G.R. No. 178382 -83 September 23, 2015
Continental Micronesia, Inc., Petitioner, vs. Joseph Basso, Respondent.

FACTS

Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation licensed to do business in the Philippines. Respondent Joseph Basso, a US citizen residing in the Philippines, was offered the position of General Manager of the Philippine Branch of Continental Airlines, Inc. in 1990. He signed an employment contract dated February 1, 1991. On November 7, 1992, CMI took over the Philippine operations, with Basso retaining his position. On December 20, 1995, Basso received a letter informing him that he would work as a consultant on an “as needed basis” effective February 1, 1996 to July 31, 1996, with no monetary compensation but with continued insurance coverage, travel privileges, and a housing advance. After Basso sent a counter-proposal and an inquiry, CMI informed him that his employment was terminated effective January 31, 1996, pursuant to the employment contract allowing termination at will upon thirty-day notice, and offered severance pay. Basso filed a Complaint for Illegal Dismissal on December 19, 1996. CMI filed a Motion to Dismiss on the ground of lack of jurisdiction, citing foreign elements and arguing for the application of US laws under the doctrines of lex loci contractus and lex loci celebrationis. The Labor Arbiter initially granted the motion, but the NLRC remanded the case. The Labor Arbiter subsequently dismissed the case for lack of merit and jurisdiction, applying US laws. The NLRC, on appeal, vacated the Labor Arbiter’s decision, found Basso was dismissed for just cause (loss of confidence) but denied due process, and ordered CMI to pay US$5,416.00 for failure to comply with the notice requirement. Both parties filed Motions for Reconsideration, which were dismissed. Basso and CMI filed separate Petitions for Certiorari with the Court of Appeals, which were consolidated. The Court of Appeals set aside the NLRC decision, declared Basso’s dismissal illegal, and ordered CMI to pay separation pay and full backwages.

ISSUE

1. Whether the Court of Appeals erred in reviewing the factual findings of the NLRC instead of limiting its inquiry into whether the NLRC committed grave abuse of discretion.
2. Whether the Court of Appeals erred in ruling that the Labor Arbiter and the NLRC had jurisdiction to hear and try the illegal dismissal case.
3. Whether the Court of Appeals erred in finding that Basso was not validly dismissed on the ground of loss of trust or confidence.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ Decision and Resolution. On the jurisdiction issue, the Court held that the Labor Arbiter and the NLRC had jurisdiction over the subject matter, as the case involved a termination dispute cognizable by labor tribunals. Jurisdiction over Basso was acquired when he filed the complaint, and over CMI through service of summons to its agent in the Philippines and by its voluntary submission through active participation in the proceedings. The presence of foreign elements does not oust local tribunals of jurisdiction. On the merits, the Court agreed with the Court of Appeals that CMI failed to substantiate its claim of loss of trust and confidence with clear and convincing evidence. The alleged incidents constituting breach of trust were not proven. Furthermore, the Court found that Basso was denied procedural due process as he was not given the required notice and hearing. The Court also held that the Court of Appeals did not err in reviewing the NLRC’s factual findings, as the NLRC’s decision was not supported by substantial evidence, constituting grave abuse of discretion. The dismissal was declared illegal. However, considering Basso had reached the compulsory retirement age of 65 during the pendency of the case, the grant of separation pay and backwages was modified. He was awarded backwages only from the date of his illegal dismissal (January 31, 1996) until his compulsory retirement age (October 2, 2002), and separation pay in lieu of reinstatement equivalent to one month’s salary for every year of service, computed from the start of his employment until his retirement age.