employee. Thus, before 45
backwages may be
granted, there must be a finding of unjust or illegal dismissal from work.  The Labor Arbiter
ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor
Arbiter’s ruling and categorically declared Astorga’s dismissal valid. This ruling was affirmed
by the CA in its assailed Decision. Since Astorga’s dismissal is for an authorized cause, she is
not entitled to backwages. The CA’s award of backwages is totally inconsistent with its finding
of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The
February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R.
SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch 57 is
DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with
reasonable dispatch.

_______________
44 G& M (Phil.), Inc. v. Batomalaque, G.R. No. 151849, June 23, 2005, 461 SCRA 111, 118.
45  Filflex
Industrial & Manufacturing Corporation v. National Labor Relations Commission,  G.R. No. 115395,
February 12, 1998, 286 SCRA 245, 253.

454

454 SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and
151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in
CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is declared validly
dismissed. However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its
noncompliance with procedural due process, her separation pay equivalent to one (1) month
pay, and her salary from February 15, 1998 until the effective date of her termination on April
3, 1998. The award of backwages is DELETED for lack of basis.
SO ORDERED.

     Ynares-Santiago (Chairperson), Austria-Martinez, Corona** and Reyes, JJ., concur.

Petition granted in G.R. No. 148132, judgment and resolution dated February 28, 2000 set
aside.

Notes.—Replevin may refer either to the action itself,  i.e., to regain the possession of
personal chattels being wrongfully detained from the plaintiff by another, or to the provisional
remedy that would allow the plaintiff to retain the thing during the pendency of the action and
hold it pendente lite. (BA Finance Corporation vs. Court of Appeals, 258 SCRA 102 [1996])
Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise—a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise. (DOLE Philippines, Inc. vs. National Labor Relations Commission,  365 SCRA
124 [2001]

_______________
** In lieu of Associate Justice Minita Chico-Nazario per Special Order No. 484 dated January 11, 2008.

455

VOL. 542, JANUARY 28, 2008 455

Tokio Marine Malayan Insurance Company
Incorporated vs. Valdez

Basic is the rule that property already placed under legal custody may not be a proper subject
of replevin. (Vda. De Danao vs. Ginete, 395 SCRA 542 [2003])